M/S. Abhay Industries vs Commissioner Of Central Excise & S.T., ...

(Arising out of OIO-DMN-EXCUS-000-COM-0026-14-15 dated 07.01.2015, Passed by Commissioner Central Excise, & S.T., Daman)

M/s. Abhay Industries : Appellant (s)

VERSUS

Commissioner of Central Excise & S.T., Daman : Respondent (s)

Represented by :

For Appellant (s) : Shri S.P. Mathew, Advocate For Respondent (s) : Shri Lalatendu Patra, Authorised Representative

For approval and signature :

Mr. H.K. Thakur, Honble Member (Technical)

1 Whether Press Reporter 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?

No 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

CORAM :

Mr. H.K. Thakur, Honble Member (Technical)

Date of Hearing : 12.06.2015

Date of Decision : 30.06.2015

ORDER No. A/10904 / 2015 dated 30.06.2015

Per : Mr. H.K. Thakur;

This appeal has been filed by the appellant M/s. Abhay Industries, A-3/19, GDDIDC, Somnath Road, Daman against OIO No. DMN-EXCUS-000-COM-0026-14-15 dated 07.01.2015 under which a demand of Rs. 33,94,591/- has been confirmed along with interest and an equivalent penalty has also been imposed upon the appellant under Section 11AC of the Central Excise Act, 1944, read with Rule 173(Q) (1) of the erstwhile Central Excise Rules, 1944.

2. Shri S.P. Mathew (Advocate) appearing on behalf of the appellant argued that present appeal represent third round of litigation and the issue involved is whether appellant has clandestinely diverted raw materials (M.S. Sheets and Tin Plates) imported by the appellant, and used for the manufacture of Metal Containers and Components, for which Modvat credit was availed by the appellant, Learned Advocate submitted that a show cause notice dated 09.02.2001 was issued to the appellant by Commissioner of Central Excise and Customs, Surat-II for the improper taking credit of Rs. 33,94,591/-, on the ground that imported goods were not received in the appellants factory at all on the basis of statements of Shri Rajesh G. Shah, Proprietor of the appellant and Shri Anand Tukaram Sardar, Manager of the appellant. That the said show cause notice was decided under OIO No. 101/MP/2002 dated 21.03.2002 by Commissioner of Central Excise, Surat which was appealed against by the appellant and CESTAT vide order NO. C-III-521 to 524/WZB/2003 dated 25.3.2003 passed the following order and remanded the case to the adjudicating authority for considering the calculations submitted by the appellants:-

1. Shri S.P. Mathew, Learned Advocate appearing on behalf of the appellants has filed calculation sheets showing a difference of 145.344MT of raw material compared to the difference of 1086.091 MT of raw materials as alleged by the Department. The Department has not brought on record the evidence of retailers to whom it is alleged to have sold said raw material. Shri S.P. Mathew contended that the case is only based on presumption and in support of his contention he relied on the decision of Oudh Sugar Mills Limited vs. UOI [1978.ELT.(J-172)] wherein the Apex Court interalia held that the findings based on show cause notice are without any tangible evidence and are based only on inferences involving unwarranted assumptions and are vitiated by an error of law.

2. Shri Ajit Awasthi, Learned JDR appearing on behalf of the Revenue drew our attention to the statement of Shri Rajesh G. Shah recorded under Section 14 and submitted that such recording is a judicial proceeding. Therefore, his contention is that the statement may be legally relied on.

3. After hearing both sides and perusal of the records, we find that the calculation as submitted by the appellants bears a big difference with the calculation arrived at by the Department. It is not feasible for us to go into details of this calculation. Besides, as mentioned above we also do not find any independent corroborative evidence to support the allegation of the Department. In these circumstances, we think it fit to remand the matter to the adjudicating authority for considering the calculation now submitted. Learned JDR and the appellants both are agreeable for remand to the adjudicating authority. We accordingly remand the mater at the stay stage itself after dispensing with the pre-deposit of duty and penalty and stay recovery thereof till the final decision for de-novo adjudication after affording reasonable opportunity of being heard to the appellants and pass a fresh speaking order.

That Commissioner of Central Excise and Customs, Daman vide OIO No. 5/MP/2005 dated 30.6.2005 did not agree with the calculations submitted by the appellant and again confirmed the demand and imposed penalties. Appeal filed against this order was rejected by CESTAT vide order dated 03.02.2009 and appellant took the matter to Bombay High Court and the Honble Bombay High Court vide order dated 06.10.2009 in Central Excise Appeal No. 60/2009 remanded the case back to Tribunal for de-novo consideration and to restrict itself to the issue of calculation. That this bench vide order No. A/1294-1295/WZB/AHD/2010 dated 25.08.2010 again remanded the matter to the Adjudicating authority for re-quantification of the demand after considering the calculation sheet produced on record by the appellant. That under the present OIO dated 07.01.2015, Adjudicating authority has accepted the method of weighment of containers by investigation and has rejected the calculations submitted by the appellant.

