TaxTMI 
TaxTMI 
2024 (3) TMI 687
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....31089/2016 filed by the Company is whether demand of duty confirmed on alleged shortage of goods said to be found on the basis of comparison of the quantity accounted in SAP system and the quantity accounted in defunct manual RG1 Register is correct, when the Dept. has not considered the quantity of fruit pulps accounted by the Appellants in SAP system, at the time of arriving at so called excess quantity of goods for confiscation but, at the same time, adopted the very same figures accounted in SAP system for alleging shortage of goods and confirmation of demand thereon. 3.1. Since the facts and circumstances in both the appeals of the company, i.e. Unit No.1 & Unit No.2, are identical, except few dates, quantities, demands, etc., facts of Unit No.1 are narrated for the purpose of deciding all the appeals. 3.2. The Appellants were manufacturing various types of fruit pulps and were classifying under Heading 2007. The Fruit Pulps were cleared by them for home consumption as well as for export, on payment of duty or under bond, as the case may be. 3.3. It was stated that on or around 15.8.2010, the Appellants switched over to maintenance of their records, including the prod....
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....ecords were also not considered in its entirety. 3.9. After hearing the Appellants, the Commissioner, vide Order-in-Original dated 30.05.2014, confiscated the excess stock of fruit pulp; imposed redemption fine of rupees one crore, imposed penalty of Rs.25 lakhs on the company and Rs.20 lakhs on Mr. Sameer Sharma. Similar SCN was issued and Order passed in respect Unit.2 also. 3.10. Both Unit Nos.1 & 2 and Mr. Sameer Sharma challenged the Orders before this Tribunal by filing separate appeals. The Dept. also filed two appeals praying for enhancement of redemption fine. The Company opted for SVLDRS scheme and settled the issue. Therefore, a separate Order No.A/30437-30442/2023 dated 20.12.2023 was passed dismissing all the six appeals, as withdrawn. 3.11. In the meantime, two separate SCNs, both dated 07.05.2015, were issued to Unit Nos.1 & 2, proposing to recover specified amounts of duty on the fruit pulp, allegedly cleared clandestinely; alleged undervaluation of the fruit pulp stock transferred to their sister unit; MS drums/liners allegedly removed clandestinely; interest on the aforesaid duties and also to impose penalty on the company and its Associate Vice President....
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....to the Officers at the time of first stock verification done in the factory during February & March 2013; 5.4. That when the Dept. has not taken into consideration and not accepted the accounts maintained in SAP system, while issuing first SCN for confiscation of alleged excess stock of finished goods, the Dept. cannot take an altogether different stand and consider and rely upon those documents (SAP system) for issuing second SCN for demanding duty on alleged shortage of final products, when physical stock is compared with and stock maintained in SAP system; 5.5. That when there was excess stock while issuing first SCN for confiscation, there cannot be shortage, arising out of the very same investigation and documents, while issuing second SCN for demanding duty; 5.6. That when the Dept. considered and compared physical stock with defunct RG1 Register, for the purpose of arriving at excess stock and confiscated the same, despite the Appellants' repeated requests that correct stock was as accounted in SAP system, the Dept. cannot take an altogether different stand and compare the quantity accounted in SAP system with quantity accounted in defunct RG1 Register, to arrive at....
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.... physical verification and improper comparison of figures shown in RG1 Register/ER1 Returns and in SAP system; 5.15. That it is noteworthy that for manufacture and clearances of such a huge quantity of fruit pulp, enormous quantity of raw materials and packing materials were required. The Dept. has not adduced any evidence of unaccounted purchase of raw materials/packing materials required for manufacture of fruit pulp alleged to have been clandestinely removed; 5.16. That it is a settled law that the burden of proof of clandestine removal is on the Dept. and the same has to be proved with cogent and tangible evidence and not mere suspicion, in support of which reliance is placed on the following judgments: (i) Amforge Industries Ltd. - 2019 (367) ELT 208 (Bom) (ii) Auto Gollon Industries - 2018 (360) ELT 29 (All) (iii) Nissan Thermoware P. Ltd. - 2011 (266) ELT 45 (Guj) (iv) Arsh Casting Pvt. Ltd. - 2010 (252) ELT 191 (HP) (v) Air Carrying Corp (I) Pvt. Ltd. - 2009 (248) ELT 175 (Bom) (vi) Davinder Sandhu Impex Ltd. - 2016 (337) ELT 99 (Tri) (vii) Balajee Structurals (India) - 2016 (341) ELT 457 (Tri) 5.17. Th....
