Amar Processors vs Commissioner of Central Excise

Honourable Ms Justice Sonia Gokani

Being aggrieved by the order of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) dated 21.02.2008, the present appeal is preferred u/s. 35G of Central Excise Act, 1944 ("hereinafter referred to as Act") proposing following questions of law for consideration.

a) Whether the Hon''ble Tribunal was justified in upholding Order-in-Appeal whereby an Order-in-Original confirming the demand of duty at adv. Basis is made from the appellant above named despite the admitted fact that, the appellant was working under the provisions of Compounded Levy Scheme i.e. Section 3A of Central Excise Act, 1944 ?

b) Whether the Hon''ble Tribunal was justified in upholding Order-in-Appeal whereby the Order-In-Original confirming the demand on the appellant abovenamed as well as noticee No.1 in regard to very same quantity for the very same amount of duty along with interest and consequential penalty was upheld ?

c) Whether the Hon''ble Tribunal was justified in hpholding Order-in-Appeal which had upheld confirmed demand from a principal manufacturer whilst observing that the goods were manufactured by a job worker and that no procedure of job work was followed ?

d) Whether the Hon''ble Tribunal was justified in upholding Order-in-Appeal which had upheld confirmed demand relying on allegations pertaining to clandestine clearance in absence of a detailed investigation verifying recorded quantity of inputs, semi finished goods and finished goods lying in factory of a person from whom the said demand was made ?

e) Whether in the facts and circumstances of the case, the Hon''ble Tribunal was justified in upholding Order-in-Appeal whereby confirmed demand was upheld despite the fact that there was no corroborative evidence in support of the allegations relying upon which the said confirmed demand was made ?

On having heard learned counsel Mr. D.K. Trivedi appearing for the appellant and on perusal of materials placed before this Court, facts that can be gathered are as follows :

Central Excise Officers visited factory of one M/s. S.B.Calendar Factory, Narol, Ahmedabad on 19.5.2000. During the search, it was found that MMF fabrics measuring 34139 L.Mtrs. were found pending at different stages of production/stentered and non-stentered. It was also found during the personal hearing that MMF in question were cleared for stentering/calandering without preparing central excise invoices and without payment of central excise duty thereon and again, there was no statutory record maintained for the purpose of accounting.

Proprietor of said unit Shri P.S. Agrawal in his statement given to the authority admitted to have received the said fabrics from M/s. Amar Processors for stentering and calendering process. He also further stated that these fabrics were cleared from this factory from 8.5.2000 to 19.5.2000 and job charges were charged from M/s. Amar Processors (Present Appellant) for the said purpose.

Pursuant to this, the factory of present appellant located opposite M/s. S.B. Calendar Factory was also searched and statement of its partner Shri Bhagwandas Ahuja was recorded on 19.5.2000 who admitted of having cleared MMF Fabrics from M/s. S.B.Calendar Factory without maintaining any record and invoices for stentering purpose.

On dated 17.11.2000 and 17.2.2005 demands were raised for duty in respect of the fabrics seized and cleared respectively. On due adjudication, the demands of duty was confirmed along with interest and personal penalty also was imposed on the partner of appellant-firm.

This was challenged before the Commissioner (Appeals) which confirmed the demand of duty and penalty levied on the appellant firm whereas penalty on the partner was set-aside.

Appellant further challenged this before the CESTAT which in its impugned order dated 21.2.2008 concurred with the findings of Commissioner (Appeals) confirming the order and resultantly, rejected the appeal of the Appellant herein.

Being aggrieved by the impugned order of CESTAT, this appeal is preferred proposing the aforementioned questions of law.

Learned counsel Mr. Trivedi fervently urged on the line of Appeal Memo and insisted that there was no corroborative evidence for removal and only on the basis of statement of the partner of the appellant, corroborated by the statement of Proprietor of M/s. S.B. Calendar Factory, Commissioner (Appeals) and Tribunal rejected the appeal of appellant. It is further argued that appellant was working u/s. 3A of the Central Excise Act, 1944 and accordingly, they were to be assessed to duty on the basis of their capacity of production. In other words, duty liability could be under Compounded Levy Scheme and not under ad voleram basis. Therefore, even assuming without admitting that the duty on certain clearance was not paid by the appellant, the demand would be maintainable only in accordance with the provision of section 3A of the Central Excise Act, 1944. It is also further argued that duty cannot be demanded twice along with interest and penalty for the same quantity from two different noticees. And the same can only be demanded from the person who manufactured the said excisable goods. Appellant being principal manufacturer and not job worker, duplication of demand, interest and consequential penalty is illegal and incorrect.

