TaxTMI 
TaxTMI 
2022 (8) TMI 699
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.... inter alia, fixed the total outstanding Central Excise duty liability at Rs.48,20,700/- and also confirmed interest thereon and equivalent penalty under various provisions of the Excise Act read with the Rules framed thereunder. It is pertinent to mention here that this is the second round of litigation concerning the self-same issues before this Tribunal involving Mak Engineering and ASRM. As common questions of fact and law are involved, the two appeals were heard together and are now being disposed of by this consolidated order. 2. Brief facts of the two cases are as follows :- i) A common show cause notice dated 04.07.2001 had been issued to both Mak Engineering and its job worker, ASRM. The first appellant i.e. Mak Engineering was required to show cause as to why Modvat Credit totaling to Rs.15,73,482/- should not be disallowed, interest should not be charged and penalty should not be imposed. The show cause notice alleged, inter alia, that the ingots/billets and rounds used by the appellant were not of the type specified by the buyer and on such basis, credit of Rs.12,83,740/- availed in respect of inputs used in manufacturing Elastic Rail Clip (hereinafter "ERC"), Modifie....
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....llant-Mak Engineering's behalf that on the same facts and evidence a separate show cause notice bearing C. No. V- CH73 and 86(15) 81-CE/Kol-12/ADJN/2001/1832D dated 03.07.2001 had been issued to M/s Manash Forgings Pvt. Ltd. (hereinafter "Manash Forgings"), which was the sister concern of Mak Engineering and, thereafter, adjudicated by the Joint Commissioner of Central Excise, Kol-II Commissionerate by an Order-In-Original dated 25.07.2006 dropping the proceedings. Upon such submissions, this Tribunal directed the Learned Departmental Representative to obtain instructions relating to the above adjudication order issued to Manash Forgings. vi) The above appeals were thereafter heard by this Tribunal on 02.02.2010, when the Learned DR submitted that the adjudication order issued to Manash Forgings had been accepted by the revenue and a copy of the letter dated 17.06.2009 of the Additional Commissioner, Central Excise, Kol-II Commissionerate was also produced. Thereupon, this Tribunal, by its order dated 02.02.2010, disposed of the above appeals by way of remand, observing as under :- "........ As the demand which was raised by the separate show cause notice on the same evidence wa....
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....tiated against Mak Engineering's sister concern being Manash Forgings had been dropped vide the adjudication order dated 25.07.2006. The Learned Senior counsel submitted that on a comparison of the show cause notices issued to Manash Forgings and to Mak Engineering, there remains no doubt that the evidences in each case and the allegations framed against each assessee, except for inputs involved in the manufacture of Suspension Shackle by Mak Engineering, were nearly identical. It was evident from the letter bearing C. No. V-GL(30)159-CE/Kol-II/T & R/06 dated 17.06.2009 of the Additional Commissioner, Central Excise, Kolkata-II Commissionerate that the aforesaid adjudication order relating to Manash Forgings had been accepted by the Commissioner of Central Excise, Kolkata-II Commissionerate on 07.08.2007 and, therefore, it was not open to the revenue to take a contrary stand in the case of Mak Engineering. Further, it was submitted that it was not the Commissioner's finding that he was taking a different view because the facts in the present appellant's case were different from those in the case of Manash Forgings. To support the said submission, Sri Khaitan relied on the following....
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....n neither the manufacturers nor the Central Excise authorities had been very particular about classification of alloy/non- alloy products as per the strict rules of classification mentioned in Chapter Note 1(f) of Chapter 72 of the Central Excise Tariff Act, 1985 (hereinafter referred to "Excise Tariff"). The appellant's specific case all through had been that it had only used alloy steel inputs of grade EN-45. By referring to the technical literature included in Paper Books, Sri Khaitan sought to demonstrate that goods of grade EN-45 contained 1.50/2.00% of silicon and were "alloy steel" as per Chapter Note 1(f) of Chapter 72 of Excise Tariff. Our attention was invited to Page No. 4 of the show cause notice, wherein it has been stated that grade-55SI7 mentioned in the Railways specification corresponds to the British specification No. EN-45 and EN-45A and that the material conforming to the said grade/specification is alloy steel. I(b). The invoices listed in Annexure-I/96-97 to the show cause notice, the invoice of M/s OSIL Steel Works as also the accompanying challans relating to Zenith Alloys & Steel Limited had clearly mentioned about the grade as EN-45. Therefore, the nomenc....
