TaxTMI 
TaxTMI 
2003 (1) TMI 587
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....000.00  (4) Surendra Malhotra ... Rs. 10,000.00  Appeal Nos. E-612-615/2000: (1) M/s. J.K. Corporation Ltd. Rs. 41,75,460.00 Rs. 7,00,000.00  (2) G.D. Kabra ... Rs. 4,000.00  (3) V.S. Kansal ... Rs. 4,000.00  (4) Surendra Malhotra ... Rs. 8,000.00  Appeal Nos. E-17-18/2001: (1) M/s. J.K. Corporation Ltd. Rs. 57,60,563.00 Rs. 57,60,563.00  (2) G.D. Kabra ... Rs. 5,000.00  3. The appellants, M/s. J.K. Corporation Ltd. are engaged in the manufacture of Polyester Staple Fibre and Polyester Filament Yarn. The various raw materials used in the manufacture of the said final product are Purified Terephthalic Acid (PTA), Mono Ethylene Glycol (MEG) and P.P. Chips. The demands of duties have been confirmed against the main appellant firm on the ground that the input-materials on which the appellant firm is availing the Modvat Credit, have not been utilised in the manufacture of the said final product to the extent indicated in the impugned Orders, though the statutory records showed their consumption. Accordingly, demands were....
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....d that PTA Log Book and Shift Engineer Log Book were being maintained by the appellants for the purpose of ISO-9002 certification. On comparison of the figures of consumption of PTA as reflected in these two records and the entries made in RG-23A Part-I register and as reflected in RT-5 returns, it was found that the appellants have, in fact, consumed lesser quantity of PTA than what has been reflected in their Modvat Accounts. 6. Based upon the result of the above investigations, the appellants were served with a show cause notice dated 20-2-96 alleging that 492.708 MTs. of PTA on which the appellant firm has claimed the Modvat credit has, in fact, not been utilised by them in the manufacture of their final product. Thus the notice proposed confirmation of demand of duty of Rs. 72,13,259.60 under the provisions of Rule 57-I along with the imposition of personal penalty upon the main appellant firm, as also upon the other persons under the provisions of Rule 209A. The said show cause notice culminated into the impugned Order passed by the Commissioner of Central Excise and Customs, Bhubaneswar-I on 25-9-2000, wherein after taking into account the appellants' various pleas a....
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....statutory and private records, there is no other evidence to show that the appellants had indulged into any clandestine removal of either the raw materials or the final products. Referring to various decisions, he submitted that the onus to prove that there was any clandestine activity going on at the appellants' end, heavily lies upon the Revenue and is required to be discharged by production of affirmative and tangible evidence. He further submitted that ISO-9002 is a Quality Management and Quality Assurance Standard prescribed by the Bureau of Indian Standards. The standard specifies quality system requirements for use where as supplier's capability to design and supply conforming to the product, needs to be demonstrated. In the premises, the consumption Figures of PTA obtained from the Shift Engineers' Log Book, cannot be the correct figures of consumption and the quantities as reflected in the RT-5 returns which were based on the figures contained in the statutory RG-23 Part-I register, are the correct quantities of PTA consumed. He also submitted that the scope and purpose of the ISO-9002 and the maintenance of registers as required under the said Law, are different. He advan....
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.... by ignoring the statutory records. He further submitted that the findings of the Commissioner are imaginary. By giving the details of the Consumption Figure of PP Chips during the period from May, 1994 to January, 1995, he submits that there would not be any difference between the Consumption Figure and the final product because of a minor difference of 2.6922 MTs. which would be to the extent of 0.073%. In view of the foregoing submissions, he prayed for setting aside the impugned Orders. The prayer for setting aside the personal penalties upon the various persons under the provisions of Rule 209A is based on the arguments that Rule 209A requires the condition precedent for imposition of penalty upon a finding that the person concerned was aware of the fact or had reason to believe that the goods in question were liable to confiscation. In the instant cases, from the impugned Orders, it would be evident that no finding has been given by the Commissioner that the goods were liable to confiscation. As such, he submitted that Rule 209A is not attracted and imposition of penalties upon the various persons under the said Rule was not justified. He relies upon the Tribunal's decision i....