2.1 Learned Advocate appearing on behalf of the appellant made the bench go through some copies of Bills of Entry under which the inputs were imported, and made the bench go through the thickness details given in these bills of entry copies to argue that thickness of tinplates imported varies greatly. It was his case that the size of a container may be same but the weight of the container varies on account of thickness of metal sheet used. It was strongly argued by the Advocate that due to difference in the thickness the standard average weight of 950gms per unit and 16gms per Ring-O-Seal (ROS) taken by Revenue is not correct and that the average weight should be 1.588 Kgs and 0.040 Kgs. for container and ROS as mentioned in the last column of Para 6.1 of the OIO dated 07.01.2015 passed by the Adjudicating authority. That their weight calculation are based on an affidavit dated 20.10.2014 filed by Shri Anand Tukaram Sardar, the Supervisor of the appellant, and that this affidavit was produced before the adjudicating authority but no findings have been given by the adjudicating authority as to why this affidavit is not acceptable. That as per the cross-examination of the investigating officer before the adjudicating authority it is very clearly demonstrated that thickness of imported sheets vary greatly. It was also the case of the appellant that for making a container the top and bottom components of metal container is made from metal sheet having higher thickness and the weight of the container will vary from consignment to consignment and that the entire demand, based on presumption and assumption is illogical, arbitrary and unsustainable. Appellant relies upon the case law of CCE vs. Saakeen Alloys Private Limited [2014 (308) ELT 655 (Guj.)] to argue that a case of clandestine removal can not be established only on a few confessional statements.

3. Shri Lalatendu Patra (AR) appearing on behalf of the Revenue made the bench go through paras 6.1 to 6.8 of the OIO dated 07.01.2015 to argue that method adopted by the department for calculating the shortages of raw material was correct and strongly defended the OIO passed by the Adjudicating authority. It was his case that the calculations were made on the basis of statements given by the appellants in these proceedings.

4. Heard both sides and perused the case records. The issue involved in the present appeal is whether there was a clandestine removal of the raw materials imported by the appellant on which Modvat credit was taken. Revenue made the case against the appellant on the grounds of a Panchnama drawn on 23.12.1998 where three samples of metal containers, container components and Ring-O-Seal, used for making containers, were taken and weighed. A statement dated 03.12.1998 of Shti Anand Tukaram Sardar, Manager of the appellant was recorded before drawal of Panchnama who gave an opinion that average weight of container and component sets varies from 900gms to 950gms. Both Shri Anand Tukaram Sardar and Proprietor of the appellant have retracted the statements recorded during investigation on the grounds that these were recorded under duress. Looking to all these facts, Tribunal vide order dated 25.3.2003 remanded the case for deciding the issue only on the basis of calculations submitted by the appellant. This was reiterated by the Honble Bombay High Court and subsequent order dated 25.08.2010 passed by this bench. Under the above factual matrix adjudicating authority was incorrect in relying upon the statements of Shri Anand Tukaram Sardar alone. It is observed that adjudicating authority is relying upon the opinion given by Shri Anand Tukaram Sardar, Manager of the appellant given before the date of Panchnama but not giving any credit to the opinion given the same person under affidavit dated 20.10.2014, that weight of metal container could be 1.25Kg and weight of metal component set of one container could be 1.5 Kg. Once the same person is giving contradictory opinion then none of these opinions is acceptable. Adjudicating authority should have only restricted to the calculations submitted by the appellant, as per remand directions (without giving any credence to the contradictory opinion given by the same person). Further, jurisdictional Gujarat High Court in the case of CCE vs. Saakeen Alloys Private Limited (supra) has held that only confessional statements can not be made the sole basis of clandestine removals. In the present case no shortage of raw material was detected and no seizure of cash with respect to alleged selling of raw materials could be brought on record.

4.1 On the issue of calculation sheets submitted by the appellant, it was argued that weight of the metal sheets used in the manufacture of metal containers varies. It is observed from the representative copies of the bills of entry relied upon by the appellant that only the highest guage of the metal sheet imported is given and lower limit of thickness or actual thickness in a consignment is not available. As per the cross-examination of Shri B.K. Verma, Superintendent, who investigated this case, it has come out that the thickness of materials imported by the appellant varies. It is also clear from the cross-examination of the investigating officer that the thickness of the metal sheets was not verified as the thickness is not mentioned in the sale documents and also due to the fact that Manager-cum-Authorised signatory and the Proprietor of the appellant gave clear admissions of the weight of the container. The findings recorded by the adjudicating authority, that calculations submitted by the appellant are not accepted, can not be upheld in the absence of any evidence on record that all the metal sheets imported by the appellant, used for manufacture of container, had uniform thickness and weight. Accordingly appeal filed by the appellant is required to be allowed by setting aside the Adjudicating authority.

5. In view of the above observations appeal filed by the appellant is allowed with consequential relief, if any.

(Order pronounced in the Court on 30.06.2015)

(H.K. Thakur) Member (Technical) .KL

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