TaxTMI 
TaxTMI 
2023 (11) TMI 885
X X X X Extracts X X X X
X X X X Extracts X X X X
.... like cement, fly ash, cotton pulp, etc. for manufacture of final product viz., Asbestos Cement Sheet. The appellant was availing the duty exemption in terms of Notification No.6/2002-CE dt.1.3.2002 on the finished products. 2. As per notification 6/2002 at serial no.158, for goods falling under Chapter heading 68 of CETA, 1985, the duty to be paid is 'Nil' if the goods are manufactured by use of not less than 25% by weight of fly ash or phosphogypsum or using both of these. The notification states that Condition 36 has to be fulfilled. As per the notification Condition 36 reads as under: "If the manufacturer maintains proper account in such form and in such manner, as the Commissioner of Central Excise having jurisdiction may specify in their behalf, for receipt and use of fly ash or phosphogypsum or both, in the manufacture of all goods falling under Chapter 68 of the First Schedule and files monthly return in the form and manner, as may be specified by such Commissioner of Central Excise, with the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction". 3. The department was of the view that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ash was not in order. The appellant as well as NEC were found to have stated in their private records about the (bogus) excess supply of fly ash purportedly made from MTPS. Statement was recorded by the Officers from Shri D. Manickavasagam, Works Manager of M/s. Visaka lndustries Ltd. and from Shri. N. Santhosh Kumar, Proprietor of NEC. It appeared that though they were aware of the actual quantity of fly ash lifted, NEC has connived with the appellant and prepared faulty/bogus consignment notes and raised them for dispatch of fly ash over and above the actual quantity of fly ash lifted from MTPS. 3.3 As per the data provided by MTPS, it was noticed that if the excess quantity of fly ash recorded by the appellant as received by them for the year 2003-04 & 2004 05 was reduced, the actual fly ash content percentage in final products would fall well below 25%. Thus, the investigation and scrutiny of the various documents recovered, revealed that there was bogus fly ash receipt accounted as received from MTPS to the tune of 2251.311 MT during the year 2003-04, and 7957.690 MTs for the year 2004-05. The average percentage of fly ash recorded in the statutory record Form B and Form C ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... only but accounted under the head VTPS/RTPP. The department has not suspected such unallotted receipt of fly ash." 4.1 The gist of the reply filed by co-noticee, M/s. Natesan Engineers & Contractors (Appellant in Appeal No.40390/2021) is stated in para 5.02 of the impugned order. Relevant part is extracted as under: * Small units and brick manufacturers who are in existence only in paper also get allotment from MTPS and many of such units will not use the allotted quota of fly ash but sell it and make profit out of it. From such units, they procured fly ash allotted by MTPS and diverted to M/s. Visaka Industries Ltd., because they are actual users. * Perusal of the purchase orders would reveal that two types of supplies i.e., delivery from MTPS quota to M/s. Visaka Industries Ltd., and another type was delivery of fly ash by them from the quota allotted to others by MTPS. The unloading of fly ash at Sankari Yard is known to MTPS. Further in the Sankari Yard not only the fly ash lifted from MTPS by them on behalf of M/s. Visaka Industries Ltd., but also fly ash lifted on behalf of other units was unloaded, packed and removed to the respective units. So....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... It is also their case that M/s.NEC procured fly ash from other sources in open market. On perusal of the documents produced before us and after hearing the submissions made by both sides, we are of the considered opinion that the appellant has to be given a further chance of contesting the case with the support of these documents. They have consistently pleaded in the reply to the notice as well as in the appeal that they have received supply of fly ash not only from MTPS but also from various other sources. In fact, the appellant has stated in the reply as under : 2. At the outset, we thank the Hon'ble Commissioner for allowing cross-examination of Sri N. Santhoshkumar as witness in this case. During the cross examination held on 19/11/2008 Sri N. Santhoshkumar inter-alia started that M/s.Natesan Engineers & Contractors and Natesan Construction Products are agents to many fly ash utilization companies like cement companies ACC, Asbestos Companies like Visaka, Readymix concrete plants like ACC RMC, RMC India Ultratech Readymix, R.B.S Readymix, Ganesh Concrete etc., and brick units like Sakthi Interlock and others; that no documents are given by MTPS for them for trans....