M/S. Rpm Auto vs Cce-Delhi-Ii

[Arising out of order-in-original no. 26/2005 dated 31.05.2005 passed by CCE-Delhi-II]

1. Whether Press Reporter may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of the order?

4. Whether order is to be circulated to the Department Authorities?

M/s. PEE KAY Enterprises,

Shri Pradeep Kumar Goel and

M/s. RPM Auto Appellants

Vs.

CCE-Delhi-II Respondent

Appearance: Shri A.K. Jain, Advocate for the appellant

Shri Yashpal Sharma, DR for the respondent.

Coram: Honble Shri Rakesh Kumar, Member (Technical)

Honble Shri S.K. Mohanty, Member (Judicial)

Final Order No. 51697-51699/2015

Per: Rakesh Kumar

The facts leading to filing of these appeals are, in brief, as under:

1.1 M/s. RPM Auto, 22, 25C, Gali No. 2, Bihari Colony-Shahadara, Delhi (hereinafter referred to as RPM), a proprietorship concern of Shri Pradeep Kumar Goel, is engaged in manufacture of brake linings for 4-wheelers under the brand name of TVS, Charlie, Mintex, Rodex, Rane, Mark, Farodo, etc. The brake linings were chargeable to Central Excise Duty under heading 6806 of the Central Excise Tariff. There is another Unit M/s. PEE KAY Enterprises having factory at P-38B, Gali No. 15, Bihari Colony-Shahadara, Delhi (hereinafter referred to as PKE) which is partnership concern of Shri Pradeep Kumar Goel, Shri Ashok Kumar Goel, Shri Manoj Kumar Goel and Shri Mukesh Kumar Goel, all real brothers and is engaged in manufacture of brake linings for 4-wheelers under the brand name-TVS, Rane, Compo and Allied. They were also engaged in trading of other auto parts namely, clutch plates, clutch facing and rivets along with brake linings manufactured by them, from their shop and godown premises.

1.2 The period of dispute in this case is from 1997 -1998 to 1999-2000. These units were visited by the Jurisdictional Central Excise Officers on 17/6/1999. At that time, none of these units  RPM and PKE were either having Central Excise Registration or were paying duty. According to the appellants, both the units, at that time, were within full exemption limit of the SSI Exemption notification. In course of search of the factory premises, the officers found that both-RPM and PKE, besides clearing the brakeing linings manufactured by them under their own brand names Raymond, Charlie and Allied, were also using the brand name of other persons, i.e., TVS and Rane. According to the department, the goods affixed with the brand name-TVS and Rane of other persons, were not eligible for SSI exemption.

1.3 At the time of search, while the unit of PKE was found to be working, the factory of RPM was not found to be working. At the time of search in the factory of PKE, the challan books were found regarding dispatch of the goods. In the factory premises of RPM, three registers were found which appeared to be containing the details regarding manufacture of brake linings.

1.4 Other than the departments allegation that the appellants cleared the goods affixed with the brand name TVS and Rane of other persons without payment of duty, the department has made the following allegations:

i) It has been alleged that the factory premises of RPM and PKE were owned by the same familys four brother- Shri Ashok Kumar Goel, Shri Pradeep Kumar Goel, Shri Manoj Kumar Goel and Shri Mukesh Kumar Goel and were being actually controlled by Shri Ashok Kumar Goel and that their account of procurement of the raw material, manufacturer of finished goods and sale of the finished goods were common and, hence, the clearances of the two units must be clubbed for determining their eligibility of SSI Exemption.

ii) The second allegation against the appellant is that the value declared in the invoices in respect of the brake linings bearing the brand name of TVS and Rane and those which were described only in terms of the vehicles they were meant for, are not acceptable. In this regard, the department in respect of the brake linings bearing the brand names  TVS and Rane has adopted the value based on the price list of the owners of these brand names after 40 per cent discount. In respect of the brake linings which were described in the invoices in terms of the vehicles for which they were meant, the department conducted market enquiry and based on the opinion of three traders-M/s. Masu International, M/s. Serbestos Auto International and M/s. Minocha Metals (P) ltd. have determined their value.

iii) The third allegation against the appellants is that they have under reported their actual production and in this regard, the production recorded in the three registers seized from the premises of RPM has been treated as the production of the sets of brake linings, each set consisting of eight brake linings. Thus, whatever is the production recorded in the three registers, has been treated as the production of that many sets of brake linings and accordingly the production of brake linings has been determined by multiplying that number by 8.

