TaxTMI 
TaxTMI 
TaxTMI 
2017 (10) TMI 394
X X X X Extracts X X X X
X X X X Extracts X X X X
....008 is by M/s. Wahab Stores against imposition of penalty of Rs. 10,000/-. 1.3 Appeal No. E/826/2008 is by Shri Prabhu Deva of M/s. Embee Agencies against imposition of penalty of Rs. 20,000/- (The above three appeals arise out of common Order-in-Original No. 11/2008 (Denovo) dated 28.4.2008 by the Commissioner passed in pursuance of show-cause notice dated 17/12/2005.) 1.4 Appeal No. E/69/2008 is by TAG against demand of duty of Rs. 4,29,95,446/- along with interest and imposition of penalty of equal amount under Section 11AC and further penalty of Rs. 42 lakhs under Rule 25 of the Central Excise Rules, 2002 by the Order-in-Original No.14/2007 dated 28/9/2007 passed by the Commissioner. 1.5 Appeal No. E/70/2008 is by Shri H.S. Nataraj, Managing Director of TAG challenging the penalty of Rs. 5 lakhs imposed under Rule 26 of the Central Excise Rules 2002 by the order No. 14/2007 dated 28/9/2007 passed by the Commissioner. 1.6 All the above five appeals arise out of common investigation, involve common evidences and also a common appellant and therefore, are being disposed of by this common order. 2. The brief facts of the case are as follows: 2.1. TAG is a manufacturer of gut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y three parties viz. TAG, M/s Wahab Stores and M/s. Embee Agencies. 2.7 In pursuance of show-cause notice dated 31/1/2007, duty of Rs. 4,29,95,446/- along with interest stands demanded and penalty of equal amount under Section 11AC and further penalty of Rs. 42 lakhs under Rule 25 of the Central Excise Rules, 2002 stand imposed. A penalty of Rs. 5 lakhs stands imposed on Shri H.S. Nataraj, Managing Director of TAG under Rule 26 of the Central Excise Rules 2002. 3. The Tribunal during the 1st litigation had passed the following order: "19. In view of the above the appeals are disposed of as follows: (a) Appeal No. E/669/08 by TAG is disposed of as follows: (i) Demand of Rs. 9,66,224/- relating to the period 2002-03, demand of Rs. 1,35,28,624/- relating to April 2003 to July 2004 and demand of duty relating to April & May 2005 amounting to Rs. 50,05,439/- are upheld. Corresponding penalties of equal amounts under Section 11AC are also upheld. (ii) Demand of duty for the period April 2004 to March 2005 shall be restricted to duty payable on a differential quantity of pouches determined based on production capacity and accordingly, the duty liability shall be reworked and the cor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er these circumstances, is available to the Assessing Authority for levy of Excise duty on the basis of production capacity or not. However, it appears from the order of the Tribunal that, either said contention was raised nor considered by the Tribunal in the impugned order. Had it been a mixed question of law and fact, the matter may stand on a different footing and different consideration but, when it is a pure question of law for available recourse under section 3A, we find that such a contention is available to the party aggrieved by the order of the Tribunal. Further, as observed by us hereinabove, even if section 3A is to apply, then also, a further scrutiny may be required to be undertaken as to whether, for the goods in question, the notification was issued or not. It is only after two aspects of applicability of section 3A and the availability of the notification for production of gutka, the matter can be considered for finalization of excise duty by the Revenue. As, neither there is reference to such contention nor there is discussion by the Tribunal on the aforesaid aspects which are vital aspects for charging of excise duty, we find that it would be just and proper to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Tribunal shall examine the same in accordance with law. 17. In View of the aforesaid observation and discussion, we find that, on the aforesaid two limited aspects, the matter deserves to be remanded to the Tribunal." 5. With the above background we have heard Sh. S. Jaikumar, Ld. advocate and Sh. P.R.V. Ramanan, the ld. Special Counsel appearing for the Revenue. 