TaxTMI 
TaxTMI 
2008 (3) TMI 587
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.... Rs. 1,00,000/- 4. E/777/2006 N. Krishna Mohan Rs. 5,00,000/- 5. E/778/2006 STV Raghunadha Rao Rs. 1,00,000/- 6. E/779/2006 B. Ramakrishna Reddy Rs. 1,00,000/- 3. The brief facts of the case are as follows : The assessees manufactured ordinary Portland Cement and Clinker which are excisable. In terms of Notification No. 5/99 - Central Excise dated 28-2-1999 as amended, they had availed concessional rate of duty for cement for the clearance of 99,000 MT. The above-mentioned notification is available for mini cement plants based on their installed capacity. The Departmental Officers carried out investigations into the affairs of the assessee's unit. The investigations revealed various irregularities. The irregularities are : (i) In terms of the installed capacity the assessees are not entitled for the benefit of the notification. Hence, they are required to pay full rate of duty. (ii) There is clandestine clearance without payment of duty. (iii) There was irregular availment of Cenvat credit. 4. In view of the above irregularities, Revenue proceeded against t....
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....on of an amount of Rs. 50,00,000/- deposited by the appellant on 25-2-2005 and 26-2-2005 towards the duties payable. The penalties imposed on the various persons have already been given in the tabular column supra. 6. The assessees as well as Revenue are aggrieved over the impugned order. Even though the demand in the show cause notice was huge, the Commissioner did not confirm the demand in the show cause notice in its entirety. Moreover, he has held that the appellants are entitled for the benefit of notification 5/99-CX available for mini cement plants. He has also not imposed personal penalty on Shri K. S. Rama Rao, M.D of M/s. Torus India Ltd. The assessees are also aggrieved over the impugned order on grounds of incorrect computation of the demand. They have also challenged the demand on account of clandestine clearance. The denial of Cenvat credit is also under challenge. The personal penalties imposed are also contested. We shall deal with the appeals of the assessees and the Revenue separately. 7. Assessees' Appeals : Shri B.N. Gururaj, learned Advocate, appeared on behalf of the assessees and Ms. Sudha Koka, for the Revenue. 8. The learned Advoc....
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....d on the data from a computer belonging to the appellant and which had been given to a distributor M/s. Modern Plastic Corporation for their temporary use. (i) Sale of 1578.5 MT cement to M/s. Lavena Marketing Pvt. Ltd. Appellant has contended that this was sold by M/s. Modern Plastic Corpn. and hence, appellant is not liable to pay duty. As per notice, this quantity was 2155 MT. Demand Rs. 5,52,472/-. (ii) 156 MT cement sold to Sri Lakshmi Enterprises. Appellant has contended that 131 tons were sold by Modern Plastic and 25 tons by Sri Chakra Marketing and hence, appellant is not liable to pay duty. Demand Rs. 54,600/-. (iii) 290.5 MT sold to Kamakshi Agencies. Appellant has contended that 117 tons were sold by Modern Plastic through Sri Chakra Marketing and 151 tons were sold by the appellant. Demand Rs. 1,04,125/-. (iv) 6361.5 tons supplied to various assorted parties. Demand Rs. 23,25,850/-. The total demand comes to Rs. 30,37,050/-. It was argued that the brand name "Sri Chakra" is the one used by the assessees. The brand name "Chakra Gold" is used only on cement procured from grinding units....
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....g media as such. There is of course, no evidence to support this view. The demand is entirely based on suspicion and is liable to be set aside. (Para 22.2 of Order-in-Original.) Part of the demand also relates to inputs removed to mines. This recovery is impermissible in view of the Hon'ble Supreme Court's decision in Vikram Cements case, 2006 (194) E.L.T. 3 (S.C.). It was requested that this issue should be remanded for detailed examination of each removal and decision thereon. (iii) A demand of Rs. 50,348/- is on account of the recovery of credit taken on cement returned as hardened and used within the factory for road and repair work. The duty payment particulars were furnished. But, the Original Authority ignores and confirms the recovery of credit of Rs. 50,348/-. (Para 12.2 of Order-in-Original). VI. General defence : The duty demand is based on alleged clandestine removal of over 20,000 tons of cement during the period of dispute. But, there is no unexplained consumption of raw materials, power or undisclosed capacity of the plant. In fact, upholding of exemption claim itself shows that production of cement has been within the capacity of the appell....
