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TMI Blog2009 (3) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... y all should have been made parties to the Show Cause Notice. This has not been done. To put it otherwise, suppression of facts/mis-declaration, etc, cannot be alleged, as the departmental officers were kept informed of the receipt of goods by the appellants. – Very serious and fatal flaw in Show Cause Notice – larger period not invocable– Impugned order is set aside – Appeals allowed - C/461-464/2006 - 167-170/2009 - Dated:- 5-3-2009 - S/Shri T.K. Jayaraman, Member (T) and M.V. Ravindran, Member (J) S/Shri G. Sampath and M.G. Varadarajan, Advocates, for the Appellant. Shri P.R.V. Ramanan, Special Counsel, for the Respondent. [Order per: T.K. Jayaraman, Member (T)]. - These appeals have been filed against the Order-in-Original No. 07/2006 dated 31-7-2006/4-8-2006 passed by the Commissioner of Central Excise, Bangalore-III Commissionerate. The details of the appeals are given below:- Sl. No. Appeal No. Name of the Party Amount involved 1. C/464/2006 M/s. Lanyard Foods Ltd. v. CCE, Bangalore Duty : Rs. 3,97,33,271/- Penalty: Rs. 3,97,33,271 u/s 114A of the CA Act, 1962. 2. C/463/2006 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al discrepancies were found out and it appeared that the crude oil imported by the assessee had not reached their factory premises at Bangalore but had been sent from the port of Import namely Mangalore to various Refineries. The preventive officers visited the premises of two such refineries viz. (i) M/s. S.A.S. Refineries (P) Ltd., Gauribidanur and (ii) M/s. K.L.N. Agrotechs (P) Ltd., Tumkur. They conducted verification of records. Statements of the following persons were recorded (i) Shri R. Krishna Rao, Executive Coordinator of KLN Agrotech on 18-4-2002; (ii) Shri C.S. Rajashekar, Deputy Manager (Accounts) of M/s. KLN Agrotech on 2-5-2002; (iii) Shri S.A. Suresh Babu, Managing Director of M/s. SAS Refineries on 23-4-2002. They all stated that the process involved in refining the Crude Sunflower oil/Soyabean oil are degumming; Neutralisation and bleaching, etc. They also stated that no Crude Oil in semi-finished condition was cleared by them to the appellant. The statement of Shri H.S. Shetty, Power of Attorney holder for M/s. LFL, (Director of M/s. LFL during the period 1999-2000 upto September 2001) was recorded on 28-5-20002. As it appeared that the appellant had fraudulently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilter press. Based on the Certificate issued by the jurisdictional Assistant/Deputy Commissioner of Central Excise, the appellant cleared Ex-Bond 3086.405 MTs of Crude Sunflower Oil and 4172.264 MTs of Crude Soyabean Oil during the period from March, 2000 to July, 2000 vide 18 Ex-bond Bills of Entry. On receipt of the goods cleared from the Port, the appellants were required to intimate the Jurisdictional Central Excise Officers by Annexure V declarations. The appellants filed intimations under 17 declarations in Annexure-V, before the Range Superintendent. In para 72, some of the Annexure-V declarations filed by the appellants have been scrutinized. The conclusion reached is that the imported goods had not been received in the factory. 4.2 In respect of the goods purported to have been received on 28-4-2000 and 25-2-2000, the concerned Ex-Bond Bills of Entry themselves had been reassessed consequent to change in rate of duty and ex-bond after 7-7-2000. On a scrutiny of the documents, this is evident. Before the clearance was effected from Mangalore, the goods could not have reached Bangalore. The Commissioner has given a finding of the fraudulent nature of the operations. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the weighment slips in respect of palm oil was available. The non-existence of weighment slips has led the Commissioner to conclude that the imported goods were not received in the premises of the appellant. The appellant was required to maintain a simple account in Annexure-VI indicating the quantity and value of the goods imported, the quantity of goods consumed for the intended purpose and the quantum, remaining in stock, bill of entry wise. In all the entries made, the appellants have shown the consumption of the entire stock on the same day that it was received, by indicating the balance quantity as NIL. The storage capacity of the appellant unit is only 231 MTs for both input and output goods. As against this, the stock received on any given day was usually 500 MTs. Hence, the Commissioner concluded that Annexure-VI is blatantly false and fabricated as the unit did not have the storage capacity of the amounts shown as taken into account stock on a particular day. 4.4 The Commissioner has stated in para 77 that the appellant had maintained 3 separate sets of Form 39 i.e. for transporting (i) the crude oil from Mangapore port to M/s. LFL, Bangalore; (ii) Crude oil from M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Collector of Central Excise, Meerut - 2000 (126) E.L.T. 1256 (T). 