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TMI Blog2010 (2) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... BY: Shri R.K. Hasija, Advocate, for the Appellant. Shri Sunil Kumar, DR. for the Respondent. [Order per Justice R.M.S. Khandeparkar, President (Oral)]. - Heard the ld. Advocate for the appellants and ld. DR for the respondent and perused the records. The appellants challenge the order dated 23rd No., 2007 passed by the Commissioner, Allahabad. By the impugned order the Commissioner has confirmed the demand of duty of Rs.75,85,328/- while directing payment of interest and imposing penalty of equal amount under section 11AC as also under Rule 25 of the Central Excise Rules 2002. By the impugned order the Commissioner has disposed of the proceedings initiated pursuant to the issuance of show cause notice dated 26th June 2007. 2. The impugned order is sought to be challenged on two grounds. Firstly, that the findings arrived at by the Commissioner are not borne out from records and are merely based on assumptions and secondly, on the ground that there was no case for invoking extended period of limitation. 3. The appellants are engaged in the manufacture of V.P. sugar/molasses falling under chapter 17 of the Schedule to the Central Excise Tariff Act, 1985. On 8th of Decemb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained by the appellants as also the production of sugar on crushing such cane along with the molasses. It was also further case of the appellants that the sugar manufactured was kept in gunny bags of one quintal each and the same was counted and accounted for in daily stock register and weekly report thereof were submitted to the Department, besides, monthly account. It was their further case that their sugar godown was hypothecated to the Central Bank of India and daily report of production, storage and dispatch of the sugar was duly informed to the Branch Manager of the Bank. All the details of purchase of raw-materials for the production of sugar and molasses were also submitted to the proper officers of the Department. As regards declaration of the excess molasses, it was the case of the appellants that the same was due to the chemical reaction of the elements present in the molasses. Since in the storage tank of molasses, the heat used to get generated automatically, to control the temperature inside the tanks, water was showered from all sides of the tank. It was noticed that the same at times used to percolate into the tank and get mixed with molasses. These also used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses were stored has been rejected while observing that the Department was never informed about the same at any point of time and that, it was statutory obligation of the appellants to inform the Department about the procedure adopted by them to control the temperature in the tanks wherein excisable products were stored and they had failed to do so. The Commissioner has also observed that the appellants had not furnished any explanation for generation of excess quantity of molasses after closure of the factory. The theory of addition and/or mixing of water was sought to be pleaded only after issuance of show cause notice, apart from the fact that there was no proof regarding such mixing of water with the molasses. In the facts and circumstances, the Commissioner has held that abnormal excess molasses found subsequent to the date of closure of the factory, presence of which has not been satisfactorily explained, is a clear evidence of clandestine production and clearance of sugar from the factory. 6. As regards the point regarding bar of limitation, it has been observed by the Commissioner that it was mandatory for the appellants to submit RT-8(c) statement under the Central Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice. 8. The Apex Court in Oudh Sugar Mills Ltd. case was dealing with a matter wherein in May 1957 Asst. Chemical Examiner on inspection of the factory of the appellants in that case had made a report to the government that the company had not kept correct accounts of the sugar cane juice which was consumed for the production of sugar as was otherwise required under Rule 83 of the Excise Rules. The report related to the period between the commencements of crushing season for the year 1956-57 and 7th May 1957 and accordingly 11,606 mounds of sugar were reported to have been short accounted for. A show cause notice came to be issued and after hearing the parties, the Collector of Excise, Allahabad required the company under his order dated 19th Feb., 1958 to pay the duty on the said quantity of 11,606 mounds of sugar and also imposed penalty. The appeal carried against the same to the Central Board of Revenue did not yield any success. The revision application to the government also was rejected and hence the company had approached the Apex Court. It was the case of the company that the allegation of short accounting of the sugar was based on assumption and not on factual data. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the average of 10.11% of sugar recovery for the entire period because it involves the assumption that even during the period when the gross weight of the tanks was 7.5 tons or less sugar content of the sugarcane were crushed in the factory, it would not have yielded anything less than 10.11%." 9. Apparently, the Apex Court after pointing out the flaws in the report of the Chemical Examiner clearly held that such a report could not have been the basis for calculating the quantity of the sugar that might have been produced, even assuming it was produced clandestinely, in the factory by the appellants. In fact, the Apex Court had further observed thus: "We would also mention one more factor which is mentioned in the letter addressed by the milts to the Resident Inspector on July 27, 1957, replying to the Asstt. Chemical Examiner's comment on the working of the factory. In that letter, they have taken explanation to the calculations of the percentage of mixed juice to the quantity of sugarcane made by the Asstt. Chemical Examiner on the ground that it is merely inferential and based upon the factor which was first evolved in 1921 by one Noel Deer by taking average of number of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n excess quantity of molasses (MT) 1. 2001-02 01.05.2002 Pucca Pit No.2 04.07.02 600.000 -do- 12.07.02 600.000 -do- 21.08.02 356.649 Steel Tank No.2 21.09.02 391.700 -do- 20.10.02 150.000 -do- 07.11.02 30.000 -do- 17.11.02 25.000 Total 2153.349 2. 2004-05 02.03.05 Pucca Pit No.2 21.05.02 400.000 Steel Tank 02.06.05 500.000 No.1 -do- 08.06.05 150.000 Total 1050.000 3. 2005-06 29.03.06 Pucca Pit No.2 07.04.06 500.000 -do- 23.05.06 200.000 Pucca Pit No.2 04.06.06 200.000 -do- 07.06.06 150.000 Steel Tank 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... molasses in the factors or any material which could reveal the increase in the quantity of molasses on account of seepage of water during the period immediately after the expiry of crushing season till the date of declaration made in that regard. It is pertinent to note that the theory of mixing of water had been for the first time thought of after the service of show cause notice. We have not been pointed out a single document or material which could reveal that the appellants had at any point of time prior to service of show cause notice disclosed to the Department or any other authority that storage of the molasses were subjected to seepage of water therein. 