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TMI Blog2013 (9) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... e Show Cause Notice is issued in November 2001 - Since the entire appeal is allowed, the question of imposition of penalty under Section 11AC does not arise - Decided in favor of assessee. - E/1491 and 283/2006 - A/1652-1653/2011/WZB/AHD - Dated:- 29-9-2011 - Ms. Archana Wadhwa and Shri B.S.V. Murthy, JJ. Shri S. J. Vyas, Advocate, for the Appellant. Shri R.S. Srova, JDR, for the Respondent. ORDER Both the appeals, one filed by the assessee and the other by the Revenue are being disposed of by a common order as they arise out of the same impugned order passed by Commissioner of Central Excise, Ahmedabad, in de novo proceedings vide which he has confirmed the demand of duty of Rs. 18,93,141/- out of the proposed demand of duty of Rs. 63,88,474/- and dropped the balance. 2. As per facts on record the appellant is engaged in the manufacture of printed cartons, corrugated boxes, paper labels, advertising material etc. The appellant was also manufacturing ink and using the same captively under exemption Notification No. 67/95. Some of the appellant s products were dutiable and some of them were exempted. The demand stands confirmed against them at 8% of the value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ob work basis. However he submits that the entire demand, whether confirmed by the Commissioner in respect of the appellant s own cleared goods or dropped by him in respect of the goods cleared by on job work basis would be barred by limitation. Explaining further learned advocate submits that the period in question is from October 1996 to March 2000 whereas the show cause notice was issued on 5-11-2001. Drawing our attention to para 22 of the Commissioner s own order, he submits that the adjudicating authority has himself come to a clear finding that there was no suppression on the part of the assessee and the entire demand barred by from the period of October 1996 to July 1998 has to be held as barred by limitation. However he has not extended the benefit of limitation to the assessee on the round that they have accepted their liability and deposited the dues. According to the learned advocate this cannot be made the basis for not extending the benefit of limitation to the appellant. He further clarifies that in view of the fact that all job work clearances have to be subject to the provisions of Rule 57CC, the Revenue s contention that they were not actually doing job work, as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said audit party. As already held by me above, from the various documents submitted by the assessee, it can be reasonably inferred that they had maintained some kind of records, although they did not satisfy the requirements of Rule 57CC but from those evidences now produced during the de novo proceedings, it could be established that they had in fact undertaken job work on material supplied by their principals. I find that it is a well settled position in law that to sustain the allegation of suppression of facts with intent to evade payment of duty, mere inaction on the part of an assessee was not sufficient and that something positive to establish the malafides were required. In this case, the mere fact that the assessee did not maintain records for the purposes of Rule 57CC during the year 1996 and 1997 or that even though they did maintain that, they were unable to produce the same before the investigating officers, cannot by itself be a ground to allege suppression of facts. Suppression could be only of something which was otherwise done ostensibly as if in full compliance of the requirements under the law, but when discreetly enquired would show that something was reall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be appropriated and the question of limitation is not relevant. He set aside the penalty under Section 11AC. It was the submission of the learned advocate that once there is a clear finding by the adjudicating authority that suppression with intent to evade payment of duty cannot be attributed, the benefit of limitation as regards demand also should have beer extended. Further, it was also submitted that the finding of limitation arrived at by the adjudicating authority has not been challenged. 13. Since this is department s appeal, it may be worthwhile to reproduce the grounds of appeal formulated by the committee of the Chief Commissioners and the points for determination identified by them. 1. The adjudicating authority has erred in not confirming the duty demand of Rs. 3,33,657/- in respect of clearance of corrugated boxes inasmuch as it is very much on record and also admitted by the assessee that the common input on which credit had been taken was printing ink. Thus, it would not make any difference to the case whether Modvat credit had been taken on Kraft paper used in the manufacture of the same or otherwise. Besides, the adjudicating authority has not given any fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one on the basis of entries in private register produced by the said assessee. In the said private register, the assessee had shown job work done on behalf of the said parties, however, actual investigation at the end revealed contrary facts. The authorized persons of the said firms have categorically stated in their respective statements that they had not supplied any kind of raw material to the said assessee. This is contrary to the assessee s claim that the said transaction were shown as sales since they had used their own inputs in excess of 3.5% and in terms of the sales tax rules the same was shown as sales. It is very clear from the statements of the authorized persons of the above two firms was purely on purchase basis. Since no raw material has been supplied by the so-called principals, it would imply that all the raw material used in the manufacture of the said goods was owned by the said assessee which in turn negates the very theory of manufacture on job work basis. 