2004 (97) ECC 617 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonal Bench : Bangalore

Dr. S.L. Peeran, Member (J) and Shri K.C. Mamgain, Member (T)

ITEL Industries Pvt. Ltd.

Versus

Commissioner of Central Excise, Calicut

Appeal No. 226/2002

[Arising out of Order-in-Appeal No. 410/2001 CE dated 10.11.2001 passed by the Commissioner of Customs & Central Excise (Appeals), Cochin]

Final Order No. 1285/2004, dt. 27.7.2004, Certified on 3.8.2004

Demand (C. Excise)

Clandestine Removal -- Assessee themselves have shown the manufacture of the goods in their own records and in the statement submitted by them to the department. Therefore, it is not for the department to establish whether the goods were manufactured or cleared when the assessees themselves have shown in their record the manufacture and clearance of the goods. Within 6 months since the assessees have not produced the proof of export in terms of the bond, they are required to pay the duty liable on the goods cleared for export -- Secs. 11A, 11AC of CEA.

PRESENT :

Shri Aravind P. Datar, Senior Advocate alongwith Shri C. Saravanan, Adv. for the appellant.

Shri L. Narasimha Murthy, SDR for the respondent.

Cases Cited :

1. Akbar Badruddin Jiwani v. CC, 1990 (27) ECC 69 (SC)..................................... [Para 3]

2. CCE Chandigarh v. Metro Tyres Limited, 2001 (43) RLT 801 (CEGAT)................ [Para 3]

3. Hindustan Steel Ltd. v. State of Orissa 1978 ELT J159..................................... [Para 3]

4. Kabra Enterprises & Ors. v. CCE Raipur, 1999 (109) ELT 571 (T)...................... [Para 3]

5. M.K. Meeran Sahib v. State, 2000 (125) ELT 288............................................. [Para 3]

6. Metal Fitting (P) Ltd. v. Collector of C.Ex. Delhi, 1997 (93) ELT 747 (T).............. [Para 3]

7. Mohd. Mohmood v. CC & CE, 1998 (98) ELT 688.............................................. [Para 3]

8. Oudh Sugar Mills Ltd. v. UOI 1978 (2) ELT J172............................................... [Para 3]

9. Rukman Bairolyia v. State of Bihar, AIR 1971 SC 746....................................... [Para 3]

10. Sayaji Iron & Engg. Co Pvt Ltd v. Collector of C. Ex., 1999 (45) ELT 104 (T)..... [Para 3]

11. Shabroc Chemicals v. CCE, Kanpur, 2002 (149) ELT 1020 (T)......................... [Para 3]

12. Sun Engichem Ltd. v. Collector of C.Ex., Pune, 1995 (75) ELT 694 (T)............. [Para 3]

Per : K.C. Mamgain

Heard both sides.

2. M/s Tata Telecom Ltd., Kanjikode West, Palakkad are manufacturers of Telephones falling under Chapter 85 of Central Excise Tariff Act. They filed 6 AR4's bearing Nos. 101 to 106/98-99 all dated 31.3.99 for export of the articles. Since they failed to submit the proof of export in respect of the clearances made under six AR4 applications with the Department, a Show Cause Notice was issued to them alleging violation of Rules 13 & 14 of Central Excise Rules, 1944 and demanding duty and proposing penalty. The case was adjudicated by the Deputy Commissioner of Central Excise Palakkad Division, who confirmed the demand of Rs. 13,06,240 and imposed a penalty of Rs. 13 lakhs on the appellants. On appeal, the Commissioner (Appeals) confirmed the duty demanded by the Original Authority but reduced the penalty of Rs. 12,000.

3. Shri Aravind P. Datar Senior Advocate alongwith Shri Saravanan advocate appearing for the appellants pleaded that during March 1999, in anticipation of an export order for 30,000 telephone instruments from Shri Lanka Telecom Ltd. through Marubeni Corporation of Shri Lanka the appellants filed form AR4 and made entry in RG I. The filing of AR4 was a mistake as the marketing division of the appellant believed that they will be able to export 30,000 telephones and they could show higher export during the period ending 31.3.99. Invoices referred to in the AR4s were serially numbered without generating invoice. The appellants were waiting for a formal export order from Shri Lanka Telecom Ltd., but contrary to their expectations, it did not receive the export orders as anticipated earlier, though they had made informal arrangements with the suppliers of the components/inputs to meet the requirement to manufacture 30,000 instruments for the anticipated export order. With the efflux of time, the Accounts Department of the appellant which handled export related issues and filed Form AR4s, lost sight of the fact that it had indeed filed export documents without manufacture/removal. There had been an error of Judgment in filing AR4 Form without corresponding manufacture and removal with a view to project higher export sale. But that by itself did not mean that there was either manufacture of 30,000 instruments or their removal for export or otherwise. The entries were made in RG I register on 31st March 1999 to show that goods had been manufactured. However, the goods were not manufactured. He pleaded that mere making entries in the RG I Register although the telephone were not manufactured is an error and for this, penalty can be imposed on the appellants. However, he stated that when neither goods were manufactured nor they were cleared for export, the question of producing proof of export or demanding duty for the goods which were not cleared from the factory does not arise. He pleaded that on 15.4.2000, the export order for Shri Lanka was cancelled. He relied on the following decisions:

(1) Oudh Sugar Mills Ltd. v. UOI 1978 (2) ELT J172

(2) Kabra Enterprises & Ors. v. CCE Raipur, 1999 (30) RLT 664 : 1999 (109) ELT 571 (T)

(3) Rukman Bairolyia v. State of Bihar, AIR 1971 SC 746

(4) M.K. Meeran Sahib v. State, 2000 (125) ELT 288

(5) CCE Chandigarh v. Metro Tyres Limited, 2001 (43) RLT 801 CEGAT

(6) Hindustan Steel Ltd. v. State of Orissa 1978 ELT J159

(7) Mohd. Mohmood v. CC & CE, 1998 (98) ELT 688

(8) Akbar Badruddin Jiwani v. CC, 1990 (27) ECC 69 (SC) : 1990 (47) ELT 161

(9) Shabroc Chemicals v. CCE, Kanpur, 2002 (149) ELT 1020 (T)

(10) Sayaji Iron & Engg. Co Pvt Ltd v. Collector of C. Ex., 1999 (45) ELT 104 (T)

(11) Metal Fitting (P) Ltd. v. Collector of C.Ex. Delhi, 1997 (93) ELT 747 (T)

(12) Sun Engichem Ltd. v. Collector of C.Ex., Pune, 1995 (75) ELT 694 (T).

He also pleaded that the show cause notice is time barred as it has been issued on 27.1.2000 by the Superintendent. He also pleaded that Shri K.S. Kasturi Rangan Finance Controller of the appellants in his statement dated 14.6.2000 in reply to question No. 2 had stated that the invoice Nos. were allotted by the person preparing AR4 on a continuous basis without any actual invoice being prepared. The lapse was noted only after the excise department inquired on the status of export of the goods. In reply to question No. 3 he replied that the goods covered under the said AR4s were never manufactured. The goods cleared for home consumption was cleared only after payment of duty. In reply to question No. 4 he stated that the error was due to clerical mistake and due to year end work pressure and reiterated that the goods were not manufactured and Department was not informed because of the bona fide belief that there was no loss of revenue. He further pleaded that for manufacture of 30,000 telephone instruments, they were not having the raw-material and he produced the CA's certificate wherein it is certified that the appellants did not manufacture 30,000 numbers of telephones during March 99 for which form AR4 No. 101/98-99 to 106/98-99 dated 31.3.99 were filed and computer generated invoice numbers were allotted. They verified the invoices of the components received during the period from which it is evident that they did not have components to manufacture 30,000 numbers of telephone instruments during the period in question. They have also verified their bank statements as on 31.3.99 and found that there was no purchases required to manufacture 30,000 instruments. Though RG I during March 99 reflects an entry to the effect that there was manufacture of 30,000 telephone instruments, there is no corresponding credit entry in the bank statement of the unit to show that there was sale of 30,000 instruments. He therefore pleaded that since department has not been able to establish that the appellants have manufactured 30,000 instruments therefore, duty demand may be set aside and only a nominal penalty may be imposed for incorrect maintenance of records.

4. Shri L. Narasimha Murthy learned SDR appearing for the revenue pleaded that the appellants are working under self-removal procedure. There is no supervision of the department, on manufacture and clearance. The control on collection of excise duty is exercised through the records and statements submitted by them. Since in their RG I register they have shown manufacture of 33460 telephones 31.3.99 and also clearance of 11310 telephones on the same date, it is clear that they have manufactured the said quantity. Further the appellants have also filed six AR4s No. 101 to 106/98-99 for clearance of the telephones for export. The AR4 application for removal of excisable goods for export is filed only when the goods are available for export. In the application they have clearly shown electronic push button telephone Model T 911 under the column description of the goods and they have also shown the marks and number on the packages for export and details of the bond. They have given certificate that the above-mentioned goods have been manufactured and they are availing facility of modvat credit under Rule 57-A and Rule 57-Q of Central Excise Rules and they have given other required declarations stating that the above particulars are true and correct. Part A Certification by Central Excise Officer on the form is also completed by the Inspector of Central Excise and countersigned by the Superintendent of Central Excise certifying that the owner has entered in to BI bond No. 10/BI/98 under Rule 13/14 of Central Excise Rules with the Assistant Commissioner of Central Excise Palakkad Division. All the certificates are signed by both the Central Excise Officers on 22.4.99. The manufacture and clearance of the goods is also shown by the appellant in their RT 12 return for the month of March 99. Therefore, all the documents which are submitted to the Central Excise department clearly show that the goods were manufactured and cleared by them for export. The appellant never approached central excise department that the goods were not manufactured or were not cleared for export. Therefore, it is clear that they have cleared the goods from the factory for export without payment of duty. Therefore, the lower authorities have correctly confirmed the demands. He also pleaded that, it is not for the department to show that the goods have been manufactured since the appellants have themselves shown in their RG I register that the goods have been manufactured and have also filed application for clearance for export in form AR4 and also filed the necessary RT 12 returns showing the manufacture and clearance. Therefore, the appellants have no case. At this late stage, it is not possible to accept that they had wrongly entered the goods in the RG I register.

