TaxTMI 
TaxTMI 
2018 (2) TMI 1022
X X X X Extracts X X X X
X X X X Extracts X X X X
....to as APPB) who are manufacturers of Ply Wood and Block Boards falling under Chapter 44 of the Chapter to CETA 1985. During the course of investigation, it appeared that some records namely delivery notes, invoices of unused receipts were not only related to APPD but also to another two units viz; The Veera Silver Frames (hereinafter referred to as VSF) and Sri Ambigai Lumber Board Works (hereinafter referred to ALBW). On visit to VSF, department officers found one Glue / Resin make machine in working condition and one hot press machinery was in repair condition. EB connection was found common for both APPD and VSF. It further emerged that ALBW was functioning within the compound of one Ambigai Saw Mills and that following machineries were found installed therein namely (a) Jamauna make peeling machine (b) Jamauna make cutting machine (c) Portable like cutting machine and (d) table cutting machine. Core stock of 80,000 sq.fts. was also found. It further appeared that the records of all the three units were kept at one place. Pursuant to investigations, the department took the view that although three units in the names of APPD, VSF, ALBW were apparently engaged in manufacture of Pl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ames (VSF) 75,00,000/- 2. Ambigai Lumber Board Works (ALBW) 25,00,000/- 3. G. Madhan Kumar, Managing Partner of APPD 75,00,000/- 4. V. Sivaa Kumar, Managing Partner of APPD 75,00,000 5. Shri G. Vinoth Kumar, Partner of APPD 25,00,000 6. V. Veeraraghavan, Partner of APPD 25,00,000 7. G. Chendil Kumar, Partner of APPD 25,00,000 8. V. Veera Rajendran, Managing Partner of VSF 25,00,000 9. G.Kasthuri, Partner of VSF 15,00,000 10. V. Anitha, Partner of VSF 15,00,000 11. V. Ganesan, Managing Partner of ALBW 10,00,000 12. M. Sujatha, Partner of ALBW 10,00,000 13. S. Maheswari, Partner of ALBW 10,00,000 Aggrieved, all the above persons have filed appeals E/41822/2014 to E/41835/2014 as listed in the preamble to this order. 4.1 All these appellants were represented by Shri S. Durairaj, Ld. Advocate who made a preliminary objection on the maintainability of the proceedings itself. 4.2 Ld. Advocate drew our attention to the two SCNs dt. 08.11.2012 & 08.01.2013 and to the statement of demand dt. 30.12.2013 to point out that the Notices/Demand required only Ambi Ply P....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of the provisions of the Central Excise law it is considered appropriate to penalize the defaulter, it is necessary to first issue a show cause notice. The show cause notice would necessarily detail the provisions of law allegedly violated and ask the noticee to show cause why such penalty should not be imposed on him under the relevant provisions of the Act / Rules. Thus, a show cause notice gives the noticee the opportunity to present his case. 5.1 On the other hand, on behalf of Revenue, Ld. A.R Shri K.Veerabhadra Reddy while supporting the impugned order vehemently opposes the prayer of the Ld. Advocate to set aside proceedings on technical grounds. 5.2 Ld. AR submits that while only APPD have been asked to show cause and other persons have not been so asked individually, this is a minor discrepancy since copies of SCN had been marked to all the other persons. Ld. A.R also contends that there is no dispute that SCNs were received by all the persons concerned. It is also not disputed that all these persons were represented by a common advocate during the adjudication process and that many submissions on merits had been then made. He submits that appellant cannot now take....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of justice has been refined and adapted to govern the proceedings of bodies other than judicial tribunals; and a duty to act judicially in conformity with the rule has been imposed by the common law on administrative bodies not required by statute or contract to conduct themselves in a manner analogues to a court. Moreover, even in the absence of any charge, the severity of the impact of a discretionary decision on the interest of an individual may suffice in itself to attract an implied duty to comply with this maxim. [Halsbury's Laws of England (4th Edn.), Vol.1, para. 74.] 