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TMI Blog2002 (8) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... acid slurry under seizure, from M/s. Caress Industries under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Section 11A(1) of the Central Excises and Salt Act, 1944. (ii) I also confirm Rs. 5,94,012.00 (Rupees Five lakhs, ninety-four thousand and twelve only) being the duty on the goods cleared for home consumption by wrong availment of exemption under Notfn. No. 1/93, dated 28-02-1993 for which M/s. Caress Industries, are not eligible to, in respect of the clearances during the period 16-10-1993 to Feb., 1995 and demand the same from M/s. Caress Industries under Rule 9(2) of the Central Excise Rules, 1944. (iii) I order for confiscation of 449 kgs. of acid slurry (seized along with the lorry ) valued at Rs. 16,000.00 to the Govt. of India under Rule 173Q of the Central Excise Rules, 1944. However, I give an option to M/s. CI to redeem the same on payment of fine of Rs. 5000.00 (Rupees Five thousand only) in lieu of confiscation. This option should be exercised within 60 days from the receipt of this order. (iv) The quantity of 140 kgs. of acid slurry valued at Rs. 5,000.00 seized fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nes of acid sulrry and 0.770 tones of spent acid. That means LAB : Acid Slurry 1 : 1.430. The details furnished in Paras 39 to 43 of the OIO are reproduced herein below :- 39. From the above, it appeared that M/s. CI, had purchased LAB and manufactured acid slurry and cleared clandestinely without payment of duty. 40. The production of acid slurry is arrived as detailed below : "1 tonne of LAB + 1.2 tones of Oleum or sulphuric acid gives 1.430 tones of acid slurry and 0.770 tones of spent acid. That menas LAB : Acid slurry 1 : 1.430". 41. During 1989-90, duty is calculated after allowing duty concession under Notification No. 175/86. Since the value of clearances of acid slurry and spent acid appeared to have crossed Rs. 2 crores exceeding the SSI exemption limit during the financial years 1989-90, 1990-91, 1991-92, 1992-93, the duty amount for the years 1990-91, 1991-92, 1992-93 and 1993-94 has been worked out based on the normal rates of duty prevailed during those years. For the seized goods also normal rate of duty has been applied and duty calculated. 42. A show cause notice was issued to M/s. CI requiring them to show cause to the Commissioner of Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required and the department has in the SCN not brought forth any evidence with regard to receipt of Oleum (concentrated sulphuric acid). It was also pleaded that Oleum being in concentrated state, it cannot be transported in drums but only in tankers and appellants do not have sufficient storage facility for storing that much quantity of both the ingredients. They pointed out that revenue has not produced any evidence which is cogent and clear to establish receipt of these items in their factory for manufacture of final product. They also pointed out that there was no evidence of manufacture and clandestine clearance of any person has been brought on record. They submitted that in paras-X to XV of the reply to the show cause notice as follows : - X. Neither TPL nor SWC claim to have proceeded to enforce their claim for settlement of their due as per TPL or SWC records against "Caress group". Caress group are due as per TPL A/c Rs. 55,30,544/- as on 31-3-1993 and as per SWC works to Rs. 57,28,544.60. Caress have stopped their Acid Slurry business even in May, 1993. The very fact that no claim made on them for duesor no action taken by TPL/SWC on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Details are furnished of credit, with and without considering the exclusion of fraudulent documents of TPL disclosing deliveries in dubious vehicles. The details of all inwards allegedly used as inputs are borne by TPL Gate Passes, which have been verified by the Department as duty suffered in character. In any view MODVAT credit has to be granted when there is the charge of manufacture by using duty paid input of TPL which are stated to be supported by gate passes. Details are submitted in the computerised sheets to the Commissioner. XIII. We further submit that the show cause notice totally overlooks the manufacturing facility and infrastructure. We deny that the manufacturing capacity is 4 MT per day or LAB storage capacity is 50 MT or acid storage capacity 35 MT throughout the period of the show cause notice. We have informed deletion of certain items of vessels to the Department from time to time which are part of the records with the Department Superintendent. Assuming the alleged capacity, there is clear and unimpeachable evidence of the bogus data furnished by TPL and SWC which purports to effect supplies beyond our storage capacity as detailed hereunder :- D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be a specific provision to assess a dissolved firm which is not the case under Act 1/1944. Our firm initially known as Caress Industries, consisted of A.R. Shanmughasundaram, A.M. Ramaswamy A.R. Rajalakshmi, S. Vijayarani and minor S. Nanth...... this firm was dissolved on 15-5-94 as per Deed of Dissolution dated 15-5-94. Currently a new business is run in which the partners are A.R. Shanmughasundaram, A.R. Ramaswamy, A.R. Rajalakshmi and S. Deivathal. In view of these we request that the entire matter has to be dropped. 