6. On behalf of the appellants the ld advocate took us through the facts of the case in detail and advanced the main arguments as follows: i) The adjudicating authority as well as the Tribunal has confirmed the duty demands with penalties against the appellants by traversing beyond the grounds advanced in the show cause notice and the statement of facts attached with the show cause notice. The SCN has cited various evidences to support the duty demand only to the extent of Rs. 2.82 crore whereas the total duty demand confirmed is to the extent of Rs. 4.29 crore. The duty demands are not backed by evidence, but has been raised on the basis of production capacity of the Unit 1 and 2 of the appellant. He further argued that the SCN did not raise the subject of production capacity, but the adjudicating authority as wel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....med by the MD of the appellant. ii) The special counsel further added that the breakup of duty demand was submitted by him during the course of hearing of the 1st appeal before the Tribunal, only on the basis of what has been stated in the SCN and discussed by the adjudicating authority. He submitted that it will be incorrect to state that he has created the worksheet what has been used by the Tribunal in the last round of litigation. iii) He finally submitted that the evidence gathered by revenue undoubtedly establishes the fact that the appellant has indulged in clandestine clearance of goods without payment of duty and hence the demand of duty on such clearances may be upheld. 8. In the written submissions made by the ld. Special counsel, he has submitted as follows: 8.1 The Hon'ble Karnataka High Court has disposed of the aforesaid appeals filed before them by remanding the matter to the Tribunal to consider two limited aspects. These aspects are: (i) Whether the recourse under section 3A is available to the assessing authority for the levy of Excise duty on the basis of production capacity or not and whether a notification was available under the said section 3A for g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ermine the likely quantity of clandestine clearances for the period from April 2003 to July 2004. (iv) However, the Tribunal, in its final order, extended the application of the same basis also for the period from August 2004 to March 200s.This was because it was found that estimated clandestine clearances as per the number of cotton canvas bags purchased from dealers was far in excess of the quantity arrived at based on production capacity. (v) In any case, the Order of the Hon'ble Karnataka High Court would apply only to the duty demands for the period from April 2003 to March 2005 since duty demands for the said period alone were based on the likely clandestine production based on the capacity of machines of TAG. The norm of production for 5 hrs, per day for 14 days in a month was as per the statement of the MD and the estimation of production was done in his presence. In its earlier order, this Hon'ble Bench has held that the estimation method and the determination of clandestine production/clearances as not arbitrary or unreasonable. (vi) For the periods, 2002-2003 and April and May 2005, the basis of determining the quantum of clandestine clearances- as upheld by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... modified by the Final Order of the Hon'ble Tribunal dated 1/12/2011 is both legally and arithmetically correct and proper. 9. After hearing of the appeal by the Tribunal on 03.5.2017, the ld advocate filed the rejoinder and additional submissions dated 08.05.2017 in which he has further emphasised the following points: i) From a perusal of the SCN as well as of the SOF attached, it could be seen that there is no mention about purchase of tobacco pathi which is indicated in the worksheet submitted by the special counsel as leading to demand of Rs. 9,66,224/-. ii) It is evident that the basis of quantification furnished by the special counsel is not available in the SOF served on the appellants. iii) Para 58 of the impugned order discusses the duty as recoverable from the appellants only to the extent of Rs. 2.82 crore. The basis of the duty demand of Rs. 4.29 crore has not been detailed in the SOF. Accordingly this duty demand confirmed by the Commissioner is beyond the grounds proposed in the SOF attached to SCN. iv) They relied on the following cased to support their contention that the Department cannot travel beyond the SCN: a) CC Mumbai Vs. Toyo Engg Ltd. 2006 (201....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing order has referred to in section 3A. Hence it is to be concluded that the duty demand raised and confirmed was not on the basis of Section 3A which was not in the statute books during the period of dispute. 