TaxTMI 
TaxTMI 
2006 (12) TMI 150
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....unal that the Assessee Company had not satisfactorily explained the difference in quantities in the two sets of records, the statutory records under the Central Excise Act and the Central Excise Rules and the private records required to be maintained in terms of ISO 9002, is not based on evidence and materials on record, has been arrived at ignoring relevant materials on record and is based on conjectures and surmises and by misdirecting itself in point of law and, therefore, the said conclusion is perverse and vitiated in law ? 2. Whether, in the facts and circumstances of the case, the Tribunal was right in upholding the finding of the Commissioner that the Assessee Company had clandestinely removed 858.938 MT of the input materials, MEG, without payment of Central Excise duty and whether the said conclusion of the Tribunal is based on evidence and materials on record and is not perverse and/or is not vitiated in law ? 3. Whether the Tribunal has misdirected itself in law in coming to the conclusion that the particulars contained in the Shift Engineer's Log Book maintained under ISO 9002 is to be taken into account disregarding those contained in the statutory records maint....
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....partment. 7. It was further alleged that on a comparison of the consumption figure of MEG and in respect of both indigenous/imported duty paid and non-duty paid variety, as indicated in RT-5 returns with the Shift Engineers' Log Book, it was found that the Company had availed Modvat credit on 858.938 MTs but had not utilized the same in manufacturing of finished goods during the said period, namely, between October, 91 to October, 95. It was, therefore, alleged that differential quantity having not been consumed in the manufacturing process the same should have been available inside the factory premises but it was found to be not available. Therefore, it was alleged that excess and unutilized MEG has been diverted elsewhere by the Company without following due procedure laid down in Rule 57F of Central Excise Rules and the duty involved therein works out to an amount of Rs. 56,68,991.00 calculated at 20% based on the value in the invoice. The Company was, therefore, called upon why Central Excise Duty amounting to Rs.56,68,991/- as mentioned in the show cause notice should not be paid by the Company in cash under Section 11A of Central Excise Act read with Rule 9(2) thereof and ....
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....sters of PP Chips maintained by the Company had allegedly shown that the PP Chips were actually consumed but they were not reflected in the statutory RG-23A Part-I Register and RT-5 returns filed by it. As such, the Company was called upon to show cause why Central Excise Duty amounting to Rs. 57,60,563/- should not be paid by it under Section 11A of the Central Excise Act, 1944 read with Rule 9(2) and Rule 57-I of the said Rules and penalty should not be imposed upon the Company under Section 11AC of the Act and Rules 57-I(4), 9(2), 173Q and 226 of the said Rules. On 24th April, 1998 the Company filed its reply to the show cause notice and whereupon a personal hearing was held. Thereafter by order dated 11th October, 2000 the Commissioner confirmed the purported demand of Rs. 57,60,563/- as made in the show cause notice and also imposed penalty of an equivalent amount of Rs. 57,60,563/- under Section 11AC of the Act and in the alternative under Rule 173Q of the said Rules and the Company was also asked to pay interest under Section 11AB of the Act. 10. Being aggrieved by the said order of the Commissioner, the Company preferred an appeal before the Tribunal, which was registere....
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....etween the two Members of the Bench of the Tribunal and the matter was placed before the President of the Tribunal for referring the difference of opinion for decision to a third Member of the Tribunal. The difference of opinion between ihe two Members was on the following points; "Whether the appeals of M/s. J.K. Corporation Limited are required to be rejected and the appeals of the other appellants are required to be allowed as held by the Member (Judicial) or all the appeals are required to be allowed as held by the Member (Technical)" 13. Thereafter, the appeals were heard by the third Member of the Tribunal. By the common final order of the Tribunal, by a majority decision, the three appeals filed by the Company were rejected while the appeals filed by the other Officers of the Company were allowed. Here, we are not concerned with the appeals filed by the Officers of the Company. However, it appears that the third Member had agreed with the opinion of the Member (Judicial) of the Tribunal. The reference arising out of the said decision of the Tribunal is pending for consideration before this Court. 14. The main question, therefore, is whether the shortage of raw mater....
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.... and specifically urged that in Paragraph-7 at page 284 and in Paragraph-10 at page 286 of the Supplementary Paper Book, the difference between the statutory records and private records has been explained and it has further been stated that it was made very much clear in the written notes that during the material period the difference is reduced to 3.258 MTs., which is insignificant. The learned counsel for the Company submitted that when a specific explanation has been given before the Tribunal, the Member (Judicial) as a quasi judicial fact finding authority, failed to consider the said explanation and had the explanation been considered and a finding had been arrived at, it would have been difficult for this Court to interfere with the same. But the learned counsel submitted that in the instant case, the specific explanation offered in the written notes was not at all considered. The learned counsel, however, submitted that as an appellate authority the Member (Judicial) has merely reiterated the finding of the Commissioner. The learned counsel also submitted that various decisions which had been cited before the Member (Judicial) were also not properly considered and this will ....