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.... report as claimed by the appellants. (iv) That the appellant firm has admitted that some pages of the Log Books are found missing. These also raised doubt about the activity of the Company. (v) That it is a fact that statutory records when maintained correctly and when no other evidence contrary to that are found, should rely on the statutory report, but when there is a clear evidence of lesser consumption endorsed by the responsible Officials directly connecting with the process of production and when they categorically stated that their records were correct and genuine, at that stage, the Department can dispute the statutory records by admitting the correct records maintained by the Higher Officials connected in the process of manufacture. (vi) That the Hon'ble Bench should appreciate that Standard ISO-9002 is a very sophisticated and highly technical in rature. To get the standard, the Company has to pass through strict technical test and norms and specified parameters. In this case also, the appellant company has got the Standard ISO-9002 and accordingly, they have to maintain the strict norms and parameters ....
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.... the same. RT-5 returns filed by the appellants declare such Consumption Figures based upon RG-23A Part-I records. The assessments are made by the Central Excise Authorities based upon such quarterly returns filed by the assessee. On the other hand, the Shift Engineers' Log Book which is being maintained by the appellants under ISO-9002 are the internal records of the appellant firm, which were never placed before the authorities. The said records show the different figures of consumption of the various raw materials. The comparison of the figures as given in the two records vary and show difference in the quantities and consumption of the raw materials resulting in allegations by the Revenue that the appellants have availed the Modvat credit on excess quantity of raw materials, which have not been, in fact, used by them in the manufacture of their final product. The appellants have not denied the fact that on comparison of figures between the two records, difference is there. However, they have challenged the findings on the ground that the statutory records were correct records, at the same time, not denying the fact that the records maintained under ISO-9002 reflect the correct ....
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....returns showing such consumption are required to be filed by the assessee. Assessments of such returns are made by the Central Excise Officers based upon the declarations made by the assessee. In these circumstances, it is expected that a person who is enjoying the benefit of Modvat credit of Duty paid on the inputs, would maintain the proper records. The present dispute has surfaced on account of the investigations made by the Revenue. There is admittedly difference in the Consumption Figures as reflected in the statutory records and the internal records maintained by the appellants for different purposes. The appellants have not been able to satisfactorily explain the difference between the two. Once the difference was established by the Revenue, the onus to prove and fill the said gap lied heavily upon the appellants who are required to discharge the same by showing sufficient and affirmative material on record, which they have failed to do. Merely because the assessment of RT-12 returns was completed and no objection was raised by the Revenue during the relevant period in question will not come to the rescue of the appellants inasmuch as the present cases have been made out aga....
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....s. All these cases are distinguishable from the facts of the present cases where the appellants had not disputed the entries made in the Log Book or the Shift Engineers' Log Book and it is also not a case of clandestine removal of the final product without payment of duty. To expect the Revenue to prove its case on mathematical precision is expecting them to do the impossible. When admittedly the two sets of records maintained by the appellants, show the difference in the Consumption Figures of raw materials, the onus to explain such a difference shifts to the appellants, especially when such Consumption Figures in the records maintained under ISO-9002 have been admitted to be correct figures by the various Senior Officers of the appellant firm in their statements recorded during the investigations. In fact, we find that the Tribunal in the case of Shree Vallabh Glass Works Ltd. v. Collector of Central Excise, Ahmedabad reported in 2000 (126) E.L.T. 1117 (Tribunal) has held that Machine performance reports being prepared and signed by the Glass Technologist of the factory who confirmed that figures in the machine report are figures of actual production were correctly relied upon fo....
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....nal products, but clandestinely removed these quantities without payment of duty. The duty demands and imposition of penalties are a consequence of this finding. 22. The main evidence for reaching the finding regarding clandestine removal is that certain internal records maintained by the factory personnel showed the utilization of the inputs less by the quantities on which duty demands have been made, even though statutory Central Excise records showed issue of these quantities also for the manufacture of the final products. The private records in question were the Charging Register, and Shift Engineers Log Book maintained in connection with the ISO 9002 Certification. The impugned orders have held that ISO 9002 records were authentic record about the actual consumption of inputs inasmuch as they are maintained in terms of the high standards imposed under ISO 9002. Reliance has also been based on the statements of the officials of the Company that in terms of ISO 9002, these records are required to be kept and that their records had been correctly kept. Thus, the demands have been confirmed by preferring one set of records of the appellants to another set of records. 23....
