2017 (11) TMI 478 - AT - Central Excise

Tribunal rules in favor of Alumeco Ltd, exempts duty on profiles supplied to Agarvanshi Ltd

Alumeco India Extrusion Ltd, Agarvanshi Aluminium Ltd., Mr. B.B. Agarwal, Mr. Rahul Agarwal And Mr. P. Bhaskara Rao Versus Commissioner of Central Excise, Hyderabad

The Tribunal allowed all appeals, holding that Alumeco Ltd is not liable to pay duty on profiles cleared to Agarvanshi Ltd under Notification No ... Clandestine removal - job-work - Whether the total quantity of 1071.3863 MT of materials sent by Agarvanshi Ltd under job work challans in terms of Notification No 214/1986-CE were received by Alumeco Ltd? - Held that: - the department has failed to establish from the record that 380.256 MTs of materials have not been received by Alumeco Ltd. Burden of establishing the fact of receipt of material cannot be shifted upon Alumeco Ltd. Whether Alumeco Ltd performed the declared process of homogenization and cutting cannot be a criterion to decide whether they have received material for job work from Agarvanshi Ltd. We also find from the record that the Adjudicating Authority has clearly held that profiles to the tune of 1063.6222 M.Tons have been manufactured by Alumeco Ltd. However, we find that no evidence has been lead by the department to show that the said profiles were made out Alumeco's own raw material and not out of the materials sent for job work by Agarvanshi Ltd. We have, therefore, no hesitation in holding that the entire quantity of raw materials to the tune of 1071.3863 MTs sent by Agarvanshi Ltd has been received by Alumeco Ltd. Whether the job work profiles cleared by Alumeco Ltd were manufactured out of the materials supplied by Agarvanshi Ltd? - Held that: - There is nothing in the impugned order to show that the raw materials used for manufacture and clearance of profiles to Agarvanshi Ltd was procured clandestinely. There is nothing to show that profiles have been sold clandestinely in the open market. No such instance has been given in the impugned order. In fact, Agarvanshi Ltd has submitted that all the profiles received from Alumeco Ltd were cleared on payment of duty after due accountal in their books of accounts. Shri Bhaskar Rao during hearing has drawn our attention to the raw material inventory reconciliation statement annexed with the appeal paper book. According to him, every kilo of materials was accounted by Alumeco Ltd, monthly reports were also submitted to the Management. The Investigating Officers had taken all these documents and it is beyond imagination that if there are cash purchases of raw material and cash sale of profiles, the inventory would tally month to month. There was no possibility of huge quantity of invoices without receipt of raw material. We find the revenue in response thereto has failed to point out any discrepancy with the records produced by the Bhaskar Rao in his appeal. We, therefore, hold that the profiles sent by Alumeco Ltd to Agarvanshi Ltd were made out of the materials sent by Agarvanshi Ltd to Alumeco Ltd under the job work challans. Whether Alumeco Ltd is entitled to the benefit of Notification No. 214/86-CE? - Held that: - this Tribunal in the case of Moon Chemicals vs. CC [2007 (6) TMI 324 - CESTAT, CHENNA] has held that the omission of filing an undertaking cannot be a ground to deny the benefit of the exemption under N/N. 214/86-CE - The submission of the revenue with regard to the fact that Notification 214/1986-CE has to be strictly interpreted and procedural lapse cannot be condoned, cannot apply to the present case as in the present case - the benefit of Notification 214/1986-CE cannot be denied to Alumeco Ltd. They are, therefore, not liable to pay duty on the clearance of profiles to Agarvanshi Ltd. Whether appropriate duty has been paid on the profiles sent by Alumeco Ltd.? - Held that: - there is nothing in the impugned order to indicate that the profiles cleared by Agarvanshi Ltd are actually the profiles made by them using their own raw material. Revenue has also failed to show that the profiles received from Alumeco Ltd have been sold in the open market clandestinely. Not even a single buyer has been identified to show that Agarvanshi Ltd has sold the profiles in cash in a clandestine manner. Merely stating that indication of equivalent number of profile in the sale invoice of Agarvanshi Ltd does not ipso faco prove duty payment by Agarvanshi in respect of profiles is not enough to hold that profile sent to Agarvanshi Ltd by Alumeco Ltd has been cleared in the market without payment of duty. Efforts should have been made by the Revenue to disprove the