Shri Tulsidas Manwani, Director vs C.C.E. & S.T. Indore

[Arising out of Order-in-Appeal No. 112/COMMR/CEX/IND/2003 dated 30.12.2003 by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Indore].

For approval and signature:

Honble Shri Ashok Jindal, 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?

2 Whether it should 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 Departmental authorities?

M/s. Manwani Industries Ltd.

Shri Tulsidas Manwani, Director .Appellants

Vs.

C.C.E. & S.T. Indore .Respondent

.

Appearance:

Shri A.Upadhya, Advocate for the Appellant

Shri G.R. Singh, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Date of Hearing: 17.07.2015

Date of Pronouncement: 31.07.2015

FINAL ORDER NO. 52380-52381/2015-EX(SM)

Per Ashok Jindal:

This is the second round of litigation. In the earlier round of litigation matter was remanded by this Tribunal with the following observations:

We have heard Shri A. Upadhyay, Ld. Advocate for the appellants and Shri Atul Saxena, Ld. JDR for the respondents. We have considered the submissions made before us. We have also perused the impugned order. It is observed that the impugned order contains long extracts in Hindi from the statements recorded from Shri Tulsidas Manwani, Laxmandas Manwani, Jagdish Chandra Joshi, Narayan Prasad Kothari and Shambhu Dayal Agarwal verbatim. It does not contain any discussion or the analysis of the evidence before the adjudicating authority. The impugned order is non-speaking and is passed without application of mind. This order, therefore, cannot be sustained. The order is accordingly set aside and the matter remanded to the original authority for passing a de-novo order as per the provisions of law. It is further observed from the record that the appellants did not file any reply to the Show Cause Notice, nor did they appear for personal hearing before the adjudicating authority. Since the matter is being remanded, the appellant shall file their written reply to the Show Cause Notice within six weeks of the receipt of this order. The commissioner shall fix the matter for personal hearing and afford a reasonable opportunity of hearing to the appellant parties. The appeals are thus allowed by remand in these terms.

2. The facts of the case are as under:

The relevant facts, in brief, are that when the officers of Central Excise visited the appellants factory on 06.11.1996 and checked stock of raw materials and finished goods; they found 2100 ltrs of furnace oil in excess of stock as per record which was 5800 ltrs; as regards the finished goods there was a shortage of 36.830 MT of bars and rods. The authorized signatory explained the shortage as due to removal of the said goods clandestinely without preparation of invoice / gate passes. Further, investigation revealed that the appellant company have used parallel invoices of same number. They also recovered three Lrs. relating to the period July 1996 and enquiry revealed that only consignment covered by one of the 3 Lrs. was found accounted as cleared from the factory on payment of duty. The consignments covered by other two LRs were not accounted and there were no duty paying documents with the appellant company. A parallel book of invoices pre-authenticated by the Director of the company but not numbered was recovered. In addition, they have recovered private bill book based on which payments were made to the contractor two bills, on behalf of the contractor, were actually prepared by Shri J.C.

Joshi, authorized signatory of the appellant company as the Partners of the contractor were said to be not literates. The authorized signatory, Shri Joshi admitted to clearance of goods without accounting and without payment of duty using parallel invoices. He also admitted having prepared the bills on behalf of the contractor and that only goods covered by some of the bills were accounted and the rest were not accounted for excise purposes. This has been corroborated by the statements given by Shri Santosh Kumar and Shri Narayan Prasad partners of the contractor firm. Shri Laxmandas Manwani, Director, stated that he was not aware of use of parallel invoices book and that he had never given any instructions to clear any goods without payment of duty issuing the invoice book. However, he admitted having pre-authenticated the invoice book. Shri Tulsidas Manwani, the other Director stated that he was not involved in day-to-day affairs of the company and that Shri Joshi was responsible for day-to-day affairs of the company and that Shri Joshi was responsible for day-to-day affairs of production, clearance, accounts and, therefore, he was not able to explain shortage of M.S.

Bars and rods on the date of visit of the officers and that he had not instructed Shri Joshi to clear any goods without payment of duty and that he had already instructed Shri Joshi to deposit the duty involved.

In pursuance of the investigation as above, show cause notice demanding duty of Rs.39,87,688/- on 2189.512 MT of finished goods were issued. The show cause notice also proposed demand of certain other amounts and proposed penalties on various persons including the appellant company. Commissioner adjudicated the show cause notice vide his order dated 30.09.1999, which was set aside by the Tribunal vide order dated 06.12.2001 for violation of principles of natural justice. The impugned order dated 30.12.2003 has been passed by the Commissioner in denovo proceedings. The matter is, thus, before the Tribunal for the second time.

3. The Tribunal vide order dated 17.09.2009 disposed of appeals and the appellants challenged the order before the Honble High Court of Allahabad and the Honble has directed the appellants to move an application for recalling the order. In consequent to the order of High Court of Allahabad, the order dated 19.09.2009 was recalled by order dated 05.03.2012. Thereafter, appeals were dismissed on 02.08.2012 by this Tribunal on account of non appearance of the Counsel. The appellants filed applications for restoration of appeals, vide order dated 21.01.2013, the applications for restoration were allowed. In consequent to this, appeals are listed before me for hearing.

4. The main ground of the appellants is that the cross examination of the witnesses namely Shri Jagdish Chandra Joshi, Shri R P Srivastava, Shri Santosh Kumar Sahu & Shri Narayan Sahu was not afforded to the appellants. Therefore, impugned order is not sustainable. He also drew my attention to the show cause notices and the Annexure to the show cause notices to show there is a difference in quantities of goods shown in the invoices. Therefore, the demands are not sustainable.