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....; Set aside the recovery of Cenvat credit of Rs. 16,78,336/-, (vi) Set aside the penalty under Section 11AC amounting to Rs. 1,04,83,744/-, (vii) Set aside the demand of interest. 9. The learned Departmental Representative reiterated the findings of the Commissioner which are not contested by the Revenue. 10. As the Revenue has also filed an appeal against the impugned order, we shall give our findings after narrating the grounds of appeal by the Revenue. The assessee has also filed a cross-objection in this matter. 11. The grounds of appeal of the Revenue are as follows : I. Eligibility of SSI Exemption : The SSI Exemption will not be available to unit if its installed capacity is more than 900 TPD. The Commissioner has given the benefit to the assessee based on the certificate issued by the Commissioner of Industries, Hyderabad. In terms of the said certificate, the installed capacity is only 786 MT/day. Revenue's objection is that the certificate was issued on 19-5-2005. The inspection of the unit was carried out by the Commissioner of Industry on 11-2-2005. According to the Committee which inspect the plant, the i....
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....t the assessee cleared cement on transport documents without any invoice, the department recovered freight letters and lorry transaction slips. Based on these documents, demand was made. However, the Commissioner held that there is no conclusive evidence for sustaining the charge. On 29-4-2001 and 30-4-2001 there were a clearance of 120 MT and of 90 MT of clearance through 10 and 9 vehicles respectively as per the freight letters. Totally, a quantity of 660 MT was cleared by the assessee without payment of duty and without accountal. Similarly, verification of lorry placement books recovered from M/s. Sai Ram Transport revealed that they cleared cement without invoice. Shri M. Radha Krishna, Managing Partner of M/s. Sai Ram Transport, in his statement, confirmed that they are issuing freight letters for the placement of lorry with assessee, that almost all the vehicles placed by them will be loaded and rarely cancelled, that the lorry transaction slips are for the transactions of transportation undertaken. Therefore, it appears that there was actual clearance of cement without payment of duty in cases where there were lorry-loading slips without corresponding Central Excise invoice....
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....account full quantity of the inputs and packing materials received by them. The ledger accounts for the years 2000-01 to 2003-04 revealed that the assessee had shown substantial amounts of cash receipts in their books of account in contravention of established accounting practices. All these transactions are sale proceeds of clandestine removals of the goods made by the assessee. The actual consumption of raw materials as well as production of norms as maintained by the assessee in their cost audit reports revealed that the assessee should have produced more cement and clinker, than what has been accounted for and cleared through their official accounts. The show cause notice has brought out evidences to the fact that the assessee has shown production of clinker in their records even on days when the kiln was closed. The respondent has not only admitted this fact in his statement but also admitted that there is variation in actual production and the quantities shown in the records. The show cause notice has brought out incontrovertible evidence to the fact that the assessee has not accounted for vital inputs like Gypsum, packing material etc. The Commissioner has not given his find....
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....e only in respect of 80 invoices. In view of the above, it appears that rejecting the entire demand is incorrect and bad in law. In order to avail illegally Cenvat credit a bogus transaction in respect of goods received from M/s. Torus India Ltd. was shown in the books of accounts, the value of the supply is equal to Rs. 82,49,363/-. Shri K.S. Rama Rao, M.D. of M/s. Torus India Ltd. was responsible for manipulating the figures in their books of accounts thereby abetting, but no penalty was imposed on Shri K.S. Rama Rao. The Commissioner has erred in not imposing personal penalty on Shri K.S. Rama Rao. 12. Grounds of Cross-Appeal : The assessee has also filed cross-objections under Section 35B(4) of the Central Excise Act, 1944 urging the following points : (i) In Revenue's appeal non-application of mind is writ large. The Revenue in their foremost ground refers to the department seeking to deny the SSI Exemption. Revenue is unaware of the contents of its show cause notice. Neither is the assessee working under any SSI Exemption notification, nor has it ever claimed to be a SSI. In the entire show cause notice there is not even a whisper a....
