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TMI Blog2001 (10) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Central Excise Rules, 1944, under sub-section (2) of section 11A of Central Excise Act, 1944 read with sub-section (1) of Sec. 11A of CE Act, 1944. However, an amount of Rs. 5 lakhs paid by BEC shall be adjusted towards the duty payable as determined above; (ii) I also demand an amount of Rs. 7,72,693 differential duty payable in respect of clearances made during the period from July, 97 to November, 97 by BEC under sub-sec. (2) of Sec. 11A of Central Excise Act, 1944 read with sub-section (1) of sec. 11A of Central Excise Act, 1944 since BEC is not eligible to avail SSI benefits for the year 1997-98 as proposed in the show cause notice issued under C. No. V/84/15/206/97, dt. 5-1-98 (OR No. 25/98-Hyd-III/Adjn.); (iii) I also demand an amount of Rs. 31,38,596/- being the differential duty payable in respect of show cause notices OR No. 142/98, dated 30-10-98 (Rs. 6,51,003), OR No. 32/99, dated 19-2-99 (Rs. 4,66,017), OR No. 128/99, dated 13-7-99 (Rs. 70,671), OR No. 153/99, dated 2-11-99 (Rs. 9,92,191) and OR No. 48/2000, dated 22-3-2000 (Rs. 9,58,714) during the period April, 98 to February, 2000 under sub-section (2) of Section 11A of Central Excise Act, 1944 read with sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra, under the provisions of Rules 173Q of Central Excise Rules, 1944. However, BEC can redeem the same on payment of a fine of Rs. 1,000/- (Rupees One thousand only). The allegation made against the appellants have been brought out in the brief facts of the case by the Commissioner in Paras 1 to 12 which is reproduced below : "BRIEF FACTS OF THE CASE : M/s. Beaver Engineering Corporation, Kushaiguda, Hyderabad (hereinafter referred to as "BEC/assessees") are the manufacturers of parts of drilling rigs, such as tungsten carbide button bits (hereinafter referred to as "Bits/Button Bits") falling under Chapter sub-heading No. 8207, attracting duty @ 15% and down-the-hole hammer assemblies (hereinafter referred to as "hammers") and parts thereof, falling under chapter sub-heading Nos. 8430.00 and 8431.00 respectively, attracting duty @ 13% of Central Excise Tariff Act, 1985 and are availing exemption under Notification No. 1/93, dated 28-2-93 as amended by Notification No. 7/97, dated 1-3-97, No. 16/97, dated 1-4-97 and No. 8/98-C.E., dt. 2-6-98. 2. On gathering intelligence that BEC are indulging in clandestine manufacture and clearances of excisable goods, the officers of Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esidence of Shri E.V. Subba Reddy, clerk of BEC on 29-6-97 and recovered certain private records. 6. BEC, DEW, VE and CI are all manufacturers of button bits and hammers. CI was also manufacturing truck mounted drilling rigs. BEC, DEW and CI have obtained Central Excise registration and VE remained within the exemption limits. The value of clearances of button bits and hammer assemblies and parts thereof from BEC, CE and VE for 1995-96 & 1996-97 is as under : Value of clearances Name of the Unit 1995-96 (Rs. in lakhs) 1996-97 (Rs. in lakhs) 1.BEC 73.60 98.46 2. DEW 55.58 69.67 3. CI 21.13 13.15 4. VE 27.09 15.98 7. To manufacture T.C. buttons, alloy & Steel of EN 19 grade and tungsten carbide buttons are the main raw material. Alloy Steel of EN 36C grade and Rolled Steel rounds and tubes are the main raw material to manufacture hammer assemblies. Manufacturing process of TC buttons involve the operation of turning, forging, cutting, drilling, milling, heat treatment, button grinding and button fixing. BEC has the capacity to carry out all the operations except forging and heat-treatment, for which they are getting job-work done at M/s. Manjeera Machine Buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Note Book Nos. 4 Oct., 95 to Apr., 96 Details of purchases of T.C. Buttons and alloy steel and payments made therefor. (xi) File No. 7 (Page No. 25) 11-3-96 Delivery challan No. 64, dt. 11-3-96 of M/s. Steel & Stores (India) Agency, Hyd. issued to BEC for 9.59 MT (unaccounted) (D) Records recovered from the residence of Shri N. Rama Rao, Area Sales Manager, M/s. Drillco Metal Carbides Ltd. (xii) Note Book Nos. 1, 