M/S. Span Intermediates Pvt. Limited vs Commissioner Of Central Excise & S.T., ...

(Arising out of OIA-DA/06-07/DMN/VAPI-I/2011-12 dated 21.04.2011, passed by Commissioner (Appeals) Central Excise, & S.T., Daman)

M/s. Span Intermediates Pvt. Limited : Appellant (s) Shri Krishnadev S. Choubey

VERSUS

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

Represented by :

For Appellant (s) : Shri K.I. Vyas, 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 / Decision : 30.07.2015

ORDER No. A/11146-11147/2015 Dated 30.07.2015

Per : Mr. H.K. Thakur;

These appeals have been filed by the appellants against OIA No. DA/06-07/DMN/VAPI-I/2011-12 dated 21.04.2011 passed by Commissioner (Appeals), Vapi; as first appellate authority; under which OIO No. Vapi-I/OA/35/2007-08 dated 31.12.2007 decided by the Adjudicating authority has been upheld. Under OIO dated 31.12.2007, Adjudicating authority confirmed a demand of Rs. 1,55,368/- against the main appellant M/s. Span Intermediates Pvt. Limited, Vapi, along with section 11AB interest and also imposed equivalent penalty upon the main appellant under Section 11AC of the Central Excise Act, 1944, read with Rule 173Q (1) of the erstwhile Central Excise Rules, 1944. A penalty of Rs. 10,000/- was imposed upon Shri Krishnadev S. Choubey, Technical Director-cum-Authorised Signatory of the main appellant, under Rule 209A of the Central Excise Rules, 1944.

2. Shri K.I. Vyas, (Advocate) appearing on behalf of the appellants argued that the main appellant is the manufacturer of Synthetic Organic Dyes (S.O. Dyes) as per the specifications of the customers. That during a visit of the Central Excise officers to the factory premises of the main appellant on 20.3.1999, physical stock verification was done and it was observed by drawal of a Panchnama that there was excess stock of finished S.O. Dyes in the factory than what was recorded in the RG-1 register maintained by the main appellant. That the officers also noticed 6263 Kgs. of S.O. Dyes, valued at Rs. 9,71,047/- involving Central Excise duty of Rs 1,55,368/-, which appeared to have been manufactured and cleared without payment of duty by the main appellant. Revenue issued two show cause notices with respect to excess seized goods and alleged clandestine removal of goods demanding duty of Rs. 1,55,368/-. That the seizure portion of the case was decided against the main appellant but on appeal the same was set-aside by Commissioner (Appeals) and that order has been accepted by the Revenue. That the second show cause notice for Rs. 1,55,368/- was decided under OIO dated 31.12.2007 and confirmed under OIA dated 21.4.2011 against which the present appeals are filed by the appellants.

2.1 It was the case of the appellant that lower authorities mainly relied upon the blender register/notebook which reflects the semi-finished goods and can not be the basis for entering the same in RG-1 register. Moreover, the said notebook was exclusively meant for production of the goods that has varied grades of S.O. Dyes as per their customers specification and the figures reflected in the said notebook can not be compared with the figures entered in RG-1 register and can not be taken as a basis for allegation of illicit removal. Appellants also contended that weightage can not be given to the depositions made by their Technical Director in his statement. He further contended that blender notebook is their internal record for movement of semi-finished goods for other processes and the same can not be considered as the base for entries in RG-1 register. Appellants also argued that no cross-examination of the investigating authority was permitted to prove their side. They contended that demand can not be confirmed and penalty can not be imposed on the basis of recorded statements where cross-examination of persons have been denied. Learned Advocate relied upon the case law of Abir Chemicals Limited vs. CCE, Surat  [1998 (102) ELT 406 (Tribunal)] and argued that the RG-1 stage for the S.O. Dyes is fully packed goods in containers as per customers specifications when those are packed in the containers ready for dispatch. That if the batch manufactured is not taken delivery by the customers for any reason, the same is kept in polythene bags and used in the manufacture of S.O. Dyes of other customers. That such batches prepared and recorded in the blender register are not required to be reflected in the RG-1 register. Learned Advocate made the Bench go through Para-4 of the CESTAT order in the case of Abir Chemicals Limited vs. CCE, Surat (supra) to argue that there was no clandestine clearance as the goods recorded in the Blender register and not entered in the RG-1 register did not reach RG-1 stage. That statements of Shri Krishnadev S. Choubey, Technical Director-cum-Authorised Signatory has not admitted anywhere that goods entered in Blender Register were ever cleared clandestinely.