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated 30.11.2018, upheld the Final Order passed by CESTAT. The relevant paras are extracted as below : "25. In the instant case, the Adjudicating Authority has recorded in paragraph 23.01 of the Order-in-Original that the quantity delivered to the assessee as per the MTPS records was found to be reflected in the private register of M/s. Natesan Engineers and Contractors and that there was no dispute over this. The dispute, therefore, appears to be with regard to the quantity received from outside allottees by M/s. Natesan Engineers and Contractors. Mr. Santhoshkumar, Managing Director deposed in his cross examination held on 19.11.2008 that he had evidence to show the procurement of fly ash from other sources. The explanation given by the assessee was that those were third party documents and therefore, they took some time to get those documents. 26. In paragraph 3.1 of the order passed by the Tribunal, this submission of the assessee as placed on record. That apart, with regard to the discrepancy in the vehicle numbers, the assessee produced certain records to show that an error had occurred. Similarly, we find that in paragraphs 23.01, 23.02(i), 23.02(x), 23.02(x....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d order. The operative part of this order is extracted below: ORDER (i) I confirm and demand an amount of Rs.13,23,85,374/-(Rupees thirteen crores twenty three lakhs eighty five thousand three hundred and seventy four only) (BED Rs.13,12,20,280/-& Education Cess Rs.11,65,094/-) towards the Central Excise duty liability on Asbestos Cement Sheets cleared by them during the years 2003-04 & 2004 05 under Section 11A(2) of the Central Excise Act, 1944, from M/s.Visaka Industries Ltd., (ii) I demand appropriate interest under Section 11AB of the Central Excise Act, 1944 on the amount demanded at SI.No.(i) above; (iii) I impose a penalty of Rs.13,23,85,374/-(Rupees thirteen crores twenty three lakhs eighty five thousand three hundred and seventy four only) under Section 11AC of the Central Excise Act 1944 and Rule 25 of Central Excise Rules 2002 on M/s.Visaka Industries Ltd.,, and (iv) I impose a penalty of Rs. 19,00,000/-(Rupees nineteen lakhs only) on M/s.Natesan Engineers and Contractors under Rule 26 of the Central Excise Rules, 2002. 8. The very same duty demand, interest and penalties were again confirmed after re-adjudication also. Ag....
X X X X Extracts X X X X
X X X X Extracts X X X X
....procured from the cement companies and brick companies reached the Appellant through various transport operators like Natesan Engineers and Contractors ('NEC') etc. The sources of fly ash and their movement from MTPS to the Appellant is captured in the flow chart below : * MTPS direct allotment of fly ash was supplied to Appellant through transport operator-NEC ** Cement Companies supplied fly ash to Appellant through transport operators like NEC, Guru Traders, etc. *** NEC procured Fly Ash from bricks companies and in turn supplied to the Appellant, etc. 9.5 Since the Appellant was using more than 25% fly ash in manufacture of asbestos sheets, the Appellant cleared the asbestos sheets at NIL rate of duty under the NN 06/2002 for the year 2003-04 and 2004-05. The Appellant maintained proper records for receipt and use of fly ash and filed the monthly returns promptly as required under the NN 06/2002. There was no dispute raised by the Department when the monthly returns were filed by the Appellant. The Appellant continued to use more than 25% fly ash in asbestos sheets even after the NN 06/2002 was rescinded in 2006. Proceedings initiated against th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onfirm the present demand by denying NIL rate of duty. A.1. The NN 06/2002 permits asbestos sheets to be cleared at NIL rate of duty when: ▪ Such sheets are manufactured with not less than 25% fly ash; ▪ If the manufacturer maintains proper accounts in the specified form & manner and files monthly returns with the jurisdictional officer. A.2. The contention of the Department is that the asbestos sheets do not contain 25% or more than 25% fly ash because the source of fly ash could not be substantiated. A.3. The Appellant submits that such denial is alien to the NN 06/2002. The NN 06/2002 requires the Appellant to account for and furnish monthly receipts of fly ash to demonstrate that the asbestos sheets contained not less than 25% fly ash. A.4. The impugned order has required the Appellant to also identify the source from where they procure fly ash when there is no requirement to prove the source of the supplier. A.5. In Paragraph-16.01, the impugned order has held that the Appellant has not proved the sources of fly ash procured by the brick companies, Sakthiguhan Construction Products and SIAR Traders and therefore has held the Appella....