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TMI Blog2011 (7) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... grade PVC resin CP172SG from M/s Chemplast Sanmar Ltd., PVC resin of 6701 grade from M/s Reliance Industries and PVC resin of other grades from M/s Oswal Cables Products and M/s Sancheti Vinyl. 1.2 M/s Tanishq wires & Conductors Pvt. Ltd. Sonipat (hereinafter referred to as M/s Tanishq) is a private limited company with Shri Dinesh Kumar Gupta and his son Shri Gaurav Gupta as Directors. It is also engaged in manufacture of PVC compound and PVC insulated wires. 1.3 M/s Aditya Plastic, Delhi is a proprietorship concern of Shri Rajesh Mittal. It is engaged in trading of PVC resin. It is alleged that during the period of dispute, they purchased CP172 SG grade PVC resin from M/s Chemplast Sanmar under invoices and from M/s Natraj without invoices and supplied the same to various manufacturers of battery separators including M/s Mukesh Industries (India), Delhi (hereinafter referred to as M/s Mukesh) which is a proprietorship concern of Shri Sunil Mittal. 1.4 Acting on an information that M/s. Mukesh are evading central excise duty by clandestine clearances, a watch was kept at their premises on 6.5.2005 and a tempo loaded with battery separators manufactured by M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw materials including 4.37 MTs. of CP 172 SG Resin were found. The goods were placed under detention. In the course of search of premises of M/s. Aditya Plastics on 14.02,2006, certain records regarding purchase of CP 172 SG Resin and other plastic resins by M/s. Aditya Plastics from M/s. Chemplast Sanmar, M/s. Royal Industries and M/s. Vikas Pvt. Ltd. were recovered which were placed under seizure. Certain stock of CP 172 SG Resin was found in the premises of M/s. Aditya Plastics, which was placed under detention. Residential premises of Shri Dinesh Gupta, Director of M/s. Natraj was also searched on 14.2.2006 in presence of panch witnesses in course of which certain documents were recovered and the same were resumed. 1.5 Inquiry was made with Shri Dinesh Gupta of M/s. Natraj in course of which his statements were recorded on 14.02.2006, 14.03.2006. 28.4.2006, 15.06.2006, 23.06,2006, 3.8.2006 and 28.08.2006, 22.09.2006, 3.10.2006, 7.11.2006, 8.11.2006 and 10.11.2006 under Section 14 of the Central Excise Act, 1944. Shri Dinesh Gupta in his statement dated 14.02.2006 stated that they had started their factory in the name of M/s. Natraj Plast Industries in the year 1994 at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal of M/s.Appu Cables, it was found that no material had been supplied under those invoices. The Cenvat Credit illicitly passed on to M/s. Appu Cable under those invoices was Rs.1,13,130/-, which was deposited by Shri Naresh Bansal, Proprietor of M/s. Appu Cables on 25.03.2006. Shri Dinesh Gupta in his statements, while claiming the use of certain quantity of CP172 SG Resin purchased by him for manufacture of PVC Filler Cord, PVC Tapes admitted that substantial quantity had been sold as such without reversing the Cenvat credit and that some of the parties to whom CP 172 SG resin had been sold were Shri Rajesh Mittal of M/s. Aditya Plastics, Shri Sunil Mittal of M/s. Mukesh Industries and Shri Rajesh Bansal, Proprietor of M/s. Micro Sec Industries. On inquiry with Shri Rajesh Mittal of M/s. Aditya Plastics, it was found that they were purchasing CP 172 SG Resin directly from M/s. Chemplast and that the quantity was being sold mostly under invoices, but for supply of this resin to the manufacturers of battery separators, who wanted the same without invoices, they were procuring this resin from M/s. Natraj who was supplying the same without any invoices. Shri Sunil Mittal of M/s.Muke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Cord and PVC Tapes. As per these details given in his statement, M/s. Natraj during 1.11.2001 to 31.3.2002 period of 2001-2002, 2002-2003, 2003-2004, 2004-2005 and 2005-2006 (upto 14.02.2006) had purchased 166 MT, 179.367 