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....ly; 5.22. That the valuation adopted by the Appellants for stock transfer of fruit pulp to their sister unit at Jalgaon was correct and no favoured treatment was afforded and, hence, differential duty, as alleged/confirmed through the impugned SCN/Order, is not sustainable; 5.23. That, in any case, the fruit pulp stock transferred to sister unit was used by them for manufacture of their final products which were ultimately cleared on payment of appropriate duty for home consumption and/or exported under bond or under rebate scheme. Therefore, whatever duty paid on the fruit pulp by the Appellants would have been available as Cenvat credit to their own sister unit and, hence, the entire exercise lead to revenue neutral situation and, accordingly, there would not have been any inducement to undervalue the fruit pulp stock transferred by the Appellants; 5.24. That since all the MS Drums and LDPE Liners obtained without payment of duty, under Rule 19(2) of CER, 2002 read with Notn.No.43/2001- CE(NT) dated 26.6.2001, were used for filling in the fruit pulp, either in Unit-I or Unit-II, and the same were cleared on payment of duty for home consumption and/or for export, no duty ....
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....nordinate delay in issuance of the present SCN, as way back in February 2013, the Dept. was aware of the so called stock discrepancies and the present SCN was issued only on 07.05.2015, i.e. after the lapse of more than two years, hence, the same is barred by limitation, based on the following judgments: (i) Kushal Fertilisers - 2009 (238) ELT 21 (SC) (ii) Orissa Bridge & Construction - 2011 (264) ELT 14 (SC) (iii) Gammon India - 2002 (146) ELT 173 (T) (iv) -do- Upheld by Supreme Court - 2002 (146) ELT A-313 (SC) 5.31. That in the absence of any conscious and deliberate suppression of facts or wilful mis-declaration, extended period is not invocable and for the very same reason, penalty is not imposable, either on the company or its Executive. 5.32. That, in any case, penalty is not imposable in the absence of mens rea; 5.33. That Shri Sameer Sharma has acted as an employee of the company, while discharging his duties, and there was no mala fide on his part nor does he has any undue gain, whatsoever. Therefore, personal penalties imposed on him are not sustainable. 5.34. Based on the above submissions, the Ld. Advocate prayed for allo....
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....rts from the cause of action is not stainable in view of Hon'ble Supreme Court judgment in the case of Mehta & Co., reported in 2011 (264) ELT 481 (SC). 6.10. Based on the above submissions, Ld. ARs prayed for dismissing the appeals filed by the Appellants. 7. In rejoinder, Ld. Advocate argued that Division Bench judgment of Hon'ble Supreme Court judgment in Mehta & Co (supra) is not applicable to the present case, in view of an earlier Full Bench judgment in Gammon India [2002 (146) ELT A-313 (SC)]. In support of the arguments, the Ld. Advocate, filed additional written submissions contenting as under: 7.1. that 2-Judge Bench Hon'ble Supreme Court judgment dated 10.02.2011 in Mehta & Co. (supra), holding that SCN is permissible to be issued within five years from the date of knowledge, is not applicable to the present case, in view of Hon'ble Supreme Court 3-Judge Bench judgment dated 01.05.2002 in Gammon India (supra), upholding Tribunal judgment holding that SCN issued after nearly two years of completion of enquiry would be barred by limitation. Hon'ble Supreme Court in the said judgment in Gammon India has specifically held as under: "We have heard learned Co....
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....ts, etc. on 02.02.2013/ 06.02.2013/ 20.02.2012, vide their letters dated 16.02.2012, 20.02.2013, 27.02.2013, 13.03.2013, etc. Over and above this, the Appellants substantiated that not only there was no excess stock of Fruit Pulp in both of the units, as wrongly claimed by the Officers, but also there was no shortage of goods, except meagre quantity of less than one percent due to handling loss, spillage, evaporation, etc. which was within the permissible limit, considering the nature of products involved. 7.8. that invoking Article 145(5) of Constitution of India, 5-Judge Constitution Bench of Hon'ble Supreme Court, vide its judgment dated 19.09.2022, in Trimurthi Fragrance - (2022) 15 SCR 516 has held that majority decision of a Bench of larger strength would prevail over the decision of a Bench of lesser strength. 7.9. that in the case of Trimuthi Fragrance (supra), Hon'ble Supreme Court (in para G) has held that a Bench of lesser quorum cannot disagree or dissent from the view of law taken by a Bench of larger quorum. The said para of the said judgment is reproduced below, for ease of reference : "G. The conclusion (1) is that a decision delivered by a Benc....
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....t in various subsequent judgments, including in Khoday Distilleries Ltd. (supra). 7.14. that in the case cited by Ld. AR, although Hon'ble Supreme Court had dismissed the Civil Appeal filed by the Dept., vide its judgment dated 19.07.2020, the same was not invoked in Experion Developers on the ground that the Architect's certificate was not produced and relied upon in Pawan Gupta's case, while the same was the basis in Experion Developers' case, which although relied upon was not discussed. 7.15. that, as against this, in the present case, substantial question of law of general importance involved is whether the Dept. was estopped from issuance of SCN after one year from the date of knowledge (Dept. was in know with relevant facts by drawing panchanamas on 02.02.2013, 06.02.2012 and 20.02.2013, withdrawal of relevant records, recording of statements of various Executives, etc. in February/March 2013). The statement of Mr. Sameer Sharma recorded on 06.01.2015 was just a reiteration of earlier averments and no new facts were emerged. This might have been done by the Dept. to circumvent the time limit for issuance of SCN. Therefore, the cause of action would start from 02.02.201....