5. They further contended that the department has to show through consumption of electricity with regard to manufacture of final product which they have not done so. They also submitted that they were entitled for the benefit of Modvat credit in respect of both the items used for manufacture of final product. They also contended that the product which should be manufactured and sold is required to be valued as cum-duty and therefore the valuation has not been properly arrived at. The goods were received on wholesale price after several deductions which has also been not taken into consideration and therefore the figures given for assessing the value is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt of LAB and oleum for the manufacture of the final product namely acid slurry. He pointed out that the findings on the receipt of oleum the order itself is a non-speaking order and such an order is required to be set aside. He points out that the Commissioner has only spoken about the fictitious unit supplying the LAB and on that basis only held the appellant having manufactured acid slurry. The vehicle number stated by department is of mopeds, scooters, autorickshaws and not of lorries. The investigation is defective and has several loop-holes. The LAB and oleum is to be transported only through tankers and it cannot be brought through vehicles like mopeds, scooters and autorickshaws. Therefore, there is total non-application of mind and non-examination of rebuttal evidence thereby the order is not a speaking order. He submits that for the purpose of manufacturing the final product as per the allegations made in the SCN, the appellants is required to purchase LAB of 2139.07 MTs to a tune of Rs. 8 crores and oleum of 2566 MTs valued at Rs. 51 lakhs. The total cost of production could be more than Rs. 10 crores and appellants neither have the funds nor the capability nor manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chemical definition of Oleum appearing at page 758 of "The Condensed Chemical Dictionary, Tenth Edition Revised by Gessner G. Hawley" therein it is defined as :- "Oleum. The Latin word for oil applied to fuming sulphuric acid (q.v.); (sulphuric acid was originally called oil of vitriol)". Further, pointing out from the cited case ld. Advocate submitted that the Tribunal had given a finding that the authorities shall not take any additional evidence. He submits that tribunal in large number of cases pertaining to clandestine manufacture and removal of rubber had directed the authorities to take into consideration the evidence of consumption of electricity, etc., as a factor to determine clandestine removals. He submitted that the appellants have not utilized the electricity required for manufacture of alleged quantum of final product. In this connection he has referred to various citations wherein the matters were remanded and on remand the Commissioner had dropped proceedings solely on the basis of evidence of electricity not having been considered. ld. Counsel submits that the fact that department had not produced any evidence of manufacture of final product with use of oleum and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is with regard to non-receipt of both the ingredients which has been brought out in great detail even as per the vehicles said to have been noted in the SCN. On verification of the vehicle number by the appellant, they have found it to be that of scooters, mopeds and autorickshaws and not of the alleged lorry said to have been used for transporting the LAB. It was also pleaded that for transportation of these items, special tankers are required and special storage facility is also required and it cannot be kept in drums. This valuable piece of defence and rebuttal evidence has not been taken into consideration thereby the impugned order is a not a speaking order. In so far as the allegation of the receipt of important item clandestinely and clandestine manufacture and removal of final product i.e. acid slurry, it is for the department to show that the appellants had received and clandestinely manufactured with all the raw material. It is not sufficient for the department to show the evidence of receipt of only one material and that too through various sources said to have been received without establishing the quantum said to have been removed by Tamil Nadu Petrochemicals, the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Bench in the case of Jaya Soap Works, 1995 (79) E.L.T. 92 (T) in an identical allegation on similar and evidence had noticed that appellants therein had likewise stated that they had not received LAB from the very same dealers as alleged herein. The tribunal did not confirm the demands but remanded the matter for de novo consideration as per paras-12 to 14 which is extracted herein below :- 12. We have carefully considered the submissions made before us. Indeed extensive and long arguments were heard in the appeals. On going through the entire records and on consideration of the entire submissions, we find that the primary question that arises for determination, is whether Acid slurry was manufactured and cleared by Jaya Soap Works clandestinely without payment of duty as alleged. The adjudicating authority has correctly addressed himself to the relevant issues in this regard as extracted above. It is not disputed that for manufacture of Acid slurry the two important raw materials are Sulphuric Acid and LAB. So far as Sulphuric Acid is concerned, the contention is that the same was purchased by Jaya Soap Works from