TaxTMI 
TaxTMI 
2001 (10) TMI 870
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....ontravention of the provisions of Rule 9(1) of the Central Excise Rules, 1944, under sub-section (2) of section 11A of Central Excise Act, 1944 read with sub-section (1) of Sec. 11A of CE Act, 1944. However, an amount of Rs. 5 lakhs paid by BEC shall be adjusted towards the duty payable as determined above; (ii) I also demand an amount of Rs. 7,72,693 differential duty payable in respect of clearances made during the period from July, 97 to November, 97 by BEC under sub-sec. (2) of Sec. 11A of Central Excise Act, 1944 read with sub-section (1) of sec. 11A of Central Excise Act, 1944 since BEC is not eligible to avail SSI benefits for the year 1997-98 as proposed in the show cause notice issued under C. No. V/84/15/206/97, dt. 5-1-98 (OR No. 25/98-Hyd-III/Adjn.); (iii) I also demand an amount of Rs. 31,38,596/- being the differential duty payable in respect of show cause notices OR No. 142/98, dated 30-10-98 (Rs. 6,51,003), OR No. 32/99, dated 19-2-99 (Rs. 4,66,017), OR No. 128/99, dated 13-7-99 (Rs. 70,671), OR No. 153/99, dated 2-11-99 (Rs. 9,92,191) and OR No. 48/2000, dated 22-3-2000 (Rs. 9,58,714) during the period April, 98 to Fe....
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.... supra, under the provisions of Rule 173Q. However, BEC can redeem the same on payment of a fine of Rs. 10,000/- (Rupees ten thousand only). (xii) I confiscate 8 nos. of button bits valued at Rs. 24,000/- seized at M/s. Precision Metal Treaters as discussed at Para 68 supra, under the provisions of Rules 173Q of Central Excise Rules, 1944. However, BEC can redeem the same on payment of a fine of Rs. 1,000/- (Rupees One thousand only). The allegation made against the appellants have been brought out in the brief facts of the case by the Commissioner in Paras 1 to 12 which is reproduced below : "BRIEF FACTS OF THE CASE : M/s. Beaver Engineering Corporation, Kushaiguda, Hyderabad (hereinafter referred to as "BEC/assessees") are the manufacturers of parts of drilling rigs, such as tungsten carbide button bits (hereinafter referred to as "Bits/Button Bits") falling under Chapter sub-heading No. 8207, attracting duty @ 15% and down-the-hole hammer assemblies (hereinafter referred to as "hammers") and parts thereof, falling under chapter sub-heading Nos. 8430.00 and 8431.00 respectively, attracting duty @ 13% of Central Excise Tariff Act, 1985 and are availing exem....
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....ce of Shri N. Ranga Rao, Area Sales Manager, M/s. Drillco Metal Carbides Ltd. 4. The officers have also verified physical stocks with the entries in the statutory records and noticed the following discrepancies : (i) button bits and hammer assemblies valued at Rs. 2,44,600/- found in excess at M/s. BEC. (ii) parts valued at Rs. 1,57,696/- found in excess at M/s. Beaver Rock Drills, Sec'bad. (iii) 8 Nos. of 'BEAVER' make Button bits valued at Rs. 24,000/- found at M/s. PMT received without any valid document from BEC, for job work without any documents. In view of the said discrepancies and on reasonable belief, that the goods are liable for confiscation, the officers have seized the said goods at the respective places mentioned at (i) to (iii) above. 5. On the basis of further intelligence, the officers searched the residence of Shri E.V. Subba Reddy, clerk of BEC on 29-6-97 and recovered certain private records. 6. BEC, DEW, VE and CI are all manufacturers of button bits and hammers. CI was also manufacturing truc....
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....ri Madhusudhan Reddy amounting to Rs. 1.17 crore. (v) Document No. 30 as on 30-9-96 Amounts due to suppliers of Alloy Steel and T.C. buttons - Rs. 2,61,40,101 written by Shri Ram Murthy as on 28-12-96 Amounts due to suppliers of Alloy steel and T.C. buttons - Rs. 1,43,76,214 written by Shri Madhu Sudhana Reddy (B) Records recovered from the residence of Shri E.V. Subba Reddy, clerk of BEC (vi) Box File No. 1 Feb., 97 to March, 97 Day-wise sheets - written by Shri Ram Murthy- containing the particulars of sales of bits, hammers and parts. (vii) Box file No. 3 April, 97 and June, 97 Amounts received from customers and payments made to job workers, raw material suppliers etc. with endorsements of Shri Madhusudhan Reddy. (viii) Note Books 3 and 4 October, 96 to June, 97 Party-wise ledger and day book respectively prepared by Shri Subba Reddy on the basis of daily sheets (c) Records recovered from the residence of Shri G. Ram Murthy, Manager of BEC. (ix) Note Book Nos. 1 and 6 96 - 97 Details of purchases of alloy Steel (x) Note Book Nos. 4 Oct., 95 to Apr., 96 Details of purchases of T.C. Buttons and allo....