4.7 As regards the contention of the appellant that vital documents were not made available, she has stated that, all documents relied upon were made available to the appellant. Only the document relating to the cancellation of the bonds were not provided being internal correspondence and no reliance being placed on them. 4.8 With regard to their contention that the job work charges have been paid to the job workers, the Commissioner has taken certain instances to show that there is no correlation between the quantity sent for job work and the quantity billed by the so called job worker. She has stated that the differences have not been convincingly explained by the appellant. 4.9 As regards the cross-examination in the case of Shri Krishna Rao and Shri C.S. Rajashekar, she has stated that efforts were made by issuing notices for cross-examination. All reasonable steps were taken to provide the opportunity for their cross-examination. However, the witnesses failed to turn up. With regard to providing copies of certain documents, the Department has provided sample copies of Annexure-V wherein endorsements w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been subjected to a process of manufacture. 4.12 She has also dealt with the question of time bar. She has stated that the first ex-bond bill of entry has been filed by the appellant in the month of March 2000 and the Show Cause Notice had been issued during January 2005, which is well within the time limit of five years. She has also mentioned that the Certificates by the Departmental officers cannot be accepted in this case. 4.13 In para 84(o), she has discussed the penalty proposals on S/Shri Gandhi Haresh, Shailesh Desai and H.S. Shetty. She has also distinguished the facts of CESTAT's Final Order No. 1547/2005 dated 19-12-2005 in the case of M/s. Tamil Nadu Corporation relied on by the appellant. Confirming the proposals in the Show Cause Notice, the Commissioner has confirmed a total demand of Rs. 3,97,33,271/- being the differential duty between the tariff rate and the concessional rate as per Notification No. 16/2000-Cus., dated 1-3-2000 and Notification No. 18/2000-Cus., dated 1-3-2000 in respect of the impugned goods. Equal penalty has been imposed under Section 114A. Interest under Section 28AB of the Customs Act, 1962 read with Rule 8 of the IGCRDMEG Rules has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught back to the factory at Bangalore. In this background, the abrupt conclusion of the learned Commissioner in para 81 of the impugned order that the crude oil was directly sold to other Refineries in the guise of sending goods for job work is baseless and beyond the allegation levelled in the Show Cause Notice. (3) It was submitted that consequent to the issue of Notification fixing concessional rate of duty on import for the manufacture of Vanaspathi or refining, the appellants took out registration. At the time of registration, they had submitted all the necessary documents including the Ground Plan, etc. They filed the Annexure-V declarations. The jurisdictional Officers visited and verified. The goods were put to use by the appellants. In view of this, the appellants requested for issue of End Use Certificates. While requesting for end use certificates, the appellants furnished all the relevant documents. After satisfying the compliance with the provisions of the said Notification, the jurisdictional AC cancelled all the bonds on 17-4-2003. Despite the availment of the concessional rate of duty correctly and with the knowledge and acquiescence of the jurisdictional Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only as second sales after paying the price of RF to the appellant and ST. Dodwad refineries have admitted having refined, collected job charges and returned the RF to the appellant. No investigation was conducted at other refineries. The AC who cancelled the bond on 17-4-2003, was cross-examined on 18-11-2005. He categorically deposed that he cancelled the bond only after fully satisfying the fulfillment of condition and looking into the investigation. The non-supply of copy of the correspondence relating to cancellation of bond is a violation of Principles of Natural Justice. (5) Further, with regard to the Commissioner's observation in para 72(1) relating to Bills of Entry No. 873/26-4-2000 and 1088/22-5-2000 reassessed on 7-7-2000 only, the appellants requested for the countersigned copy of Form V. Despite repeated requests, the said countersigned copy was not furnished. Only sample was furnished. The original assessment order also was not furnished. Therefore, there is violation of Principles of Natural Justice. (6) With regard td the observation of the Commissioner on the Central Excise Officers verification, it was