7.3 This is the essence of the maxim Audi Alteram Partem, namely no man should be condemned unheard. The maxim, being a cardinal principle of justice, is required to be followed in all judicial proceedings. Non-adherence to this cardinal principle of law will undoubtly result in a decision which can only be termed as discretionary and which due to the inherent lack of natural justice accorded to the accused, will then have the result of becoming vitiated abi initio. Unless the statute expressly excludes the application of this maxim, the principle of natural justice must be invariably followed. But poss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ines Vs CC Bombay 1995 (75) ELT 513 (Tribunal), which case law has also been relied upon by the Ld. Advocate for the appellant, has held that non-issue of SCNs is not regardable as a SCN. The relevant portion of the order is reproduced as under : "11. We have considered the submissions and perused the records. On the issue of trafficking of license we find that Department has accepted that goods in question were sold on high sea sales basis and permitted M/s Bentam Industries to amend the Bill of Entry changing into their name as importers. There is a clear finding that goods are not covered by additional licenses of export houses which are alleged to be transferred. When once there is a finding that goods are not covered by such licenses, the transfer of such licenses has no bearing on importation and importation has to be adjudged independently whether importation was legal or otherwise. Since goods are not covered by licence and such license is not valid for goods in question, any transfer of such license amounts to void transaction which confers no rights and obligations on respective parties. If the goods are covered by such license, the position would have been diffe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rein that when SCN was not served on the person but only a copy thereof endorsed to him, the proceedings were bad in law and could not sustain. 7.9 The Tribunal in the case of Kesat Chemicals Pvt. Ltd. Vs CCE Pune - 2006 (202) ELT 666 (Tri.-Mumbai), following the ratio laid down in the case of Expo Combines, inter alia held that the SCN therein did not contain any allegation on the Directors of part nor did it call upon them even to show cause. Hence the penalties arrived at on the Directors cannot be upheld. Appeal filed by the department was dismissed by the Hon'ble Apex Court as reported in 2015 (324) ELT 631 (SC) wherein, inter alia Apex Court held that the finding of the Tribunal are pure finding of facts and after due consideration of the entire material on record". 7.10 We thus find that on this issue there are a number of Tribunal decisions which have consistently held that non-issue of SCN on the affected persons would vitiate the proceedings. As discussed, appeals by the Department against at least two of these Tribunal decisions have been dismissed by the Hon'ble Supreme Court. 7.11 Viewed in this light, and in particular following the settled law in the matter ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r unit by permitting the usage of its own premises and that violates the law. That is how the Commissioner should have proceeded once he found that M/s. Neha Refrigeration is not a fictitious unit. Once M/s. Neha Refrigeration did not have the opportunity to establish the genuineness of the contents of the documents, then, all other findings of the Commissioner are vitiated. That is how it has been held to be prejudiced. In any event, the appeals have been allowed also by holding that this is not a case where M/s. Sapna Engineering have carried out activities of manufacturing coils on which the duty has been demanded. Such an evidence does not exist. The finding of fact is that the appellants did not have the capacity to manufacture all the parts of air-conditioner and refrigerator appliances on which duty has been demanded. The finding of fact about absence of co-relation appearing in paras 4(iv) and 4(v) would denote that the allegations in the show cause notice could not be substantiated against M/s. Sapna Engineering as well. The finding further goes that there is independent evidence supporting the contention of M/s. Sapna Engineering that defective coils were repaired by M/s.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (hereinafter to be referred as the noticee). In such notice, the Department alleged that there was intelligence received by the Excise Department that the appellant-company is a dummy unit of the noticee and no manufacturing facilities are available at the site of the appellant-company. Upon visit by the officers of the Excise Department at the site of the appellant-company, it was noticed that the unit came into existence in the year 1992 and skeleton machinery was installed at the site. There was commonality of directors between the two companies. On the basis of investigation carried out by the Excise Department, the noticee was called upon to show cause why excise duty of Rs. 4,97,348/- already paid should not be recovered and confirmed under the Central Excise Act and why interest and penalty should not be levied. 