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....(India) Agency, Fathenagar, Hyderabad. (e) Statement dated 12-7-97 of Shri Subodh Gupta, Branch Incharge of M/s. Steel Centre, Fathenager, Hyderabad. (f) Statements dated 9-7-97 and 14-8-97 of Shri Manoj Kanodia, Branch Incharge of M/s. Kanodiya Udyog, Hyderabad and authorised person of M/s. R.V. Steel Corporation, Bombay. (g) Statement dated 3-8-97 of Shri Vijay Kumar Nopany and dated 21-11-97 of Shri Ashok Khemka, Partners of M/s. Eastern Steel Corporation, Calcutta. (h) Statement dated 19-7-97 of Shri Rakesh Brij Mohan Agarwal, Authorised person of M/s. Giridharilal Agarwal, Bombay. (i) Statement dated 27-6-97 of Shri N. Ranga Rao, Area Sales Manager of M/s. Drillco Metal Carbides Ltd., Hyderabad. (j) Statements dated 30-6-97 and 7-7-97 of Shri S. Raghvendra, Sr. Sales Manager of M/s. Rapicut Carbides Ltd., Hyderabad. (k) Statements dated 4-7-97, 7-7-97 and 31-7-97 of Shri K.S. Narayana Swamy, Assistant Manager of M/s. Indicarb Ltd., ....
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....ed goods, clandestine removal of goods without cover of Central Excise Invoice and non-accountal of above said undertakings in their statutory records with an intention to evade Central Excise duty thereof, proviso to sub-section (1) of Section 11A of Central Excise Act, 1944 appears to be invokable for demanding duty for the extended period. 12. In view of the foregoing, a show cause notice in OR No. 49/97- Hyd.III/Adjn. dated 17-12-97 was issued to BEC requiring them to show cause as to why : (a) an amount of Rs. 2,11,12,227/- (Rupees two crores eleven lakhs twelve thousand two hundred and twenty-seven only) being the Central Excise duty payable on the finished goods i.e. Button Bits, Hammers, parts of Hammer Assemblies and M.S. Scrap, totally valued at Rs. 17,36,99,374/- manufactured and cleared during the period October, 1995 to June, 1997 (including on those parts of drilling rigs found excess at M/s. Beaver Rock Drills, Secunderabad) should not be paid by them under Rule 9(2) of Central Excise Rules, 1944 read with the proviso to sub-section (1) of Section 11A of the Central Excise Act, 1944. (b) the am....
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....ployees of the appellants who had given statement and who had maintained the records could not appear for cross-examination due to their ill-health. G. Ram Murthy was suffering from high blood pressure and diabetics and had requested for an adjournment so that he can appear on the next date to subject to cross-examination. However, the Commissioner of Central Excise refused to grant that opportunity and proceeded to decide the case. The findings recorded by the Commissioner in paras 54 to 74 are reproduced below : "54. The first contention is not acceptable since (a) the maintenance of private records was done by Shri E.V. Subba Reddy and Shri G. Ram Murthy and was solely within the knowledge of Shri M. Madhusudhan Reddy. They are all responsible employees at BEC. (b) they are unable to segregate the production/clearance of goods towards other firms at any stage. (c) at the time of surprise visit made to four units except BEC in none of the other three units there was variation in stocks. (d) the partners/employees of three units viz., DEW, CI ....
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.... TR-6 challan dt. 7-7-97. It is worth to mention that a part of the duty was paid on 7-7-97 even after the alleged affidavit dated 30-6-97 retracting the statement dt. 28-6-97 given by Shri Madhusudan Reddy. At the time of part payment of duty, there is no intimation of alleged affidavit. Therefore, the arguments advanced by the learned Counsel that the statements were retracted by affidavits do not stand to the test of legality. 58. The third contention is not acceptable as it is relevant to note that neither Shri Madhusudhan Reddy nor Shri G. Ram Murthy have submitted any details of purchases of raw material and bits and hammers made locally for trading, such as names of suppliers, quantity purchased and details of payments made to them and sales made to local manufacturers when particularly asked for. Further they are unable to submit the same even during submission of reply to the show cause notice or at the time of personal hearings conducted. If any trading taken place, certainly it would have been noted in the private records maintained by the assessees. Had it been there, the same could have been identified by Shri Mahdusudhan Reddy/Shri G. Ram Murthy/Shri E.V. Subb....