submitted that the deposition of the jurisdictional In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ples of Natural Justice as neither the RG-12 Returns nor Form VI were filed. The learned Commissioner appears to have conducted investigation at the back of the appellant to confirm the demand on some flimsy grounds or other. The processing took place upto December 2000. The ownership of RF remained with the appellant till it was sold for a price to the Refineries on payment of Sales Tax. Soap Stock position has not been alleged in the Show Cause Notice. There is no infirmity in collecting at one time and accounting it. (11) As regards the Commissioner's observation in para 77 on the maintenance of three sets of Form 39, it was stated that there was no tampering with any copy of Form 39. Single copy of Form 39 was used only to keep track of all the transactions. Goods were sent to job workers via Bangalore only. (12) On the Commissioner's observation in para 79 that Refineries have certified that refined oil was not sent to Bangalore, the appellants stated that correlation statement was filed with Bill of Entry No. 663 that crude oil was subjected to refining only and not sold as such. In the Form 39, it is clearly mentioned as not for sale. 25 Lorry Receipts were produced. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciples of Natural Justice. The learned Commissioner has relied on the documents of Shri P. Krishna Rao of M/s. KLN Agrotech. If only he had been produced, the appellants could have elucidated the truth relying on the transactions and the nature of the documents in question. The documents referred to are sample copies and deposition of Shri R. Krishna Rao. 6. Shri P.R.V. Ramanan, the learned Special Counsel, appeared on behalf of the Revenue. He outlined briefly the facts of the case and took us through certain documents to show that the crude oil imported at Mangalore Port had been removed to various places and not to the appellant's factory. He stated that all the movement of crude oil were supposedly made by the tanker bearing the same registration number notwithstanding the fact that the refineries were situated at outstations such as Tumkur, Gauribidanur, Bellary, Hiriyur, Srirangapatna and Dharwad. Further, the same tanker was shown to be present at two places far away from each other on the same day or on consecutive days. The office records reflected that 709 consignments of imported crude oil were received at LFL's factory and an equal number of consignments were shown to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r oath that the crude oil was received, filtered and deodorized and then sent for job work. In the reply to the Show Cause Notice, the assertion was that the crude oil was sent for partial refining and upon receipt from job-workers, the same was filtered and packed for sale. There is also no correlation between the quantity of oils sent for job work and the bills for job work. 6.2 The learned Special Counsel took up the issue of time bar as contended by the appellant. The appellants relied on the following case-laws :- (i) CC, Mumbai v. MMK Jewellers Anr. - 2008 (225) E.L.T. 3 (S.C.) = 2008 (85) RLT 629 (S.C.) (ii) Gammon India Ltd. v. CCE, Goa - 2002 (146) E.L.T. 173 (Tri. - Mumbai) (iii) Lovely Food Industries v. CCE, Cochin - 2006 (195) E.L.T. 90 (Tri. - Bang.) (iv) CCE, Indore v. Prashant Electrode - 2006 (196) E.L.T. 297 (Tri.-Del.) 6.3 Shri Ramanan distinguished the facts of the relied on case-laws with those of the present appeal. He also referred to the non-cooperation of the appellants in the proceedings. He stated that M/s. LFL deliberately did not furnish complete and truthful information about their transactions, which constrained the investigations. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is-statements and suppression of facts. Therefore, invoking of the extended period for duty demand was fully justified. 6.5 Shri Ramanan stressed the point that the longer period is justified in view of the suppression of facts, mis-statement, fabrication of documents to mis-lead the department, the acts of commission/omission on the apart of the appellants and mis-representation of the facts to get the duplicate copies of bond cancelled. He has also stated that the Divisional Officer failed to forward the case papers to the appropriate authority, for which disciplinary action has been initiated. In view of the above, he stated that the time taken to issue the Show Cause Notice is justified and true. 6.6 The question of jurisdiction was also challenged by the appellant. Shri Ramanan referred to the decision of M/s. Samtel Color Ltd. (cited supra) and stated that in terms of the above decision, upheld by the Hon'ble Supreme Court, the ACCE has indeed the jurisdiction. 