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....ate issued by the State Government's Department of Industries. (vi) Revenue's assertion that the brand name "Chakra Gold" does not belong to the assessee, but to Modern Plastic Corporation is without any basis. In the department's own earlier proceeding, it has been brought on record and admitted by the department that "Chakra Gold" was the brand name used when the assessee got cement manufactured by other grinding units by selling clinker to them and bought back cement under the brand name "Chakra Gold". Hence, the new ground that the said brand name belongs to Modern Plastic Corporation is without basis in the original proceedings. The assessee states that it is wrong to state that the assessee has not claimed the ownership of the brand name "Chakra Gold". It is merely a case of owning an unregistered brand name. (vii) The ratio of Rukmani Pakkwell case, 2004 (165) E.L.T. 481 (S.C.), has been correctly distinguished inasmuch as that was a case of a SSI clearing goods under the partial brand name of another person. In this case, the assessee had not manufactured under another person's brand name. Ins....
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....ces. (xi) The assessee further reiterated their grounds of appeal against the impugned order. 13. Findings : We have gone through the records of the case carefully. After a very elaborate investigation proceedings were initiated against M/s. Shri Chakra Cements Ltd. (SCCL and Others). The main charges are that : (a) SCCL are not entitled for the benefit of exemption notification 5/99 dated 28-2-1999 as amended. (b) SCCL have irregularly availed credit on the clinker/cement claimed to have been returned back. (c) SCCL have cleared cement for construction works outside their factory without payment of duty. (d) SCCL have cleared cement as per the details in the ledger accounts as available in the CPU recovered without payment of duty. (e) SCCL have cleared cement in the name of grinding units, viz., M/s. Modern Plastic Corporation, M/s. Prakasam Pulverisers, M/s. Tirumala Pulverisers, M/s. Ganesh Industry etc. without payment of duty. (f) SCCL have cleared cement by misdeclaring the weight without p....
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....e impugned order. Benefit of Notification No. 5/99 Even though the total demand in the show cause notice is to the tune of Rs. 9,61,79,004/-, the Commissioner has confirmed only an amount of Rs. 88,05,408/-. Cenvat credit to the tune of Rs. 16,78,336/- has been denied to the assessee. This huge amount was proposed to be demanded as the show cause notice alleged that the assessee was not entitled for the benefit of the concessional assessment in terms of the notification which is based on installed capacity. The contention of the Revenue is that the installed capacity exceeded 900 TPD or 2,97,000 tones per annum. Another condition in the notification is that the concessional rate is not available to cement bearing a brand name or trade name (whether registered or not) of another person. The first allegation against the assessee is that their installed capacity is more than 900 TPD. The second allegation is that they were using the brand name of another person. The show cause notice stated that SCCL undertook major extension of their plant during the year 1995-1996 by expanding the installed capacity to 950 TPD and the same had been fine tuned to 1200 TPD by 2000. Reliance was ....
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....he capacity of the plant as 786 MT per day. The assessee submitted that one of their cement grinding mill is a converted raw mill and as such the output of the same is below par and it is not a cement grinding mill in the first place. The Commissioner has also stated that when a competent authority of the rank of Commissioner of Industries, Hyderabad, who is a government body certified the installed capacity as 786 MT per day, it is bound to be accepted. 17. The Commissioner has also referred to Board's clarification dated 8-7-1980 holding that "the installed capacity should not exceed the limit fixed in the notification and actual production of cement can be to an extent of 25% more than the installed capacity." In view of the above, the actual production of 25 TPH on certain days cannot be the basis for deciding the installed capacity. Thus, the Commissioner has concluded that the benefit of the exemption notification to the assessee cannot be denied on the ground that the installed capacity is more than 900 TPD. The Revenue has challenged the finding of the Commissioner. We have already stated the Revenue's grounds of appeal on this point. One of the grounds is that the ....