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....l with reference to the strict rules of classification under Chapter 72 of the Excise Tariff. The Joint Commissioner, in the case of Manash Forgings, had given due recognition to the challans relating to the inputs in question which had formed part of the Department's seized records. The Joint Commissioner had also critically analyzed the purported incriminating statements by the ingot manufacturers, which the Commissioner during the denovo adjudication had failed to do. I(f). Lastly, by referring to paragraph No. 7 of the show cause notice and the purported findings of the Commissioner in this behalf, the Learned Senior counsel submitted that the case of alleged price differential between non-alloy and alloy products was totally meritless. II(a). In so far as the findings in the impugned order related to Rail Anchor, the Commissioner had failed to appreciate that the Indian Railways Standard Specification for Rail Anchor, Serial No. T-24/65 permitted the use of materials conforming to IRS Grade I-55C-6 water hardening quality to IS:3885 (Part I) 1977 or other recognized spring steel specification which produced anchor complying with the tests specified in clause 6. To achieve th....
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....ating authority had unreasonably sought to make out a new case in favour of the revenue. The show cause notice had proposed denial of Modvat Credit on the allegation of violation of the conditions of Notification No. 58/97-CE dated 30.08.1997. More specifically, paragraph Nos. 14 and 15 of the show cause notice showed that credit had been sought to be denied on the ground that price of the goods ought to have been charged by the manufacturer of the inputs to the manufacturer of final products whereas, commercial invoices had been raised by Unit III of Bengal Hammer Industries and no price at all been charged by the actual manufacturer, Unit II. III(b). The aforesaid allegations were baseless since Mak Engineering's orders for supply of fish plate bar and loose jaw bar had been placed on M/s Bengal Hammer Industries, who, irrespective of the location of its different factories remained the manufacturer and had maintained the same bank account for all its units. M/s Bengal Hammer Industries had provided central excise invoices as also commercial invoices. By referring to the bills and invoices at page Nos. 156 to 159 of the Paper Book, Volume -I, it was explained that the inputs in ....
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.... been written at the behest of Central Excise authorities and ought not to have been relied upon. IV(c). Similarly, the statement given by the third supplier, M/s Shiva Steel Rolling Mills contained no reference to its documents listed in Annexure-IV/99-2000 to the show cause notice and the said statement did not bear any great significance. In any event, Mak Engineering had specifically requested in its reply that the relevant records of the said supplier should be called for and after affording an opportunity to inspect the said records, it should be permitted to cross-examine Sri Bimal Sureka, partner of the said supplier, whose alleged statement had been relied upon by the revenue without allowing any cross- examination. In the circumstances, the said alleged statement could not have been relied upon by the Commissioner. D. Lastly, the Learned Senior counsel also raised the defence of limitation and submitted that the entire relevant facts relating to his client's manufacturing activities had been fully disclosed to the Department. Mak Engineering had taken credit in respect of the inputs in question on the basis of documents evidencing payment of Central Excise duty and such....
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....te fair in his submissions. 7. Having given our anxious thoughts to the various issues involved in the two appeals and upon a proper consideration of the entire gamut of evidence adduced by the parties, we are inclined to hold in favour of the appellants for the reasons stated in detail hereinafter. At the very outset, we are constrained to observe that while passing the de-novo adjudication order, the Commissioner failed to apply his mind independently to the matters and largely followed the earlier adjudication order dated 28.02.2005, since set aside by this Tribunal. The 'DISCUSSION AND FINDINGS' part of the de-novo adjudication order which starts at page No. 22 is nearly identical to that in the earlier aforesaid adjudication order, which shows that the Commissioner failed to re-consider the entire matter and decide afresh. This apart, we find that the Commissioner did not properly consider the applicability of the findings in the adjudication order dated 25.07.2006 of Manash Forgings, which was the sister concern of Mak Engineering. At page No. 31 of the present impugned order, the Commissioner has simply observed " ....... As such, I would like to hold a different view....