6.7 As regards the contention of the appellant regarding dominant intention, Shri Ramanan took us through the IGCRDMEG Rules, 1996. He referred to Rule 4 wherein it is stated that "a manufacturer who has obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same could not have been verified in one day. 6.10 As regards 'cancellation' of the bond by the ACCE, cancellation was done on three copies and one photocopy, whose originals were not properly filed. Further two additional bonds for Rs. 43.71 lakhs were not 'cancelled' at all and were missing. 6.11 Assuming without admitting that LFL was sending the imported goods for job work as provided in the C. Ex. Rules, 1944, it is pertinent to mention that the erstwhile Rule 57F r/w Notfns. 214/86 and 83/94-CE makes it mandatory that the inputs removed to the job worker's premises should be returned to the factory of the assessee. Further, erstwhile Rule 56B provided that sending of semi-finished goods for completion of manufacture and clearance from the job worker's premises, provided prior permission was obtained from the Commissioner for the same. It is a fact that these provisions were not complied with. Besides, such permission has not been applied for and obtained. Hence, the crude oils could not have been sent to any job worker's premises for processing either under the IGCRDMEG Rules or by applying the analogy of similar provisions under the C. Ex. law. 6.12 In view of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, during the cross-examination, the concerned Inspector has testified and stated that there was no discrepancy. The Advocate has cross-examined the Inspector who was supposed to have verified the Annexure-V declarations. The record of cross-examination conducted on 20-10-2005 before the Commissioner of Central Excise of Shri H. Jayathirtha, Inspector is given below. "Q.1. Did you receive the 18 Annexure V declarations filed by the said unit for the receipt for the crude oil? Answer: I don't remember the number of Annexure Vs received. As and when I received it I had verified them randomly by visiting the unit. Q. 2. Did you find any discrepancy during the verification? Answer: I did not find any discrepancy." 7.2 The Assistant Commissioner, Shri R. Arunachalam, actually cancelled the bonds executed by the appellant. He was cross-examined. The following extracts of the record of cross-examination are relevant and reproduced below :- "Q.1. I put it to you that you cancelled the bonds after satisfying yourself that the assessee has satisfied all the conditions of notification and the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Provided that where any duty has not been levied or has been short-levied or the interest has not been charged or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any willful mis-statement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this sub-section shall have effect as if for the words "one year" and "six months", the words "five years" were substituted." 7.5 Suppression/mis-declaration of facts has been alleged in the Show Cause Notice. Para 10 of the Show Cause Notice is reproduced below. "10. It also appears that the assessee by their acts of not receiving the goods imported in the registered manufacturing premises and by not using the same for the said intended purpose had misused the concession provided in the said notification and had willfully and deliberately suppressed and mis-declared the facts and had thereby rendered themselves liable to penalty under Sections 112 114A of the Customs Act, 1962." 7.6 Though the department alleges suppression of facts and mis-declaration, it is on record that the jurisdictional Inspector visited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficers, in our view, they all should have been made parties to the Show Cause Notice. This has not been done. To put it otherwise, suppression of facts/mis-declaration, etc, cannot be alleged, as the departmental officers were kept informed of the receipt of goods by the appellants. In cross-examination, they had categorically stated that there was no discrepancy. Even the AC who cancelled the bond has satisfied himself that conditions of Notification/IGCRDMEG Rules have been complied with. Therefore, to invoke longer period, the department should necessary allege collusion. This has not been done. The conclusion is that, the longer period could not have been invoked. Moreover, if collusion is alleged, the departmental officers also would be party to the Show Cause Notice. In view of these defects, we are of the view that there is a very serious and fatal flaw in the Show Cause Notice itself. In the absence of charge of collusion and notices to the departmental officers, the longer period is not sustainable. In such circumstances, we are not in a position to uphold the impugned order. 7.7 The appellants had submitted many legal points. For example, the question of jurisdiction h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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