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....ed. We also have to observe that Revenue's reference to benefit of SSI Notification in grounds of appeal reveals non-application of mind. Hence, Commissioner's decision in Para 10.13 of the impugned order dropping the duty demand amounting to Rs. 7,25,84,075/- is correct. 19. Irregular availment of Cenvat credit on returned clinker of SCCL : In the impugned order Paragraphs 11, 11.1, 11.2, 11.3, 11.4 and 11.5 deal with the issue of irregular availment of Cenvat credit on returned clinker/cement. The show cause notice proposed denial of Cenvat credit to the tune of Rs. 3,07,357/- on 1225.03 MT of rejected clinker/cement availed. The rejected materials have come from the following units. (i) Levina Marketing Pvt. Ltd. (LMPL) (ii) Modern Plastic Corporation (iii) SCCL, Chennai (iv) Prakasham Pulvarisers Vallampatte. 20. The show cause notice alleged availment of irregular credit based on certain discrepancies in the documents. All the allegations have been recorded in Para 11 of the impugned order. The assessee's reply for the allegations are recorded in Para 11.1. The main contentio....
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....d the same was being used for the purpose of laying of Roads at Mines CC, New Office Buildings and Sri Venkateswara Swamy Temple Road. The point made by the assessee is that the returned material was used by them for roads and premises within the factory. The Commissioner has not given a finding that the said roads are outside the factory. On going through the documents we find that the appellant has submitted that on the cement which was returned and used for internal purposes duty has been paid and the invoice particulars have been submitted which are available in pages 157-158 of the yellow paper book submitted by the appellant. The fact that the appellant had paid Central Excise duty on these goods has been completely ignored by the Commissioner. Hence, confirmation of Rs. 50,348/- is not in order. Hence, we set aside the demand made in Para 12 of the O-I-O. 22. Demands based on CPU : During the investigations, a CPU was recovered by the officers from the premises of M/s. Modern Plastic Corporation. Based on the data retrieved from that CPU, it was alleged that the assessee had clandestinely cleared 2155.5 MT of cement to LMPL without invoice and payment of duty duri....
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....ent with brand name "Chakra Gold". As the grinding units were unable to pay for the clinker supplied to them, the assessee directly received payment and thereafter paid the price of cement to grinding units after adjusting the price of clinker supplied by them. 24. We have examined the demand of duty on account of the data available from the CPU recovered from Modern Plastic Corporation. The Commissioner has dealt with this issue in Paragraphs 13, 13.1, 13.2, 13.3, 13.4, 13.5, 13.6, 13.7 and 13.8 in the impugned order. He has recorded that Shri Ch. Sankara Rao, DGM of SCCL (the assessee) had certified that the data contained in the CPU pertinent to SCCL. Mr N. Krishna Mohan, Chairman of SCCL admitted that the CPU was used for recording day-to-day transmission. Moreover, the printouts were taken from the same CPU in the presence of personnel of MPC under Panchanama. The investigation has found out acknowledgement slips containing receipt of cement by buyers indicating that sale of cement shown in the major account has taken place and money was received by the assessee. Shri Govind Prasad Chitlangya, Director of M/s. LMPL in his statement dated 2-12-2004 categorically stated ....
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....were directly received by Kamakshi Agencies. In their reply, the assessee did not make any submission regarding the reason for supplying cement through Shri Chakra Marketing in respect of order being received by SCCL. He has also stated that 32 MT has been received by Kamakshi Agencies and there is no explanation for such removal by the assessee. In respect of supply of cement of 6361.5 MT to different parties, demand has been made. This demand is also based on the data recovered from CPU. The Commissioner has recorded a finding in Para 13.8, the parties concerned had stated that they had only dealt with SCCL, the assessee and they had only purchased Shri Chakra Gold Brand Cement. Therefore, he has not accepted the assessee's contention that the goods were cleared by grinding units. In view of the above the Commissioner has confirmed a demand of Rs. 31,15,975/-. 26. On a careful consideration of the confirmation of duty on the basis of the data gathered from CPU seized from the business premises of Modern Plastics, we feel that it is necessary to examine whether the evidence thus gathered is admissible in terms of Section 36(B) of Central Excise Act, 1944. The relevant p....