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....It can be observed from the box file No. 2 recovered from the residence of Shri E.V. Subba Reddy, during, April, 97 to June '97, on several occasions, Shri Madhusudhan Reddy has received amounts and also payments made to job workers, raw materials suppliers. During this period, Shri Madhusudhan Reddy has endorsed his signatures in token of receiving the same whenever he has taken the amounts/issued payments to raw material suppliers. 61. The assessee's contention as stated in their written reply dated 24-3-99 that "Shri G. Ram Murthy" has no connection with the manufacturing activity of BEC is not correct for the following reasons. (a) (i) Sri N. Mani Raju in his statement dated 29-6-97 stated that he will attend to maintenance of statutory accounts, despatches, preparation of Central Excise Invoices on the instructions received from Shri Madhusudhan Reddy, G. Ram Murthy, E.V. Subba Reddy. He has also stated that the matters relating to purchase of raw material, production and despatch of finished goods is totally taken care of by Madhusudan Reddy, Shri G. Ram Murthy and Shri E.V. Subba Reddy. (ii) Shri E.V. Subba ....
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....uments such as challans and bills. In fact they have identified the corresponding entries in the incriminating documents recovered relating to the amounts paid and payable to them by BEC. (d) Also Shri Vijay Kumar, Proprietor M/s. Eastern Steel Corporation, and Shri Rakesh Brij Mohan also confirmed the particulars noted in the incriminating documents, against the name of their firm. (e) Huge amount of job work charges (Rs. 25,62,161/-) paid by BEC during 1996-97 as admitted by Shri E.V. Subba Reddy with reference to the records recovered from his residence also supports the involvement of huge quantity of raw material for production and clearance thereof without accounting the same in the statutory records. (f) K. Sriram Prakash, Branch Manager, BEC, Bangalore and Shri Suresh Singhvi, Manager, M/s. BEC. India have admitted in their statements that on most of the occasions they receive the material without any documents and sale proceeds in respect of goods sold without bills were handed over to Shri G. Ram Murthy/ E.V. Subba Reddy or any other person authorised by Sri G. Ram Murthy/ M. Madhusudhan Reddy. Taking all this into account the plea of production....
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.... 66. 68 Nos. of various parts of drilling rigs valued at Rs. 1,57,696 were seized at the business premises of M/s. Beaver Rock Drills, Secunderabad on 27-6-97 (dealer of BEC) since the stock was in excess having without bills. Shri Raghuvardhan Reddy in his statement dt. 22-8-97 stated that they receive the material sometimes without bill from BEC and its sister concerns, as such it was in excess than what was recorded in their stock register. He further confirmed on perusal of the records recovered from the residence of Shri E.V. Subba Reddy clerk of BEC, that the details contained in the note-books and computerized statements against the entries "BRD" are correct. Shri Madhusudhan Reddy, vide his statement dt. 7-10-97 further corroborated the statement given by Shri Raghuvardhan Reddy that the statement is correct. During the cross-examination on 2-2-2000 by the Counsel Shri Raghuvardhan Reddy deposed that they are selling hammers and other materials with bills and receiving them on bills. Had it been true, they would have received the material with bill and could have shown and the same would have been entered into the register. The answer given by Shri Raghuvardhan Reddy, ....
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....rly because the modus operandi adopted by BEC is established by the documents/records recovered from the factory premises of BEC, residential premises of Shri E.V. Subba Reddy and Shri G. Ram Murthy, employees of BEC, confirmative deposition given by the personnel of BEC and accepting the details available in the said private records. The duty demand on clandestine removal as proposed in the SCN is liable to be confirmed. I have taken BEC's own data and clear details shown in the documents/registers how much worth of bits and hammers were actually removed as a basis to demand the duty. After taking into consideration the unaccounted clearances effected as shown in the private records during financial year 1995-98. BEC has crossed Rs. 3 crores turnover during the preceding financial year and thereby they are not eligible for SSI benefits. 70. In view of the foregoing, I conclude that the circumstances appearing in evidence on records, prove beyond doubt that the clandestine manufacture and clandestine removal without payment of duty. Therefore, the larger period has rightly been invoked vide the proviso to sub-section (1) of Section 11A of the Act. Evasion of duty on unaccou....