However learned counsel Mr. Trivedi admitted that submission with regard to applicability of Section 3A of the Central Excise Act was never raised before any of the adjudicating authorities.

Having carefully considered the submissions of learned counsel and findings given by all the adjudicating authorities. For the reasons to be followed hereinafter, this appeal deserves no consideration.

As can be noted from the record, a Show Cause Notice given by Additional Commissioner, Central Excise dated 17.2.2005 extensively dealt with the clearance of MMF Fabrics for the period between 8.5.2000 to 19.5.2000 without any Central Excise Invoice or bill.It further states that there is no statutory record for such MMF cleared from process of stentering and calendering process etc. It further makes the note of statement of partner of the present appellant who in terms admitted of such clearance in a clear breach of statutory provisions. This notice also refers to the statement of Shri P.S. Agrawal, Proprietor of M/s. S.B. Calendar Factory who carried finishing of MMF on an open stentering machine with the aid of power without obtaining central excise registration. It was the present appellant which was sending MMF for further process to M/s. S.B. Calendar Factory.

It also emerges that this was reflected by the Joint Commissioner in Order-in-Original dated 30.11.2006. The Order-in-Original was passed by the Commissioner having found "clinching evidence such as facts detailed in Panchnama, various Confirmatory statements recorded at the time of investigations, certain independent documentary evidence etc. All these evidences get strength from the admissions of various responsible persons of various units." The Order-in-Original also found that all the statements, Panchnama etc. were voluntarily in nature and same had not been rebutted by the author of the same. It concluded in confiscating sizable quantity of MMF and confirmed the duty interest and penalty.

Commissioner (Appeals) also dealt with this issue at length and was convinced about the surreptitious removal without payment of central excise duty and observed thus :

I have carefully gone through the full facts of the case and also submissions made by the appellants in their appeal memorandum as well as during the personal hearing. In the present case, the MMF in question were cleared for stentering/calendering without preparing Central excise invoices, without paying Central Excise Duty thereon and without accounting for in the statutory records. I find that there are confessional and corroborative statements of Shri Prahalad bhai S. Agrawal, the Proprietor of SBCF and that of Shri Bhagwandas Ahuja the partner of M/s. Amar Processors they had clearly admitted to have cleared the MMF in question after doing processes, without payment of Central Excise duty, without accounting for in the statutory record and without preparing any central excise invoices/bill. Shri Prahaladbhai Agrawal had admitted the fact of receiving the fabrics from the appellants for carrying out the process of sentering/calendering and charging 10 paise for such processes and clearing the same to M/s. Amar Processors. He had also confirmed that not only M/s. Amar Processors but other co-offenders viz. M/s. Navyug Synthetics. M/s. Shree Bhagirath Processors, M/s. Tirupati Processors, M/s. Lalbhai etc. were also sent the fabrics to ''SBCF'' for certain processes without payment of duty and without preparing any invoice/bill and without accounted for in statutory records. Hence it cannot be said that M/s. SBCF had involved the name of the appellants to take revenge for some old dispute. This could be the figment of the imagination of the appellant or a defence just for sake of it. Further it was stated that the statement of Shri Bhagwandas Ahuja was recorded under duress and pressure. But I find that the second appellant had not retracted his statement soon thereafter. Moreover, they had neither at the time of filing defence reply to the SCN nor before the adjudicating authority confronted about the same. For sake of argument, it is presumed that he was not well at the time of visiting of C. x. fficers then he should not have present at the factory rather could have visited the doctor for medication. Later on producing doctor''s certificate does not make any sence. Rather it was an after thought. Further I find that the job worker i.e. SBCF had returned the fabrics to the appellants after processing. It was the responsibility of the appellants to clear the same on payment of C.Ex duty. Since there were no such records maintained by the appellants for such fabrics, it can not be pleaded that there was no shortage of finished fabrics or fabrics were not intercepted in transit etc. or there were no delivery challan, octroi receipt etc. In fact certain incriminating documents in the form of folding reports were found from the factory of M/s. SBCF indicating transaction of fabrics from M/s. Amar Processors without payment of duty, it suffices the corroboration backed by the confessional statement of Shri Prahaladbhai Agrawal and Shri Bhagwandas Ahuja. I find no infirmity in the adjudicating authority''s order confirming demand, therefore, it stands upheld. The interest on duty is confirmed from the due date till it is paid. As regards imposition of penalty equivalent to duty, I find that till date the appellants had not paid the duty and had kept the money of Govt. in their pocket almost for the last seven years. They had been rightly penalized with such penalty by the adjudicating authority. It is hereby upheld in full. As regards imposition of penalty on the partner Shri Bhagwandas Ahuja. I find that it is a well settled law that the penalty is imposed on partnership firm then the partner of the firm can not be penalized. I do not find any active role of Shri Ahuja in the whole scenario hence, I set aside the penalty imposed on the second appellant i.e. Shri Bhagwandas Ahuja.

