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TMI Blog2012 (11) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... ond applicant, without any evidence for procurement from third parties has prepared documents showing additional supply of fly ash and therefore abetted 1st applicant in wrongly availing the exemption – both the appellants directed to make pre-deposit - E/423 and 422/2009 - 813-814/2011 - Dated:- 8-12-2011 - Ms. Jyoti Balasundaram, Dr. Chittaranjan Satapathy, Shri M. Veeraiyan, Shri P.G. Chacko, Dr. Chittaranjan Satapathy, JJ. REPRESENTED BY : S/Shri N. Venkataraman, Sr. Advocate, S. Muthuvenkataraman and T. Ramesh, Advocates, for the Appellant. Shri T.H. Rao, SDR and N. Rajagopalan, Counsel, for the Respondent. [Order per : Jyoti Balasundaram, Vice-President]. Heard both sides on the applications for waiver of pre-deposit of duty of Rs. 13,23,85,374/- together with interest confirmed against the 1st applicant herein by denial of the benefit of exemption under Notification No. 6/2002-C.E., dated 1-3-2002 on the ground that the fly ash content in their final product viz. Asbestos Cement Sheets was less than 25% as required under the Notification, penalty of equal amount imposed upon it and a penalty of Rs. 19.00 lakhs imposed upon the second applicant for abetti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also been used against the applicants to conclude that the second applicant did not supply fly ash other than on the first applicant account from MTPS. No shortage of fly ash has been noticed at any point of time and entire purchase thereof is duly reflected in the books of accounts of the first applicant. There is no allegation of clandestine removal. Therefore, the applicants, prima facie, could not have produced the total quantity of finished goods if there was a shortage of fly ash to the tune of 10 MTs. No alternative procurement to this extent of fly ash has been brought out. The finding of the Commissioner on this aspect is that it is not impossible to manufacture asbestos cement sheet without use of fly ash; however the chemical composition of the raw materials including fly ash has been duly accepted and found to be correct. The second applicant has also prima facie satisfactorily explained the reason for non-registration with the Sales Tax authorities and therefore, prima facie, it is established that fly ash was used in the manufacture of asbestos cement sheets during the period of dispute. 5. We note that the first applicant had paid the second applicant for fly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion namely Central Excise Act/Notification thereunder, in the absence of reference to incorporation of the violation in the legislation in question, in the light of the Apex Court s decision in Becker Gray Co. Ltd. Others v. Union of India Another - (1970) 1 SCC 352 and Collector of Central Excise v. Orient Fabrics Pvt. Ltd. - (2004) 1 SCC 597 = 2003 (158) E.L.T. 545 (S.C.). 8. In the light of the above discussion we hold that the first applicant has prima facie established use of fly ash of the percentage prescribed under the Notification and is therefore prima facie entitled to the benefit thereof. The second applicant, therefore, prima facie cannot be held to have abetted the first applicant in misuse of the exemption. In the result we find that both the applicants have made out a strong prima facie case for waiver and accordingly we disperse with pre-deposit of the duty and penalties and stay recovery thereof pending the appeals. (Pronounced in open Court on ) Sd/- (Chittaranjan Satapathy) Technical Member Sd/- (Jyoti Balasundaram) Vice-President 9. [Order per : Chittaranjan Satapathy, Member (T)]. - For the reasons recorded here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is settled law that the burden of proof in such a case is on the assessed who is required to strictly prove that he has satisfied the conditions to be able to avail an exemption and pay no tax or less tax than the normal rate. The burden of proof cannot be cast upon the Department to prove that an assessee is not eligible to exemption merely because he claims it. It is also settled law that the conditions of any exemption have to be strictly construed. 13. It is also admitted that for proper disposal of the environmentally hazardous fly ash arising from burning of coal in the thermal power plants, the Ministry of Environment and Forest has formulated a policy regarding disposal of fly ash under which the concerned Electricity Boards/power stations have to regulate disposal of fly ash as per quotas/allotments made in the policy and the same prohibits resale of fly ash by the allottees. 14. Both the appellants are claiming that there is wide spread black marketing of fly ash in contravention of the policy of the Govt. and that they have bought fly ash in the black market from non-allottees and that the first appellant has used the same in the manufacture of the impugned good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner against the appellants cannot just be wished away. Nor it can be held in favour of the appellants that the Department has not investigated some of the receipts claimed to be from other black market operators and therefore, the investigation against the second appellant who has claimed to have supplied a major portion of illegally procured fly ash is invalid. The investigation has to be viewed in the proper perspective. I find that the Department has investigated the case of a major supplier of raw material namely the second appellant and through such investigation, it has come to the conclusion that the appellants have not satisfied the condition of exemption notification in regard to use of fly ash to the extent of 25% by weight. It is for the appellants to rebut the evidence collected by the Department. Instead, they are trying to say that since a part of the receipt has not been investigated, the part that has been investigated and from which conclusions have been drawn against them should be wished away. 19. In my considered view, prima facie, the Department has established a case against the appellants and they cannot be given a blanket waiver from the requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... President, CESTAT for nomination of Third Member. (Pronounced in open court on 9-12-2009) Sd/- (Chittaranjan Satapathy) Technical Member Sd/- (Jyoti Balasundaram) Vice-President 21. [Order per : M. Veeraiyan, Member (T)]. - This matter stands listed before me as third Member for resolving the difference of opinion recorded in Misc. Order No. 624/09 dated 9-12-09. 