3 and 4 95-96 and 96-97 Details of supplies of T.C buttons to BEC and Shri Madhusudhan Reddy of value Rs. 64,04,252 and payments of Rs. 39,75,371 received therefor from BEC. 9. Scrutiny of the private records recovered from the factory premises of BEC and from the residence of Shri E.V. Subba Reddy and Shri G. Ram Murthy when compared with the statutory records, revealed that : (i) Rs. 16,14,60,133/- value of finished goods were cleared during October '95 to June '97 (Rs. 10,61,82,701/- during the period October, '95 to September '96 and Rs. 5,52,77,432/- during October, 96 to June, 1997). Whereas as per statutory records of BEC the value of clearances of finished goods were Rs. 1,60,07,524/- during 10/95 to 6/97. Verification of private records, furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97 and 5-8-97 of Shri A. Bhagirath, Proprietor of M/s. B.S. Metallurgicals, Balanagar and M/s. Bharat Heat Treaters and Analysts, Fathenagar, Hyderabad. (p) Statement dt. 22-8-97 of Shri K. Purnachadra Rao, Authorised signatory of M/s. Manjeera Machine Builders (P) Ltd. Patancheru. (q) Statement dt. 20-8-97 of Shri Madar Saheb, Managing Partner of M/s. Maruti Forgings, Jeedimetla. (r) Statement dt. 11-8-97 of Shri M. Chandran, Commission Agent at Tiruchengode. (s) Statement dt. 16-8-97 of Shri A. Mohan Reddy, Company Representative of BEC at M/s. Beaver Rock Drills & Equipments, Bhilwara. (t) Statement dt. 22-8-97 of Shri Raghuvardhan Reddy, Assistant Manager, M/s. Beaver Rock Drills, Secunderabad. (u) Statements dated 30-6-97 and 13-8-97 of Shri K. Sriram Prakash, Branch Manager, BEC Bangalore Branch, Bangalore. (v) Statement dated 2-9-97 of Shri Suresh Singhvi, Manager of M/s. Beaver Engineering Corporation, Indore. (w) Statement dated 29-6-97 of Shri N. Maniraju, Accountant of BEC. (x) Statement dated 29-6-97 of Shri Amrutha Rao, Accountant and authorised signatory of DEW. (y) Statement dated 28-11-97 of Shri K. Krishna Reddy, Managing Partner of DEW. (z) Statement da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clandestine clearances of the excisable goods afore-mentioned should not be confiscated to the Government of India under Rule 173Q(2) of the Central Excise Rules, 1944." (g) penalties should not be imposed on them under Rules 9(2), 52A(8), 173Q and 226 of the Central Excise Rules, 1944." 2. The appellants filed their reply denying all the charges. The statements which they had given were all retracted and a very strong plea was taken by them that the whole case has been drawn on the basis of the private registers maintained by Shri Ram Murthy, Manager and these registers having seized from his residence. The appellants in order to prove that they do not have the capacity to produce the extent of goods as alleged in the show cause notice, got their machinery and the production capacity verified through a Government agency namely Andhra Pradesh Productivity Council and also through Shri Venkata Rao, Chartered Engineer. They filed these two documents to prove that they do not have such capacity and such extent of goods to be manufactured for clearance. Therefore, they denied that there was any clandestine activity or clandestine removal of goods. They also took the opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o material evidence was given in support of the contra-submission made at the time of cross-examination of several persons these are clearly an afterthought and are not acceptable as evidence. 56. The statements given by Shri M. Madhusudhan Reddy and the job workers are clear admissions only. It was held in the case of Ayodhya Prasad v. Bhawani Sankar, AIR 1957 A41 that : "the effect of an admission of a fact by a party is to shift the onus. He is required to prove the contrary. Again if a person to whom the admission was made acted on the faith of it and altered his position, it may also operate as on estoppel. The party making admission is at liberty to prove that such admissions were mistaken or were untrue and he is not estoppel or concluded by them unless other person has been induced by them to alter his condition". 