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t specified the source of procurement of fly ash in the dispatch note/consignment note/freight bill issued to the Appellant. Further, Paragraph-16.01 of the impugned order observes that the Appellant has not proved the sources of fly ash procured by the brick companies, Sakthiguhan Construction Products and SIAR Traders. B.3. Further, in Paragraph 17.03 of the impugned order, the impugned order has held that transactions between Co-Appellant and the Appellant are mere arrangements to satisfy the Department since there is no corroborative evidence produced by NEC in the form of Sales Tax Registration, Sales Tax returns, Ledger A/c, P&L A/c, Income Tax Return to prove the genuineness of transactions. B.4. It is submitted that all the aforesaid findings are beyond the scope of the SCN and merits to be set aside. It is well settled that an order cannot travel beyond scope of SCN. Reliance in this regard is placed on the following decisions: B.4.1. Caprihans India Ltd. v. CCE [2017 (51) STR 239 (SC)] B.4.2. Saci Allied Products ltd. v. CCE, Meerut [2005 (183) ELT 225 (SC)] B.4.3. CC Mumbai v. Toyo Engineering India Ltd. [2006 (201) ELT 513 (SC)] C. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gned order with respect to CCCL. Therefore, to this extent, the source of fly ash is deemed to be accepted. Once the fly ash of 1295 MTs obtained from CCCL is considered, the fly ash used by the Appellant is more than 25%. The said computation is tabulated below : Source Quantity (in M.T.) Quantity of Asbestos sheet manufactured (as per SCN) (A) 66,142.21 Quantity of fly ash consumed in production As per SCN (excluding the alleged bogus quantity) (B) 16,232.51 As per the Appellant (considering only 1295 MTs in excess of B) (C) 17,527.51 % of fly ash consumed in manufacture As per SCN (B/A * 100) 24.54% As per the Appellant (considering only 1295 MTs in excess of B) (C/A* 100) 26.50% D.3. In light of the above, even without considering the procurements from Sakthiguhan Construction Products and Shri Karthikeyan Transports, the Appellant is eligible for exemption. E. The Appellant is eligible for exemption for the year 2004-05 E.1. During the year 2004-05, the Appellant had procured fly ash indirectly from the following sources: Source Quantity (in M.T.) Chettinad Cement Corporation Ltd. (CCCL) 2957.85....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Appellant (considering only 7963.185 MTs in excess of B) (C/A * 100) 26.60% E.7. The Appellant submits that the impugned order is only attempting ways and means to deny the Appellant the benefit which it is otherwise eligible to. F. If the disputed quantity of fly ash was never received by the Appellant, then the Department ought to have proved as to how the final product was manufactured. F.1. The Appellant submits that to manufacture 1 Metric Tonne (1000 Kgs) of asbestos sheet, the Appellant uses 83.3 Kgs of Asbestos Fibre, 416.7 Kgs of Cement, 285.6 Kg of fly ash, 8 Kg of cotton pulp which totals to about 793.6 Kg of input approximately. Asbestos sheets predominantly contain cement and fly ash (about 90%). F.2. The Appellant submits that assuming without admitting that the disputed quantity of fly ash was not received by the Appellant, the Department ought to have proved as to how the final product was manufactured by the Appellant. F.3. In any case, the only substitute to fly ash, is cement which is significantly more expensive. Therefore, it is commercially not viable to manufacture asbestos without fly ash. Business prudence and best practises demand that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... fly ash contractor, Mettur. These consignment notes showed the consignee as M/s.Vishaka Industries (the appellant). The description was 'dry fly ash'. Another miscellaneous file was found, which contained details of MTPS fly ash receipts for the year 2004-05, supplied by Mettur Thermal Power Station (MTPS) and Natesan Engineering Contractors was highlighted. A separate column Miscellaneous GRN accounted in the name of Natesan Engineers and Contractors was seen to be made. 10.2 Statements of Shri. D.Manickavasagam, Works Manager, of appellant company and Shri. Santhosh Kumar of Natesan Engineers and Contractors was recorded. 10.3 On enquiry, it was found by the department that the basis for receipt of fly ash is the allotment order issued by the Chief Engineer, of MTPS. The Officers visited MTPS on 6.10.2005 to verify the actual quantity of fly ash effected to appellant M/s.Vishaka Industries. The Superintending Engineer, of MTPS vide letter dated 6.10.2005 answered that the allotted quantity is 2000 tons/month and that no contract is made with TNEB. The month-wise details of lifting of fly ash by M/s.Vishaka Industries were furnished. 