2004 (97) ECC 162 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(C)

Shri V.K. Agrawal, Member (T) and Shri P.G. Chacko, Member (J)

Haryana Acrylic Mfg. Co. Pvt. Ltd. & Ors.

Versus

CCE, Delhi

Appeals No. E/2269-72/03-NB(C)

[Arising out of Order-in-Appeal No. 225 to 228/AKG/RTK/2003 dated 2.6.2003 passed by the Commissioner of Central Excise (Appeals), Gurgaon]

Final Order No. 398-401/2004-NB-C, dt. 3.6.2004, Certified on 17.6.2004

Duty Demand & Penalty (C. Excise)

Manufacture of Plastic sheets -- Clandestine removal of goods -- Shortage of finished goods -- One of the demands of duty has been confirmed against the Appellant No. 1 as a parallel invoices book was found by the Central Excise Officers from the factory premises and invoice Nos. 34 and 35 issued from the said invoice book were found with the drivers of the tempos which were intercepted with the goods cleared by the Appellant No. 1 -- Duty has to be demanded on the basis of quantity of goods cleared and the period during which the same were cleared. In respect of shortage of finished goods found in the factory, it has to be worked out after taking into consideration the said 7085 kg. cleared on 19.5.95 itself. Accordingly, the Appellants are liable to pay duty on the quantity 2716 kg. found short. Penalty is imposable on the Appellant No. 1 as the excisable goods have been cleared without payment of Central Excise duty. However, taking into consideration all facts, a penalty of Rs. 10,000 on the Appellant No. 1 will meet the end of justice. The penalties imposed on other three Appellants are set aside.

PRESENT :

Shri K.K. Anand and Shri P.Ranjan, Advs. for the appellants.

Shri Virag Gupta, JDR for the respondent.

Cases Cited :

1. Flex Industries Ltd. v. CCE, Noida, 2003 (151) ELT 198 (Tri)................................................. [Para 5]

2. Gian Malhani v. State of Maharashtra, 1999 (110) ELT 400 (SC) (Followed) ......... [Paras 3.2 & 6]

3. Gilloram Gauri Shankar v. CCE, 2001 (42) RLT 1010 (CEGAT)............................................ [Para 4]

4. K.I. Pavunony v. Assistant Collector, 1997 (90) ELT 241 (SC)............................................... [Para 5]

5. Nazir Ahmed v. CCE, 1998 (101) ELT 337 (Tri)........................................................................ [Para 5]

6. Oudh Sugar Mills Ltd. v. Union of India, 1976 Cen-Cus 81 (SC) (Followed) ....................... [Para 6]

7. S.U. Alvi v. CCE, 2000 (36) RLT 721 (T)..................................................................................... [Para 4]

8. Triveni Rubbers v. CCE, Kanpur, 2001 (75) ECC 180 (Tri) (Followed) ................... [Paras 3.2 & 6]

Per : V.K. Agrawal

These four appeals, arising out of a Common Order-in-Appeal Nos. 225 to 228/2003 dated 2.6.2003, have been filed by M/s. Haryana Acrylic Manufacturing Company Pvt. Ltd. and Ors. challenging the confirmation of demand of Central Excise duty and imposition of penalties.

2. Shri K.K. Anand, learned Advocate, mentioned that M/s. Haryana Acrylic Mfg. Co. P. Ltd., Appellant No. 1, manufacture acrylic plastic sheets; that the Central Excise Officers intercepted two tempos loaded with acrylic sheets on 19.5.95; that the drivers produced the invoices to the Officers; that on checking the invoice book bearing serial Nos. 1 to 50 in the factory, it was found that the last invoice issued from the said invoice book was bearing serial No.33 dated 17.5.95; that the Officers found one more invoice book from which the invoice Nos. 34 and 35 both dated 19.5.95 which were produced by the tempo drivers were issued; that Shri Bhupender Nath, General Manager, informed that 2198 kgs. of acrylic plastic sheet had been despatched under invoice No. 36 dated 19.5.95 in Tempo No. HR-10-6850; that on physical verification of the finished goods, a shortage of 9801 kgs of acrylic plastic sheet involving duty Rs. 1,20,552.30 was found; that the Central Excise Duty has been paid in respect of these three invoices. He, further, mentioned that a show cause notice dated 18.10.96 has been issued to them for demanding duty on the finished goods found short; that duty in respect of goods cleared against invoice No. 36 dated 19.5.95 and duty in respect of goods said to be cleared without payment of duty against invoices No. 1 to 13 of M/s. Haryana Acrylic Mfg. Co. P. Ltd. of Delhi, whose invoice book was also found in the factory premises of the Appellants at Sonepat and duty in respect of goods said to be cleared against invoice Nos. 1 to 33 worked out on pro rata basis and for imposition of penalties on all the four appellants; that the Additional Commissioner has confirmed the demand of duty as mentioned in the show cause notice and imposed penalties on all the Appellants; that the Commissioner (Appeals) has also under the impugned Order rejected their appeals.

