TaxTMI 
TaxTMI 
TaxTMI 
2017 (11) TMI 478
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....o Ltd was known as Progressive Aluminium Company Ltd and thereafter as Pennar Profiles Ltd. Mr. P. Bhaskar Rao-appellant in Appeal No: E/1494/2011 became the director of Alumeco Ltd in the year 1997. Based on an intelligence, factory and office premises of Alumeco Ltd was searched on 10.01.07. Records and documents were resumed from Alumeco Ltd which are narrated in para 5.2 of the impugned Order-in-Original. Agarvanshi Aluminium Ltd (hereinafter referred to as Agarvanshi Ltd )-appellant in Appeal No: E/1658/2011 was another company who was also engaged in the manufacture of aluminium extrusions. Search was also conducted at the premises of Agarvanshi Ltd. Records were also recovered and seized from Agarvanshi Ltd. The scrutiny of records according to the department revealed that Alumeco Ltd had clandestinely manufactured and cleared:- (i) 1063.6222 M.Ts of aluminium extrusions to Agarvanshi Ltd without account, without raising invoice and without payment of central excise duty during the period from September 2002 to August 2005, in the guise of job worked billets. Amount of central excise duty involved on such clearances is to the tune of Rs. 1,87,59,245/-; (ii) 46.0166 M.Ton....
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....shi Ltd for the job work of conversion into billets, was not used by Alumeco Ltd, as its usage is not documented in 'Foundry Log Records of Alumeco Ltd'. (i) In three job work challans and two challans description of the goods was wilfully camouflaged. Scrap was described as aluminium metal and wire rod as 'wire rod scrap'/'aluminium metal'. (j) In challan No 65 dated 31.05.05, the goods shown as sent are described as ingots (semi-finished). On or around this date, Agarvanshi Ltd was casting logs also. Therefore, converting molten metal into ingots and then sending it for conversion into logs which can be done only after re-melting was not be economically viable and prudent. It would lead to melting loss twice. Further, there is nothing called semi-finished ingots in trade parlance. (k) Alumeco Ltd did not manufacture 6 logs, which size was most suitable for Agarvanshi Ltd, from the ingots and sows sent by Agarvanshi Ltd to Alumeco Ltd for the job work of conversion into billets . (l) Agarvanshi Ltd placed orders on NALCO for 7" and 5" logs only. These were the sizes required by Alumeco Ltd and have accordingly been used by Alumeco Ltd for manufact....
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....Director of Agarvanshi Ltd and looking after plant and production has in his statement dated 12.03.07 stated that Alumeco Ltd has exchanged NALCO logs which were of 5" and 7" dia sent under job work for Alumeco Ltd's own manufactured logs. Alumeco Ltd has never manufactured 6 dia logs which were most suitable for Agarvanshi Ltd. Alumeco Ltd has always manufactured 5 and 7 dia logs. Therefore, the claim of exchange of 5" and 7" homogenized NALCO logs with 5 and 7 Alumeco Ltd logs can only be false. (v) Sri Bhaskara Rao, ex-Managing Director of Alumeco Ltd has categorically stated in his statement dated 12.03.07 that the job work process mentioned on the job work challans of Agarvanshi Ltd were not done by Alumeco Ltd and that Alumeco Ltd manufactured profiles which was done with his knowledge and consent. According to the department the facility of job work under Rule 4(5)(a) of the Cenvat Credit Rules, 2002/2004 read with Notification No 214/86-CE dated 25.03.86 has been misused by Agarvanshi Ltd and Alumeco Ltd as a cover to manufacture and clear profiles clandestinely with active connivance and conspiracy of officers of Alumeco Ltd and Agarvanshi Ltd. 4. Show Cause Noti....