five units and out of the five units, purchases from three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Krishnan or on his letter dated 16-5-1991, copy of which was not given to the appellant. We emphasise that the original basic records that have been seized should be made available to the appellant if the Department wants to place reliance on the same in support of the charge of clandestine removal of the goods not accounted for and manufactured out of the same. Therefore, on consideration of the entire evidence on record, we are satisfied that the various basic records on which reliance has been placed by the Department against the appellant have not been made available to the appellant. We therefore, set aside the impugned order No. 5/92, dated 27-5-1992 relating to Jaya Soap Works and remand the issue for reconsideration in the light of the observations made above. We make it clear that the Department cannot embark upon further investigations nor collect any new evidence against the appellants. The Department is directed to make available the basic original records admittedly seized from Gee Gee Khay Chemical Industry and Krishna Industrial Chemicals Pvt. Ltd. which formed the basis for Shri Gurumurthy and Shri V.S. Krishnan to give out their figures in support of the charge a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in tune with the Apex Court judgment rendered in Formica India Ltd. (supra). However, we notice that the duty calculation on the final product is required to be considered after taking the duty as cum-duty, in terms of the ratio as now laid down by the Larger Bench of the tribunal in the case of Sri Chakra Tyres (supra). Further contention that in case if the department establishes their case, appellants are entitled to argue and plead with regard to valuation aspect and that they had received raw materials at whole-sale price and that they are entitled for various deductions and is also required to be considered. 11. We hold that that this plea will be applicable only when the ld. Commissioner come to the conclusion on a categorical cogent and reliable evidence that there is receipt of quantum as alleged in the SCN of both the inputs i.e. LAB and oleum and that they had manufactured the extent of final product and cleared it surreptitiously and clandestinely to buyers on consideration as alleged in the SCN. 12. The ld. Commissioner shall readjudicate the matter in the light of observations made and the directions given by the Tribunal in Jaya Soaps Works (supra) whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely M/s. Southern Warehousing Corporation (SWC) who are the dealer for TNPPL. The appellants had procured raw materials only through SWC. The facts emerging from evidence on record are that M/s. Caress Industries had made available cheques in the name of Shri Srinivasa Vardhan, Shri Kuppuswamy and Shri Ramaswamy (employees of SWC). These three persons had encashed the cheques and had taken up the jobs for supply of LAB from TNPPL in the name of third parties to be ultimately supplied to M/s. Caress Industries. 16. The argument of the appellant before the Commissioner and in the synopsis submitted before us is that the material despatched in the name of third parties and shown as supplies to M/s. Caress Industries in the account books of SWC was not delivered to the appellants namely Caress Industries for manufacture of unaccounted Acid Slurry. However, since Caress Industries have issued cheques to the employees of SWC and they have converted the same into drafts to be handed over to M/s. TNPPL for supply of LAB, the inescapable conclusion is that the raw material have reached only M/s. Caress Industries. Otherwise, the cheques issued to the various employees of SWC referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore (2) Khadar & Co., Vaniampadi (3) Meenakshi Chemicals, Coimbatore (4) Chemical Syndot Corpn., Coimbatore (5) Sumathi Chemicals, Coimbatore (6) Vincent Chemicals, Dharmapuri (7) Senthilvel Chemicals, Coimbatore (8) Vanmathi Soap Works, Pollachi (9) Chandra Chemicals Works, Pollachi (10) Velmurugan Chemical Agency, Coimbatore (11) Abubacker Agency, Ambur (12) SWC, Coimbatore. 17. M/s. Thulasi Transport, Madras-81 have also delivered LAB consignments at M/s. CI, who are their regular clients through their lorry tankers under the TNPPL invoices raised in the name of different non-existing units/fictitious units (as per the annexure) and also in the name of M/s. CI as deposed by Shri T. Ravi, Manager of Thulasi Transport. M/s. CI also transported LAB from M/s. TNPPL to their company through their vehicle using different bogus number plates like TMN 3317 (Vinod & Chamundi), TAA 5792, TDU 5931, TDU 5910, etc. It is, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SWC. Above all, M/s. CI had not proved/established the reason due to which M/s. SCW should have fabricated accounts against it. Further, M/s. CI contended that there had been serious errors of book-keeping and stated that the outstanding as per M/s. TNPPL and M/s. SWC accounts in respect of M/s. CI and their group of fictitious units vary in respect of each financial year. As the transactions were in several lakhs, the difference of 2 or 3 lakhs in respect of unreconciled accounts are not uncommon, and this argument by itself does not provide any concrete evidence to allege that the accounts were fabricated/false. It was in this background that the ld. Commissioner rejected the claim of M/s. CI regarding fabrication