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..... ERC and MLJ 9. We find that the Commissioner has made several contradictory observations in the de-novo adjudication order without specifically examining the appellant's contentions regarding use of 'alloy steel' in the manufacture of ERC and MLJ. It was throughout Mak Engineering's case that goods of grade EN-45 were alloy steel according to Chapter Note 1(f), Chapter 72 of the Excise Tariff and such specification of grade EN-45 had been mentioned in several challans corresponding to the invoices listed at Sl. Nos. 16,17, 18, 41, 42 and 43 of Annexure- I/96-97 to the show cause notice, which were the invoices issued by M/s Zenith Alloys & Steel Limited. It has also been shown to us that an invoice issued by M/s OSIL Steel Works dated 29.06.1997 (at page No. 343 of the Paper Book, Volume-II filed by Mak Engineering) had described the product as 'EN-45 GRADE'. Further, we find that M/s Zenith Alloys & Steel Limited vide its letter dated 13.09.2000 had clarified to the Department that it was only after 01.10.1997 the Central Excise authorities insisted for classification of alloy steel goods and non-alloy steel goods with reference to Chapter 1(f), Chapter 72 of the Ex....
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....rectly sent to its job workers, who had undertaken re-rolling on job work basis, were of grade EN-45. Such grade had also been specifically mentioned in the job work challans issued by the job workers. The job workers' challans, manufacturers' challans and other relevant challans should have been given due recognition by the Commissioner. On a query from this Bench, Sri Khaitan satisfied us that all such challans had formed part of the Department's seized records. Further, we find that the invoices at pages 236 to 278 of the Paper Book, Volume II described the products as non-alloy while simultaneously mentioning the grade as EN-45. Use of the term 'non-alloy' in some invoices and challans, thus, could not have been determinative as to the proper classification of a product as alloy or non-alloy in the pre-compounded levy period according to Chapter Note 1(f), Chapter 72 of the Excise Tariff. 12. The appellant's submissions regarding use of alloy inputs have been wholly supported by the categorical statements made by two of the three job workers who had carried out re-rolling of the ingots/billets into rounds/bars i.e. ASRM and M/s Bengal Hammer Industries Pvt. Ltd. We have ....
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....steel products sought to be made against the appellant on the basis of two invoices, one dated 08.08.1996 and the other dated 22.09.1996, lacks merit. In this behalf, the Commissioner referred to paragraph No. 7 of the show cause notice which had alleged that the price charged in respect of non-alloy goods covered by invoice No. 237 dated 08.08.1996 was Rs. 10,000/- per ton. However, it is evident from the accompanying challan that the goods were actually of grade EN-45 i.e. alloy steel. The said accompanying challan has been wrongly ignored and it accordingly follows that the entire case of alleged price differential must fail. Even otherwise, the said two invoices under consideration were more than one and half months apart and ought not to have been compared in the manner as done while framing the allegations in the show cause notice. Nothing turns against Mak Engineering on the basis of such alleged price differential. 15. For the reasons aforesaid, we do not find that there is proper justification to deny the credit on inputs in relation to manufacture of ERC and MLJ. II. Rail Anchor 16. As regards the final product Rail Anchor, it is seen that credit has been denied by the....
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....ating to Rail Anchor; iv. Mak Engineering's Rail Anchor contained chromium in the range of 0.32% to 0.38% which conformed to the Railways' Specifications as also the hardness test. The said facts are borne out from the test reports of M/s Bhaskar Industrial Development Limited which were contemporaneous record of the tests conducted and formed part of the Annexures to show cause notice. At paragraph No. 28 at page 13 of the brief note of submissions filed by Mak Engineering, a table has been set out showing the composition of materials used for manufacturing Rail Anchor on the basis of the said test reports. According to Chapter Note 1(f) of Chapter 72 of the Excise Tariff, steel containing by weight 0.3% or more of chromium was alloy steel. Thus, having used materials with chromium content to the extent of 0.32% to 0.38%, Mak Engineering was entitled to Modvat Credit thereon and the said input materials had been correctly classified as alloy steel; v. The Commissioner sought to discard the aforesaid test reports of Bhaskar Industrial Development Limited on the ground that it was not known whether the said Bhaskar Industrial Development Limited was authorized to undertake such te....
