TaxTMI 
TaxTMI 
2015 (9) TMI 1151
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....e sole Proprietrix, was engaged in the manufacturing of air-conditioners. The Appellant is also stated to be engaged in the trading of compressors, water coolers, transformers etc. It was a small scale unit and registered as such with the Central Excise Department. It was exempted from payment of excise duty on that basis. 4. On 28th February, 1992, the officers of the Central Excise Department (hereafter 'Department') visited the factory premises of the Appellant. They found 36 air-conditioners (ACs) valued at Rs. 7,92,000/-, 281 compressors valued at Rs. 47,77,000/-, 4 deep freezers valued collectively at Rs. 41,500/- and 4 fan motors collectively valued at Rs,1,600/-. 5. On the same day, the officers of the Department visited the residence of Mr. Pradeep Khanna, the husband of Mrs. Neera Khanna. He was the Proprietor of M/s Thermoking. The officers seized 24 ACs from the residence of Mr. Khanna. 6. According to the Appellant, immediately thereafter she appeared before the officers of the Department, produced the RG-1 Register and claimed that 36 ACs were duly accounted for therein. The Appellant states that on that very date the 36 ACs, 4 fan motors and 24 ACs seized ....
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...., xvi, xvii and xviii above, it appears that they have been manufacturing and removing A.C. in the guise of gas compressors and extra payments were reflected in the ledgers without corresponding bills. (iv) From point No.i, vii, viii, xi, xiv, xv, xiv, xx, it appears that they had been raising invoices but no corresponding excise gate passes were issued. (v) Point No. viii reveals that they even issued bills in triplicate sets bearing the same serial number." 9. The show cause notice also alleged that although the Appellant had supplied and installed ACs, in some instances, the invoices showed the sale of compressors. The scrutiny of the ledger for the years 1988-89 and 1989-90 showed that certain payments had been made and credited in the books but no bill numbers have been mentioned against such receipts and the debit column of the ledgers also reflected the conversing position. The SCN also referred to the statement of one Mr K.V. Subba Rao, Deputy Manager (Marketing) of SRR recorded on 24th June, 1992 regarding supply of compressors to the Appellant, which was registered as an Original Equipment Manufacturer (OEM) to enable them to use the said compressors to manufacture....
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...., washing machines and geysers, it was also trading in such items as well as compressors, water coolers, heat convectors etc. It was asserted that during the year 1988-89 for all such sales the Appellant had raised proper invoices copies of which were enclosed with the reply. Reference was also made to the statement of Mrs. Neera Khanna before the sales tax authorities and to the fact that the Appellant had a sales tax registration for selling compressors. A copy of the sale tax registration certificate was enclosed. It was also stated that the Appellant was allowed to retain the Central Excise registration for ACs and for other items which were exempt from payment of duty under Notification No. 175/87. The Appellant maintained separate 'simplified registers' for such items and those registers were pre-authenticated by the officers of the Department. The Appellant offered to produce such registers at the time of hearing. It was submitted that the figures appearing in the ledger for the year 1988-89 and 1989-90 accounted for sale of goods other than ACs. It was pointed out that ACs required use of components like compressors, cooling coil, condensers, motors, capacitors, she....
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....ao, Deputy Manager (Marketing) of SRR did not establish that the compressors purchased by the Appellant had not been sold by it. It is pointed out that as far as Mr. Pradeep Bhargava was concerned, by his letter dated 2nd May 2002, he had retracted the statement earlier made by him. It was stated that Mr. Bhargava had been removed from service as he was caught for stealing Rs. 50,000 and for which an FIR was also registered in 1989. Therefore, his statement that the compressors received from M/s. Thermoking were used for all the ACs manufactured by the Appellant was incorrect and unreliable. It was stated that "my clients are prepared to cross-examine him for establishing of such details and thereby further establish that the statements of Shri Pradeep Bhargava are not correct on facts and should not be used against my clients." 17. It was pointed out that there was no basis for clubbing the Appellant's business with that of M/s. Jass Kann and M/s. Thermoking and thereby denying the benefit of Notification No. 85/87. Adjudication order 18. The Commissioner of Central Excise ("CCE") passed the adjudication order on 4th January 2014. According to the CCE, it transpired during inve....