He also pleaded that the certificate of the CA which is being produced now at the time of hearing should not be admitted as the appellant had never produced such a document earlier before the lower authorities. The claim of appellant that they had made wrong entry in RG-I was investigated by range Superintendent and it was found that the claim of appellant is not correct. The Dy. Commissioner has confirmed the demand only after detailed investigation and being satisfied that entry in RG-I was correct as there was no shortage found than the recorded balance by the Superintendent. He also said the demand is not time barred as the show-cause notice has been issued in terms of Rule 14 A and the bond executed by the appellants. Hence, time bar will not be applicable.

5. We have carefully considered the submissions made by both the sides. We find that the appellants claim is that they had not manufactured 30,000 telephone instruments which are entered in their RG I Register as on 31.3.99. This was done by mistake to show higher export performance. Since export order of Shri Lanka was not materialized, therefore, the AR4 forms which were submitted by them in anticipation of export order were not used for export but they failed to get these cancelled. We find that when there is entry of production in the records of appellants, it is for the appellant to establish that they have not manufactured required number of telephones. They have produced CA's certificate at the time of hearing certifying that the appellants have not received the required components to manufacture 30,000 number of telephone instruments. The certificate issued by the Chartered Accountant was neither produced before lower authorities nor during enquiry by the Department. The certificate certifies that the bank statement as on 31.3.99 shows that there were no purchases required to manufacture 30,000 instruments. They also certified that no income was generated on the invoices in dispute as there were no manufacture and removal. We find that the appellants had shown the manufacture of the telephone and entered in their RG I. They have also filed an application for removal of goods. We also find that it was argued before us that the Shri Lanka order was cancelled. We find that the Cancellation order was not produced before us. We also find that in reply to the show-cause notice, the appellant had stated that the planning department had advised the shop floor to complete the production process. All concerned were simultaneously advised to be ready with necessary documentation. To the grant surprise of all, they came to know that shop floor had assembled the open market phones instead of export phones. On enquiry, the error in executing the production appeared to be an error in normal course of human conduct. In the last but one para it is also mentioned in their reply to SCN that their expected order from Shri Lanka Telecom fructified and they have supplied 47,840 telephones under AR4 as per Annexure I. AR4 shown in Annexure I are dated from 20.5.99 to 3.2.2000. Thus, plea of the appellant that the order was cancelled also does not appear to be correct. The decisions relied upon by the appellant are regarding clandestine removal or where the department has alleged extra production and not relevant to present case. In the present case, the appellants themselves have shown the manufacture of the goods in their own records and in the statement submitted by them to the department. They have also submitted the application for clearance of the goods for export. Therefore, it is not for the department to establish whether the goods were manufactured or cleared when the appellants themselves have shown in their record the manufacture and clearance of the goods. The department's case is only based on the fact that, they have not produced the proof of export. Since the appellants have not produced the proof of export in terms of the bond, they are required to pay the duty liable on the goods cleared for export. The CA's certificate cannot be accepted as it was not produced before the lower authorities who could have examined its veracity.

Therefore, we are not convinced with the arguments of the appellants that there was mistake in showing the number of telephones manufactured. We also find that there was no shortage of phones than recorded balance when Superintendent verified the stock during investigation. They have never come to the department to get cancelled the documents/application for export. If there would have been mistake on their part in showing wrong manufacture or filing an application under which goods were not exported, they would have got it cancelled. We also find that in the RT-12 for the month of March 1999 the appellants have shown manufacture of 171142 Nos. of Electronic Push Button telephones and duty free clearance of 56200 Nos. of such phones. The RT-12 was prepared on 5.4.99. If there was mistake, it could have been detected at that time. AR 4 was signed by Central Excise Officer on 22.4.99, mistake could have been detected then also. Therefore, we do not find any merit in the arguments of the appellants who are working under SRP and responsibility lies on them to produce the correct documents. It is not only in one document that the manufacture is shown, but is also shown in their monthly report/in form RT-12 return. Application for export was filed for the goods and bond amount was also debited and the same was certified by Central Excise Officers. Since the procedures have been liberalized and these are the only controlling documents submitted to the department and these documents show that there been production and clearance for export under bond. Therefore, appellants were required to produce proof of export of the goods within six months from the date of clearance. Since they failed to do so, duty was correctly demanded. The Commissioner (Appeals) have given detailed finding in para 5 of his order and we do not find any reason to differ with him. Show cause notice is not time barred as the goods were not exported in terms of bond executed for export of the goods.

6. We therefore do not see any merit in the appeal and the same is rejected.

……………………….