57. The investigating officers acted on faith of admissions of Shri M. Madhusudhan Reddy, who is the main person of BEC, that the recovered documents related to transactions made by BEC. BEC has paid the duty of Rs. 5 lakhs vide TR-6 challan dt. 7-7-97. It is worth to mention that a part of the duty was paid on 7-7-97 even after the alleged affidavit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete the manufacturing process required for finished goods. The same was also admitted by Shri Madhusudan Reddy vide his statement dated 7-10-97. As such, consideration/non-consideration of production capacity of BEC alone does not arise. The contention put forth by the assessees is only to side track the issue. 60. It is also observed that BEC has procured T.C. buttons valued of Rs. 2.13 crores during 95-96, 96-97 and 97-98 and Rs. 2.11 crores worth of steel during Oct., 95 to April, 96 as per the note book recovered from Shri Ram Murthy and Rs. 0.84 crore during Feb. '97 to June, 97 as per box file recovered from the residence of Shri E.V. Subba Reddy. If the contention of the (sic) that BEC can produce only Rs. 1 to 1.5 crores of goods per year is correct then what is the necessity to purchase Rs. 2.11 crores worth of steel during Oct., '95 to April 96 (7 months) and Rs. 0.84 crores of steel during Feb '97 to June '97 (5 months). The statements further corroborate the basic evidence collected i.e, documents/note books/box files recovered. It can be observed from the box file No. 2 recovered from the residence of Shri E.V. Subba Reddy, during, April, 97 to June '97, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy, Supervisor, Authorised Signatory. Shri G. Ram Murthy singed the vakalat in the capacity of Manager, M/s. BEC and the same was accepted by the learned advocate. (b) From the above, it is amply clear that Shri G. Ram Murthy is closely associated with the manufacturing activity and day to day transactions of BEC. It is noteworthy to mention that Shri G. Ram Murthy has acknowledged the receipt of SCN (OR No. 48/97, dated 17-12-97) on dated 20-12-97 on letter head of M/s. Beaver Engineering Corporation, Hyderabad in the capacity of Manager, M/s. BEC. Hence it is construed that the affidavit dated 16-7-97 (submitted along with reply dated on 24-3-99) does not contain facts. (c) The Revenue got strong substantial corroborative evidence to prove that M/s. BEC has procured huge quantity of raw material as the suppliers of raw material (Alloy-steel) have admitted that they have supplied raw materials without issuing any documents such as challans and bills. In fact they have identified the corresponding entries in the incriminating documents recovered relating to the amounts paid and payable to them by BEC. (d) Also Shri Vijay Kumar, Proprietor M/s. Eastern Steel Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation of certain individuals and employees of BEC has not resulted in miscarriage of justice. 65. The learned Counsel of BEC has cited a catena of decisions of the Hon'ble Supreme Court/Tribunal in support of their submissions. It is necessary to peruse the case laws cited by the Counsel. The case laws submitted have been carefully considered. The ratio of the decisions of those cases cannot be applied to the instant case for the reason that the facts and circumstances of those cases are not the same. As detailed out in the findings this case is based on specific documents recovered during raid and duly corroborated by statements of individuals concerned with the transactions. Therefore, I do not consider it necessary to discuss the individual case laws referred to by BEC separately as the proposals contemplated in the show cause notice are correct. Hence, I reject the arguments of the learned Counsel. 66. 68 Nos. of various parts of drilling rigs valued at Rs. 1,57,696 were seized at the business premises of M/s. Beaver Rock Drills, Secunderabad on 27-6-97 (dealer of BEC) since the stock was in excess having without bills. Shri Raghuvardhan Reddy in his statement dt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . At the time of drawing panchnama, Shri K. Sreeramulu, Partner of M/s. Precision Metal Treaters could not produce any job work challans in respect of 8 Nos. of bits of "BEAVER" make. Shri K. Sreeramulu, in his statement at 11-8-97 stated that they undertaken job work of heat treatment to BEC and CI among others and further stated that they had received 8 Nos. of "BEAVER" make button bits for job work from BEC without any documents. Shri M. Madhusudhan Reddy, in his statement dt. 7-10-97 agreed that the contents of the statement of Shri K. Sreeramulu is correct. In this regard Counsel has not given satisfactory reply. As such, 8 Nos. of button bits are liable for confiscation. 