5. On the other hand, Ld. AR reiterated the findings of the impugned order.

6. Heard the parties. Considered the submission.

7. The contention of the Ld. Counsel for the appellant is that they were not given the cross examination of the witnesses. In the impugned order, I have perused that the appellant sought the cross examination of namely Shri Jagdish Chandra Joshi, Shri R P Srivastava, Shri Santosh Kumar Sahu & Shri Narayan Sahu. The request of cross examination was considered by the Adjudicating Authority and given the findings as under:

8. I have gone through the observations of the Ld. Adjudicating Authority for denial of cross examination and found is correct.

9. With above observations, request of cross examination of the witnesses by the appellant is rightly set aside by the Adjudicating Authority.

10. The second issue raised by the Ld. Counsel for the appellants is that there are different quantities in the invoices as per the show cause notices and Annexure to the show cause notice. I have seen both the show cause notices as well as Annexure -1 to the show cause notice. The main allegation against the appellant is that the some entries were made on the backside of the invoices. If these entries are considered, the quantity shown in the Annexure  1 to the show cause notice are justified. During the course of hearing, it was asked from the Ld. Counsel for the appellants to provide a copy of the invoices which were given to the appellants along with show cause notices but Ld. Counsel for the appellant did not produce these invoices. As these invoices were not produced by the Ld. Counsel before me, it would lead to draw the inference contrary to claim of the appellants. As revenue has alleged that the quantity mentioned in the invoices and backside thereon are shown as clandestinely removed. Therefore, the burden lies on the appellants to prove contrary which appellants have failed to do so. In these circumstances, I hold that the allegation made against the appellants found justified by the Adjudicating Authority in the impugned order.

11. Further, I find that there was shortage of finished goods of bars and rods weighing 36.830 MT on the date of visit of officers on 06.11.1996. The authorized representative of the appellant company clearly admitted the shortage as due to removal without accounting and without payment of duty. The use of parallel invoices for clearing unaccounted excisable goods without payment of duty stands admitted by the authorized signatory. The Director, Shri Laxmandas Manwani while admitting having authenticated the invoice book claimed that he has not given instructions to clear any goods without payment of duty. The other Director, Shri Tulsidas Manwani merely stated that he was not involved in day-to-day affairs of the factory but he had already instructed Shri Joshi to deposit the duty involved. The bills on behalf of the contractors have admittedly been prepared by Shri Joshi, authorized signatory of the appellant company. Shri Joshi has clearly admitted that sometimes, two bills are prepared with the same number, one for the accounted quantity and other for the unaccounted quantity. It was also admitted that some of the bills were of accounted quantities and the rest for the unaccounted quantities.

This has been corroborated by the admission statement of Sh. Santosh Kumar and Shri Narayan Prasad representing the contractor firm. These three persons have not retracted their statements. The main demand relates to the period June 1996 to October 1996. The appellant company contest this demand Rs.39,87,886/- as having been raised without any basis. It was submitted that the amount has been calculated on the basis of amount which was mentioned at the back of the bill which was raised by the contractor for loading and unloading. It was their claim that the contractor used to do other work such as cleaning of factory, banding of the rods, keeping the rods here and there, putting raw material in the furnace, keeping the material on table i.e. putting the material at the required place, cutting of miss rolled, cutting of blade etc. Since the company was paying TDS only, in respect of loading and unloading bill and not for other miscellaneous work, the bills were raised by the contractor for the said work. This amount was mentioned at the back of the bill which was raised for loading and unloading.

These submissions, in my view, are clearly after thought and it is clearly contrary to the evidence tendered by Shri Joshi who admittedly prepared the bills on behalf of the contractor and the corroboration given by Shri Santosh Kumar and SHri Narayan Prasad of the contracting firm. Further the shortage of finished goods on the date of visit by the officer, the recovery of un-numbered pre-authenticated invoice book, admitted use of parallel invoices for clearing excisable goods without payment of duty and presence of LRs without corresponding clearance / duty paying documents are clenching evidences in support of clandestine removal as originally admitted by the authorized signatory. As already noted, the authorized signatory has not retracted his statement. The Directors at the time of investigation merely pleaded ignorance of the day-to-day activities relating to production and clearance and that they have not directed Shri Joshi to indulge in clandestine removal. In view of the above, the duty demand amounting to Rs. 39,87,886/- on clearances relating to 1st June 1996 and 31.10.96 as well as demand of Rs.67255/- on the shortage found are upheld.

As regards the penalty imposed, I note that the provisions of procedure of section 11AC are applicable from 26.09.1996 and the amount of demand relating to the period October 1996 having been quantified as Rs.4,08,866/-. I, therefore, reduce the penalty from Rs.40,54,893/- to Rs. 4,08,866/- on the appellant company.

12. Shri Tulsidas Manwani was the Director of the appellant company during the relevant time. The obligation of the Director relating to the overall performance avidities of the company, are well defined under the provisions of the Companies Act, and therefore, the plea of ignorance cannot be accepted. The claim fo Shri Tulsidas Manwani that the entire activities like production, clearance were being looked after by authorized signatory is also not acceptable. Shri Joshi, has stated he has acted as per the direction of the Directors. On the same ground penalties on him are justified. However, considering the entire facts and circumstances, of the case, I reduce the penalty to Rs.1 Lakh only.

13. In these terms, I pass the following order:

a) Demands of Rs. 39,87,886/- on account of clandestine clearance of the goods stands confirmed.

b) Demand of Rs. 67,255/- on shortage is confirmed. Penalty on M/s. Manwani Industries Ltd. is reduced to Rs. 4,08,866/-.

c) Penalties on Shri Tulsidas is reduced to Rs. 1 Lakhs.

14. With these terms appeals are disposed of.

(Pronounced in the open court on ________)

(Ashok Jindal) Member (Judicial)

Bhanu

2

E/3482-3483/2004-EX(SM)