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....ayment of duty and gate passes was not acceptable since it was not shown to be obtained by inducement, threat or promise. However, it was held that his statement was corroborated by the fact that neither any evidence showing clearance of the said ACs on payment on demand of dues or issue of GPs nor any record by the manufacturer has been produced either by the Appellant or M/s. Thermoking. Therefore, the contention that the ACs were manufactured on behalf of M/s. Thermoking was held not to be convincing. (v) As regards the clubbing of the Appellant with M/s. Jass Kann and M/s. Thermotech, the CCE held that since Ms. Neera Khanna was proprietor of the said two concerns there could not be any dispute about clubbing of the clearance of the excisable goods from the said two units. Therefore, the value of the goods cleared by the Appellant had been clubbed with those cleared by the said two concerns for determining the Appellant's liability to the benefit of excise exemption. The combined value of the clearances for the years 1988-89, 1989-90 and 1990-91 was in excess of the liability criterion for availing exemption under Notification No.75/87/CE. Consequently, the Appellant was hel....
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....detail i.e. GPs, name of the parties and corresponding details as per the ledger to verify and adjudge its veracity. It could, therefore, be inferred that the entries in the ledger were not in respect of the ACs cleared over and above the ones in the statutory documents. 25. As regards the clandestine removal of 36 ACs involving dues amounting to Rs. 3,53,650 during the period 1987-88 to 1990-91, the CCE concluded that the field enquiries conducted revealed that the Appellant were clearing the ACs without raising bills and GPs and in the guise of compressors. No satisfactory explanation had been offered by the Appellant. The statement of one Mr. R.K. Sharma revealed the modus operandi of ACs of the Appellant being sold by M/s. Thermoking. Consequently, it was held that the case of the Department regarding clearance of the 36 ACs without payment of duty stood established and the duty demand was confirmed. The Appellant was held liable to pay Rs. 77,95,808 for contravening the statutory provisions as well as for penalty. Two dissenting opinions of the Members of CESTAT 26. In the appeal filed by the Appellant before the CESTAT there was a difference of opinion between Ms. Archana ....
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....tements of Mr. Subba Rao and Mr. Shiv Prasad were sufficient to prove the allegation. Since no complaint had been made by KBLand SRR it had to be presumed that the Appellant had not traded the compressors received from both of them and this in turn pointed out the fact that they had been illicitly diverted by M/s. Thermoking to the Appellant who manufactured ACs and cleared them clandestinely. (iv) On two aspects, therefore, i.e. confiscation of 24 ACs and corresponding duty demand of Rs. 3,16,800 and the clearance of 606 ACs with the corresponding duty demand of Rs. 58,44,825, Mr. Rakesh Kumar, Member (Technical) differed with the Member (Judicial) and confirmed the demand. 29. As a result of the above two opinions, the position that emerged was that in respect of two of the points of charge in the SCN i.e. confiscation of 24 ACs, 4 deep freezers and 4 fan motors with corresponding duty demand of Rs. 3,53,640 and the clubbing of clearance of the Appellant with M/s.Thermotech and M/s. Jass Kann there was no disagreement among the two Members that the case of the Department was not made out. The said two demands were accordingly held to be unsustainable. 30. The two issues on ....
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.... of duty or value of goods. Moreover when the appeal was admitted by the Court and question of law framed by the order dated 28th January 2014, no question was framed as regards the maintainability of the appeal. Consequently, the preliminary objection as regards the maintainability is hereby rejected. Demand in relation to 24 ACs not challenged 36. As far as the merits are concerned, at the outset Mr. C. Hari Shanker, learned Senior counsel appearing for the Appellant, submitted on instructions, that the Appellant seeks to urge only one part of the question framed by the Court concerning the alleged clandestine clearance of 606 ACs with the corresponding duty demand of Rs. 58,44,825. He stated that the Appellant was not pressing the appeal as regards the clandestine removal of 24 ACs and the corresponding duty demand. 37. Consequently, while affirming the impugned order of the CCE as regards the duty demand of Rs. 3,16,800 corresponding to the clandestine removal of 24 ACs, the Court proceeds to examine the appeal only as regards the issue of the clandestine removal of the 606 ACs with the corresponding duty demand of Rs. 58,44,825. Reasons 38. On the above surviving question....