MT, 118 MT, 339.411 MT and 352.937 MT respectively (total 1055.715 MT) of CP 172 SG Resin from M/s.Chemplast, out of which, while the use of this Resin during the period 2001-2002, 2002-2003, 2003-2004, 2004-2005 and 2005-2006 for manufacture of PVC Filler Cord was 5.56 MT, 121.37 MT, 32.97 MT., 26.556 MT and 17.542 M.T. respectively, claimed the use of this resin in the manufacture of PVC Tapes during this period was nil, nil, 0.735 MT, 117.671 MT and 112.396 MT respectively. Even if these figures are accepted, the resin actually used was only 344.8 MT which indicated that at least 720.915 MT of resin had been illicitly divested. 1.8 Statement of Dr. R. Paliniappan, Technical Officer, M/s. Chemplast Sanmar was recorded on 25.04.2006 wherein he stated that CP 172 SG Resin has been specially developed for manufacture of battery separators and he was not aware of the uses of this resin for the manufacture of PVC insulated Wire and Cables, PVC Tapes, etc. & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s. Natraj, Shri Gaurav, Director of M/s. Natraj, M/s. Tanishq, Shri Sunil Mittal, Proprietor of M/s. Mukesh Industries and Shri Rajesh Mittal of M/s. Aditya plastics for (a) recovery of Cenvat credit amounting to Rs. 1,13,76,073/- (excluding Cenvat credit of Rs.1,85,419/- in respect of 15.5 M.T. of resin covered by show cause notice No.IV/.PRV/15/7/06 dated 10.08.2006 issued for the seizure portion) illegally availed by M/s. Natraj on purchase of CP 172 SG resin during the period from 1.11.2001 to 6.2.2006 by M/s. Natraj and illicitly divested by them to M/s. Sunil Mittal of M/s. Mukesh Industries and Shri Rajesh Mittal of M/s. Aditya Platics, under Rule 12 of the Cenvat Credit Rules, 2001/2002/ Rule 14 of the Cenvat Credit Rules, 2004 read with proviso to Section 11 A(1) of the Central Excise Act, 1944, along with interest on the same at the applicable rate under Section 11AB of the Central Excise Act, 1944; (b) recovery of Cenvat credit amounting to Rs.77,586/- on 7.314 MT of PVC Resin illicitly availed by M/s. Natraj under Rule 12 of the Cenvat Credit Rules, 2001/2002 of 2004/ under Rule 14 of the Cenvat Credit Rules, 2004 read with proviso to Section 11 AC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals of M/s. Natraj and other appellants were dismissed vide Final Order No.597-602/09 dated 21.08.2009. Against this order of the Tribunal, M/s. Natraj and other appellants filed writ petitions before the Hon ble Delhi High Court. The Hon ble Delhi High Court after directing them to deposit the amount of Rs.40 Lakhs within the certain period permitted by the Hon ble Court and after compliance of the order, disposed of the writ petition vide order dated 17.09.2010 by which the Tribunal s order dismissing the appeals was set aside and the Tribunal was directed to decide these appeals on merits as expeditiously as possible. Accordingly in pursuance of the above order of Hon ble Delhi High Court, these appeals were taken up for hearing. 3. Heard both the sides. 4. Smt. Seema Jain, Advocate, ld. Counsel appearing for M/s. Natraj Plast Industries, M/s. Tanishq, Shri Dinesh Gupta and Shri Gaurav Gupta and Shri A.K. Mishra, Advocate, ld. Counsel for M/s. Aditya Plastics and M/s. Mukesh Industries made the following submissions:- (1) M/s. Natraj Plast Industries has been using PVC Resin CP 172 SG purchased by them from M/s. Chemplast Sanmar for manufacture of PVC Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tapes manufactured in presence of the departmental officers was identical, as small changes in ingredients can result in the difference in the physical properties like tensile strength and allocation, etc. Therefore, on the basis of the test reports alone, it cannot be concluded that M/s. Natraj had not used CP 172 SG Resin in the manufacture of PVC Tapes. (5) The Tribunal in the case of Sanco Plastics Pvt. Ltd. Vs. CCE, Delhi reported in 2004 (176) ELT 740 had accepted the party s contention that emulsion grade resin can be used for manufacture of cable compound. The CP 172 SG Resin