M/s. Elango Industries Ltd., Shri S. Elangovan, MD, Shri S.A. Prem Kumar, M/s. Goyal Ispat Ltd. Versus Commissioner of GST & Central Excise Puducherry
Central Excise
2018 (12) TMI 1108 – CESTAT CHENNAI – TMI
CESTAT CHENNAI – AT
Dated:- 20-12-2018
Appeal Nos. E/162 to 164/2011 and E/107/2011 – Final Order Nos. 43123-43126/2018
Central Excise
Ms. Sulekha Beevi C.S., Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical)
Shri N. Viswanathan and Shri A. Mudimannan, Advocates for the Appellant
Shri K. Veerabhadra Reddy, ADC (AR) for the Respondent
ORDER
Per Bench
Brief facts are that the appellant M/s. Elango Industries Ltd. (herein after referred to as M/s. EIL) is engaged in manufacture of MS ingots. Based on intelligence that they were evading payment of central excise duty by suppression of production and clandestine removal of MS ingots, the officers of DGAE conducted search operations in the appellant's factory on 6.5.1997 and recovered docum
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d notice dated 17.6.1998 was adjudicated earlier by the Commissioner and taking note of the fact that period of seven months is overlapping with the period of first notice and that appellant had paid 50% of the duty in the earlier show cause notice, he confirmed Rs. 6,73,546/- as duty with reference to clandestine clearance of finished products and the demand of MODVAT credit was confirmed to the tune of Rs. 40,500/-. Penalty under section 11AC read with Rule 9(2) and Rule 173Q and Rule 57I of Central Excise Act, 1944 was imposed on M/s. EIL. Separate penalty under Rule 209A was imposed on Shri Elangovan, MD of M/s. EIL, M/s Goyal Ispat, Shri Premkumar, Director of M/s. EIL, Shri T.K. Raghunathan, GM of M/s. EIL, Shri S.Sankar PO of M/s. EIL, Shri G. Odayappan Managing Partner of M/s. ASRM and Shri Vijay Jain of M/s. Subash Trading Co. The adjudicating authority dropped proposal to impose penalty against remaining persons like transporters, supplier of inputs / dealers etc.
1.3 An app
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MODVAT credit. Equal penalties are imposed on M/s. EIL under Rule 173Q (1) (a), (b), (d) r/w Rule 9(2) and Rule 226 of Central Excise Rules, 2002. Penalty under Rule 209A is imposed on Shri S. Elangovan, MD of M/s. EIL, M/s. Goyal Ispat, Shri A. Premkumar, Shri T.K. Raghunathan, Shri S. Sankar, Shri G. Odayappan and Shri Vijay Jain. Aggrieved by such order, M/s. EIL, Shri S. Elangovan, MD of the appellant-company, Shri Prem Kumar and the dealer M/s. Goyal Ispat Ltd. have filed these appeals.
2.1 On behalf of the appellants, ld. counsel Shri N. Viswanathan and Shri A. Mudimannan appeared and argued the matter. Shri N. Viswanathan submitted that the Tribunal had remanded the matter to the adjudicating authority to consider afresh the issues regarding allegation of clandestine clearance as well as wrong availment of MODVAT credit. There was specific direction that the penalties which were set aside by the adjudicating authority in the earlier proceedings on the transporters, dealers etc
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, the department has not verified the payment of electricity charges. The electricity consumed by office of the factory, general maintenance and other connected places have not been taken into account by the adjudicating authority while arriving at the electricity consumed per heat. The quantity of waste also has been totally ignored. The appellant had paid up the duty and settled the earlier proceedings only to buy peace with department and to avoid litigation.
2.3 In any case and without prejudice, the respondent ought to have seen that for the periods between 21.3.1995 and 28.10.1995, the demand was quantified based on the maximum production the unit could make and the demand for duty on the clandestine removal determined based on power consumption to the extent of 1307.55 MTs was demanded and settled under the KVSS. So the claim of department that the DGAE notice has quantified the demand on different set of buyers compared to the earlier notice has no logic at all. The unit is no
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n its final order dated 7.8.2008. The statement of the transporter or the documents furnished by him cannot be relied as the issue of penalty on the transporter having attained finality, the same evidence cannot be applied against the appellant to hold that the appellant has cleared the goods clandestinely with the help of the transporter. The mere statements of Nagappan, A. Rawther, the alleged brokers cannot be relied without corroboration. They have stated that the statements were made under coercion. Therefore, the case of the department that these persons assisted in procuring unaccounted raw materials by payment in cash is not sustainable. Again, when the statements of such persons which have been relied upon by the department to issue the show cause notice and demand duty as well as recover MODVAT credit has been fully held to be unreliable so as to drop the proceedings against such persons, the deposition of the very same co-noticees cannot be relied against the appellant to de
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f such charges of clandestine clearance of finished product. The wrong availment of credit is alleged stating that there is difference in the quantity shown in commercial invoice and the excise invoice. The difference if any is very less and of 1 to 2 MTs in few occasions and cannot form basis for alleging clandestine removal of about 1700 MTs.