1.5 During the search of the premises of RPM and PKE, certain stock of brake linings had been seized from both the premises and also from the premises of the shop and godown of PKE and that the stock had also been placed under seizure.

1.6 In view of the above investigation, a show cause notice dated 15/12/1999 was issued to RPM, PKE, Shri Pradeep Kumar Goel, Shri Ashok Kumar Goel and Shri Manoj Kumar Goel and Shri Mukesh Kumar Goel for-(a) confiscation of the brake linings seized from various premises;

(b) demand of Central Excise duty amounting to Rs. 54,35,941/- from RPM chargeable on the goods valued at Rs. 3,60,88,342/- alleged to have been cleared during period from 1997-1998 to 1999-2000 under proviso to section 11A(1) of Central Excise Act, 1944 along with interest on it under section 11AB and also for imposition of penalty on RPM under section 11AC of Central Excise Act, 1944; and

(c) imposition of penalty under Rule, 209A of Central Excise Act, 1944 on Shri Pradeep Kumar Goel, proprietor of RPM and Shri Ashok Kumar Goel and Shri Manoj Kumar Goel, partners of PKE.

1.7 The above show cause notice was adjudicated by the Commissioner vide order-in-original dated 19/2/2000 by which the entire duty demand as mentioned above was confirmed against RPM along with interest on it under section 11AB and besides this, penalty of equal amount was imposed on RPM under section 11AC. The Commissioner also imposed penalty under Rule 209A of Central Excise Rule, 1944 on Shri Manoj Kumar Goel, Shri Ashok Kumar Goel. and Shri Pradeep Kumar Goel. The seized goods valued at Rs. 50,88,790/- were also ordered to be confiscated with option to be redeemed on payment of redemption of fine.

1.8 On appeal being filed to the Tribunal against the above order dated 19/2/2000 of the Commissioner, Tribunal vide final order no. 609 to 613/2002 dated 21/11/2002 set aside the Commissioners order and remanded the matter to the Commissioner for de-novo adjudication with certain directions. The Tribunal in the remand order observed that the impugned order has not considered the brake linings product wise or brand name owner wise and, therefore, it is necessary in the interests of justice that the case is remanded to the original authority for de-novo adjudication after considering the evidence on record along with the appellants defence on the allegation that the brake linings, in question, were manufactured under the brand name of other persons.

1.9 Another observation of the Tribunal is that the appellants also have grievance about the valuation of the goods which is also required to be considered appeal, inasmuch as the impugned order has valued the goods based on the price of other manufacturers without considering the appellants own sale price.

1.10 In de-novo proceedings, the Commissioner vide order-in-original no. 26/05 dated 31/5/2005 confirmed the duty demand of only Rs. 24,18,501/- against RPM along with interest on it under section 11AB and imposed penalty of equal amount on it under section 11AC. Certain amount which had been deposited during investigation was ordered to be appropriated. Commissioner also ordered confiscation of the seized goods with option to be redeemed on payment of redemption fine in lieu of confiscation and besides this, he also imposed penalty of Rs. 4 lakh each on Shri Pradeep Kumar Goel, proprietor RPM and Shri Ashok Kumar Goel, partner of M/s. PKE. He decided not to impose any penalty on Shri Manoj Kumar Goel and Shri Manish Kumar Goel who as per his findings were not responsible for day to day running of the affairs of PKE.

1.11 Against this order of the Commissioner, these appeals have been filed by PKE, RPM and Shri Pradeep Kumar Goel. As regards, the appeal filed by Shri Ashok Kumar Goel against this order, since he has expired, the same has been dismissed, as abetted, in terms of the Rule 22 of the CESTAT Rules by a separate order.