10.4 As per Board Circular 477/43/99-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ention of the appellant that in addition to the quantity received from M/s.Natesan Engineers and Contractors from MTPS, the appellants also procured through Natesan Engineers and Contractors, sourced from the quantity allotted to small units; brick manufacturers, Cement companies, etc. In para 16.01, the adjudicating authority has examined the entire set of documents submitted by the assessee. However, the appellant was not able to establish their contentions that fly ash was procured from other sources also. Further, the documents having produced after much delay cannot be accepted, as their veracity is not established. The Learned AR submitted that the order passed being legal and proper, the appeals may be dismissed. 11. Heard both sides and perused the records carefully. 12. The issue to be considered is whether the duty demand, interest and penalties imposed on the appellants denying the exemption under notification 6/2002 dt.1.3.2002 is sustainable or not. 12.1 The undisputed fact is that the quantity of fly ash received by the appellant, viz, M/s.Vishaka Industries under direct allotment from MTPS tallies with the quantity of fly ash accounted by appellant as well a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ike Sakhi Interlock and others. It is also stated that MTPS does not issue any document for transport and that they use their own consignment notes to the companies they supply fly ash. It is stated by him that brick units who get allotment from MTPS may have excess after their usage and these units sell the excess to them and they in turn sell these to those companies who need more fly ash apart from their allotted quantities. 12.7 The appellant, Vishaka Industries has furnished documents before the adjudicating authority to establish that they received fly ash from other sources over and above the quantity allotted to them by MTPS. The details of these documents are explained by the appellant. Some quantities were sourced through NEC and some quantity procured directly by appellant. 12.8 In para 16.01, the adjudicating authority has recorded his discussions and findings after examining the documents submitted by appellant, with regard to procurement of fly ash from other sources. The table in para 16.01 of the impugned order has summarized the procurements explained by the appellant : 2003-04 Name of Supplier Quantity (MT) Mode of procurement Chettinad Cement....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a finding as to the quantity said to have been procured from Chettinad Cements Corporation. In page 504 of the appeal paper book, the letter dt. 25.3.2004 issued by Chettinad Cements Corporation to the appellant is enclosed. This letter shows the lifting of 748 MTs of dry fly ash from MTPS by appellant which is the allotted quota of Chettinad Cements Corporation. 12.9.2 Similar letters are furnished in page 505, to 507 of the appeal paper book. The letter dt. 8.4.2004 shows that a quantity of 547 MTs fly ash has been lifted by appellant. The letter dt. 5.5.2004 shows that a quantity of 2957.85 has been lifted. The letter dt. 25.5.2004 shows that appellant has procured 748 MTs, 547 MTs and 2957.85 MTs in February, March and April respectively, and that the appellant (M/s.Vishaka) has to pay balance of Rs.2,93,589/- towards the cost of fly ash to M/s.Chettinad Cement Corporation Ltd. This letter is extracted as under : 12.9.3 In spite of this document there is no finding as to the procurement made from CCCL. The contention put forward by the appellant about the quantity of fly ash procured through M/s.Karthikeyan Transports is discussed as the letter dt. 20.12.2003 issued by M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on Ltd. M/s.MSM Transports, ACC RMC, Sakthiguhan Construction Products, and SIAR Traders. 12.9.7 The appellant contends to have procured 2957.85 MTs of fly ash from Chettinad Cements. It is observed by the adjudicating authority that the appellant has furnished necessary documents for such procurement. However, again, there is no finding recorded as to whether these documents are accepted or not. The adjudicating authority is silent as to the procurement on the basis of these documents. The duty demand has been confirmed by disregarding these documents, without recording any reason. 