2005 (98) ECC 138 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

West Regional Bench : Mumbai

Shri S.S. Sekhon, Member (T) and T. Anjaneyulu, Member (J)

S.J.N. Auto Industries Pvt. Ltd. & Ors

Versus

Commissioner of Central Excise, Mumbai-V

Application in Appeals No. E/3191, 3190, 3189/2003

[Arising out of Order-in-Appeal 27/Commr/V/2003 dated 6th August, 2003 passed by the Commissioner of Central Excise Mumbai-V]

Order No. A/723-725/WZB/2004-C-II, dt. 27.8.2004, Certified on 31.8.2004

Confiscation (C. Excise)

Demand -- Act on the part of the department to some-how make out a case, such orders cannot be approved -- Relying on a panchnama weight and working out demands of duty by rejecting the information supplied by Mahindra & Mahindra could not be sustained.

Demand (C. Excise)

No Material of removal of the huge quantity of goods found where value was estimated without any corresponding material about and on receipt/recovery of money or and actual transport having been effected, was a demand made on presumptions it could not be upheld.

Appeals allowed

PRESENT :

Shri J.N. Pikle & Deepa Pikle, Advs. for the appellants.

Shri Sanjay Singhal, JDR for the respondent.

Cases Cited :

1. A.K. Tantil, 2003 (158) ELT 638...................................................................... [Para 2]

2. Bhilai Conductors (P) Ltd. 2000 (125) ELT 78................................................... [Para 2]

3. Emperor v. Mohanlal Babla, 1940 (43) Bom L.R................................................ [Para 2]

4. Glade Containers Castings Ltd., 1985 (19) ELT 408 (A.P.)................................ [Para 2]

5. Harwood Garment 2003 (158) ELT 401 (SC)..................................................... [Para 2]

6. Kirloskar Brother 1988 (34) ELT 301 (Bom)...................................................... [Para 2]

7. Naguba v. B. Shen Roa AIR 1956 SC 595....................................................... [Para 2]

8. Southern Steel Ltd., Hyderabad, 1979 ELT 402 (A.P.)....................................... [Para 2]

9. Steel Authority of India Ltd., 2001 (46) RLT 701................................................ [Para 2]

10. Vishnu Krishna v. State of Maharashtra, 1974 (76) Bom LR. 627 (FB)............... [Para 2]

Per : S.S. Sekhon

On 16.10.2001, the officers of preventive wing of the Commissioner of Central Excise Mumbai-I pursuant to an intelligence developed by them, searched the premises of M/s Sun Auto Industries Pvt Ltd., (hereinafter referred to Sun for short) and a proprietary firm of Sushil Parilar, named Sumansu Enterprises, who was at the relevant time a Director of Sun. They drew panchanama, seized records and took physical stock of the goods, raw material at the factories. Issued summons and recorded statements, especially of Sh. Jaykumar Menon (hereafter referred to as Menon) another Director of Sun, Shri Navin Parilkar (hereafter referred to as Navin) yet another Director of Sun, Sushil, Shri Santosh George, the excise clerk, who was supervised by Menon to comply with Central Excise matters and others. A Show Cause Notice was issued on 15.4.02 demanding duty by restricting the same to and on `Clearances effected of inputs, semi-finished goods their under seizure equivalent to Modvat/Cenvat credit invalid in respect of such goods, semi-finished goods under seizure finished goods under seizure. The Commissioner vide order dated 6.8.03 confirmed the demand, confiscated the goods valued at Rs. 6,60,175 seized at imposed penalty under Section AC & held interest to be liable under Section 11AB & penalties under Rule 209 A on SUN, SUMANSO & NAVIN. No penalty liability was found, as regards Menon and also the other charges on SUN was dropped. Hence, these appeals.

2. After hearing both sides and considering the material on record it is found --

(a) The appellants have stressed upon the fact of Navin's arrest, on grounds of clandestine removal of finished goods, they have elaborated on how that was the case of the department before the Magistrate & the High Court in the bail proceedings. They have relied upon the affidavits & submissions made in those proceedings, especially the averments "there is no removal of inputs". They have also cast doubt on and about the validity of the arrests. While this Tribunal is not sitting over the validity or otherwise of the arrest of `Navin's the mere fact that the arrest was for clandestine removal of finished goods and averments were made by Department of `no removal of inputs' will not ipso facto render these proceedings initiated void, if on enquiries made such proceedings are called for.