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....the said activities." 27. In the present case the data is based on the computer printout seized from Modern Plastics. As can be seen, one of the conditions for the computer printout to be an admissible evidence is that the said printout should have been produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer. It is on record that the CPU was given to MPC in September 2004. Therefore, it is clear that the computer was not in the regular use of the appellant. The Commissioner has not examined these aspects. There was also a submission that the computer was used by the appellant's trainee for data entry practice and could contain information, which is not on company's official record. It is also been urged that the print out was taken in the presence of representative of Modern Plastic and not in the presence of appellant's representative against whom the data has been used. There is also no investigation to find out whether the said data were forming part of the regular books of ....
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.... 1,645.000 5,75,750 All the supplies made from SCCL through SCM and the same suffered duty as per the Excise Gate pass list enclosed. 37.1 In respect of the above clearances, the appellant has stated that they had not manufactured the cement and cleared them without payment of duty. The assessee clear duty paid clinker to the following Pulverisers for the purpose of grinding for eventual sale by them independently. Their names are : (a) M/s. Prakasam Pulverisers (b) M/s. Kiranmayi Cements (c) M/s. Ganesh Industires (d) M/s. Surya Industries (e) M/s. Tirumala Pulverisers (f) M/s. Modern Plastic Corporation 29. Then the following dealers deal with the products manufactured either by the appellant or by the above-mentioned grinding units. (a) M/s. Laveena Marketing (b) M/s. Sri Chakra Marketing (c) M/s. Sri Lakshmi Enterprises (d) M/s. Kamakshi Agencies (e) ....
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....icial invoices to the tune of clinker purchased from SCCL, it cannot undertake the above-mentioned clandestine clearance. The brand of cement has been mentioned as "Shri Chakra Gold" which is different from the brand name of Pulverising unit. Therefore, according to the Revenue, the above clearances were made by SCCL in the guise of second sales through commercial invoices illicitly without accountal and payment of duty. Similar method was adopted in the clearance of "Shri Chakra" brand cement on the parallel set of invoices without accountal. This has been observed from the records of SCCL recovered from M/s. Kiranmayi Cements, Miryalaguda, M/s. Krishna Priya Cements and M/s. Tirumala Pulverisers, Miryalaguda. Second sets of commercial invoices were recovered from the registered office premises of SCCL. Verification of this document revealed that SCCL cleared unaccounted quantity of 210.5 MT of cement and 12.36 MT of cement without payment of duty. The investigation has found that SCCL were maintaining simultaneously numbered sets of commercial invoices for each clearances made from each Pulvarising units i.e serial no. 1 onwards from each grinding unit. However, the said invoices....
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....g that SCCL received huge amounts in the name of fictitious units. These amounts are clearly relatable to the clandestine clearances made on parallel sets of commercial invoices. He has come to the conclusion that the clandestine clearances were effected by SCCL in the guise of second sales on parallel set of invoices. Since such clearances were suppressed from the knowledge of the department, he has justified the invocation of the extended period in terms of proviso to Section 11A(1) of the Central Excise Act, 1944. 33. The assessee supplied clinker to grinding units and purchased cement from them. The cement purchased from the grinding units is sold by the assessee. These are known as second sales. The contention of the Revenue is that the so called second sale relate to the cement actually manufactured by the appellant and cleared by them without payment of duty. The appellants have urged that they are not liable to Excise duty in respect of the so-called second sale because the said cement has not been manufactured by them. They have urged that they are not required to account for the sale of cement dispatched from the pulverizing units in their excise records. It was s....
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.... Industry. According to the Revenue, two sets of invoices were issued by the appellant for the same transaction of which one set is reflected in the official ledger while the second was not reflected in the accounts. The Commissioner has come to the conclusion that the assessee asserted to modus operandi of clearing one consignment directly to the party and second consignment on commercial invoices to Ganesh Industries. As there is excess collection to the account of SCCL over and above the invoiced value he has held that the department has been able to establish their case for demand of duty. The assessee has urged that the supplies to L&T and RPG Transmission was also a second sale by the appellant. The goods had been procured from Ganesh Industries and sold to the said parties. It was stated that the Commissioner ignored the reply to the notice that order had been placed on the appellant and hence the appellant had raised commercial invoice. There is no evidence to prove that these consignments had been cleared from the appellant's factory. Further, it was stated that the Commissioner has recorded that the cement supplied to L&T and RPG were directly removed from the assessee's ....