Tribunal also took note of these reasonings given by the Commissioner (Appeals) and also was influenced by the fact that demand of duty confirmed was not on the basis of uncorroborated statement. What had further weighed with the Tribunal was the fact that the statement of Shri Agrawal was not retracted at any point of time.

Challenge to the order of Tribunal is essentially on two counts firstly, for having confirmed the demand of duty and interest on no evidence and secondly, for non considering the provision of Section 3A of the Central Excise Act.

At no point of time, the appellant has raised the second issue before any of the adjudicating authorities. Therefore, order cannot be attacked on the ground that the submissions put forth before this Court were not considered by the Tribunal while deciding the challenge made by the appellant as this was at no point of time raised. This is not to suggest that the legal issue now cannot be agitated but, the onus would be on the appellant to lay factual foundation for the same which is missing.

As can be noted from the facts reflected in the Show Cause Notice, there are glaring facts and voluminous evidence for basing the order. The present appellant has registration with the Central Excise Department for manufacturing MMF with the aid of power. It was carrying out process of bleaching, dyeing and printing on MMF and the appellant was sending MMF to M/s. S.B. Calendar Factory which had no registration for further processing on stenter. MMF was cleared without payment of duty as also without invoices and without accounting in any statutory records. The Proprietor of M/s. S.B. Calendar Factory had in terms admitted of having received MMF from the appellant. The statement of Mr. Bhagwandas Ahuja, partner of appellant revealed that MMF was cleared from his factory without payment of M/s. S. B. Calendar Factory for stentering as thereon. Senter was sealed on 28.4.2000. The Proprietor of M/s. S.B. Calendar Factory in terms admitted that MMF was received from the appellant and was sent back after carrying out process of sentering and other finished process on calendar machine and drying range. The amount of charges for the said process were received in cash. As could be noted from the orders of Adjudicating Authorities, they concluded the clearance of MMF in clear breach of statutory provisions depending on substantive evidence. The entire issue is based on the material made available before the Tribunal and it has rightly depended on evidence as also the findings of Commissioner (Appeals) which found corroborative evidence amply to conclude illegality and breach of statutory provisions. Learned counsel for the appellant fails to dislodge the findings particularly with regard to the absence of evidence or corroborative evidence.

It is needed to be noted that this is not the criminal trial where the question would arise of not considering the statement/admission of the co-accused without any other corroborative evidence. Proceedings under these provisions may culminate into the penalty. However, these essentially are the proceedings of civil nature and it is not the solitary statement depended upon to conclude the breach.

As regards the confirmation of demand of central excise duty from the present appellant and the interest levied thereon, no infirmity in the order impugned could be pointed out by the appellant. And, as mentioned herein above, considering the gross facts of breach of provisions of Central Excise Act and extensive discussion made by all the adjudicating authorities below during the process of adjudication, no cause is made out to point out any illegality or perversity in the impugned order. With no question of law, much less substantial question of law having arisen, this Tax Appeal requires to be dismissed. Tax Appeal is dismissed and disposed of with no order as to costs.