Tulsyan Nec Ltd vs Commissioner Of Central Excise ...

[Arising out of Order-in-Appeal No. 400-2011 dated 16/12/2011 passed by Commissioner of Central Excise, Bangalore-I]

For approval and signature:

HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER

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 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? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes

TULSYAN NEC LTD NO.37, KAVERIAPPA LAYOUT, MILLER TANK BUND ROAD, VASANTHNAGAR, BANGALORE 560 052 Appellant(s)

Versus

Commissioner of Central Excise ,Customs and Service Tax BANGALORE-I POST BOX NO 5400...CR BUILDINGS, BANGALORE, - 560001 KARNATAKA Respondent(s)

Appearance:

Mr. Ramesh Anantan, Adv #452, 1ST FLOOR, 18TH MAIN, 4TH 'T' BLOCK, JAYANAGAR, BANGALORE -

KARNATAKA For the Appellant Mr. Ajay Saxena. A.R. For the Respondent

Date of Hearing: 14/09/2015

Date of Decision: 14/09/2015

CORAM:

HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER

Final Order No. 21935 / 2015

Per : ASHOK K. ARYA

Both the parties have been heard in detail.

2. The matter relates to the allegation of clandestine clearance of the product namely HDPE woven sacks/bags, which are manufactured by the appellant. Learned advocate, Mr. Ramesh Ananthan pleads that the case of the department is entirely based on the audit objection. He says, in this regard, they submitted a letter dated 7.1.2005 to the Superintendent, Central Excise, Mahadevapura Range, Bangalore inter alia saying therein that:

Since the work related to conversion of fabric to sacks were being handled by private contractors all the sacks that were manufactured on behalf of supplier of raw material was also taken into account in the production slips maintained daily. Since the goods manufactured was on behalf of the principal raw material supplier we would not take the same into RG I as such we would like to point out that the difference as pointed out is due to the production of Bags as a job worker. Even though this was brought to the notice of the Audit party they did not take cognizance of the same. As such we submit that we have not removed any goods without payment of duty and we are not liable to pay any duty as mentioned in para 13 of the IAR. 2.1 Learned advocate for the appellant pleads that they had engaged a contractor who was doing stitching of the fabric converting the same into bags and once bags were made, they were entering them in the RG-I register and paying duty. It was pleaded by the learned advocate that along with their own manufacture, they were doing job work for others for which payment of duty was not their responsibility; it was the principal manufacturers responsibility from whom they were receiving the raw material for the same. He points out that the audit was done in December-January 2003-04; they were issued show-cause notice on 13.12.2008 which was received on 03.01.2009 by them. He pleads that show-cause notice is beyond limitation and at least for the month of November 2003, the period is beyond the period of five years that cannot be taken into account for the liability of Central Excise duty against the appellant as per Central Excise Law.

2.2 Learned advocate argues that though there is difference between the entries in private register and the entries in the RG-I register, this difference is mainly on account of their job work and for the said job work, duty was payable at the end of principal manufacturer. He also pleads that this private register is not maintained by them. It is maintained by their contractor.

3. Learned Commissioner (A.R.) for the department, Shri Ajay Saxena vehemently argues that the appellant has not been able to explain the difference in quantities between the private register (which the appellant argues that it was maintained by their contractors) and the entries in the RG-I register. The learned A.R. argues that this difference in the quantities is the clear value of the quantity of the HDPE woven sacks/bags on which duty has not been paid by the appellant and which had been cleared clandestinely. The learned A.R. refers to para-10 of the order dated 29.12.2009 of the original adjudicating authority, wherein inter alia the following has been mentioned:

10. ....The assessees have promised to produce such job work challans as documentary evidence before the adjudicating authority for necessary consideration. The assesees have produced only few copies of jobwork challans dated 30.10.2003,29.11.2003, 8.11.2003, 16.12.2003, 29.12.2003,and 31.12.2003. It is observed from the said copies of challans that M/s Tulsyan NEC Ltd, Doddaballapur have sent 10,000 Kg granules ( in each challans) to M/s Tulsyan NEC Ltd, Bangalore in question for the purpose of making granules into fabric. After the said process, the assssee have sent fabric 9600 Kg along with waste of 400 Kgs ( in each challans) to M/s Tulsyan NEC Ltd, Doddaballapur.

3.1 Referring to above facts mentioned in the original adjudicating authoritys order in Para 10, the learned A.R. argues that the appellant has not at all manufactured any of the HDPE woven sacks/bags on job work basis for their principal manufacturer.