invoices or documents produced by Bhaskar Rao to indicate that Agarvanshi sold the profiles in market without raising any invoice. The details produced before us by Bhaskar Rao are not only confined to invoices showing payment of duty by Agarvanshi Ltd but the same has also been co-related with Alumeco's profile nos. In the absence of any evidence to the contrary, we hold that job worked profiles received by Agarvanshi Ltd has been finally cleared on payment of duty. Thus, there has been no loss of Revenue in the present case - Alumeco Ltd is not liable to pay duty on 1063.6222 M.Ts of profiles cleared after job work to Agarvanshi Ltd in terms of N/N. 214/86-CE. As regards confirmation of duty demand on 46.0166 M.T's of aluminium extrusions to Agarvanshi Ltd, we find that there is no finding by Adjudicating Authority. The Adjudicating Authority has not even rejected the submissions made by Bhaskar Rao, former Managing Director of Alumeco Ltd. This demand is also, therefore, set aside. Appeal allowed - decided in favor of appellant. Issues Involved:1. Receipt of materials by Alumeco Ltd under job work challans.2. Manufacture of profiles by Alumeco Ltd using materials supplied by Agarvanshi Ltd.3. Eligibility of Alumeco Ltd for the benefit of Notification No 214/1986-CE.4. Payment of appropriate duty on profiles sent by Alumeco Ltd.5. Imposition of penalties on Alumeco Ltd, Agarvanshi Ltd, and their directors.Detailed Analysis:1. Receipt of Materials by Alumeco Ltd Under Job Work Challans:The Adjudicating Authority acknowledged that 691.130 MT of materials were received by Alumeco Ltd from Agarvanshi Ltd, but disputed the receipt of 380.256 MT. The Authority failed to acknowledge the documents recovered during the investigation, which included production, packing, and clearance records, job work records, and various registers. The Tribunal held that the department did not establish that 380.256 MT of materials were not received by Alumeco Ltd, thus concluding that the entire quantity of 1071.3863 MT sent by Agarvanshi Ltd was received by Alumeco Ltd.2. Manufacture of Profiles by Alumeco Ltd Using Materials Supplied by Agarvanshi Ltd:The Tribunal found no evidence from the Revenue to show that profiles made and sent to Agarvanshi Ltd were made out of Alumeco’s own raw material. The Tribunal noted the absence of any evidence indicating that the materials received from Agarvanshi Ltd were sold clandestinely in the market. The Tribunal concluded that the profiles sent by Alumeco Ltd to Agarvanshi Ltd were made out of the materials sent by Agarvanshi Ltd under job work challans.3. Eligibility of Alumeco Ltd for the Benefit of Notification No 214/1986-CE:The Adjudicating Authority denied the benefit of Notification No 214/1986-CE based on procedural lapses and differences in job work processes. The Tribunal found that the processes indicated in the job work challans were necessary for the manufacture of profiles and that the profiles were manufactured out of the raw materials kept in stock received from Agarvanshi Ltd. The Tribunal held that the benefit of Notification No 214/1986-CE could not be denied to Alumeco Ltd, as the raw materials were received, converted into finished goods, and sent back to the principal manufacturer, who then cleared the goods on payment of duty.4. Payment of Appropriate Duty on Profiles Sent by Alumeco Ltd:The Tribunal reviewed the records and found that the profiles received from Alumeco Ltd were cleared by Agarvanshi Ltd on payment of duty. The Tribunal noted that the Revenue did not deny the receipt of profiles by Agarvanshi Ltd or dispute the payment of duty shown in the invoices. The Tribunal concluded that the job-worked profiles received by Agarvanshi Ltd were cleared on payment of duty, complying with the undertaking to pay duty in terms of Notification No 214/1986-CE.5. Imposition of Penalties on Alumeco Ltd, Agarvanshi Ltd, and Their Directors:The Tribunal found that the penalties imposed on Alumeco Ltd, Agarvanshi Ltd, and their directors were unwarranted and unsustainable, as the profiles were manufactured out of the materials supplied by Agarvanshi Ltd and cleared on payment of duty. The Tribunal set aside the penalties imposed on Bhaskar Rao, Agarvanshi Ltd, and its directors.Conclusion:The Tribunal allowed all the appeals, holding that Alumeco Ltd is not liable to pay duty on the profiles cleared to Agarvanshi Ltd under Notification No 214/1986-CE and set aside the penalties imposed. The Tribunal also set aside the duty demand on 46.0166 MT of aluminium extrusions to Agarvanshi Ltd due to the lack of findings by the Adjudicating Authority.