TaxTMI 
TaxTMI 
2017 (11) TMI 478
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....rofiles'. Prior to 3rd February 2006, Alumeco 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....
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....p and 8.610 M.tons of wire rods (describing the goods as aluminium scrap and aluminium metal ) shown as sent by Agarvanshi 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....
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....rofiles. The non-existent billets appear to have been replenished by unaccounted scrap as deposed by Agarvanshi Ltd's officials in their statements above. (u) Sri Rahul Agarwal, Executive 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 be....
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.... He has, therefore, in the impugned order confirmed the duty demand of Rs. 1,86,23,571/- against Alumeco Ltd. A duty demand of Rs. 7,73,079/- was also confirmed against Alumeco Ltd in respect of clearance of 46.0166 MT of extrusions to 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 (....
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.... any of the contents of the documents resumed by the department. This shows lack of application of mind on his part. He has only stated what appeared to him. The manner in which the Commissioner has come to his conclusion in regard to the 380.257 MT 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 ....
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....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. As regards the denial of benefit 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 ....
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....SCN, and as confirmed by the Adjudicating Authority, the stocks were not separately stored, how could the SCN and the Adjudicating Authority confirm that the appellant had used only their own raw material and not what was received from Agarvanshi Ltd, to make billets or even 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....
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.... shall be used to manufacture the final product in Agarvanshi Ltd and removed on payment of duty from its factory. It has been proved that the goods have been so removed in the prescribed manner. Clause (d) (iii) of the Notification also requires Agarvanshi Ltd to undertake to discharge 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 ....
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....ods accounted for the same in the statutory records and showed the same as used in the manufacture of dutiable goods. (iv) Agarvanshi Ltd after receipt of the job worked goods to the tune of Rs. 1063.6222 MT accounted for the same in the statutory records and showed the same as used in the manufacture of dutiable goods. 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 ....
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....s in pages 155-161 of the appeal. The Investigating Officer first arrived at this conclusion and thereafter selectively looked at the record and also made assumptions ignoring other relevant records. That the entire quantity of 1063.6222 Mts of profiles supplied to Agarvanshi Ltd is only on job work basis after having received 1071.3863 Mts of raw material through 128 job work challans during the investigation period. (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 so....
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.... work challans. The said irregularities have been squarely accepted by the appellants in their appeals filed before this Hon'ble Tribunal. (ii) Investigations further revealed that material to the tune of 380.256 MT said to have been sent by the appellant were not received by Alumeco Ltd and the said inputs were not used by Alumeco Ltd. In view of this, Alumeco Ltd has used the inputs procured by them to the tune of 380.256 MT in the manufacture of aluminium profiles cleared to Agarvanshi Ltd. (iii) Aluminium 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 ....
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....of Notification No 214/86-CE? (iii) Whether appropriate duty has been paid on the profiles sent by Alumeco Ltd. As regards the receipt of materials under job work challans by Alumeco Ltd, the Adjudicating Authority has himself referred to the fact that Show Cause Notice admits that 691.130 MT of materials sent for job work have been received by the Alumeco Ltd from Agarvanshi Ltd while 380.256 MT were not received by them. The Adjudicating Authority has rejected the submission of Alumeco Ltd regarding receipt of 380.256 MT of materials on the ground that Alumeco Ltd in their reply has not submitted 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 re....
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....o the tune of 1071.3863 MTs sent by Agarvanshi Ltd has been received by Alumeco Ltd. 12. On the issue as to whether the profiles cleared by Alumeco Ltd has been made out of materials supplied by Agarvanshi, we find from the record that there is no dispute regarding receipt of materials at least to the extent of 691.130 MT by Alumeco Ltd. We have in our findings hereinabove, already held that why the findings of the Adjudicating Authority regarding non receipt of balance 380.216 MT of materials by Alumeco Ltd was not sustainable. On the ground that the materials received from Agarvanshi Ltd have not been stored 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 sho....
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....e is no evidence regarding the fact that job work activity has been done on the materials supplied by Agarvanshi Ltd as no separate accounts are maintained by Alumeco Ltd in respect of material received for job work. All the materials formed the common pool. Therefore, it has to be concluded that there is no evidence that the profiles that were supplied to Agarvanshi Ltd by Alumeco Ltd were manufactured out of the raw material supplied by Agarvanshi Ltd. The other reasoning of the Adjudicating Authority for denying the benefit of Not.214/86-CE is that the description of job work in the job work challans are totally 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 ....
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.... performed were different cannot be a ground to deny the benefit of Notification No 214/1986-CE, especially in view of the fact that the process indicated in the job work challans are one of the necessary processes required for the manufacture of profiles. We also agree with the submission made by the appellant that both the inputs and final products are, admittedly, covered under Notification 214/86-CE, and the alleged mis-declaration makes no difference to the availability. We also find from the record that there is nothing to show that Agarvanshi has paid anything over and above job work charges. A stand has 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 benefi....
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....ordingly, the profiles manufactured by Alumeco Ltd would be corresponding to the profile designs of Alumeco Ltd. In such a scenario, mere indication of equivalent number of profiles in the sale invoice of Agarvanshi Ltd does not ipso facto prove duty payment by Agarvanshi Ltd in respect of profiles manufactured and cleared by Alumeco Ltd in the guise of job-worked goods. We have gone through the said records. The records clearly show that profiles received from Alumeco Ltd has been cleared by Agarvanshi Ltd on payment of duty. From the submissions made on behalf of the Revenue, it is clear that they are not denying the fact that profiles 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. Mere....