2.8 The other evidence relied upon by the department is the bank account of Shri Prem Kumar who is one of the Directors. It is the case of department that he was maintaining accounts wherein cash from clandestine clearance was deposited. The said director has clearly stated that he was having other construction activities and had maintained receipts and expenditure with regard to such transactions. The department has wrongly proceeded on presumption that these are financial transactions relating to clandestine clearance of goods. This explanation was not considered or verified by department.
2.9 The entire case of department is built on isolat
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mitting that there could be supply of better variety scrap to M/s. EIL. Their contradictory statements would show that they have supplied unaccounted raw materials to M/s. EIL. The commissioner has not imposed any penalty on these dealers / suppliers only because of the direction of the Tribunal that no penalty can be imposed upon such persons in denovo adjudication. However, their role for supply of unaccounted raw materials is brought out from their statements.
3.2 The second allegation is with regard to unaccounted clearance of finished products. The main argument of the ld. counsel is with regard to the production capacity and that the alleged quantity cannot be manufactured by the appellant. He adverted to para 21 of the show cause notice. From the evidence gathered, it is clear that appellant had been suppressing the actual production by showing lesser heats in their log sheets for the period from October 1995 to August 1996. For the months of December 1996 to May 1997, M/s. EIL
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of M/s. EIL, it was seen that one Shri Muthusamy, who was an ex-employee of Anjaneya Steel Rolling Mills (M/s. ASRM) was depositing cash in the said account maintained by Shri Prem Kumar. Shri Prem Kumar has not been able to give proper explanation for these cash deposits made by Shri Muthusamy. It is very much clear that the cash deposits are the funds received from unaccounted clandestine clearance of finished products. The department has been able to prove the unaccounted purchase of raw materials as well as clandestine clearance of finished products and therefore the demand of Rs. 24,13,918/- against clandestine clearance and disallowance of MODVAT credit to the tune of Rs. 18,93,298/-, the interest thereon and the penalties imposed are legal and proper.
4. Heard both sides.
5.1 The allegations are two-fold. Firstly, that the appellant has purchased unaccounted raw materials and also availed fraudulent MODVAT credit to the tune of Rs. 18,93,298/-. Secondly, that the appellant has
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rated by the Commissioner by setting aside the penalty imposed in the earlier proceedings and the said findings have become final as observed by the Tribunal in its Final Order dated 7.8.2008. Taking this into consideration, we may now address the arguments put forward by the ld. AR adverting to para 96 (96A) of the impugned order. The Commissioner has concluded that there has been unaccounted purchase of raw materials merely for the reason that in cross-examination, the traders / suppliers have deposed that there might have been a mixing up of scrap at their end. We do not find any logic in drawing inference from such statements that the appellants have procured unaccounted raw material. Apart from such statement, there is no evidence adduced by the department to show that the appellants have procured unaccounted raw materials. The other evidence is that some katcha slips were recovered from the residence of Shri Elangovan which showed payment details of scrap. That in the commercial
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8/- It is to be stated that an earlier show cause notice dated 18.8.1997 was issued to the appellant covering the period from 3.11.1994 to 28.10.1995. Almost seven months of the present show cause notice overlaps with the earlier show cause notice which was settled under KVS Scheme by paying 50% of the duty demand. In such show cause notice and settlement, the duty demand was quantified on the basis of production capacity / electricity consumption. The department was also part of such settlement. However, in the second show cause notice, the department has quantified the demand on different basis which is evidence of dealers and buyers of finished goods. We do not understand how at least for the overlapping period, the department can adopt a different method for quantifying the demand when the production capacity on the basis of electricity consumption has been the basis for quantifying the demand for a period of seven months overlapping in the earlier show cause notice. It is worthwhi
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is different from the formula accepted by both sides for the purpose of settlement under the KVS Scheme cannot be sustained insofar as the overlapping period is concerned. The question which now arises for consideration is whether a different formula is applicable to the rest of the period of dispute covered by DGAE (CE) notice. The show cause notice have offered factual support to adoption of such different formula for a part of the period of dispute. No such thing is forthcoming in the present case.”
(emphasis supplied)
5.5 Even in the denovo proceedings, the department has not been able to establish the reason for applying a different formula for demanding duty for the overlapping period. We have also to mention that when we have already concluded that the department has failed to establish procurement of unaccounted raw materials and when there is no discrepancy with regard to the stock of raw materials and finished products, noted by the department, the allegation of clandesti
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rence in quantity in some cases. For eg. Against net weight of ingots of 11.065, 12,060, 12.625 MTs. cleared on 30.1.1996, the invoices show only 9.065, 10.060 and 10.265 MTs. The difference is 1 to 2 MTs only. The allegation is that M/s. EIL cleared 1752.34 MTs clandestinely. Such minor differences in quantity in few instances are not sufficient to prove clandestine clearance of huge quantity of MS Ingots. The other evidences are the statements of brokers like D. Nagappa, R. Kumar etc. Such statements can be relied only with corroboration of documents since clandestine clearance is a serious charge. Apart from some katcha slips and private documents, department has not been able to prove the correlation of clearance of such huge quantity of finished goods with the stock / account of the buyers. Though one to one correlation may not be possible, a probable case has to be made out which is totally lacking before us.
5.8 It is further to be noted that on physical verification of stock,
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