14. It is also pertinent to note that though the appellants had sent the letters to the Inspector of State Excise about excess quantity of molasses and with copy thereof to Superintendent, Central Excise and Asstt. Commissioner of Central Excise, there is no explanation forthcoming from the appellants as to what prevented the appellants from filing revised RT-8(c) statements which was the clear requirement of law in the case of any excess of molasses being observed by the appellants. In-fact, there is a clear finding to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... molasses and the same being consequent to the corresponding quantity of manufacture of sugar clearly stood established and burden in that regard by the department was clearly discharged. The onus thus shifted upon the appellants to prove that the excess generation of molasses was on account of mixing of the water and not on account of excess manufacture of sugar. 17. The perusal of the records disclose that as regards the contention regarding the mixing of water with the molasses being the reason for increase in the weight thereof, there was no material of any type produced on record in support of the said contention. As already seen above, the mere contention in that regard cannot be believed. The contention being that the excess molasses were on account of mixing of water, it was necessary for the appellants primarily to establish the same by producing the analysis of the sample of molasses with the necessary contents of the water. There were no such efforts made by the appellants for reasons unknown. The burden in that regard was squarely upon the appellants as by the time the facts were revealed to the department and the investigation had started, the molasses in question wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt is submitted to Jurisdictional Superintendent Central Excise as well as, to Inspector U.P. State Excise. The declaration of excess Molasses is a practice regularly followed by every sugar factory where excess and shortages always happened. In our case over the last six years we have declared and informed the concerned department in time. Copies of written information submitted to the aforesaid officers during the period under reference are enclosed and collectively marked as Annexure-3." 19. The above averments clearly disclose clear confirmation of excess molasses with sole contention that the increase thereof was on account of mixing of water. As already observed above, there is no material placed on record in support of the said contention. Being so, while the Department had clearly discharged its burden, the appellants failed to discharge the onus. 20. As rightly pointed out by the ld. DR it appears that the excess generation of molasses or excess production of sugar was a normal phenomena in the factory of the appellants. The ld. DR has drawn our attention to earlier cases in relation to the appellants factory in this regard. They are: (1) reported in 1984 (18) ELT 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever has drawn our attention to the reply which was filed in response to the show cause notice and has submitted that the fact of the generation of excess molasses was informed from time to time to the Department and not only that, they had also paid duty on such excess molasses. 27. The Apex Court in Commissioner of Customs vs. Candid Enterprises case has undoubtedly observed that the fraud nullifies everything and, therefore, mere delay in taking action in the case of fraud may not be a justification to enable the party responsible for playing fraud to avoid the consequences of such wrong. However, before deciding applicability or non-applicability of this rule to the facts of the case in hand, it is necessary to consider the circumstances under which the action has been initiated against the appellants. 28. The show cause notice on the face of it, disclosed that the same was sought to be issued on account of declaration of excess quantity of molasses in the storage tanks/pucca pits of the appellants in relation to the period of 2001-02, 2004-05 and 2005-06 while the notice was issued on 26th June, 2007. Undoubtedly, it is also stated in the show cause notice that these dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment for the first time came to know about excess quantity of molasses and indeed the Department could not have alleged so, as it has been specifically revealed in reply to the show cause notice that the excess quantity of molasses was cleared on payment of duty from time to time. Factum of payment of duty on excess molasses would clearly reveal knowledge of excess generation of molasses in the factory of the appellants at the appropriate time to the Department. 30. Besides, the show cause notice itself refers to dates of declaration, which tally with the dates of the letters which were addressed to the Inspector of State Excise Department with copy thereof to the Superintendent of the respondent. The show cause notice nowhere states that those declarations were not received accordingly. 31. Above facts would reveal that the Department acquired knowledge about the excess quantity of molasses as and when the same was cleared on payment of duty. In these circumstances, it is difficult to accept the contention on behalf of the respondent that they were entitled to invoke the extended period of limitation. 32. The ld. DR, however, as already observed above, has submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end a copy of this order to the Hon'ble Minister of Finance as well as to the Revenue Secretary and the Chairman of the Board, for appropriate action if they deem fit and proper. 33. For the reasons stated above, therefore, the claim in relation to the period beyond one year prior to issuance of show cause notice dated 27th June, 2007 is clearly barred by limitation. The records do not justify invocation of extended period of limitation. 34. In the result, appeal partly succeeds, demand of duty under the impugned order with reference to the period beyond one year prior to issuance of the show cause notice dated 27th June, 2007 cannot be sustained, as it is barred by limitation. The rest of the demand cannot be interfered with. The same is liable to be paid according to the calculation to be made by the Department and to be intimated to be appellants. The appellants also will be liable to pay interest thereon and equal amount of penalty in terms of section 11AC. There shall be no penalty under Rule 25 of Central Excise Rules. The order in that regard stands modified accordingly. The appeal is disposed of in the above terms. 35. Registrar to forward the copies of this order to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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