3.3 Importantly, without any notice to the appellant-company, the proceedings were conducted, which culminated into confirmation of duty, interest and penalty demands. 3.4 The appellant-company filed claims for refund for a sum of Rs. 4,97,348/- recovered by the Department from the appellant. Such refund claim was rejected by the competent authorit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... necessary to hear the appellant separately before taking final decision of appropriation of the duty amount. 6. As can be seen from the record, the question relates to the appellant-company being dummy of the noticee company. It is not even the case of the Department that before declaring the appellant-company as a dummy, hearing was necessary. Merely because the notice was issued on the so-called parent company, requirement of hearing the appellant-company would not be done away with. It was on this basis that the Tribunal found that the Department had committed an error and had therefore, directed service of copy of the notice to the appellant-company. These findings of the Tribunal and the ultimate directions have not been challenged by the Department. The conclusion that the order of recovery of tax, interest and penalty could not have been passed without hearing the appellant, thus becomes final. If that be so, the question is mere supply of copy of the show cause notice to the company be sufficient The show cause notice, we may recall, was issued against the original noticee company and there was neither any proposal against the appellant-company nor a copy was serv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ove proposition reliance has been placed upon the following decisions of the Tribunal holding that non-issuance of a show cause notice to all the units whose clearances are proposed to be clubbed vitiates the proceedings. 1. Dawn Fire Works Factory & Ors. v. CCE, Madurai - 1999 (31) RLT 104 2. Ramsay Pharma Pvt. Ltd. v. CCE - 2001 (127) E.L.T. 789 (T) = 2000 (41) RLT 713 3. SKN Gas Appliances & Ors. v. CCE, New Delhi - 2000 (120) E.L.T. 732 (T) = 2000 (39) RLT 528 (CEGAT) 4. Expo Combines v. CCE, Bombay - 1995 (75) E.L.T. 513 5. CCE v. Sompura Ceramics - 2001 (130) E.L.T. 195 (T) = 2001 (42) RLT 399 (T) 18. The ratio of all the above decisions have been individually discussed by the learned Member (Technical) in his proposed order, but has not been followed by him by observing that the show cause notice in question was marked to M/s. Reliable Corpn. who had also filed a reply to the same and have participated in the adjudication proceedings by attending personal hearing before the Commissioner. My learned brother has also referred to the various paragraphs in the show cause notice alleging in detail the grounds on which M/s. Rel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce to the proposed dummy unit without specifically calling upon the same to show cause against the proposed action cannot be held to be sufficient compliance with principles of natural justice and the proceedings arising out of the same are required to be set aside. Learned Member (Technical) has observed that M/s. RC having participated in the proceedings and having filed a reply to the show cause notice, are estopped from taking the above technical plea. I find from the reply filed by M/s. Reliable Corpn., which stands annexed with the order proposed by ld. Member (Technical) that they have mentioned that - the present reply, is filed by way of abundant caution and it cannot be treated that RC is participating in the proceedings. As such in my views the ratio of the precedent decisions of the Tribunal as discussed earlier is fully applicable to the present case and the impugned order is liable to be set aside on this sole ground itself. I would also like to observe here that the Hon'ble Supreme Courts decision in the case of CCE, Coimbatore v. V. Madhu [2002 (146) E.L.T. 252 (S.C.) = 2002 (105) ECR 273 (S.C.)] referred to by ld. Member (Technical) is not applicable to the facts o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evant portion : "The Revenues case is that, on 29-1-2003, following simultaneous searches at the premises of M/s. Copier Force India Ltd., No. 283, Anna Salai, Chennai, (CFI), their godowns and the residential premises of the Managing Director Shri K.A. Shabu, the officers recovered several