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....n account of shortage of 13,291.02 MT of clinker found short during physical verification. The assumption of the department is that cement produced on account of the above shortage had been cleared in a clandestine manner. The Commissioner has dropped the demand because a physical stock verification was conducted on visual examination. In Para 19.2 of the order, he had observed that the practice followed by the appellant is contrary to the law and throws serious doubt, but it is setted law that suspicion however grave cannot be a substitute for proof. The Revenue has not accepted the finding of the Commissioner. In our view, when the shortage itself is based on visual estimate, in the absence of other corroborative evidence to the effect that clandestine clearance has taken place, the demand cannot be confirmed. Commissioner's decision is correct. We uphold the same and reject the Revenue's appeal on this point. 37. Demand based on consumption of inputs and cost audit analysis : The Commissioner has dealt with this issue in Paras 20, 20.1 and 20.2 of the O-I-O. The show cause notice proposed to demand duty of Rs. 1,01,11,241/- alleging clandestine clearances of 28,889.26....
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....in parties one cannot come to the conclusion that the same is towards clandestine clearance. He has observed, "it is strongly contended by SCCL that these amounts are in the form of working capital. I find that unsecured loans/working capital could have been obtained by SCCL and such loan does not warrant any official transactions of sale and purchase. The show cause notice itself states that part of the amounts having returned during the year, which suggests that these amounts may be loans, or else there is no necessity for returning the same. As already held by me, suspicion however grave cannot be substituted for positive proof. Further, applying the ratio of decision in the case of Kesarwani Zarda Bhandar v. CCE - 1998 (101) E.L.T. 181 (Tribunal); Sri Vigneswar Textile Printers - 1999 (111) E.L.T. 316 (Comm. Appeal); and BECO Industries Ltd. v. CCE, Jamshedpur - 2000 (121) E.L.T. 650 (Tribunal), wherein it is held that clandestine clearance has to be proved conclusively and cannot be arrived at theoretically, I hold that department did not establish its case with any evidence, but submitted theoretical calculation for sustaining the demand. This does not establish the case with....
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....acing of grinding media. The assessee assailed the reasoning of the Commissioner on the following grounds. The history of past consumption as a guide for future consumption is at best a very vague guide. Based on the demand for the product and type of product, consumption can increase. The department has made no attempt to find our reason for higher consumption such as higher production, different product mix. The discrepancy in inward timing cannot lead to the conclusion that the consignments were not received at all. As regards the payment, the appellant had explained that due to quality dispute, the payment had not been made. On the other hand, booked bill had been neutralised by debiting the party's account. Without seeking supplier's explanation, the department has leapt to the conclusion that there were no supplies and hence, no payment made. The MD of Torus categorically asserted the removal of grinding balls and delivery to the assessee. The assessee also, equally vehemently asserted the receipt of such supply. Both the parties agree that there is dispute about quality and hence, payment was delayed. In between, the department is interfering to say that there was no supply ....
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....e demand. (c) Demand based on letters issued to transporters : The show cause notice proposed demand of Rs. 7,67,200/- based on certain letters issued by the assessee to the transporters. The Commissioner has dropped the demand on the ground that no investigation has been made at the receiving end to prove any clearances. No monetary consideration has been shown to be received by the assessee. Further, the statement of Shri Radha Krishna, Managing Partner of M/s. Sai Ram Transport only stated that generally the lorries placed in loading are not cancelled. This statement does not conclusively prove that all the lorries for which loading slips have been prepared are loaded cleared. As the degree of proof produced is not sufficient enough to establish clearances, the Commissioner dropped the demand. The Revenue has relied on the decision of the Hon'ble Apex Court in the case of Collector of Customs, Madras and others v. D. Bhoormull [1983 (13) E.L.T. 1546 (S.C.)] holding that the prosecution or the department is not required to prove its case with mathematical precision. The department has also referred to Section 106 of the Evidence Act and its application to cases under S....