2018 (5) TMI 1300 – CESTAT NEW DELHI – TMI – Penalty u/r 209A of the Central Excise Rules – Clandestine removal – Cigarettes – demand of duty on on all duplicate bills and entries made – absence or proper evidences – Held that: – during the period February, 1989 to March, 1992, all the franchisee units were under the strict physical control and supervision of the Excise Department who also maintained their own record. The impugned order or the show cause notice is silent on this aspect. The assessee-Appellants had repeatedly requested for production of diary XT-I which was never produced – the Department has not verified suppliers’ bills or the purchasers’ bills. No evidence was collected to adjudicate the clandestine removal of the goods which were transported and sold.
–
The bank officers accepted that the bills were discounted without any physical verification of the goods – all the transactions of the bill discounting were duly recorded in the books of account of both the par
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
r, Member ( Technical ) For the Petitioner : Sh. V.K. Bindal, CA For the Respondent : Sh. R. K. Mishra, DR ORDER Per Bijay Kumar All the present appeals are filed by the assessee-Appellants against the Order-in-Appeal No. 16-21/CE/PKJ/CCE/ADJ/2010 dated 09.07.2010 passed by the Commissioner (Appeals) Central Excise, Delhi. 2. This is the second round of litigation before the Tribunal. Earlier the Tribunal vide Final Order dated 10.04.2002 had remanded the matter to the original authority for deciding the issue afresh. In compliance with the directions, the impugned order has been passed where duty has been demanded and penalties have been imposed on various assessees. Out of which, the above named assessee-Appellants have filed the appeals and rest of the assessees have not filed any appeal. 3. The brief facts of the present appeals are that, the assessee-Appellants and its franchisees were engaged in the manufacture and sale of cigarettes. A search was conducted on 08.06.1993 at the f
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
and the other original invoice of the identical serial number was supported by the photocopy of the same Central Excise gate pass and both these invoices were discounted by the franchise units from their respective banks. 5. According to the assessee-Appellants, this exercise was done intentionally to obtain the bank loans from the different banks. But the Department has refused the plea and demanded the duty on all duplicate bills also and entries made. The Department has also imposed penalties. Being aggrieved, the assessee-Appellants have filed the present appeals. 6. With this background, we have heard Shri V.K. Bindal, learned Chartered Accountant for the assessee-Appellants and Shri R.K. Mishra, learned DR for the Revenue. 7. The learned Chartered Accountant has, at the strength of written submissions, submitted that no evidence of any nature was found from the premises of GTC or the franchisee units to suggest any clandestine removal of the cigarettes as nothing has been mentio
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
inal search was conducted in the year 1993. The adjudicating authority has accepted the additional evidence holding that the allegation of unaccounted receipt of material and clandestine removal of cigarettes were already levelled against the noticees in the show cause notices and no new allegations are sought to be added by additional evidences nor any additional liability is demanded. It is the further submission of the learned Chartered Accountant that the records seized from the premises of the assessee-Appellants or its franchise units did not show iota of evidence to prove clandestine removal of the cigarettes. No reference to any such evidence has been made in the show cause notice or the order-in-original. The quantification of clandestine removal of cigarettes has been made only on the basis of bill acceptance register maintained by GTC to manage the timely payment of bills discounted from the banks including the accommodation bills which was also not seized but was produced b
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
anges etc. without giving any guarantee or assets as security to the banks of the franchisee units. 9. The learned Chartered Accountant further submits that the assessee-Appellants and franchisee units were, during the period under dispute i.e. February, 1989 to March, 1992, under the strict physical control and supervision of the Excise Officer who supervised the manufacturing activities very closely. For this purpose, records were maintained by the Excise Officers posted there in the diary XT-1 for movement of the goods. The Departmental Officers having been constantly present and closely supervising all the activities in the factory. 10. According to the learned Chartered Accountant, there is nothing contrary to show that the goods were cleared at any time in contravention of the provisions of Rule 9(i) without payment of duty. The clandestine removal implies a conscious intention to evade payment of duty. This inference cannot be reached when proper procedure is followed and when t
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
action of any nature whatsoever has been taken against the Excise Officers in all the cigarettes supplying manufacturing units located all over the country, so allegation of clandestine removal cannot be sustained. He also submits that duplicate bills were merely an accommodation bills and there was no actual physical movement of the goods. All the transactions were duly recorded in the books of accounts of both the parties. He also informed that ITAT has deleted the additions made on this ground under the Income Tax Act for the assessment year 1992-93, so similar treatment may be given in the present case. 12. As per the statement of learned Chartered Accountant, penalty under Section 209A cannot be imposed on corporate body and, therefore, GTC is not liable for the said penalty. In an alternative plea, he submits that if the Excise Officers and management of GTC were in any manner involved or engaged in clandestine removal of cigarettes as has been mentioned in the show cause notice,