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....770.677 M.T. Difference as per show cause notice 862.196 M.T. Difference 858.938 M.T.   3.258 M.T. 19. In so far as PP Chips are concerned the following explanation has been offered. (a) Total input issued to process during May 94 to January 95 (as per Annexure II to the Reply to the show cause notice) - 3744.0228 M.T. (b) Add : Opening Stock of Chips on floor and in process 32.9250 M.T.        Total : 3776.9478 M.T. Less: Closing Stock of Chips on floor and in process 116.9840 M.T.        Net Consumption 3659.9638 M.T. Finished Product (Annexure II to the reply to show cause notice) : Production of POY (RG-I) 3112.9352 M.T. Production of POY Waste (RG-I) 131.4985 M.T. D.TY (RG-I) 304.2661 M.T. D.TY Waste (RG-I) 1.6381 M.T. D. Tex (RG-I) 250.1816 M.T. D. Tex (Waste) (RG-1)     1.5393 M.T. Grand Total 3802.0588 M.T. Less: Produ....
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....metals Ltd. v. Assistant Collector, Central Excise reported in 1992 (57) E.L.T. 209 (S.C.) and several other judgments. 23. The learned counsel very strenuously urged that in view of such factual explanation which has been offered by the Company, difference in stock when it is compared with the volume of production, no case of clandestine removal can be made out against the Company. But this explanation has not been considered by the Member (Judicial). The learned counsel further submitted that in so far as the opinion of the third Member is concerned, reasonings therein are even more sketchy and the third Member has also not considered the explanation offered. The entire finding of the third Member starts at page-327 of the Supplementary Paper Book and in the said finding there is no mention of specific explanation given by the Company. The third Member merely recorded the finding of the Member (Judicial). 24. In so far as the question of clandestine removal is concerned, the decided cases on the point support the case of the company. Reference may be made to the decision in the case of Oudh Sugar Mills Ltd. v. Union of India reported in 1978 (2) E.L.T. (J172) (S.C.). It was....
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....) E.L.T. 227. In that case also there was an allegation of clandestine removal of raw material. Against the said allegation the Company gave an explanation and there was a finding that the short received raw material being less than 0.18% of total quantity could not be an exaggerated claim and in the background of these facts the charge that short received raw material was used in manufacture of clandestinely removed final goods was not upheld. Against that order initially appeal was admitted by the Supreme Court and the Supreme Court initially granted a stay order. But ultimately the same was dismissed by the Supreme Court and the said order of dismissal was reported in 2005 (186) E.L.T. A209 (S.C.). 25. In the instant case, similarly no evidence has been adduced by the Revenue to prove its case on clandestine removal except relying on the alleged difference in the stock based on a comparison between the statutory records and the privately maintained records. This aspect of the matter was not considered by the tribunal at all. 26. On the question of penalty imposed under Section 11AC of Central Excise Act, 1944 the learned counsel for the Company submitted that the said pena....
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....Unfortunately in the instant case the imposition of penalty appears to have been vitiated on that ground. But despite non-furnishing of the particulars of contravention of the exact clause in 173Q, the penalty orders have been sustained by the Tribunal. The said finding of the penalty is clearly in violation of the settled law as has been reiterated by the Supreme Court in Amrit Foods case. 29. In this case the learned counsel for the Revenue has not been able to controvert the submissions made on behalf of the Company either on the question of penalty or on the question of non consideration by the Tribunal of the explanation given by the Company. The learned counsel did not urge that the majority decision of the Tribunal has come to its findings after considering the explanation furnished by the company. The only argument which was made by the learned counsel for the Revenue was that in the instance case the Court is acting in exercise of its reference jurisdiction and in exercise of its reference jurisdiction, the Court cannot set aside the order passed by the Tribunal. In support of such contention the learned counsel relied on the provisions of Sections 35H and 35K of ....
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....nding, the High Court has the power to direct the Tribunal to state a case. Reliance was also placed on a judgment of the Gujarat High Court in the case of Anant Mills Ltd. v. Commissioner of Income Tax reported in 1994 (206) ITR 582. The said decision was also rendered by the High Court in its reference jurisdiction under Section 256 of the Income Tax Act, 1961. Learned Judges of the Gujarat High Court found that when the Tribunal ignores material evidence on record and an inferential finding is reached, based on one fact alone and in disregard of voluminous documentary evidence to the contrary, it can be said that the finding reached by the Tribunal is patently unreasonable. In view of such finding reached by the Tribunal, the High Court can be of the opinion that the Tribunal was not justified in reaching the finding it had reached and as such, the Court can answer the question in favour of the assessee. This Court finds that the aforesaid principles are applicable to the exercise of Reference Jurisdiction by the High Court under Section 35K of the Act. 31. Following the aforesaid principles, this Court is unable to uphold the finding, by the majority decision, of the Tribuna....