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.... Agarvanshi Ltd in the guise of billets during November 2002 and December 2002. It has been also been ordered by the Adjudicating Authority that an amount of Rs. 1,95,32,324/- debited by Alumeco Ltd from the Cenvat Account to be appropriated against the confirmed duty demand. Penalty of Rs. 1,95,32,324/- has been imposed on Alumeco Ltd under Section 11AC of the Central Excise Act, 1944. Penalty of Rs. 20,00,000/- has been imposed upon Agarvanshi Ltd, Rs. 10,00,000/- upon Mr. B.B Agarwal (Managing Director of Agarvanshi Ltd), Rs. 5,00,000/- upon Mr. Rahul Agarwal (Executive Director of Agarvanshi Ltd) and Rs. 20,00,000/- upon Mr. Bhaskar Rao, former Managing Director of Alumeco Ltd. 5. Against the order of the Adjudicating Authority, appeal have been preferred before this Tribunal by Alumeco (Appeal No: E/1767/2011), Bhaskar Rao (Appeal No: E/1494/2011), Agarvanshi Ltd (Appeal No:E/16858/2011), B.B Agarwal (Appeal No:E/1659/2011) and Rahul Agarwal (Appeal No:E/1660/2011). 6. Ld. Sr. Advocate Shri M. Chandrasekharan with Shri S.Sunil, Advocate appeared on behalf of Alumeco India Extrusion Ltd and Shri G. Natarajan, Shri P. Dwarakanath and Shri V.J. Sankaran ld.Advocates appeared fo....
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....T of raw-materials displays a total disinclination to analyze the documentary evidence which was on record and called for by the Department which had all been furnished by the appellant. (ii) The Adjudicating Authority while admitting the receipt of 691.130 Mt of materials from Agarvanshi Ltd has rejected the submission of the appellant that they were used for manufacture of final products for Agarvanshi Ltd and holds that final products sent to Agarvanshi Ltd were made using Alumeco's own raw material. The adjudicating while levelling the said charge has legally failed to establish the said charge. The allegation cannot be deemed to have been established on the ground that the person against whom the allegation is made has not been able to establish that the allegation is wrong. This principle of evidence was duly recognized by the Hon'ble Supreme Court in Shiromani Gurdwara Prabandhak Committee vs. Mihan Singh (1993) 3 SCC 650 that the onus to prove an issue lay on the person asserting the same. It could not be discharged merely on inferences drawn from the evidence of the objector. The burden was on the former to prove by cogent, reliable and independent evidence that the....
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....t of Notification and the reasoning of the learned Commissioner, the appellant submit as under:- (i) The appellant manufactured and dispatched profiles to Agarvanshi Ltd by declaring the process as homogenisation and cutting or 'conversion into billets'. It is the submission of the appellant that the processes indicated in the job work challans are essential stages in the manufacture of 'profiles'. The Show Cause Notice has described in detail the process of manufacturing profiles. The main raw material for manufacture of extrusions is aluminium ingots, sows and scrap. These raw materials are fed into the melting furnace, alongwith alloy materials and contain chemicals to get required quantity of metal. After melting the raw materials, logs are cast, which are used for extrusions of profiles. Logs of long length are to be cut into billets of required length, which is determined by the size and type of profile to be extruded. In the industry, however, the term logs and billets are used interchangeably. The findings of the Adjudicating Authority are without proper examination of the conditions of Notification and also without factual appreciation of the matter. Homo....
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....en profiles. This conclusion is, per se, fallacious. No profiles can be made without first converting the raw materials into billets. The goods received by Agarvanshi Ltd from the appellant after job work were disposed of as contemplated in the Notification after due payment of duty by Agarvanshi Ltd even in the absence of the undertaking. There is no evidence whatsoever of the raw material supplied by Agarvanshi Ltd being used for the production of any other goods for any other manufacturer or about diverting any part of the raw material into the market. Reliance by the Adjudicating Authority on the sole allegation that the job work to be done was totally different from the purpose mentioned in the Job Work Challans is, it is respectfully submitted, totally irrational and unwarranted. The finding in para 35 of the Order (at p.79) is equally untenable inasmuch homogenisation and cutting and conversion into billets were necessary for making profiles which were sent to Agarvanshi Ltd and on which appropriate duty was paid by Agarvanshi Ltd. The Adjudicating Authority's finding in para 38 of the impugned order that Alumeco Ltd manufactured extrusions and cleared to Agarvanshi Ltd ....
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.... the liability in respect of the duty leviable on the final product. It is Agarvanshi Ltd who is made liable to pay duty on the final products. (v) The appellant carried out the manufacturing process using the material supplied by Agarvanshi Ltd from time to time and were paid only the job work charges mutually agreed upon. The job work charges for conversion were made by raising debit notes. Invoices were produced during the course of personal hearing. Full value/price of the products sent to Agarvanshi Ltd was not charged or obtained by the appellant, nor has it been so contended in the SCN. If the undertaking, as referred to in (ii) above is not given by Agarvanshi Ltd, the omission cannot be a ground to deny the benefit of the exemption to the appellant. The case law on the subject was furnished, e.g., Moon Chemicals Vs. CC - 2007 (215) ELT 43 (T). It is, therefore, clear that liability on account of job work is to be discharged by Agarvanshi Ltd and not by the appellant. (vi) As regard the confirmation of duty demand of Rs. 7,73,079/-, there is no discussion at all in the impugned Order as to why the demand needs to be confirmed. The Managing Director of the appellant comp....