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
CE, Kanpur, (1999) taxmann.com 385 (CESTAT-New Delhi); and (v) Sujana Metal Products Ltd., 2016 (335) ELT 218 (Madras) 13. Lastly, he made a request that the impugned order may kindly be set aside. 14. On the other hand, the learned DR for the Department, heavily relied upon the impugned order as also the show cause notice. It is his submission that the goods were discounted by the Bank only when the receipt of the goods were duly acknowledged by the GTC on the duplicate bills. This shows that there was actual movement of goods on duplicate bills without payment of excise duty. According to the learned DR, the additional evidences found during search in the year 1995 clearly support the contention of the Department and prove that there was procurement of unaccounted raw material and cut tobacco. It is further submission of the learned DR that physical supervision of the manufacturing units by the Excise Officers does not mean that the Excise Officers were there in the factory for 24 ho
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
in spite of endorsement on the documents by GTC of receipt of cigarettes. During the course of arguments, the learned DR read out para 97 of the impugned order wherein it is stated that manufacture of cigarettes is subject to physical control and the Department has also prescribed a detailed Cigarette Manual which regulates every activity in connection with the manufacture of cigarettes. It was also contended that demands on the basis of clandestine removal cannot be made and established in cases where there is physical control except through unimpeachable evidence of clandestine clearance. According to him, the assessee-Appellants purchased tobacco from GTC through supplies made by M/s Deccan Tobacco Processors Pvt. Ltd., Hyderabad (DTPL). Thus, bills were discounted with the banks for their transaction and not as accommodation bills. 15. Lastly, the learned DR justified the impugned order. 16. We have heard both sides and perused the material available on record. In the instant case,
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ce without knowledge of the departmental officers and in violation of the guidelines issued. 18. As per the ratio laid down by the Hon ble Supreme Court in the case of Audh Sugar Mills, 1978 (2) ELT J172, it was held that in the case of physical control units, cannot be held that there was suppression of facts and the assessee clandestinely manufactured and removed the goods so as to invoke the extended period of limitation. 19. Undoubtedly, in the instant case, during the period February, 1989 to March, 1992, all the franchisee units were under the strict physical control and supervision of the Excise Department who also maintained their own record. The impugned order or the show cause notice is silent on this aspect. The assessee-Appellants had repeatedly requested for production of diary XT-I which was never produced. 20. In the instant case, the Department has not verified suppliers bills or the purchasers bills. No evidence was collected to adjudicate the clandestine removal of th
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
t of the goods. These documents in original along with a Hundi accepted by buyer and were presented to their bank by the franchisee units for bill discounting. The amount of the bill after deducting charges and interest for the period of bill (normal 90 days) is credited in the bank account of the franchisee units at the time of discounting the bill by the bank. The same is paid by the buyer on the due date of bill. In this manner, the buyer avails a credit facility of 90 days to make the payment of his purchases whereas the seller gets the sale proceeds immediately on presentation of the bill. To meet the working capital shortfall, GTC in some cases got prepared duplicate invoices of its franchisee units and delivery challans bearing the same numbers from its employee like, Mr. Kamdar from Mumbai, who was made the authorised signatory by the franchisee units for the purpose. Since this duplicate bill discounting facility from the Bank could not have been availed in absence of the know
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ing cross-examination that the banks were not physically verifying the transactions and that bill discounting may have been done on the basis of Xerox copies of the invoices. 23. From the record it appears that, all the transactions of the bill discounting were duly recorded in the books of account of both the parties. 24. In view of the above, we are of the opinion that the assessee-Appellants has committed a fraud with the Banks by raising the duplicate bills. For this financial irregularity, Department will be at liberty to initiate appropriate proceedings under the relevant law. But, in the instant case, the goods were not moved and there is no evidence pertaining to the clandestine removal of the goods. 25. We also see violation of the principle of natural justice as no opportunity of cross-examination of the Departmental witnesses was provided. However, regarding the cross-examination, we are of the view that the disputed period was since 1989 to 1993 and no useful purpose will b
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =