Hitkari Fibres Ltd vs Commissioner Of Central Excise, Raigad

(Arising out Order-in- Appeal No. AT/232/RGD/2005 dated 25.04.2005 passed by the Commissioner of Central Excise (Appeals), Mumbai II)

For approval and signature: Honble Shri P.K. Jain, Member (Technical) Honble Shri S.S.Garg, Member (Judicial)

1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? : No 2. Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? : Yes 3. Whether Their Lordships wish to see the fair copy of the Order? : Seen 4. Whether Order is to be circulated to the Departmental authorities? : Yes

Hitkari Fibres Ltd. Appellant

Vs.

Commissioner of Central Excise, Raigad Respondent

Appearance:

Mr. Anil Balani, Advocate for the appellant Shri N.N. Prabhudesai, Supdt.(AR) for the respondent

CORAM:

Honble Shri P.K. Jain, Member (Technical) Honble Shri S. S. Garg, Member (Judicial)

Date of hearing : 19.08.2015 Date of decision : 01.09.2015

O R D E R No:..

Per: P.K. Jain:

The brief facts of the case are that the appellant is engaged in the manufacture of pillows. During 1999 they cleared 3928 numbers of luxury pillows at a low rate of `10 per pillow though similar goods were being sold at `162/- per piece. In this connection, investigation was taken up. Shri AM Pitke, Excise officer, initially submitted that they will submit all the documents pertaining to the clearance of the said pillow. However, he did not respond to the repeated summons issued over a period of one year. Later on, it was informed that Shri Pitke has left the organisation. Similarly, Shri M.J. Parikh, Finance manager of the appellant firm was also summoned number of time but he also did not produce the documents corresponding to these invoices. However, later on after about a year Shri Parikh claimed that these pillows were lying in stock since 1994 and were badly damaged and so they sold these pillows in 1999 at low rate of `10 per pillow. However, he could not justify from the records viz. RG-1 that the said pillows were lying with them for the last 5 years. In his statement, Shri Parikh admitted that it was not possible to correlate and give proof of stock of product in question. Further, the invoices issued did not indicate that the pillows being sold are old and damaged. After investigation, a demand notice was issued demanding differential duty and proposing penalty interest etc. the case was adjudicated by the Asstt. Commissioner who vide order dated 22.11.2004 confirmed the demand of `143293/- equal amount of penalty under Section 11AC and interest under Section 11AB. Aggrieved by the said order, appellant filed appeal before the Commissioner (Appeals) who vide order dated 25.04.2005 rejected the appeal of the appellant. Aggrieved by the said order, appellant are before this Tribunal.

2. Ld. Counsel for the appellant submitted that they were manufacturing luxury pillow for Bombay Dyeing and in 1994 their contract was terminated and these pillows were left thereafter. By 1999 these pillows got badly damaged and were in a bad shape and therefore, they sold at a price of `10 per pillow. He further submitted that the department has not submitted evidence that the normal price of the pillow is `162 per piece. In the absence of evidence relating to the normal price value of `162/pillow cannot be taken. It was further submitted in any case the pillows were badly damaged and would not fetch any value and therefore they were sold like that. He further submitted that copy of the invoices were available with the department and they could have made enquiry with the buyer of the goods to ascertain the fact but that was not done by the department. He further submitted that these transactions have taken place in 1999 and the show-cause notice has been issued in 2004 by invoking the extended period of limitation. Ld. counsel submitted that there is no reason to invoke extended period of limitation as all the facts were known to the department and they had not suppressed anything from the department.

3. Ld. AR on the other hand, submitted that the conduct of the appellant from the beginning was evasive. During investigation, the excise in charge had promised to produce the document but did not respond to the number of summons and finally after one year appellant informed them that the said official has left the unit. Similarly, the Finance Manager also did not respond to summons and later on when he appeared he tried to mislead the department by bringing in theory of old and damaged pillow. It was submitted that the invoice nowhere indicate that the pillow sold were old and damaged. Further, appellant were not able to produce any statutory or other records to prove that the said pillows were lying with them for over 5 years. It was also submitted that the contention of the counsel for the appellant that their contract with Bombay Dyeing was terminated is without any supporting evidence and even if the contract was terminated there was no reason to keep huge number of pillows for over 5 years. Any prudent manufacturer would dispose of the said pillows within short period on some discount. It was further submitted that the price of `10 per pillow is very low compared to the normal price of `162/-. Ld. AR also submitted that the appellant had not disputed that the normal price is `162/- per pillow and only at the Tribunal stage, the ld. counsel is submitting that no evidence of normal price of `162/- is produced by the Revenue. He therefore, submitted that the appeal needs to be rejected. Ld. AR also submitted the following case laws in support of his contentions ?

1) CCE vs. Fiat India P. Ltd. 2012 (283) ELT 0161 (SC)

2) CCE vs. Dipareena Investment P. Ltd. 2014 (314) ELT 571

3) Phoenix Mills ltd. vs. UOI 2004 (168) ELT 310

4) Unity Paints & Chemical Co. P. Ltd. 2015 (320) ELT 235

5) CST vs. ITC Ltd. 2014 (36) STR 481

6) Rajendra Jagannath Parekh 2004 (175) ELT 238

7) Pepsi Foods Ltd. vs. CCE 1996 (82) ELT 33

4. Ld. counsel in rebuttal submitted that Hon'ble Supreme Court judgment in the case of Fiat India P. Ltd. (supra) supports him in para 50, wherein Hon'ble Apex Court has clarified that there can be case when manufacturer may sold the goods at lower price if goods are not sold within reasonable time. It was also submitted that RG-1 account is already with department and internal production report was also submitted. It as also submitted that it is for the revenue to prove the date of manufacture is not 1994 as is held by the Tribunal in the case of Continental Engg. Industries P. Ltd. vs. CCE reported in 1989 (42) ELT 14.

5. We have considered the submission made by both sides.

6. Firstly, we observe the present case pertain to the period 1999 when the old Section 4 was in force and the concept was of the normal value of the goods and not of the transaction value. We also note that at the time of issuance of the show-cause notice itself revenue has claimed that the normal value of the said pillow is `162/-. Appellant has not questioned the same and did not produce any evidence to show that they were selling at some other price to other customers. Ld. counsels contention that Revenue has not produced any evidence that normal value is `162/- is therefore dismissed. Further, we note that the invoice and the documents nowhere indicates that the pillow sold were old and damaged. Appellants have also not been able to produce any evidence in support of their contention that the pillow were old and damaged. No statutory or other records could be produced by them which would indicate that the pillow manufactured in 1994 were lying with them till 1999. Ld. counsel has submitted that Rg-1 register is lying with department and they could have verified the same. this contention is without any basis. We find that para 4.3 of the show-cause notice states as under:

In an attempt to justify the above explanation, he submitted copies of the production report of the Tailoring department in M/s. Hitkari Fibres Ltd. Mahad for the year 1994. However, on scrutiny of the said production reports, Shri M.J. Parekh could not show that the 3928 pieces of luxury pillows under contention (size 17 X 27) were actually manufactured during the year 1994. Further Shri Parekh was asked to submit the relevant RG1 (i.e. stock register) maintained in the factory for the period from 1994 to 1999 to substantiate his explanation that the said luxury pillows was manufactured in the year 1994 and continued to remain in stock till the year 1999. However, Shri M.J. Parekh FAILED TO ESTABLISH the basic requirement that there was a non moving stock of the said luxury pillows (17 X 27) in the factory for the year 1994 to 1999. He also admitted in his statement dated 16.09.2003 that it was not possible to correlate and give proof of the stock of luxury pillows (size 17 X 27) in the factory in support of his earlier claim that the goods were manufactured during the year 1994.

7. Ld. counsels contention is therefore rejected. There is no evidence that RG-1 register are with Revenue. On the contrary, during investigation Shri Parikh was asked to justify from the RG-1 register and he failed to do. Similar is the position regarding internal reports of tailoring department. As far as the case of Continental Engg. Industries P. Ltd. (supra) is concerned, the facts are different. In that case, it was Revenues claim that goods seized in July 1978 were actually clearances of year 1976-77. Here revenue is not making any such claim. It is the appellant who is claiming that goods cleared in 1999 were actually manufactured in 1994. It is for the appellant to produce evidence in support of his claim. The evidences produced do not support the case of appellant. Normally no prudent businessman will keep pillows for five years.

8. In the overall facts of the case, we are therefore of the considered view that the normal price at which such pillow were being sold will be the correct assessable value for the goods in question. Accordingly, on merits, we find that the case made by the revenue is correct and we therefore uphold the same. The contention of the appellant was that the extended period of limitation cannot be invoked as all the information was available with the department. We are not impressed with the said argument. The appellant were doing self assessment at the relevant time and the fact that they have sold the pillow at such a low price was suppressed and in our view the extended period of limitation has been correctly invoked. We therefore do not find any merits in this contention. For the same reason penalty under Section 11AC is also upheld. Interest under Section 11AB will also be chargeable. Ld. AR has submitted number of case laws. We do not consider it necessary to discuss the case laws as this is a fact based case and the position would change from fact to fact of each case.

9. In the result, appeal is dismissed.

(Pronounced in Court on .)

(S. S. Garg) (P.K. Jain) Member (Judicial) Member (Technical)

//SR

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