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.... Mr. Bhaskar Rao, former Managing Director of the Alumeco Ltd has submitted that:- (i) The findings of the Adjudicating Authority that Alumeco Ltd dispatched 1063.6222 Mts of profiles manufactured out of Alumeco's own raw material without invoice and without payment of duty is not tenable for the following reasons: (a) The value of the above transaction is approximately Rs. 10 crores in payment of cash for Raw material procurement and approximately Rs. 11 Crores receipt in cash for sale of profiles. The department could not find this large cash transaction in the books/bank accounts of Alumeco Ltd or its officers. There is no such finding in the impugned order. (b) The department has not produced evidence regarding how did Alumeco Ltd procured 1071.386 Mts of Raw material and from where did they procure this quantity of Raw material on payment of cash without going through the Banking transaction. (c) Perusal of raw material inventory reconciliation statement at pages 162-163 shows that every kilo of material is accounted in Alumeco Ltd. Monthly inventory reports are submitted to the management. The IO has taken all these documents. If there are cash purchases of raw m....
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....d. (iv) That even though it is responsibility of the principal manufacturer (Agarvanshi in this case) as per job work procedure to pay duty on the job worked final product for clearing the goods after payment of duty and not the responsibility of the job worker (in this case Alumeco Ltd), this appellant made a very detailed analysis of the invoices of Agarvanshi Ltd for the relevant period and presented in pages 188 to 269 of appeal paper book for the months from Sep 2002 to July 2005. These invoices are obtained from DGCEI by the appellant. The month-wise invoices of Agarvanshi Ltd were presented in these pages will give the following details: i. Agarvanshi Ltd's Invoice No. ii. Date of Invoice iii. To whom the Profile sold by Agarvanshi Ltd iv. Agarvanshi Ltd's profile No. v. Corresponding Alumeco Ltd's profile No. vi. Quantity supplied under this invoice and vii. Value including duty The summary of above for all months is presented in Page 270 which shows the entire quantity of 1063.6222 Mts is sold by Agarvanshi Ltd by paying duty. This also tallies with the delivery challan wise details of profiles supplied by Alumeco Ltd to Agarvanshi Ltd (271 ....
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....inium profiles manufactured by Alumeco Ltd and sent to Agarvanshi Ltd was not exempted under Notification 214/1986-CE as job work was declared only for homogenization/billets cutting and that the inputs procured by Alumeco Ltd was used in the manufacture of profiles sent in the guise of homogenization/billets cutting. (iv) The impugned order confirms demand of duty being payable on aluminium profiles cleared by Alumeco Ltd by misdeclaration as job work returns. (v) The exemption Notification has to be construed strictly and even the procedural infractions cannot be condoned. Reliance is placed on following decisions: (i) Indian Aluminium Company Ltd v Thane Municipal Corporation-1991 (55) ELT 454 (SC) (ii) Eagle Flask Industries Ltd v CCE, Pune-2004 (171) ELT 296 (SC) (vi) The contention of Alumeco Ltd that they were under the wrong impression that job work cannot be resorted to full manufacture clearly evidences malafide intention and to misguide this Hon'ble Tribunal as they were getting aluminium manufactured on job work basis from Alumeco Ltd up to August 2002. (vi) The contention of Shri Bhaskar Rao that the aluminium profiles manufactured and cleared by Alumeco....
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....tted any cogent evidence in defence to substaniate the receipt of the said materials except making submission that they did not use their own raw materials for making profiles cleared to Agarvanshi Ltd. No documentary evidence has been produced to rebut the evidence relied upon in the Show Cause Notice. The Adjudicating Authority while arriving at such a finding has totally failed to take notice and acknowledge the documents/records resumed during the course of investigation. Para 5.2 of the impugned order gives the details of documents recovered during the investigation. These records pertained to production, packing and clearances of extrusions, job work records, credit notes, purchase bills relating to purchase of wire rods, statement of account of Balco, computer hard disc resumed from the packing section, RG-1 Register, RG-23A Register, input invoice, inward Register, file containing melting/casting/production records. We fail to understand as to why the Adjudicating Authority has not referred to the contents of the documents resumed by the department. The Adjudicating Authority has given a presumptuous finding that it appeared from the documentary and oral evidence that the p....
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....tored separately cannot be made the basis to hold that the profiles were not manufactured out of materials supplied by Agarvanshi Ltd. If the profiles were not manufactured out of the raw materials supplied by Agarvanshi Ltd, the Revenue should have at the least brought on record some evidence to show that profiles made and sent to Agarvanshi Ltd were made out of Alumeco's own raw material. If the profiles are made out of Alumeco's own raw material then what has happened to the materials sent by Agarvanshi Ltd to Alumeco Ltd. There is nothing in the impugned order to show that the material received from Agarvanshi has been sold clandestinely in the market. There is nothing on record to show procurement of material other than what has been supplied by Agarvanshi Ltd having been used for manufacture and clearance of profiles to Agarvanshi Ltd. Revenue has produced no evidence to show how Alumeco Ltd procured such a huge quantity of raw material for making profiles and clearing it to Agarvanshi. From the submissions made by Shri Bhaskar Rao one of the appellants, we find that the whole transaction is approximately to the tune of Rs. 10 crores for raw material and approx. Rs. 1....
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....tally different from the job work actually done on the materials supplied by Agarvanshi Ltd. In the job work challans, the process mentioned was homogenisation and cutting or conversion into billets but the appellant has carried out the processes other than what was mentioned in the job work challans. Alumeco Ltd did not have the facility for homogenization up to 31.5.15. It is the submission of the revenue that strict interpretation has to be given while granting benefit of exemption. Procedural lapse cannot be condoned. While dealing with this issue, we find from the record that the Show Cause Notice refers to the manufacturing process of profiles. It has been stated that the main raw material for manufacturing of extrusions are aluminium ingots, scrap etc. These raw materials are fed into the melting furnace, alongwith alloy materials and contain chemicals to get required quantity of metal. After melting the raw materials, logs are cast, which are used for extrusions of profiles. Logs of long length are to be cut into billets of required length, which is determined by the size and type of profile to be extruded. In the industry, however, the term logs and billets are used interc....
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....s been also taken by the Revenue that benefit of Notification cannot be extended to Alumeco Ltd as no undertaking in terms of the Notification has been by Agravanshi Ltd to the department. During the hearing, the ld. Counsel appearing for Agarvanshi Ltd submitted that undertaking has already been given to department. In our view, submissions regarding furnishing of the undertaking shall not be of much importance as this Tribunal in the case of Moon Chemicals vs. CC - 2007 (215) ELT 43 (T) has held that the omission of filing an undertaking cannot be a ground to deny the benefit of the exemption under Not.214/86-CE. The submission of the revenue with regard to the fact that Notification 214/1986-CE has to be strictly interpreted and procedural lapse cannot be condoned, cannot apply to the present case as in the present case, it has been clearly established that: (i) Raw material sent for job work has been received by the job worker, (ii) Raw material received by the job worker has been converted into finished goods and sent back to the principal manufacturer, (iii) Principal manufacturer has cleared the job worked goods on payment of duty. Thus, the benefit of Notification 2....
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....iles sent to Agarvanshi Ltd has been received by Agarvanshi Ltd. Payment of duty shown in the invoice has also not been disputed. However, there is nothing in the impugned order to indicate that the profiles cleared by Agarvanshi Ltd are actually the profiles made by them using their own raw material. Revenue has also failed to show that the profiles received from Alumeco Ltd have been sold in the open market clandestinely. Not even a single buyer has been identified to show that Agarvanshi Ltd has sold the profiles in cash in a clandestine manner. Merely stating that indication of equivalent number of profile in the sale invoice of Agarvanshi Ltd does not ipso faco prove duty payment by Agarvanshi in respect of profiles is not enough to hold that profile sent to Agarvanshi Ltd by Alumeco Ltd has been cleared in the market without payment of duty. Efforts should have been made by the Revenue to disprove the invoices or documents produced by Bhaskar Rao to indicate that Agarvanshi sold the profiles in market without raising any invoice. The details produced before us by Bhaskar Rao are not only confined to invoices showing payment of duty by Agarvanshi Ltd but the same has also been....