12.9.8 In the case of procurement of fly ash from M/s.MSM Transport the appellant had explained that MSM had issued letter to NEC dt. 27.11.2004 wherein MSM proposed to supply fly ash to NEC and further supply to be made to appellant. It was also stated that this supply is made from the allotment made to seven brick companies which was indicated in the letter. From the documents, it is seen that the appellant had procured 2480 MTs of fly ash on various dates during February 2005. The appellant had furnished all documents evidencing the procurement through NEC from M/s.MSM Transport. So also, they ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... department alleges that the quantity of fly ash of 2251.311 MTs 2003-04 and 7963.18 MTs for 2004-05 shown in accounts of appellant is bogus quantity. 12.11 The Ld. Counsel for appellant has given the calculation with regard to the actual quantity of fly ash received by appellant, and the alleged bogus quantity. The third table below would show that during the disputed period on the basis of the documents furnished by appellant by which they procured fly ash, the percentage of fly ash in the final product would be 28.53% (2003-04) and 26.66% (2004-05) which is higher than 25% prescribed in the notification. The tabulation presented by the counsel for appellant is as under : Ready reckoner: Supply of fly ash received in 2003-04 Supplier Quantity per Impugned Order Findings in the Impugned Order Appellant's Submissions Flow of Supply Visaka's Source Source of source M/s. Chettinad Cements Corporation Ltd. ('CCCL') Pg. 57, 58: 1295 MT Pg 58: No findings. MTPS→ CCCL→ Visaka Pg 504 & 505: Letters issued by CCCL confirming the supply of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gs MTPS→7 Brick Companies*→ MSM→ Visaka Pg. 523 & 524: Letter issued by MSM confirming the supply of fly ash to Visaka through NEC. Pg 523: MSM discloses that it had procured fly ash from 7 Brick Companies* through its letter to NEC: J.S. Hollow Blocks, Mettur Dam. M.R. Hollow Bricks, Mettur Dam. MVM Hollow Blocks, Mettur Dam. Maragatham Hollow Blocks, Mettur Dam. Muthu Hollow Blocks, Mettur Dam. RAVI Hollow Blocks, Mettur Dam. Supplier Quantity per Impugned Order Findings in the Impugned Order Appellant's Source Flow of Supply Visaka's Source Source of source 7. Sakthivel Hollow Blocks, Mettur Dam. Pg. 149: The above six companies are listed in MTPS's RTI response as recipients of fly ash for the year 2004-05 vide serial numbers 81, 82, 83, 84, 87, 90 & 91. ACC RMC Pg. 58, 59: 2481.930 MT Pg. 59: No evidence of ACC RMC authorizing M/s. Alliance Carriers to appoint other transporters. Pg.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent and ASC sheet companies which use MTPS dry fly ash, the name of appellant is seen mentioned. In the said list the name of Sakthiguhan Construction, Erode is also mentioned. This would prove that Sakthiguhan is also getting MTPS dry fly ash. In this document, the list of small scale industries which uses MTPS fly ash is also given. This list mentions the name of the six brick making units (Sun Hollow Bricks, Cheran Bricks, Sindhu FA Products, Sankar, Emerald FLAG Bricks, ERK Concrete, RM concrete) from whom Shri Karthikeyan Transports has sourced the fly ash, and supplied to appellant. Similarly, SIAR Traders, Salem is listed at Sl.No.18 in this document. These documents which are reply to RTI supports the contentions of the appellant. 12.13 Moreover, it requires to be mentioned that though the case put up by department in the SCN is that except the quantity allotted to appellant by MTPS, the entire quantity of fly ash accounted by them in their books of accounts, ER-I return, Form C, D etc. are bogus, there is indeed mention of supply from ACC RMC in the SCN itself. 13. The Ld. A.R Shri Rudra Pratap Singh had vehemently argued that as the documents were produced after muc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sufficient opportunity. 28. The learned Senior Standing Counsel for the Revenue has relied upon the decision of the Hon'ble Supreme Court in the case of Ibrahim Uddin. The said decision arose out of a civil litigation and the Court found that there were absolutely no pleadings and that there was no evidence with regard to a Will. Interpreting Order XLI Rule 27 of the CPC, the decision was rendered. In the preceding paragraphs, we have pointed out the difference in the phraseology and language in Order XLI Rule 27 of the CPC and Rule 23 of the CESTAT Rules. Therefore, we are of the considered view that the decision in the case of Ibrahim Uddin would not render any assistance to the cee t the Revenue. For the above reasons, We find that there is no error in the order passed by the Tribunal." (emphasis supplied) 13.1 We humbly note the observations made by the Hon'ble High Court that the authenticity of the documents can always be checked by the adjudicating authority. We have to say that the adjudicating authority has not made any remark in the impugned order as to the authenticity of the documents. At the adjudication level the officer is fully equipped to ....