69. I find on the basis of findings given above that the grounds contained in the show cause notice regarding clandestine manufacture and clearance of bits and hammers during Oct. 95 to June, 97 suffers no infirmity particularly because the modus operandi adopted by BEC is established by the documents/records recovered from the factory premises of BEC, residential premises of Shri E.V. Subba Reddy and Shri G. Ram Murthy, employees of BEC, confirmative deposition given by the personnel of BEC and accepti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he manufacture of the impugned goods under Rule 173Q of Central Excise Rules, 1944. However, I do not contemplate the confiscation of the same as the relevant provisions under Rule 173Q of Central Excise Rules, 1944 are not existing at present. 71. In so far as the penalty on Shri M. Madhusudhan Reddy, Managing Partner, BEC, Shri E.V. Subba Reddy, clerk of BEC and Shri G. Ram Murthy, Manager of BEC is concerned, I note that the entire spectrum of operations of procurement of raw material clandestinely and sales of finished goods clandestinely without payment of duty was done and within the knowledge of Shri M. Madhusudhan Reddy, Managing Partner of BEC. Shri E.V. Subba Reddy, clerk of BEC and Shri G. Ram Murthy, Manager of BEC have also had the knowledge of clandestine procurement of material and clearances of the same without payment of duty and assisted Shri M. Madhusudhan Reddy by maintaining the records/registers at their residences. As such, they are also liable to be penalised under Rule 209A of Central Excise Rules, 1944. 72. The clandestine removal done by BEC during 1995-98 is proved beyond doubt. The unaccounted production is also to be taken into account to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sankaram and Shri J. Sankarraman, ld. Advocates point out that there was a clear violation of principles of natural justice in not giving an opportunity to cross-examine the main witnesses namely G. Rammurthy and E.V. Subba Reddy. Ld. Counsel points out that the Commissioner has clearly erred in holding that the appellants should have produced them. They contend it was practically impossible to produce them when they were suffering from illness and completely bed ridden. Commissioner's view that G. Rammurthy's prayer for postponement cannot be accepted is clear violative of principles of natural justice. They pointed out that the findings that the cross-examination is not required in view of admission of seizure of article is not correct as there was no seizure of articles in the matter which connects to the quantum of goods said to have been removed for confirmation of duty. Therefore, there is a clear mis-application of judgment of the Supreme Court cited in Para 62 of the order extracted supra. Ld. Counsel points out to Para 65 wherein the Commissioner has stated that he does not consider it necessary to discuss the individual case law referred to by them. He submits that the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... = 2001 (94) ECR 684 (Tribunal) - MTK Gurusamy & Anr. v. CCE, Madurai Demand - Clandestine removal - Evidence - Seizure of private register maintained by a private part time employee - Demand cannot be confirmed on basis of such an unauthenticated document without corroborative evidence, such as seizure of clandestinely removed goods or invoice or purchase of raw materials, etc. - Ratio of Supreme Court judgment in the case of Triveni Rubber & Plastics v. CCE [1994 (54) ECR 40 (SC)], and of several Tribunal decisions cited. Impugned order set aside. (5) 2000 (120) E.L.T. 148 (Tribunal) - Suvarna Polymers Pvt. Ltd. v. CCE, Hyderabad Demand - Shortage - Clandestine removal - Evidence - Only piece of evidence relied upon by the Revenue is the inflated figure pertaining to