incriminating documents, three CPUs and seized 94 pieces of fully assembled photocopiers. Scrutiny of the documents revealed that CFI had imported second-hand photocopier sub-assemblies condition from countries such as Sri Lanka, Singapore and Australia. Imports were also made in the names of several dummy units created by CFI. The Managing Director of CFI admitted that the other importers (firms) were his creation. All the related Bills of Entry for import of photocopier sub-assemblies were seen to have been assessed under CSH 9009.90 i.e. photocopier parts/components. The brands included Canon, Modi Xerox and Agfa. Printouts of data retrieved from the CPUs seized from CFI premises showed details of transactions in photocopier parts and photocopiers by CFI during 2001-02 and 2002-03 (12/01 to 1/03). The data showed transactions by CFI in the names of dummies also. Various statements re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... after a long time of recording statement. He had deposed that he used to instruct Ms. Radha and Ms. Rathi to enter data relating to transactions in the CFI computer. From the involvement of employees of CFI in the transactions recorded in the CPU of CFI and the treatment of sub-assemblies and photocopiers in the records of CFI, the Commissioner concluded that all the transactions were on behalf of CFI. CFI had manufactured a new product different from the inputs, imported sub-assemblies and indigenous parts and sold them under brand names not owned by them. Therefore, excise duty was payable on the seized goods and the clandestine removals. In computing the clearance value transactions in the names of various concerns accounted in the computer records were taken into account. The Commissioner found sufficient evidence to hold that all the transactions were conducted at the behest of Shri K.A. Shabu by the employees of CFI. CPUs were seized from the CFI premises. The data could be accessed only with the password known to Ms. Radha, who was an Accounts Assistant of CFI. Statements of the staff of CFI confirmed transactions under fictitious names like Abci, RAM, RAD which were actual....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as to why clearances attributed to it should not be clubbed with those of SGRM. The original authority had categorically recorded that no such notice was issued to A.G. Company. In the circumstances, we find that the demand of Rs. 3,229/- from SGRM, imposition of penalties on SGRM and Sri N. Manikandan to be not sustainable. In the result, cross objections filed by the respondents deserve to be allowed." 7.18 In a even more recent decision, this very Bench vide Final Order No.40215-40217/2018 dt. 25.01.2018 in the case of Sri Vari Packs & Others Vs CCE Salem in Appeals E/188/2009 etc., following earlier Tribunal's decision in the case of Poly Resins (supra) and Hon'ble Calcutta High Court's decision in CCE Kolkata Vs Diamond Scaffolding Co. 2011 (274) ELT 10 (Cal.), held that proceedings without notice to one of the parties in holding adverse view against such party is not sustainable. The relevant portion of the order is reproduced below : "5. We have heard both sides and perused the appeal records. Regarding the appeals by the assessee-appellant, we note that as correctly contested by the ld. consultant that, there is a serious legal infirmity in the proce....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the alleged "dummy units". The Tribunal decision in Box & Carton India Pvt. Ltd. Vs CCE Delhi 2008 (228) ELT 85 (Tri.-Del.) will also not help the case of the Revenue since from our reading, the only discrepancy brought up by the appellant therein was that the SCN had failed to identify as to who is the main manufacturer and who is the dummy unit. 7.21 The Ld.AR has made another forceful argument that though in the Show Cause Notice the dummy units were not called upon to show cause to club the value of their clearances, copy of the show cause notices have been issued and received by them; that further they participated in the adjudication proceedings; that therefore they are estopped from raising the contention at appellate stage that they have not been issued Show Cause Notice as provided under Section 11A (1) of Central Excise Act, 1944. We have already discussed that mere issuance of copy of show cause notice to "dummy unit" without calling upon them to show cause why their clearances should not be clubbed is not sufficient for initiating proceedings under Section 11A (1) against dummy unit. Even their participation in the adjudication proceedings pursuant to receiving a co....