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..... that in connection with the valuation of stock transfer of Fruit Pulps from the Appellants' Chittoor Units to their Jalgaon Unit, it was submitted that, considering the amendment to Rule 8 of Valuation Rules and Point 5 of CBEC Instructions dated 01.07.2002, the Hon'ble Tribunal has held that payment of duty on 110% of cost of production on clearances to sister units/own units is correct, even if part of the production was sold to other independent buyers, in support of which reliance was placed on the following judgments: (i) Surya Roshni Ltd. - 2017 (357) ELT 978 (T) (ii) Rashtriya Ispat Nigam Ltd. - 2019 (366) ELT 856 (T) (iii) Ultratech Cement Limited- 2017 (11) TMI 1385 - CESTAT, New Delhi 7.23. that, so far transfer of MS Drums procured without payment of duty, under Rule 19(2) of CER, between Unit No.1 & 2 is concerned, it was submitted that all the MS Drums, thus procured, were used for packing of Fruit Pulps exported by either Unit and not a single drum was used for clearance for domestic market. Therefore, duty thereon is not sustainable. 7.24. that demand confirmed on transfer of Fruit Pulps and MS Drums, from one Unit to other, would n....
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....ent to cross check the veracity of averments made by appellant regarding maintenance of record on SAP systems was made. 11. We find that when the Dept. did not accept the records maintained by the Appellants in their SAP system while issuing the SCNs for confiscation of excess stock of finished goods claimed to be found by the Officers, then the Dept. cannot take an altogether different stand and rely upon the records maintained in SAP system and compare it with so called RG-1 for confirming demand on the alleged shortage of goods. The Dept. cannot breathe hot and cold simultaneously. When there was excess stock while issuing SCNs for confiscation, there cannot be shortage, arising out of the very same investigation and documents, while issuing second SCNs for demanding duty. We are of the view that when the Dept. compared physical stock with defunct RG1 Register, for the purpose of arriving at excess stock to confiscate the same, the Dept. cannot take a different stand and compare the quantity accounted in SAP system with quantity accounted in defunct RG1 Register, to arrive at alleged shortage and demand duty thereon. The Dept. should have a definite stand so far as the docume....
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....ndestine removal is on the Dept. and the same has to be proved with cogent and tangible evidence and not mere suspicion and the ratio of judgments relied upon by the Appellants in their support are applicable. 14. We find that the anomaly in the stock taking conducted by the visiting Officers is evident from the stock position on the day of first visit of the Officers to the Unit No.1 on 2.2.2013, as given below: S. No. Particulars Quantity/kgs (i) Stock of fruit pulp accounted for in SAP system during the disputed period 1,36,78,029 (ii) Stock of fruit pulp physically found as per stock taking carried out by the CE-Officers 91,78,800 (iii) Excess Quantity as alleged by the Dept. 44,99,229 and the stock position on the day of second visit of the Officers to the Unit No.1 on 20.2.2013 was as under: S. No. Particulars Quantity/kgs (i) Stock of fruit pulp accounted for in SAP system 1,34,60,191 (ii) Stock of fruit pulp physically found as per stock taking carried out by the CE-Officers 1,33,48,554 (iii) Shortage Quantity as alleged by the Dept. 1,11,636 From the above, it is clear that huge excess stock o....
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....ndestine removal of goods. Therefore, duty demand confirmed on alleged clandestine removal by Unit No.1 and Unit No.2 is not sustainable and deserves to be set aside. 16. So far as valuation adopted by the Appellants for stock transfer of fruit pulp to their sister unit is concerned, we find that the same is correct, as they have adopted comparable price and no favoured treatment was afforded and, hence, differential duty confirmed in the impugned Order, is not sustainable. We further find that fruit pulp stock transferred to sister unit was used by them for manufacture of their final products which were ultimately cleared on payment of appropriate duty for home consumption or exported under bond or under rebate scheme. Therefore, whatever duty paid on the fruit pulp by the Appellants would have been available as Cenvat credit to their own sister unit. Therefore, entire exercise also leads to revenue neutral situation and there was no inducement for the Appellants to undervalue the fruit pulp stock transferred by them to their sister units. Therefore, the demand confirmed on this count is not sustainable and deserves to be set aside. 17. We find that Unit Nos.1 & 2, are of th....