3. Shri Lalatendu Patra (AR) appearing on behalf of the Revenue defended the order passed by the first appellate authority. Learned AR made the Bench go through Para 4.3 of the OIA dated 24.4.2011 to argue that case law relied upon by the appellant is not in their favour as CESTAT in that case has also observed that Dye intermediates can not be considered as semi-finished goods and were required to be entered in the RG-1 register.

4. Heard both sides and perused the case records. The issue involved in these proceedings is whether the main appellant has indulged in clandestine clearance of the S.O. Dyes mentioned in the Blender Register which were not recorded in the RG-1 register. It is the case of the appellant that all goods mentioned in the Blender register do not became ripe for clearances till the blended dye sample is approved by the customer. That in case of non approval the batch prepared is not cleared. It is also the case of the appellant that a new batch is prepared as per the desired quality of the customer either by improving the earlier batch or otherwise and earlier entry made in the Blender Register is struck-off.

5. It is observed from the case law of Abir Chemcials Limited vs. CCE Surat (supra), relied upon by the appellant, that following has been held in Para 4 by CESTAT Mumbai:-

4.? Rival submissions have been considered. In the case of S.O. Dyes falling under Chapter 32 under confiscation, we find appellants have no case in respect of S.O. Dyes which were found packed in M.S. Drums but were found not entered in the RG 1 Register as these goods are fully finished and also packed ready for marketing. The duty demand thereon is upheld. As regards S.O. Dyes packed in HDPE Woven bags under confiscation the matter is not entirely free from doubt. It is seen that in Chapter 32 of Central Excise Tariff Act 1985, Chapter Note 6 to that chapter shows that addition of diluants or mixing of dyes to make them ready for use is a process of manufacture. The Tariff description of sub-heading 3204.29 is a residuary sub-heading of S.O. dyes which is other than in unformulated or unstandardised or unprepared form not ready for use. Viewed in this context of the Tariff heading and Chapter Note, credence has to be given to the claim made by the appellants at the earliest opportunity on the day the panchnama was prepared that the goods were not recorded in RG 1 Register because they were required to be standardised as per Customers requirements (see statement of V.J. Modi, General Manager - Works dated 21-6-1996). They had also taken the plea that the goods found in HDPE bags were only tied but not packed and sealed as done for fully finished marketable goods. The Commissioner in the impugned order relying upon Tribunal decision in the case of D.S. Screen v. Collector 1990 (56) E.L.T. 475 has held goods are to be entered in RG 1 even before testing. But we feel that in the context of the Tariff Structure relating to S.O. Dyes, as noted above, the relevance of standardisation vis-a-vis accountal in RG 1 is also to be looked into. Therefore we are of the view that so far as the S.O. Dyes packed in bags are concerned it will be reasonable on the facts and in the circumstances of the case to extend the benefit of doubt to the appellants, and in this view of the matter the confiscation of the quantity of S.O. Dyes found in bags is set aside with consequential relief to the appellants as per law. 

4.2 In view of the above case law S.O. Dyes not standardised as per customers specification, are packed loosely in polythene bags and can not be considered as RG-1 stage for recording the same in the RG-1 register. Factually that is the stand taken by the main appellant as per statements of Shri Krishnadev S. Choubey, Technical Director-cum-Authorised Signatory. In none of his statements recorded by the investigation, it is admitted that goods recorded in the Blender Register have been cleared clandestinely. One of the statement was recorded on 20.03.1999 and the other was recorded after more than three years on 20.6.2002. These statements are not inculpatory. There is no other evidence on record that there is any clandestine clearance of S.O. Dyes out of the batches mentioned in the Blender register except presumptions and surmises made in the show cause notice. Further appellate authority has wrongly distinguished the case law relied upon by the main appellant on the basis of observations made by the Bench in Para 5 of the order in the case of Abir Chemicals Limited vs. CCE, Surat (supra). The observations made in Para-5 made by CESTAT were with respect to Dye intermediates and not S.O. Dyes. Accordingly, it is held that case of clandestine removal of S.O. Dyes by the main appellant is not sustainable as there is no evidence of clandestine removal of the goods calculated on the basis of entries made in the Blender register of the main appellant. Once on merits the case is held in favour of the appellants, there is no point in imposition of penalties.

5. In view of the above observations, appeals filed by the appellants are allowed with consequential relief, if any.

(Order dictated and pronounced in the Court)

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

2