3.1 The learned Advocate mentioned that the duty amount to Rs. 11,540 in respect of goods cleared under invoice No. 36 dated 19.5.95 had been paid by them by debiting the credit in R.G. 23A Part II register on 19.5.95 and as such the same was not required to be confirmed. As the Appellants are not disputing the demand of duty which also stands deposited, the same is upheld.

3.2 The learned Advocate submitted that the demand of duty in respect of invoices Nos. 1 to 33 is based on presumptions and assumptions; that there is no evidence either oral or documentary to show any clearance of goods against the said 33 invoices; that there is no material indicating any clearance against these invoices; that there is no quantity available, no period is available; that duty of excise cannot be demanded on pro rata basis; that it has been held in various judgements that demand based on assumptions and presumptions is not sustainable and that suspicion, however grave, cannot taken place of proof in absence of evidence. He relied upon the decision in the case of Triveni Rubbers v. CCE, Kanpur, 2001 (75) ECC 180 (Tri) : 2001 (131) ELT 240 (Tri) and Gian Malhani v. State of Maharashtra, 1999 (110) ELT 400 (SC). The learned Advocate emphasised that allegation of clandestine removal is a serious charge which has to be established on evidence; that no qestion was asked from Shri M.S. Aggarwal, Managing Director about these 33 invoices; that when no data is available regarding clearance, quantity, etc. duty cannot be worked out by the Department.

3.3 He, further, submitted that duty demanded in respect of 13 invoices belonging to Registered dealer at Delhi is only on the ground that the said invoice book was found in the factory premises; that the demand has been confirmed relying upon the statement of Rejinder Singh, Assistant Sales Officer; that the statement of Shri M.S. Aggarwal is quite contrary to the statement of Rajinder Singh as Shri Aggarwal had mentioned that the book was brought from Delhi to complete the accounts of Delhi unit which were being maintained at factory and that the goods are first sent to Delhi Unit and then distributed from there; that the Department has not contacted any of their buyers or transporters to ascertain the facts. He emphasised that it is not possible for anyone to use the trader's invoice to cover clandestine removal particularly when the invoice bears address at Delhi; that "C" Form had been issued for Delhi's registered premises; that the statement of Rejinder Singh is factually incorrect and is without any collaboration.

4. Regarding shortage of finished goods, weighing 9881 kgs., the learned Advocate submitted that 7085 kg. of finished goods were cleared under invoices Nos. 34 to 36 all dated 19.5.95, the day the officers visited the factory; that this quantity was not shown in R.G. I register; that thus shortage remained to be 2716 kgs. on which the Appellants have no objection in paying the appropriate duty; that the penalty imposed on Appellant Company is on very high side; that penalty is not imposable on two Directors and Assistant Sales Officers under Rule 209A of the Central Excise Rules, 1944 as existence to knowledge about confiscability of the goods has not been shown; that positive evidence is required for imposition of penalty under Rule 209A. Reliance has been placed on the decision in the case of Gilloram Gauri Shankar v. CCE, 2001 (42) RLT 1010 (CEGAT) and S.U. Alvi v. CCE, 2000 (36) RLT 721 (T)