purchased by M/s. Natraj from M/s. Chemplast is also an emulsion grade and it would be wrong to say that the same cannot be used for manufacture of PVC Compound or PVC Tapes. (6) No penalty is imposable on Shri Dinesh Gupta and on Shri Gaurav Gupta under Rule 26 of the Central Excise Rules, 2002 as there is no evidence that they have dealt with any excisable goods, which they knew or had reason to believe are liable for confiscation. No penalty is imposable on M/s. Tanishq as they have not diverted any cenvat credit availed on CP 172 SG Resin. (7) No penalty is imposable on M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom M/s. Natraj without any invoice, that the Batch No. of CP 172 SG Resin seized from the premises of M/s. Mukesh Industries was the same as the batch of this resin purchased by M/s. Natraj from M/s. Chemplast, which is a clear evidence that this Resin purchased by M/s. Natraj had been illicitly diverted without reversing of the Cenvat credit, that presence of substantial quantity of CP 172 SG Resin in the premises of M/s. Tanishq, which had no use for the same is also an indicator that this Resin was being illicitly diverted, that Shri Manoj Sharma, Driver of the Vehicle No.DL 1LB6258 in his statement dated 29.04.2006 has stated that on several occasions he had carried the materials from the premises of M/s. Natraj to the factory premises of Shri Sunil Mittal, that as against total quantity of 1102.715 MTs of CP 172SG Resin purchased by M/s. Natraj from M/s. Cam Plast during period 1.11.2001 to 31.03.2006 only a small quantity of 104.04 MTs of the Resin has been used in the manufacture of PVC Filler Cord and the balance quantity has been illicitly diverted without reversal of the Cenvat Credit, that M/s. Natraj, thus, only enjoyed the Cenvat credit in respect of CP 172 SG Resin p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,492/-. Since out of 998.705 MT of the resin, a quantity of 15.5 M.T. involving Cenvat credit of Rs.1,85,419/- has been seized and for which separate show cause notice had been issued, in this case, the duty demand is confined to only Rs.1,13,76,073/-. The evidence relied upon by the department in support of this allegation against M/s. Natraj is, in brief, as under:- (1) Statement dated 14.02.2006, 14.03.2006, 28.04.2006, 15.06.2006, 23.06.2006, 3.8.2006, 28.08.2006, 22.09.2006, 3.10.2006, 7.11.2006, 8.11.2006 and 10.11.2006 of Shri Dinesh Gupta, Director of M/s. Natraj, recorded under Section 14 of the Central Excise Act, 1944, none of which have been retracted. While in his statement dated 14.02.2006, Shri Dinesh Gupta stated that they were manufacturing only a Single Type PVC Compound in which they were changing the flexibility of the compound by changing the quantity of stablizer etc. and that in the manufacture of PVC Compound they were using Resins of 6701 grade manufactured by M/s. Reliance, Shri Ram Industries and M/s. Finolex to the extent of 56%,that the Resin CP 172 SG procured by them from M/s. Camplast was being used in the manufacture of PVC Filler Cord where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esh Mittal, Prop. of M/s. Aditya, wherein he stated that he is a dealer CP 172 SG resin, that the quantity of CP 172 SG resin purchased directly from M/s Chemplast under their invoice was being sold to buyers under invoices and that he was purchasing certain quantity of this resin, which is used for manufacture of battery separators, from M/s Natraj Plast Industries without any bills for supply to buyer who wants to purchase this resin without any bills. (6) M/s Natraj had shown disposal of substantial quantity of CP1725G resin to M/s Tanishq for job work during 2004-05 and 2005-06. But in respect of 15.624 MT of CP1725G resin sent to M/s Tanishq, there was no record of receipt of finished product from M/s Tanishq. In this regard Sh. Dinesh Gupta in his statements dated 9.11.2006 and 10.11.2006 clarified that so far as CP1725G resin is concerned, its dispatch to M/s Tanisq for job work were only paper transactions and actually