3.2 Learned A.R. refers to the Miscellaneous Order No. 25447/2013 dated 19.3.2013 passed in this case by this Tribunal where-under the appellant was asked to make predeposit of Rs 10,00,000/- within eight weeks from that date. The learned A.R. mentions about the contents of the para 4 of the said Misc.(stay) order dated 19.3.2013 arguing that there has not been any production or manufacture of sacks on job work basis by the appellant, when there was no such evidence to show by the appellant. The learned A.R. is referring to para 4 of the said Miscellaneous/Stay order wherein the following has been mentioned:

4. We have considered the submissions made by both the sides. We find that the production register for job-work to which our attention was drawn does not appear to reflect number of sacks produced at all. The register shows receipt, issue and balance and receipt quantity and the issue quantity and the balance. Further in quantity column, at the total level, figures in decimals have been indicated whereas there are no decimals anywhere. The register does not have any indication of the production of sacks manufactured nor appellants have any evidence to show that sacks were manufactured by them on job work basis. As regards time limit, we find that the submission of the learned AR are correct and the demand for the month of November will have to be excluded.

4. I have carefully considered the submissions of both parties mentioned above. The learned advocate for the appellant says that private production register (which the learned advocate later argues that it not a production register but is just a small book containing some leaves) is not their document and they are not supposed to give any clarification on that. It is very strange that the manufacturing unit claims to do job work which job work was being done by the contractor hired by them but on the other hand they claim that they were not maintaining any records for the job work. Further, during the audit done by the Central Excise Department, the same private register (small book containing leaves) was produced by the appellant before the audit officers of the Central Excise department. About the contents of the same private register, the appellant themselves say that they had written a letter dated 7.1.005 to the Superintendent of Central Excise. It is pointed out by the learned advocate that they did not produce the said private register whereas the facts on the record state that the Private register was placed before the audit team of the Department of Central Excise and placed by whom, naturally it has to be by the appellant themselves.

4.1 When there is difference between the quantities mentioned in the private register, a record maintained within the premises of the manufacturer for the activity going on therein and the RG-I register which is a statutory record, I am of the considered view that the manufacturer registered under Central Excise law has to explain and give their version regarding such difference in the quantities. Here manufacturer appellant has definitely come out with the explanation through their letter dated 7.1.2005, when they say that this difference is because of production of Bags as a job worker for their principal raw material suppliers or the principal manufacturer(s).

4.1.1. However, I find that the facts on record have not established that there has been any kind of manufacturing of the HDPE woven BAGS/SACKS ON JOB WORK BASIS especially so when the original adjudication order clearly says that the representative job work challans produced by the appellant nowhere mentions that any quantity of HDPE woven BAGS/SACKS were manufactured. In the said job work challans there has always been a mention of HDPE granules being converted into FABRICS only, and not the bags/sacks. Unless there is any credible and justifiable explanation for this difference in quantity the arguments and the submissions of the appellant on this count cannot be accepted on any judicious cirterion. The learned advocate for the appellant has consistently tried to wash off the manufacturer appellants responsibility regarding the activities and operations carried on in their premises by their contractor, who was stitching HDPE fabrics into HDPE woven bags/sacks. Thus the appellants explanation that difference in the quantity is because of production of bags as job worker can not be accepted as a judicious and justifiable explanation.

5. This case is for the period of November 2003 to January 2004. The learned advocate argues that the period of one month namely of November 2003 is certainly beyond the limitation period of five years; therefore, requires to be excluded from their liability of payment of central excise duty. Regarding this submission, the learned A.R. for the respondent also fairly agrees that this period is beyond the period of five years from the date of the show-cause notice. Therefore, one has to accept that the liability of payment of central excise duty for this period against the appellant has to be excluded as per the provisions of law of Central Excise.

6. From the above analyses and discussion, I am of the considered view that the appellant has not been able to substantiate their pleading and the argument that they did not manufacture the subject goods mentioned during the period from November 2003 to January 2004 which have been called as the difference between RG-I Register and private production register. When there has not been any evidence of payment of duty for the said quantity of goods and there could not be any possibility of such evidence also, when there are no entries in the RG-I register for such quantities of goods produced, then certainly it is the liability of the appellant to make the payment of duty of central excise under the law of Central Excise and make good the loss caused to the National Exchequer in this regard.

6.1 It is needless to say here that the manufacture and production done during November 2003 cannot attract the liability of payment of central excise duty as it is now beyond the period of limitation i.e. five years and respondents case in this regard is not sustainable under the law of Central Excise. Consequently the appellant is liable for the payment of central excise duty for all the goods produced/manufactured except for the production of the month of November, 2003, which had come to the light during the audit made by the Department of Central Excise and which is the subject matter of present proceedings.

7. Learned advocate argues that the case laws mentioned by him enjoins on the department to corroborate the allegation mentioned in the show-cause notice as well as during further proceedings. Learned advocate submits that if at all there has been clandestine removal by the appellant there is definitely requirement on the part of the department to give corroborative evidence. The learned advocate also argues that the department has not taken any statements nor made any investigations or any other evidence in this regard. I am of the considered view that the case laws mentioned by the learned advocate are not applicable to the unique facts of the current case.