22. Heard learned Senior Advocate, Shri N. Venkatraman for M/s. Visaka Industries Ltd. (hereinafter referred to as the assessee). None appears for M/s. Natesan Engineers Contractors in spite of notice. Heard Shri N. Rajagopalan, Special Counsel for the department. 23. The relevant facts of the case have been recorded in the MISC order. However, it would be appropriate to recapitulate the facts, in brief, which are relevant for considering the issues referred. (a) The assessee is a manufacturer of asbestos cement sheets falling under Chapter Heading 68.11. Notification No. 6/2002-C.E., dated 1-3-2002 Sl. No. 158 exempts goods falling under Chapter No. 68 in which not less than 25% by weight of fly ash or phospho-gypsum or both have been used subject to fulfilment of condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the second applicant has prima facie not abetted the first applicant in misuse of the exemption and hence entitled to waiver of pre-deposit of penalty as held by learned Vice-President. OR Whether the second applicant has prima facie abetted the first applicant in the misuse of the exemption and hence required to deposit Rs. 4 lakhs towards penalty as held by learned Member (Technical) 25.1 Ld. senior counsel, Shri N. Venkatraman, appearing for the assessee, supporting the view that there should be waiver of pre-deposit, made the following submissions :- (a) The assessee is a manufacturer of asbestos cement sheets which require major raw materials namely, cement, asbestos fibre, fly ash/gypsum, cotton/wood pulp. For producing 1000 kgs. of asbestos cement sheets, generally 416.7 kgs of cement, 83.3 kgs. of asbestos fibre, 285.6 kgs of fly ash, 8 kgs. of cotton pulp are required besides other inputs including water. (b) The assessee is procuring fly ash from 3 distinct sources, namely (i) from MTPS, on the basis of allotment given to them (ii) from M/s. Natesan Engineers Contractors/Natesan Construction Product and (iii) from other sources including E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence to show that assessee has procured and used any other substitute raw material to produce the quantity of asbestos cement sheets accounted as manufactured and cleared by the assessee. (i) While the burden of proving that the conditions of the Exemption Notification are fulfilled is, no doubt, on the assessee, the onus can shift and since they have maintained proper accounts of receipt of the fly ash on a day-to-day basis and since they have made payments to impugned consignment of fly ash by cheque or cash, the onus shifts to the department to prove that they have not fulfilled the conditions of the Exemption Notification. (j) In respect of some consignments of fly ash received by the assessee, the department has alleged that vehicle numbers mentioned in the documents did not refer to lorries but other vehicles like cars which cannot carry such quantity. This discrepancy relates to some consignments of fly ash totally weighing 954.63 MTs only received during the months of July, August, October, November and December 2004 and even if the quantities mentioned in those documents are excluded, then also they have fulfilled the threshold limit of 25% of utilization o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en made by Shri Santhosh Kumar were not covered by proper documents, they were subject to detailed scrutiny. Except for the quantity, as confirmed by the MTPS authorities to have been procured by them, there was no evidence to show that the rest of the quantity was supplied. Therefore, it was inferred that only documents were prepared. This inference has been made in the absence of any evidence produced by Shri Santhosh Kumar and on the basis of other corroborative evidence like invalid vehicle numbers and endorsement need not pay in the receipt registers of the assessee for certain quantities. (e) The dispatch advices issued by Shri Santhosh Kumar in the names of his firms mentioned the name of the consignor as MTPS only for the entire supplies though MTPS authorities have confirmed only supply of lesser quantity. (f) The assessee was entitled to receive 2000 MTs per month but they have chosen to lift much lesser quantity. In fact, they have made advance payment for lifting 9000 MTs for the period 2003-04 but they have lifted only a lesser quantity and accordingly claimed refund relating to a quantity of 2165 MTs. While not lifting such quantity, they have chosen to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case, the reason for accounting the said quantity as having been received from MTPS is not prima facie convincing. In other words, they have received from MTPS lesser quantity than what was accounted as received from MTPS. The explanation offered was that the said quantity of 2251.121 MTs of fly ash was procured from open market by Shri Santhosh Kumar. Similar claims has been made in respect of 7957.690 MTs of fly ash accounted for the year 2004-05 in excess of what has been received from MTPS. Though, Shri Santhosh Kumar assured to reveal the names and addresses of persons from whom fly ash was procured from open market , he failed to do so. In the absence of evidence from procurement of fly ash by the firms of Shri Santhosh Kumar, prima facie, their claim that they supplied such quantity to the assessee cannot be accepted. The assessee and the firms of Shri Santhosh Kumar have special relationship and their failure to produce the evidence regarding their procurement puts the question mark on the receipt of quantities in excess of what was actually received by assessee on the basis of allotment by MTPS. 28.4 It is not as if asbestos cement cannot be manufactured without usin ..... 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