there was no supply of this resin to M/s Tanishq and that 61 MT of CP1725G resin dispatched to M/s Tanishq during 2004-05 and 183.85 MT of this resin dispatched to M/s Tanishq during 2005-06 under job work challans had actually been diverted to manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thickness of the two tapes is different and such difference in physical properties can result on account of small variation in the properties of the ingredients like plasticizer and stabilizer 4. So far as the evidence in form of statements of Shri Dinesh Gupta Shri Rajesh Mittal, Shri Sunil Mittal, Shri Manoj Sharma, Shri Rajesh Bansal and other persons is concerned, we find that none of these statements have been retracted and all these statements are of inculpatory nature. Since these statements have been recorded by gazetted officers of Central Excise under Section 14 of the Central Excise Act, 1944, which is in peri material with Section 108 of the Customs Act, 1962, in view of the judgements of Hon ble Supreme Court in the case of - (a) Naresh J. Sukhwani vs. Union of India reported in 1996 (93) ELT 258 (SC); (b) KI Puvmny vs. Assistant Collector of Customs, reported in 1997 (90) ELT 241 and (c ) Surjeet Singh Chhabra vs. Union of India reported in 1997 (89) ELT 465 (SC)s with regard to evidence value of the statement of a person recorded under Section 108 of the Customs Act, 1962, the same have to be treated as substantive evidence. We also find that the statements o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e department and according to department the balance of 98.705 MT of CP-1725G resin has been illicitly diverted. The use of this resin is the manufacture of PVC compound has not even been claimed by Shri Dinesh Gupta and he has claimed its use only in the manufacture of PVC filler cord and PVC tape. But total PVC tape manufactured by M/s Natraj during the period of dispute is 412.149MT (1.314 MT during 2003-04 + 210.127 MT during 2004-05 + 200.708 MT during 2005-06), in the manufacture of which at the rate of 56%, only 230.72 MT of CP 172 SG resin could be used, which leaves 768.03 MT of resin still unaccounted. The department s allegation based on test report of CIPET, Lucknow in respect of sample of PVC tape manufactured by M/s Natraj in presence of investigating officers by using CP1725G resin to the extent of 56% is that CP172 SG resin has not been used in the manufacture of PVC tape supplied to M/s Motherson Sumo Systems and other buyers, as the elongation, tensile strength, tear strength and shrinkage of the sample of the PVC tape manufactured by using CP172 SG resin in presence of officers and of the same type of the PVC tape supplied to M/s Motherson Somu, which are claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, they would be liable for penalty under Rule 26 of Central Excise Rules, 2002. Therefore, imposition of penalty on them under Rule 26 of Central Excise Rules, 2002 is upheld. However, since penalty equal to cenvat credit demand under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC has been imposed on M/s Natraj, penalty of Rs. 50 lakh on Sh. Dinesh Gupta under Rule 26 of Central Excise Rules is higher side and the same is reduced to Rs.15 lakh. 7. The impugned order imposes penalty of Rs. 50 lakhs on Sh. Gaurav Gupta, Director of M/s Tanisq under Rule 26 of Central Excise Rules, 2002 on the ground that- Paper trail had been created in respect of so-called job work by M/s Tanisq Wires, a unit owned by Sh. Gaurav Gupta, Son of Sh. Dinesh Gupta, Director of M/s Natraj Plast. Evidences on record clearly reveal that so called job worker was not undertaking any job work for M/s Natraj. Paper trails were created only for diversion of materials on which cenvat credit had been availed to or through Sh. Sunil Mittal and Sh. Rajesh Mittal . On going through the records we find that Sh. Gaurav Gupta is not the Proprietor, but only a Director of M/s Tan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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