7.1. I am of the considered view that this case is of peculiar facts wherein department made the audit in November-December 2004 for the manufacturing operations done since November 2003 to December 2004. The activity of the Audit is done post facto operations and is not done simultaneously during the manufacturing activity for the current period. The audit is mainly based on the examination of records though the department has not taken the statement of the manufacturer of the contractor. Therefore, here it is not binding on the Department to produce some extra evidence regarding the difference in quantity of two documents namely private Production Register and the RG-I Register. As the matter concerns with the past production and clearance, the Department can not always find such goods and produce before the adjudication.

7.2 Further the Private production Register cannot be questioned for the entries made therein when the manufacturer appellant themselves came forward to give explanation about the same through their letter dated 7.1.2005 mentioned above. The manufacturer appellant has not stated that the entries made there are faulty or erroneous. They only have tried to explain through the letter dated 7.1.2005 the difference in the quantities of entries made in the said private register and RG-I register, though it was not found acceptable. I do not find any need for further supporting evidences when the appellants job work challans produced before the original adjudicating authority did not mention about any of the final product namely HDPE woven BAGS/SACKS, thus clearly indicating that there was no job work taken up for manufacture of HDPE woven BAGS/SACKS.

7.3 Here I would like to refer to the decision given by the Honble High court of Madras in the case of M/s Alagappa Cements P Ltd Vs CEGAT CHENNAI & CCE Trichy [2010-TIOL-770-HC-MAD-CX] wherein Honble High Court says that when facts are otherwise proving clandestine removal there is no need of further producing positive proof by the department. The Honble Madras High court in this case has inter alia stated as follows:-

6.....We fail to understand as to how the appellant is justified in contending that in the absence of positive proof as regards the actual manufacture of cement not brought into accounts, then alone the conclusion of the original authority as well as the first respondent can be justified cannot be accepted. The inference drawn by the second respondent based on shortage of clinkers and the excess quantity of limestone quarried during the relevant period was sufficient enough for the authorities to conclude as to the ultimate quantity of Portland cement which could have been produced from such excess quantity, which were not noted in the stock register, was well justified and we do not find any illegality or irregularity in such a conclusion drawn by the authorities for the levy of duty and the demand of duty imposed.... 7.3.1 Here I further refer to the CESTAT Mumbais decision in the case of CCE Pune Vs U.D. Suryavanshi [2007(220) E.L.T. 805 (Tri-Mumbai)] wherein the Tribunal has held that when private records have indicated a large gap between the actual production and the recorded production indicating clandestine removal, the demand based on such private documents cannot be considered as uncorroborated demand. It is pointed out that in this case, the Tribunal set aside the order of the Commissioner (Appeals) and upheld the order of the original adjudicating authority, confirmed the demand of duty and imposed equal amount of penalty on the manufacturer and also imposed penalties on others.

7.3.2. I take support also from the decision of the Honble High Court of Allahabad in the case of N P Agro (I) Industries Ltd Vs CCE Lucknow [2014-TIOL-2333-HC-ALL-CX] wherein it was held that if there are circumstances coupled with other materials and found sufficient to prove that there had been unaccounted production and removal of the goods in clandestine manner without payment of duty, there cannot be any reason to interfere with the orders passed by the Tribunal confirming the duty, imposing penalty under Rule 209 of the Central Excise Rules 1944. The Honble High Court of Allahabad in this judgment has inter alia stated as follows:-

4....The circumstances goes long way coupled with other materials are sufficient to prove that there had been unaccounted production and removal of the goods in clandestine manner by the appellant during the period in question without payment of duty. When it is so, then we find no reason to interfere with the impugned order passed by the Tribunal. Hence, the same is hereby sustained alongwith the reasons mentioned therein.

8. Based on the above facts, discussion and the case laws quoted above, I do not have any other option but to confirm the liability of payment of Central Excise Duty along with interest against the appellant for the subject production of the goods except for the production made during the period of November 2003, which has been found to be beyond the time limit of five years from the relevant date under provisions of Section 11 AC of Central Excise Act, 1944 read with the provisions of Section 11AB of the Central Excise Act 1944.

9. The appellant is also liable to the penalty equivalent to the duty confirmed above under Section 11 AC of the Central Excise Act 1944, but will have the benefit of reduction in penalty to the extent of 75% i.e. they will pay the penalty of only 25% of the duty confirmed if the same is paid along with interest within the period of 30 days from the day, when they are informed by the department about their exact liability of confirmed duty with interest. The department is also hereby ordered to inform the manufacturer appellant within two weeks of the receipt of this order of the exact quantum of their liability of duty of Central Excise and the interest in terms of this order.

9.1 It is ordered that there would be no change in the penalty imposed on the appellant under Rule 25 of Central Excise Rules 2002.

(Order pronounced in open court)

ASHOK K. ARYA TECHNICAL MEMBER

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