14. The 2nd aspect which is required to be examined as per the remand directions of the Hon'ble Karnataka High Court is whether the ultimate amount quantified in the SCN goes beyond the reasons appended to the SCN. In other words what is required to be examined is whether the adjudicating authority or the Tribunal in the earlier round of litigation, has confirmed the demand of excise duty going beyond the reasons appended in the SCN. 15. In the Tribunal s Final Order dated1.12.2011, in paras 7 to 14, the various evidences unearthed by the revenue- both oral as well as documentary- have been detailed. The evidences have also been analysed by the Tribunal and discussed in detail. Since the authenticity of such evidence has not been challenged either before the Hon'ble High Court or before us in the present proceedings, we do not propose to re-discuss the same in the present proceedings. The evidences lead us to the inescapable conclusion that the appellants were involved in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d alone were based on likely clandestine production based on capacity of machines. Apart from the above period, the basis for determining the clandestine clearance was based on private records corroborated by the statements given by concerned persons. He further submitted that for the period August, 2004 to March, 2005, the demand raised in the show cause notice on the basis of cotton canvas bags was restricted by the Tribunal to that worked out, on the basis of production norms, reducing the duty liability. Accordingly, he submitted that the quantification of duty demand in the show cause notice, as modified by Final Order of the Tribunal dated 1.12.2011 is legal and arithmetically correct. 18. After careful perusal of the record of the case, we note that the show cause notice has raised the demand on the basis of following evidence: (i) Duty demand for Rs. 46,77,703/- has been proposed on the basis of private records recovered during the investigation from which the alleged clandestine clearance quantities were worked out based on consumption of lime. (ii) The investigation has unearthed the quantum of cotton canvas bags procured by the appellant from M/s. Divya Enterprises. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....asons for such demand only to the extent of about Rs. 2.84 crore. Hence, we are of the view that duty demand raised beyond Rs. 2.84 crore has been made without outlining the reasons for such demand and accordingly cannot be sustained. The case laws relied by the appellant in this regard support such a view. 1) CC Mumbai vs. Toyo Engg. Ltd. [2006 (201) ELT 513 (SC)]; 2) CCE, Nagpur vs. Ballarpur Industries Ltd. [2007 (215) ELT 489 (SC)]; 3) CCE, Bhuvaneshwar vs. Champdany Indus Ltd. [2009 (241) ELT 481 (SC)]; 4) CCE vs. Gas Authority of India Ltd. [2008 (232) ELT 7 (SC)]; 5) Commissioner vs. Reliance Ports and Terminals Ltd. [2016 (334) ELT 630 (Guj)]; and 6. Hindustan Petroleum Corpn Ltd. vs. CCE, Mumbai [2011 (269) ELT 422 (Tri-Mum)] 22. Duty demand, worked out to Rs. 46,77,703/- has been made on the basis of private records recovered during investigation and the same merits to be upheld for the reasons explained in detail in the order-in-original. The appellant has also admitted such liability during the course of hearing of appeal. 23. Duty demand raised on the basis of cotton canvas bags procured by the appellant from M/s. Divya Enterprises is to the extent of Rs. 2,38,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 31.1.2007 is also based on evaluation of evidence relating to procurement of unaccounted raw materials/packing materials etc., suppression of production and admitted case of clandestine removal. Therefore, to say that the show cause notice dated 31.1.2007 relied upon the same evidence as the show-cause notice dated 20.6.2005 is incorrect. Therefore, extended period of limitation has been rightly invoked. Further, the period of 5 years in terms of proviso to Section 11A is invokable from the relevant date and the relevant date is not dependent upon the knowledge acquired by the department but with reference to the obligation of the assessee. This view is supported by the decision of the Hon'ble high Court of Gujarat in the case of Commissioner of C. Ex., Surat-I Vs. Neminath Fabrics Pvt. Ltd. [2010 (256) E.L.T. 369 (Guj.)]. In this regard, relevant portions of the said decision are reproduced below :- "17. The proviso cannot be read to mean that because there is knowledge the suppression which stands established disappears. Similarly the concept of reasonable period of limitation which is sought to be read into the provision by some of the orders of the Tribunal also cannot be per....