(b)`Menon was the Director in charge and responsible for supervising the clerk looking after Central Excise matters. They have been conveniently exonerated by Revenue. Proceedings against `Menon' have been dropped. Especially after the Commissioner has recorded that "However no reply was filed by Shri Jay Kumar Menon the notice No. 6" when a show cause notice was issued specially to him which avers as to why penalty should not be imposed on Menon under rule 209A, that gives a strong veil to shield from liabilities the other Directors and technical persons who would and are not familiar and aware of and not responsible for day to Excise law Compliance. The Commissioner has erred in his findings and reliance by the Ld. advocate on the decision of Naguba v. B. Shen Roa AIR 1956 SC 595 is well founded.

(c) Following the law on non-accountal in production records and consequent liability to confiscation and penalty is based on the decision of Bombay High Court in case of Kirloskar Brother 1988 (34) ELT 301 (Bom), Hon'ble High Court in case of Glade Containers Castings Ltd., 1985 (19) ELT 408 (A.P.) goods were not properly accounted, confiscation and penalty under Rule 173Q could be upheld. However, the Hon'ble A.P. High Court Division Bench in the case of Southern Steel Ltd. Hyderabad, 1979 ELT 402 does not uphold liability of confiscation, under Rule 173Q simulator non-accounted when no goods are found to be removed from the factory without payment of duty. The decision of the Hon'ble High Courts bring in that liability to confiscation and penalty for goods, not entered in the registers, only when there is concurrent evidence of clandestine non duty paid removal with non-accounted simplicities non-accountal in registers can lead to confiscation and penalty under rule. Rule 173Q, invoked. That was the majority view of the Tribunal, in case of Bhilai Conductors (P) Ltd. 2000 (125) ELT 78 and would be thus bunking.

(d) The departments case is built on statements recorded and the summary retrieved from the computer. This material has to be looked into in light of the fact of in fighting amongst the Directors. A comparison chart, prepared by the appellants Ld. Advocate of the statements recorded has been produced, a perusal of the same indicates the strong undertones of hostility on part of Shri Jaykumar Menon and an attempt to somehow implicate the assessee and other Directors, without taking any blame on himself. Since Jaykumar Menon was responsible for maintenance of the Excise Records , absolving him of penal consequences, when he has not even classified his position during the enquiries or in the Show Cause notice proceedings/hearings, raise doubts about the element of Department Bias to exist as against the appellants herein, as urged by the appellants before us. Enquiries and adjudication orders with a trace of bias cannot be upheld. The acquittal of Shri Jaykumar Menon by the adjudicator, of penal consequences, would call for acquittal of the assessee company following the law as laid in the case of Harwood Garment 2003 (158) ELT 401 (SC).

(e)The reliance of the Commissioner on commuter stock summary is also not well founded, for the reasons --

--(i)

--The authenticity of the weights mentioned and the hand written notations therein cannot be relied upon. The plea of the appellants that the weight of the parts as taken are arbitrary is well founded.

--(ii)

--The opening stock taken as on 5.4.99 for completion to work out the quantities of inputs involved based on these computer statements prepared for Bankers & other such uses, without any authentic data on weight of parts therein cannot be relied upon. The accepted position is that the assessee entered the Modvat credit on 24.11.99 & had to declare the inputs as per the rules under that scheme. The working out on certain conversion format by the department to arrive at and taken opening stock position with effect from 5.4.99 when the raw materials were not inputs is therefore not upheld.

--(iii)

--It is well settled, that statements prepared, for Bankers etc, for over draft and other purposes cannot by relied upon for Excise purpose.

--(iv)

--From Annexures B the Show Cause Notice it was demonstrated that the weight of same Part differs. Even in the two Panchanama i.e. dated 16.10.2001 and 18.10.2001 record the weight of parts (e.g. Tow hooks to be as 13750 kgs. and 15.250) and this product within itself would claim to be 80% of the goods manufactured.

--(v)

--Nylon Brush Weight is taken as 10 kgs when the weight of this part is only 0.015.kg.

--(vi)

--The figure for quantity of M.S. Bright Bars is 53.100 kgs in the stock summary report, while it is reckoned at 53100.00 kgs as raw material purchases in working out the alleged shortage. This one error has increased the inputs receipts by 53046 kgs.

--(vii)

--The addition of receipts with effect from 1.4.99 to 23.11.99 Modvat input's receipts have been inflated by 857.001 MTS.