2. Heard both the sides.

3. Shri A.K. Jain, Advocate, ld. Counsel for the appellants, pleaded that while the Commissioner in the earlier order-in-original passed in the year 2000 had treated all the clearances made by RPM and PKE as of branded goods, in the de-novo proceedings, the Commissioner in terms of the directions in the CESTATs remand order has quantified the value of the clearances of the brake linings in respect of which the brand name TVS and Rane had been used and has demanded duty only in respect of that quantity of brake linings; that still the Commissioner in respect of the branded goods has adopted the value of the goods on the basis of price list of the brand name owners- TVS and Rane after giving 40 per cent discount; that in respect of the goods of other brands instead of adopting the appellants invoice price, the price ascertained on the basis of the quotations given by the three dealers M/s. Masu International, M/s. Serbestos Auto International and M/s. Minocha Metals (P) ltd. have been adopted for which there is absolutely no justification; that the goods being cleared with the brand name TVS and Rane were duplicate goods as the appellant did not have any agreement with the brand name owners for use of their brand name and manufacture the goods as per their specification; that in view of this, in respect of the goods cleared with the brand name TVS and Rane, there was no justification for adopting the price at which the goods were being sold by the brand name of owners; that as regards the quantity of the goods alleged to have been cleared and clandestinely, the Commissioner has treated the quantity manufactured, as recorded in the three registers recovered from RPMs premises, as the quantity in terms of the sets of brake linings, each set being of 8 brake linings, that for this assumption, there is no justification; that the appellant do not even have the capacity to have manufactured the quantity of brake lining which is alleged to have been manufactured and cleared by them, that there is no record of purchase of the raw material required for manufacture of the quantity of the brake linings which is alleged to been manufactured by them; that as regards the allegation of the clubbing of the clearances of RPM and PKE, the Commissioner himself in para 59 of the impugned order has given the finding that while statement of partners of PKE did suggest that the accounts were maintained jointly for both the units, i.e., PKE and RPM, there is no independent evidence to support this assertion and even if, for the sake of argument, this statement is assumed to be true, there is no way to find out how much production was attributable to either factory; that the Commissioner accordingly has decided that the entire production of goods recorded in the three registers recovered from RPM has to be attributed to that factory from which the registers had been recovered and not to PKE and on this basis the Commissioner has given the findings that in these circumstances, the clubbing cease to be an issue; that thus, the only issues which have to be decided are the issue of valuation and issue of quantum of alleged clandestine clearances; that as regards, the issue of valuation, there is absolutely no justification to reject the value of the goods shown in the invoices issued by the appellant and that as regards the quantum of goods alleged to have been manufactured which has been determined on the basis of three registers recovered from the premises of RPM, there is absolutely no justification for treating the figures of the production to be the production in terms of the sets of brake linings.

He pleaded that if the value of the goods as mentioned in the invoice is accepted and the production of brake linings as recorded in the three registers seized from RPM is treated as the production of brake linings not of sets of brake linings, the duty demand would be very small.

4. Shri Yashpal Sharma, ld. DR, defended the impugned order by reiterating the findings of the Commissioner. With regard to the quantum of clearances, he stated that the figures of production as recorded in the three registers recovered from the premises of RPM are the figures of production in terms of the sets, each set being of eight brake linings. He in this regard pointed out to the statement of Shri Pradeep Kumar Goel, proprietor of RPM and Shri Satender Kumar, Supervisor discussed in para 40 of the impugned order wherein it has been stated by them that the quantity of the goods had been recorded in the registers in sets. With regard to the valuation of the goods, he stated that value of the goods affixed with the brand name TVS or Rane has been correctly determined on the basis of the price lists of the owner of the brand names and the value of the goods of other brand names not owned by the appellant or unbranded goods had been correctly determined on the basis of the quotations given by three traders-M/s. Masu International, M/s. Serbestos Auto International and M/s. Minocha Metals (P) ltd. He, therefore, pleaded that the appellant have not only under declared the value of the goods in their invoices but have also suppressed the quantity of the goods produced and manufactured by them so as to wrongly avail of the SSI Exemption. He accordingly, pleaded that there is no infirmity in the impugned order.

5. Shri A.K. Jain, Advocate, ld. Counsel for the appellants, in his rejoinder pleaded that merely on the basis of the statements of Shri Pradeep Kumar Goel, and Shri Satender Kumar, it cannot be presumed that the production recorded in the registers recovered from the RPM was in terms of the sets; that in this regard, Shri Pradeep Kumar Goel had retracted his statement on 18/6/1999, 19/7/1999 and 30/07/1999. He also pointed out that the appellants have produced Chartered Engineers Certificate regarding purchase of the raw material on the basis of the records and also Chartered Engineers Certificate certifying that there is wastage to the extent of 42.5 per cent in manufacture of brake linings and on the basis of the certificates of the Chartered Engineers, the appellant could not have manufactured the quantity of brake linings which are alleged to have been manufactured by them based, more so, when there is no allegation that the appellant have purchased extra unaccounted raw material.