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....differences can be the result of human error in recording quantities charged. Yet another ground taken by the appellants is that unit was under physical control of Central Excise Officers during part of the period covered in these proceedings and no diversion of the inputs had been noticed or raised by the officers, even though they were aware of the entire accounting procedure followed by the appellants. The appellants have raised this ground for treating the demands as time barred also. 25. Thus, the issue for determination in these appeals is whether the materials on record justify a finding of clandestine removal of the alleged quantities of inputs. The very first thing to be noted in this regard is that there is no material whatsoever relating to removal, sale, purchase, transport etc. of the alleged material, by way of records or statements of parties. Finding of clandestine removal has been reached solely on the basis of lesser quantities shown as charged into the production machinery. The differences are very small when compared to the over all consumption of materials during the relevant years. The consumption of the inputs as shown in the Statutory Records corresp....
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....rder passed by Member (Judicial) and the Order passed by Member (Technical), the matter is placed before the Honourable President for referring the same to a Third Member. Sd/- (C.N.B. Nair) Member (Technical) Sd/- (Archana Wadhwa) Member (Judicial) 27. [Order per : V.K. Agrawal, Member (T)]. - I heard Dr. Samir Chakraborty, learned Advocate for the Appellants along with Shri Abhijit Biswas, learned Advocate and Shri A.K. Pandit, learned DR for the Revenue, on the question referred as to whether the appeals filed by M/s. J.K. Corporation Ltd. are required to be rejected as held by the Hon'ble Member (Judicial) or are required to be allowed as held by the Hon'ble Member (Tech.). 28. Dr. Samir Chakraborty submitted that ISO-9002 specifies quality system requirements for use where a supplier's capability to supply conforming product to an established design needs to be demonstrated; that the requirements specified are primarily at achieving customer satisfaction by presenting non conformity at all stages from production through to servicing; that according to ISO-9002 the supplier's management shall define and document its policy for quality....
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.... called missing quantity of material; that there is no evidence that any sale proceeds had been received by them; that, further, input-output ratio of PTA to polymer tallies with the consumption of PTA as shown in RG 23A register. 29.2 He also mentioned that duty has been demanded in respect of 858.938 MT of MEG on the ground that the consumption figure of MEG shown in SELB is the correct figure and more authentic; that shift wise MEG consumption figure is calculated on approximate basis; that on the closing day of every month physical stock of MEG is ascertained by dip tape reading and the cumulative consumption figures is adjusted in RG 23 Part-I with the help of issue passes issued by the Production Department; that correlation in SELB was correspondingly not done and this accounts for the difference between RT 5 figures and the Log Book figures which in any case are based on approximation; that this is not an afterthought as the practice of adjustment of last date consumption was being followed since its starting of commercial product. 29.3 Regarding duty demand confirmed in respect of Polyester Chips, the learned Advocate mentioned that the consumption of PP Ch....
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....ri R.H. Shukla, Senior Manager, continuous polymerization was put a question as to whether there had been any chance where more material than figuring in the PTA charging Log Book, CP Report. Chips Charging Register had been used and whether figures were not the actual consumption figures; that Shri Shukla replied "there are no chance and nor had it occurred. The figure shown in above registers are actual consumption." The learned DR also emphasized that obtaining ISO-9002 Certificate is not one time affair as unit is required to carry out continuous internal quality audit to verify whether quality activities comply with plan arrangement and to determine effectiveness of the quality system; that accordingly the records maintained for ISO-9002 cannot be ignored. 32. I have considered the submissions of both the sides. The demand of duty has been confirmed on the ground that the figures of consumption of raw material is more in Statutory Records vis-a-vis the records maintained for the purpose of ISO-9002, I observe from ISO-9002 that the requirements specified have been aimed primarily at achieving customer satisfaction by preventing non conformity at all stages from product....