--(viii)

--Overlapping period in stock summary i.e. at period 1.4.99 to 27.4.2002 is against accounted in period 1.4.2000 to 27.4.2000 is again accounted in the period 1.4.2000 to 31.3.2001.

--Notices to Show Cause and orders confirming based on the same, on such in accurate figures would exhibit a lack of application of mind, if not a deliberate act on part of the department to some how make out a case. Such orders cannot be approved.

(f)  The non-reliance by the adjudicator and the Show Cause Notice issuing authority on the replies received from M/s Mahindra and Mahindra Ltd., the sole buyers of the assessee products, which were made to their specification and quality of the buyer, and when on the weights shown thereunder are considered and a work sheet prepared by the appellants on that data from M/s Mahindra and Mahindra is considered, the losses appear to be restricted to 2.6%. This vital piece of relevant evidence and explanation has been brushed aside by the adjudicator, only on the grounds that `Panchanama' weights have not been disputed. When it is found that even the Panchanamas are recording different weights and there is on record appellants Director Navin's statement dated 31.10.01 to the effect.

--"............The quantity mentioned in the above document of stock summary for the period 1.4.99 to 16.10.2001 seem to be correct as far as dispatches are concerned but the weight calculation needs to be checked"

--That should have induced the investigators and the adjudicators to have caused for a recheck of the weight calculations. The investigators did proceed to do so by issuing a summon to M/s Mahindra & Mahindra. They obtained the data and the assessee produced a chart on that basis. However that evidence supporting the assessees bonafides was brushed aside, since that appeared to be inconvenient. The weight put in "ink" on the summary, said to be provided by Shri Abhyanhar, by referring to records, in the case, to rebut the evidence from M/s Mahindra & Mahindra cannot be taken to be Gospel truth, when it is pointed out from the documents that the weight in ink for `Rear Tow Hook is written as 13.5 kgs. while the notice reckons the same as to be 20 kg. The reliance on such figures cannot be made. The order brushing aside the material, produced in defence, based on reliable date from M/s Mahindra & Mahindra and then basing itself on unreliable data in the notice cannot be upheld.

(g) The submission of the Ld. advocate that it is futile on the part of the respondent to say that creditability and acceptability of `Panchanama' outweigh the information collected from M/s Mahindra & Mahindra on summons issued under Section 14 which amount to a `Judicial Proceedings' has force on considering the following para, relied upon by the Bombay High Court quoting Justice Beaumont with approval as to the nature and purpose of a document styled as Panchanama (see. Vishnu Krishna v. State of Maharashtra 1974 (76) Bom LR. 627 (FB). The quote approved reads --

--".................... The Panchanama is merely a record of what a panch sees, and the only use to which it can properly be put is that when the Panch goes into the witness box and swears as to what he saw, the panchanama can be used as a contemporary record to refresh his memory......"

[Emperor v. Mohanlal Babla, 1940 (43) Bom L.R. (63)]

--Therefore, relying on a Panchanama weight and working out demands of duty by rejecting the information supplied by M/s Mahindra & Mahindra cannot be sustained & order impugned is required to be set aside.

(h) No material of removal of the huge quantity of goods found short i.e. 860.94 MT where value is estimated to be Rs. 1,17,51,031 without any corresponding material about and on receipt/recovery of money or and actual transport having been effected, is a demand made on presumptions it cannot be upheld. Reliance on the case of Steel Authority of India Ltd., 2001 (46) RLT 701 is well founded by the Ld. Advocate, to induce us to set aside the order and allow the appeals.

(i)  When duty demands cannot be upheld, the penalties cannot be sustained. Reliance of the appellant on A.K. Tantil, 2003 (158) ELT 638 is well placed to call for setting aside order on the penalties.

(j)  As regards the seizure of goods allegedly clandestine removed, the goods are explained to have been removed for painting, cutting and fabrication somewhere in October 2001 to the premises of M/s. Sumansu who had taken possession of their premises only on 1.7.2001. Therefore, permitted period of 180 days was not over for the return. In the statement dated 16.10.2002, Sushail has admitted to be doing job work. Modvat challan file was seized on 16.10.2002 and the explanation were offered with challan on 28.10.2002. The adjudicator also notes such removal at para 5.1 page 14 of the impugned order and permission at page 16 of shifting of the material post seizure to Kandivili premiers. The explanation offered are therefore accepted no case or cause is made to order the confiscation and impose penalty.

(k) Since no duty demands are found which could be made out, no orders on interest would survive.

3. In view of the findings the order is set aside and appeals allowed.

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