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.... the material used for manufacturing Rail Anchor. Accordingly, the said statement cannot be of much relevance in the facts and circumstances of the case. Similarly, in the statements by the suppliers we have not found any categorical answer with reference to the chemical composition of ingots supplied under the relevant invoices listed in Annexure-III/99- 2000 to show cause notice. Further, as rightly contended by Mak Engineering, none of the ingot manufacturers had stated that the composition of the alloy ingots purchased by Mak Engineering from them was as alleged in paragraph No. 20 of the show cause notice. While reaching the said conclusions, we have kept in mind the fundamental principle that a statement should be read as a whole and ought to be understood in light of the context in which it has been rendered. 20. We further find that the Commissioner had wrongly held that no documentary evidence had been produced to show that without changing the percentage of carbon, silicon, manganese and sulphur, only presence of chromium at 0.3% will change the character of non- alloy steel to alloy steel products. This observation is completely arbitrary and perverse inasmuch as it is ....
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....oice. Having gone through the excise documents issued by the said M/s Bengal Hammer Industries Pvt. Ltd., it is clear that the bills contained reference to the said manufacturer's Works, Rolling Mills, Registered Office as well as City Office. The commercial invoices of the said manufacturer containing reference of its Units III and Unit IV could not have, by itself, negatively impacted the availment of credit at the end of the supply recipient. Mak Engineering had rightly submitted that there was nothing illegal or wrong about the aforesaid internal arrangement of issuance of commercial bills, central excise invoices etc. at the end of the input supplier, M/s Bengal Hammer Industries Pvt. Ltd. We also do not find that the revenue has controverted Mak Engineering's assertion that M/s Bengal Hammer Industries Pvt. Ltd. maintained the same bank account for all its units and Mak Engineering had duly made payment for the inputs to the said M/s Bengal Hammer Industries Pvt. Ltd., pursuant to raising of central excise invoices and commercial invoices. 24. We also find that the revenue has not been able to establish that the inputs in question had not been received by Mak Engineering dir....
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.... have been encashed in the said bank account; d) That the basic object and purpose of the Notification No. 58/97- CE dated 30.08.1997 stood fulfilled since the price with reference to which credit had been availed was the amount actually paid by the manufacturer of final product to the manufacturer of inputs; e) That there was no ambiguity in respect of payment of price by Mak Engineering to M/s Bengal Hammer Industries Pvt. Ltd. and availment of credit with reference to such price. 27. It may be noted that while passing the de-novo adjudication order, the Commissioner did not advert to the aforesaid detailed findings recorded in the adjudication order dated 25.07.2006 in the case of Manash Forgings. The elaborate exercise by the adjudicating authority in the case of Manash Forgings while deciding the issue of Modvat Credit relating to fish plate bar and loose jaw bar had also not been undertaken by the Commissioner in the present appellant's case. Considering all aspects, we hold that the revenue has not been able to establish that Mak Engineering had violated the conditions of the above Notification dated 30.08.1997. Consequently, the impugned findings denying credit of Rs. 2,....
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....e allowed to cross-examine Sri Bimal Sureka, partner of Shiva Steel Rolling Mills aforesaid, then the assessee-appellant's request for cross-examination should have been granted. The Commissioner was unjustified in failing to grant such inspection and cross-examination but disallowing credit on the basis of the said alleged statement. We have no hesitation to hold that, to confirm the Commissioner's findings on the strength of the alleged statement of Sri Bimal Sureka aforesaid would tantamount to utter violation of the principles of natural justice. We need not elaborate this point by discussing the very many decisions of the higher Courts and of this Tribunal which have consistently cautioned against confirming demands based on incriminating statements without affording opportunity of cross examination to the affected assessee. 31. It must also be noted that, apart from the aforesaid statements, no evidence has been brought on record to prove that the appellant had used non-25 mm diameter rounds for manufacturing Suspension Shackle. In our considered view, Mak Engineering had lawfully and correctly availed the credit of Rs.2,47,580/-. 32. Apart from the reasons aforesaid for wh....