of accounts of M/s. TNPPL and M/s. SWC. A perusal of para 103 regarding outstanding amounts to M/s. SWC/TNPPL from M/s. CI, it is a matter of understanding between the concerns that rather they would adjust the same with regard to the freight that is to be paid to M/s. CI for the usage of the tanker lorry TCQ 7054 or with the freight subsidy to be paid for the supplies of LAB made to M/s. CI and their fictitious units or quantity discount is to be given to M/s. CI and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture of Acid Slurry. The next issue for consideration is whether the appellant would have manufactured the quantities of Acid Slurry for which demands have been confirmed in these proceedings. As it has been observed and found that there had been unaccounted receipt of LAB/Sulphuric Acid by the appellants, the other things to be gone into is whether the appellant had acquired machinery for converting the raw material into final product. In this regard, the ld. Commissioner has given detailed findings in para 86 of the impugned order. He has also relied on the statement of A.R. Shanmugasundaram to conclude that production and storage of quantity for which demands have been issued was possible and there is no reason for me to deviate from the said findings. It is also worth noting that A.R. Shanmugasundaram had not retracted from his statement at any time. If unaccounted raw material had been procured, it could only end up in manufacture of unaccounted final product namely Acid Slurry, in the absence of any proof that the unaccounted LAB has been disposed of by sale or otherwise. 20. A perusal of para 87 of the findings recorded by ld. Commissioner would reveal that the offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cid Slurry which was cleared clandestinely without any account and without payment of C.E. duty. Once we hold that there had been clandestine manufacture and clearance of the excisable goods without payment of duty, the long period of limitation invoked in the impugned order and penalty imposed is sustainable. Hence, I do not find any infirmity with the imposition of penalty. However, it is to be noted that M/s. CI being a firm is not separate juristic person and does not have any separate legal entity unlike a private limited company/limited company, where the liability of the shareholder is limited to the extent of shares held by them. The liability of the partners in the case of a firm is unlimited and they are liable for any liability or debts standing in the name of the said firm, including taxes. It was in this background that the learned Commissioner had imposed a penalty of Rs. 50,00,000/- on the Managing Partner A.R. Shanmugasundaram and therefore, the penalty of Rs. 50,00,000/- imposed on him is hereby confirmed in view of the modus operandi adopted and the overwhelming collateral evidence on record. Confiscation of vehicle TN 33 Z 3868 and redemption fine imposed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to the manufacture of final product namely Acid Slurry and abatement of cum-duty price is also required to be given where they are able to prove from various documents in their possession. The proposal for re-investigation made in the order recorded by ld. Brother regarding electricity consumption, etc. would serve no purpose in this case as the firm which manufactured and cleared the goods is no more in existence and since dissolved. 24. I, therefore, partly allow the appeal by way of remand only for the limited purpose of (1) allowing Modvat credit on inputs utilised in the manufacture of final product Acid Slurry and (2) abatement of cum-duty price under Section 4(4)(d)(ii) of the Central Excise Act. After allowing the Modvat credit on inputs and after allowing abatement of cum-duty price, the duty so worked out shall stand confirmed. Subject to the above modification, the appeals are otherwise rejected. Sd/-(Jeet Ram Kait)Member (T)Dated : 24-1-2002 POINTS OF DEFFERENCE OF OPINION In view of the difference of opinion between the Members the matter is required to be placed before the 3rd Member by Hon'ble President for deciding the following question that ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llants pointed out that Member (T) seems to disagree with the request for remand of the case mainly for the reason that the assessee firm has already been dissolved and the case itself being for the period 1989-93, a fresh adjudication may be impractical at this late stage. He submits that while these are very valid considerations remand cannot be avoided as the Tribunal would be in no position to dispose of the appeals on merits, since the adjudication order has been passed without considering very important material evidence. He also stated that the evidence regarding the electricity consumption would still be available and both sides should be able to obtain and present evidence on this count in the adjudication proceedings. 29. Learned D.R., however, submitted that adjudication in the remand proceedings should not be made subject to availability of evidence on the consumption of electricity. He stressed that the fresh adjudication should be kept open irrespective of whether evidence on electricity consumption was available or not. 30. From a perusal of the orders of my learned brothers, particularly paras 7 & 8 and the submissions made on behalf of both sides, it ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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