5. Countering the arguments, Shri Virag Gupta, learned DR, submitted that invoice Nos. 1 to 33 of the parallel invoice book maintained by the Appellants had been destroyed by them and as such there was no other way with the Department but to take the quantity of the goods cleared by them on pro rata basis; that the conduct of the Appellants in this case, that is maintenance of parallel book of invoice and clearance of goods without payment of duty by using those invoices and invoices of their trading firm and shortage of finished goods, is sufficient to prove that the excisable goods were manufactured and cleared by them without payment of duty; that they had destroyed the invoices from serial Nos. 1 to 33 to avoid detection by the department and as such duty is demandable from them. He relied upon the decision in the case of Flex Industries Ltd. v. CCE, Noida, 2003 (151) ELT 198 (Tri). The learned SDR further submitted that it is an admitted position that the invoice book of their registered firm at Delhi was recovered from the factory premises; that Rajinder Singh had admitted to have issued the invoices from serial No. 1 to 13 from the said invoice book from the factory premises; that this statement has never been retracted and as such has sufficient evidentiary value as held in the case of Nazir Ahmed v. CCE, 1998 (101) ELT 337 (Tri) and in the case of K.I. Pavunony v. Assistant Collector, 1997 (90) ELT 241 (SC). In respect of shortage of finished goods, the learned DR reiterated the findings as contained in the impugned Order to the effect that as the Appellants were having malafide intention of clearing the goods without payment of duty, they never tend to record the quantity clandestinely cleared in their production records; that this gets strengthened from the fact that they had destroyed the parallel invoices from serial Nos. 1 to 33. He, finally submitted that the penalty is imposable on Shri M.S. Aggarwal, Managing Director, Shri Bhupinder Nath, General Manager, and Shri Rajinder Singh, Assistant Sales Officer, as it is clear from the facts of the case and their conduct that they were fully aware about the maintenance of parallel set of invoices and also use of the invoices of trading firm or evading duty; that they were thus associated with commission of offence.

6. We have considered the submissions of both the sides. One of the demands of duty has been confirmed against the Appellant No. 1 as a parallel invoices book was found by the Central Excise Officers from the factory premises and invoice Nos. 34 and 35 issued from the said invoice book were found with the drivers of the tempos which were intercepted with the goods cleared by the Appellant No. 1. It was also admitted by them that excisable goods had also been cleared under the cover of Invoice No. 36 from the said invoice book. As invoices at serial Nos. 1 to 33 were not available, the Revenue has worked out the quantity pro rata on the basis of invoice Nos. 34 to 36. No doubt, the conduct of the Appellants casts a suspicion about the clearance of excisable goods without payment of duty. However, duty has to be demanded on the basis of quantity of goods cleared and the period during which the same were cleared. Some material/evidence should be there to arrive at a quantity of the goods cleared clandestinely. It has been held by the Supreme Court in the case of Oudh Sugar Mills Ltd. v. Union of India, 1976 Cen-Cus 81 (SC) that the finding is vitiated by an error of law if the same "has been arrived at without any tengible evidence and is based only on inferences involving unwarranted assumptions." The Apex Court has also held in the case of Gian Malhani, supra, that "accruing to the system of jurisprudence we follow, conviction cannot be based on suspicion nor on the conscience of the Court being morally satisfied about the complicity of an accused person." The learned Advocate has also relied upon the decision in Triveni Rubbers, supra, where the Tribunal has held that the value of the clearances "cannot be worked out on the basis of pro rata, taking into consideration the challans available with the Department." Following the ratio of these decisions, we set aside the demand of duty confirmed on the basis of invoices Nos. 1 to 33.

7. Similarly, the revenue has confirmed the demand on the basis of invoice book of Trading Firm found in the factory premises merely relying upon the statement of Shri Rajinder Singh without any corroboration. Nothing has been brought on record as to whether any buyer was contacted or any effort was made by the departmental Officers to conduct any enquiry from the transporter who might have transported the goods. Further, the statement of Shri M.S. Aggarwal, M.D. was also recorded on 27.12.95 in which he deposed that the Invoice book was brought from Delhi to complete the accounts of Delhi unit. It is also seen that Rajinder Singh had deposed in his statement dated 19.5.95 that the invoices were issued on the directions of Bhupinder Nath, General Manager. However, when the statement of Bhupinder Nath was recorded on the same day he had not deposed that the Trading Unit's invoice book was used to remove the goods from the factory premises. The Revenue has thus not substantiate the charge that excisable goods were clandestinely removed from the factory under the cover of Trading Unit's invoice. We, therefore, set aside the demand of duty on this count also. In respect of shortage of finished goods found in the factory, it is not disputed by the revenue that 7085 kg. of finished goods were removed under Invoice Nos. 34 to 36. This quantity has to be added to the physical balance found in the factory to arrive at the total quantity found short in comparison to the quantity shown as balance in the R.G. I registers. The Revenue is again presuming that the quantity of 7085 kg. cleared without payment of duty was not out of the recorded balance in R.G.I register without any basis. We, therefore, hold that the finished goods have to be worked out after taking into consideration the said 7085 kg. cleared on 19.5.95 itself. Accordingly, the Appellants are liable to pay duty on the quantity 2716 kg. found short. Penalty is imposable on the Appellant No. 1 as the excisable goods have been cleared without payment of Central Excise duty. However, taking into consideration all facts, a penalty of Rs. 10,000 on the Appellant No. 1 will meet the end of justice. The penalties imposed on other three Appellants are set aside.

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