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....g the records/registers at their residences. As such, they are also liable to be penalised under Rule 209A of Central Excise Rules, 1944. 72. The clandestine removal done by BEC during 1995-98 is proved beyond doubt. The unaccounted production is also to be taken into account to arrive at aggregate value of clearances while allowing SSI benefits for the next year. A show-cause notice under C.No. V/84/15/206/97, dt. 5-1-98 (OR No. 25/98-Hyd-III/Adjn.) for Rs. 7,72,693/- covering the period July, 97 to November, 97 alleging that BEC has crossed Rs. 3 crores turnover in the preceding financial year. Since BEC has crossed Rs. 3 crores of turnover after taking into consideration unaccounted clearances as per the private records recovered, during 1996-97, BEC is not eligible for SSI benefits for the year 1997-98 and accordingly, the assessees liable to pay full rate of duty. As such differential duty of Rs. 7,72,693/- demand as cited supra is in order. They are also liable to pay the interest under Section 11AB and penalty under Section 11AC, of Central Excise Act, 1944 as they have suppressed the Production and Clearances for the earlier period and wrongly availed the SSI exempt....
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.... is a clear mis-application of judgment of the Supreme Court cited in Para 62 of the order extracted supra. Ld. Counsel points out to Para 65 wherein the Commissioner has stated that he does not consider it necessary to discuss the individual case law referred to by them. He submits that the case law of the Apex Court and the Tribunal are clearly binding on the Commissioner and not to follow the same amounts to judicial indiscipline. The fundamental law has been laid down in these judgments pertaining to the manner in which the evidence is required to be adduced and analysed. When there is a clear violation of principles of natural justice, the citations referred to by them had a clear applicability and the Commissioner cannot hold that he is not going to discuss the individual case law. Pointing out to other portions of the evidence, ld. Counsel submits that there is no corroboration of any sort with regard to the quantum of production as they did not have the production capacity to manufacture to the extent indicated. He submits that private records and registers were maintained by the two persons and what they had written, there, was required to be put to test and in the absence....
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....bsp; 2000 (120) E.L.T. 148 (Tribunal) - Suvarna Polymers Pvt. Ltd. v. CCE, Hyderabad Demand - Shortage - Clandestine removal - Evidence - Only piece of evidence relied upon by the Revenue is the inflated figure pertaining to allegation of manufacture and clandestine removals for raising higher financial limit from the bank - Demands raised solely on the basis of the statement furnished by the assessee to the banks not sustainable - Rule 9(2) of Central Excise Rules, 1944. (6) 2001 (136) E.L.T. 1280 (Tribunal) = 2000 (93) ECR 59 (Tribunal) - IGNI Fluid Boiler (I) Ltd. v. CCE, Madras Exemption - Demand - Limitation (extended) Penalty - Clubbing of clearances of appellant and M/s. FFPL on the ground that FFPL is a hired labour and denial of exemption on the ground that premises and machinery being common, the same had been leased out by the appellants to FFPL - The contract executed between the appellants and M/s. FFPL was proper. The agreement and the purchase order clearly shows that the relationship between the appellant and M/s. FFPL ....
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....ssee to cross-examine him violated principles of natural justice - Rules 9(2) and 173Q of CER, 1944. Clandestine manufacture and removal - Evidence - Entries in a private notebook of record of production at most raise a doubt but do not prove the charge in absence of other corroborative evidences like installed capacity of factory, raw materials utilisation, labour employed, power consumed, goods actually manufactured and packed etc. - Rules 9(2) and 173Q of CER, 1944. Clandestine manufacture and removal - Evidence - Distance between 'may be true' and 'must be true' is long and whole of it must be covered by legal and unimpeachable. (8) 2001 (131) E.L.T 662 (Tri-Del) - Haryana Roadways Engineering Corporation Ltd. v. CCE, New Delhi Valuation (Central Excise) - Demand - Original consideration received by assessee for sale of the goods had to be taken as cum-duty price and abatement of differential duty from sale realisation allowable - Erstwhile Section 4(4)(b)(ii) of Central Excise Ac....
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....these evidences, the charge of clandestine manufacture and removal solely based on the private registers is not sustainable in the light of the judgment cited supra. Therefore, he submits that as the Revenue has not discharged their burden of proving the clandestine manufacture and removal and that the Commissioner has solely proceeded on the assumptions and presumptions, the impugned order is required to be set aside by granting wavier of pre-deposit at this stage itself. 5. Ld. DR submits that the case is built up on detailed investigation and on seizure of enormous private registers. Merely because two of the witnesses were not present for cross-examination that will not tilt the case in the appellant's favour for the reasons that appellants were given full opportunity to cross-examine all the witnesses. They also utilised the opportunity to cross-examine large number of witnesses. The main witnesses namely G. Ram Murthy and E.V. Subba Reddy were served with several notices to present themselves. They did not appear and appellants did not take any step to bring them as they were their employees. In the circumstance, the Commissioner has no choice but to proceed with the ....