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....esence cannot be obtained without an amount of delay or expense which, under the circumstances, the Court considers unreasonable. It was held by the Court in Basudev Garg (supra) that "it is clear that unless such circumstances exist the noticee would have a right to cross-examine the person whose statements are being relied upon even in quasi judicial proceedings." 43. In the present case, the Court finds that despite a specific request made by the Appellant for cross-examination of the witnesses whose statements were recorded and were being relied upon by the Department, no serious attempts were made to secure their presence in the adjudication proceedings. A perusal of the adjudication order of the CCE shows that as far as Mr. Pradeep Bhargava is concerned, the summons issued to him were returned with the remarks "left without address" by the postal authority. No further attempt appears to have been made to secure his presence. After simply noting the above fact the CCE in the order-in-original dated 14th January 2004 observed that "hence no purpose was going to be served by sending a fresh summons to him." 44. To say the least, this was the most perfunctory way of dealing wit....
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....Thermoking is still pending consideration and, therefore, this is yet another reason why it could not have been relied upon in the adjudication order. 48. Turning to the issue of ledger entries, the Court finds that barring the Member (Judicial) neither the CCE nor the Member (Technical) who differed with the Member (Judicial) have dealt with the explanations offered by the Assessee in the replies to the SCN. The Court"s attention has also been drawn to the detailed submissions made by the Assessee in writing on 28th December 2003 before the CCE. On the aspect of clandestine removal of 606 ACs, in para 19-B(iii) of the submissions, the Appellant offered the following explanation: "The sale figures in respect of compressors for the year 1988-89 is Rs. 14,81,300/- and towards other goods Rs. 23,25,256/-. For the year 1988-89 the total sale value comes to be Rs. 38,06,556/-. For the year 1989-90 the sale value of compressor has been Rs. 642400/- and other items has been Rs. 14,60,957.54 and thereby making the total sale figures to Rs. 21,03,357.54. All such figures were verifiable from the ledgers seized by the Department. 19-B-IV) As per Annexure-XVIII of SCN it is alleged that....
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....able evidence to show that there was large scale manufacture of the commodity in order to substantiate the allegation of clandestine removal. The Court in para 7 referred to the findings of the Tribunal in the said case as under: "7. The Tribunal in Paragraph Nos. 12, 13 and 16 has recorded clear finding that when the premises of the respondent were visited, the stock of raw-material and finished goods were tallying with the recorded goods. Further, nothing on record was found by the authority, which showed that unrecorded raw-materials were purchased or consumed by the respondent or that the respondent had clandestinely manufactured or removed the goods. It is necessary to extract Paragraph Nos. 12, 13 and 16 of order of the Tribunal, which reads as under:- 12. Be that as it may be, it is to be noted that there is no dispute that to manufacture of said final product 'Frit' requires the use of Quartz, Feldspar, Zinc, Borax Power, Calcium and Dolomite as inputs/raw material. On the date of visit of the officers to the factory premises of the appellant, it is undisputed that the stock of raw materials as well as finished goods was tallying with recorded balances. This co....
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....ting the purchase of excessive raw material, shortage of finished goods, excess consumption of power like electricity, seizure of cash, etc., the Tribunal noted and held that there was nothing to bank upon except the bare confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time of their recording. The Tribunal also noted the fact that the requisite opportunity of cross examination was also not made available so as to bring to the fore the true picture and therefore, it concluded against the Revenue observing that not permitting the cross examination of a person in-charge of records of M/s. Sunrise Enterprises and absence of other cogent and positive evidences, would not permit it to sustain the demand of Rs. 1.85 Crores raised in the Demand notice and confirmed by both the authorities below." 54. The above order has been affirmed by the Supreme Court by the dismissal of SLP (Civil) (CC Nos. 19304-07 of 2014) on 1st December 2014. 55. Mr. Hari Shanker, learned Senior counsel for the Appellant, has also drawn the attention of the Court to a decision of the CESTAT in Arya Fibre....