allegation of manufacture and clandestine removals for raising higher financial limit from the bank - Demands raised solely on the basis of the statement furnished by the assessee to the banks not sustainable - Rule 9(2) of Central Excise Rules, 1944. (6) 2001 (136) E.L.T. 1280 (Tribunal) = 2000 (93) ECR 59 (Tribunal) - IGNI Fluid Boiler (I) Ltd. v. CCE, Madras Exemption - Demand - Limitation (extended) Penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntries of production and removal of products recovered - Revenue claiming him to the employee of assessee and assessee denying the same - Denial of request of assessee to cross-examine him violated principles of natural justice - Rules 9(2) and 173Q of CER, 1944. Clandestine manufacture and removal - Evidence - Entries in a private notebook of record of production at most raise a doubt but do not prove the charge in absence of other corroborative evidences like installed capacity of factory, raw materials utilisation, labour employed, power consumed, goods actually manufactured and packed etc. - Rules 9(2) and 173Q of CER, 1944. Clandestine manufacture and removal - Evidence - Distance between 'may be true' and 'must be true' is long and whole of it must be covered by legal and unimpeachable. (8) 2001 (131) E.L.T 662 (Tri-Del) - Haryana Roadways Engineering Corporation Ltd. v. CCE, New Delhi Valuation (Central Excise) - Demand - Original consideration received by assessee for sale of the goods had to be taken as cum-duty price and abatement of differential duty from sale realisation allowable - Erstwhile Section 4(4)(b)(ii) of Central Excise Act, 1944. (9) 2000 (36) RLT 274 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as the Revenue has not discharged their burden of proving the clandestine manufacture and removal and that the Commissioner has solely proceeded on the assumptions and presumptions, the impugned order is required to be set aside by granting wavier of pre-deposit at this stage itself. 5. Ld. DR submits that the case is built up on detailed investigation and on seizure of enormous private registers. Merely because two of the witnesses were not present for cross-examination that will not tilt the case in the appellant's favour for the reasons that appellants were given full opportunity to cross-examine all the witnesses. They also utilised the opportunity to cross-examine large number of witnesses. The main witnesses namely G. Ram Murthy and E.V. Subba Reddy were served with several notices to present themselves. They did not appear and appellants did not take any step to bring them as they were their employees. In the circumstance, the Commissioner has no choice but to proceed with the orders. The Commissioner has given detailed findings and relied on their own statements and several other material evidences culled out in the investigation and have rightly confirmed the deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cedure of Tribunal is that at the time of hearing the stay application if it has been pointed out that there is a clear violation of principles of natural justice, then the Tribunal at stay stage itself takes up the matter for final hearing. Therefore, keeping with the Tribunal's practice, we take up the appeals for final disposal. 8. It was argued by the Counsels that Revenue has not established the charge of clandestine manufacture and removal and that there is a clear violation inasmuch as that the Commissioner has proceeded beyond the terms of the show cause notice. It has also been argued that without making the other units on whose clearances the demands have been raised parties to the proceedings, the proceedings are null and void. We are, therefore, of the considered opinion that all the pleas of the appellants including the plea to cross-examine the two vital wintesses namely E.V. Subba Reddy and and Rammurthy are required to be reconsidered by the Commissioner. The Commissioner should compel the witnesses to appear and face the cross-examination. The law has given powers to the Commissioner to summon them by all means as no witness can stay away from the quasi-judic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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