6. We have considered the submissions from both the sides and perused the records.

7. In the present proceedings, the dispute is only on two points: (a) Value of the brake linings cleared and (b) the quantum of the brake linings cleared.

7.1 The appellant were manufacturing the brake linings using brand name-TVS and Rane and also brake linings using their brand or other brands which are not owned by any particular person or unbranded brake linings. The Commissioner in the impugned order has denied SSI Exemption in respect of only brake linings cleared under the brand names-TVS and Rane. However, the value of the goods whether sold under the brand name TVS and Rane or sold under other brand names or sold without any brand has not been determined on the basis of the price declared in the invoices. In this regard, the Commissioner in respect of the brake linings bearing brand name TVS and Rane has adopted the price at which the brand name owners were selling the same goods and the value of the goods of other brand or unbranded goods has been determined on the basis of the quotations given by the three traders M/s. Masu International, M/s. Serbestos Auto International and M/s. Minocha Metals (P) ltd.

7.2 In the present case, it is not the departments case against the appellant that the appellant had any agreement with TVS and Rane for manufacture of brake linings as per their standards and specifications and could use their brand name. The appellant were obviously using the brand name TVS and Rane on certain brake linings manufactured by them unauthorisedly and thus, the brake linings with the brand name TVS and Rane cleared by them have to be treated as duplicate brake linings. In view of these circumstances, in our view, there is no justification to value these brake linings at the price at which such brake linings were being sold by the brand name owners.

7.3 As regards, the goods bearing the other brand name or unbranded goods, we find that the there is absolutely no justification for rejecting the invoice price of these goods as mentioned by the appellant in their invoice and valuing the goods on the basis of the price quotations given by M/s. Masu International, M/s. Serbestos Auto International and M/s. Minocha Metals (P) ltd. when there is absolutely no evidence showing that the appellant were receiving from their customers any amount over and above the invoices price. In this regard, the department has not produced any evidence in the form of the statements of the customers or any other evidence.

7.4 In view of this, the Commissioners decision, with regard to the value of the goods is not sustainable and the value of the goods as mentioned in the invoices issued by the appellant company has to be adopted.

8. The second point of dispute is regarding quantum of goods which are alleged to have been produced by RPM and cleared by them. The actual production of RPM has been determined on the basis of three registers recovered from the premises of RPM. The department, however, based on the statement of Shri Pradeep Kumar Goel and his factory Supervisor Shri Satender Kumar has taken the stand that this production has been recorded in the terms of sets, each set being of eight brake linings, while the appellants stand is that the production in these registers is not in sets but the numbers mentioned are the number of brake linings not of the sets of brake linings. There is nothing in the registers from which it can be inferred that the production recorded therein is in terms of sets. Though initially Shri Pradeep Kumar Goel had given the statement that the production recorded is in sets, this statement has been retracted by him. Though Shri Satender Kumar, Supervisor working in the RPMs factory had stated that the production has been recorded in sets., in our view without his cross-examination, his statement cannot be accepted at face value when his statement is not corroborated by any other evidence. Moreover, the appellant plead that if the production recorded in the three registers recovered from the factory premises of the RPM is treated as production in terms of the sets, each set being of eight braking linings, the raw material required for manufacture of such quantity would be huge while as per the records recovered from the appellants premises, the purchase of raw material was much less. In view of this, we hold that the departments stand that the production recorded in the three registers recovered from the premises of RPM is in terms of sets of brake linings is not sustainable and accordingly, the production recorded in these registers is to be treated as production of that many brake linings not of the sets of brake linings.

8. In view of the above discussion, the impugned order is set aside and the matter is remanded to Commissioner for re-quantification of the duty liability in terms of our observations in this order. The penalty under section 11AC on RPM and on Shri Pradeep Kumar Goel under Rule 209A of Central Excise Rules, 1944 would be according to the duty demand quantified against RPM.

(Rakesh Kumar) (S.K. Mohanty)

Member (Technical) Member (Judicial)

Ritu