5. The proceedings before the adjudicating authority has arisen out of CEGAT s Order Nos. A/958-959/2005/C.III, dated 15-6-2005. The main issue raised by the said assessee before the CEGAT was regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Packaging. Admittedly, the Kraft paper was supplied directly from the supplier to Labh Packaging. There is no evidence to show that Labh Packaging used white paper supplied by the appellant also for the manufacture of corrugated boxes. The whole case of the department is that the appellant got the corrugated boxes manufactured and had taken credit on inputs, but the appellant had clearly shown that the Kraft paper was supplied directly and corrugated boxes were manufactured. Nothing prevents Labh Packaging from using their own gum, paper etc if needed. In the absence of any evidence to show that the printing ink, corrugation gum etc. have been supplied out of Modvat Credit stock, the Commissioner s order as regards demand of Rs. 3,33,657/- has to be sustained. 16. The second point on which the Revenue in appeal is that the Commissioner should have confirmed the demand of Rs. 41,61,676/-. This relates to paper labels/advertising material which the appellant claim to have manufactured on job work basis by utilizing the raw materials supplied by the principals. Admittedly, the appellants manufactured printing ink and captively consumed the same. They were also manufacturing adverti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il based, solvent based and water based inks which were purchased and on which no Modvat Credit was taken by them. 18. The Commissioner has observed that since the product was fully exempted, there was no need for the appellant to follow the procedure prescribed in Notification No. 214/86-C.E., dated 25-3-1986. Therefore, he held that there was no need to maintain any record and it was a curable defect. Further, he also observed that the summary statement of job worker registers reveal that the paper and ink were supplied by the parties and certain quantities were purchased by the assessee and certain quantities were used from their stock and when included, the assessee produced copies of invoice under which they had supplied the paper labels along with copies of their customer s ledger account. On the basis of original invoices, the Commissioner came to the conclusion that they had manufactured labels out of the paper supplied by their customers. Along with the appeal memorandum, the appellants also had submitted a paper book, in which they had also submitted statement of stock consumption of job clearances, statement of job work and sales, statement of purchase invoice (Cenvat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, so called summary statement is totally unbelievable. Not only the statement does not reflect and fully account for the raw materials used for job work, but also looks to be totally unreliable. In view of the analysis of the statement made above, the Commissioner s conclusion about when the assessee is able to demonstrate by way of evidences in the form of invoice issued by them and the ledger accounts of their buyers showing manufacture and clearance of labels on job work basis and receipt of job charges for the same from their buyers, there is no justifiable reason to dis-believe the same, merely on the ground that the records were not strictly in terms of requirements of Rule 57CC or that the same were not in the Form IV and so on. The department s case is that it was a legal requirement to maintain separate accounts and the analysis made above also clearly show that there was no proper accounting of printing ink, paper etc. It is strange to note the observations of the Commissioner in Para 21.3 there must be some other contrary evidence on record to establish that they had in fact not undertaken any manufacturing activity on job work basis. There is, however, not even an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintain separate accounts during the relevant period and suppressed the fact of use of printing ink paper etc. in the manufacture of exempted as well as dutiable goods. Further there was definitely an intention to evade payment of duty. It has to be noted that at no stage, the appellant have claimed that it was a mistake on their part not to have maintained the accounts but have claimed that they were maintaining accounts in different forms. The discussion above clearly shows that the summary has been prepared only later and there was no proper account maintained. The consumption of raw material and finished products do not tally. This shows that the appellant did not maintain any account knowingly and with a deliberate intention to ensure that the department would not come to know the actual duty liability and department may not be able to establish the actual quantity cleared by them. Of course, the department has proceeded to issue show cause notice only in respect of documented clearance and only on legal grounds. When there is a statutory obligation to declare information, failure to do so, would clearly amount to suppression of fact and when facts are not correctly declared, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to pay duty, 25% of the duty demanded towards penalty and interest within 30 days of receipt of this order. It is made clear that failure to pay the amount demanded, interest and 25% of the amount demanded towards penalty, would result in enhancement of penalty under Section 11AC of Central Excise Act, 1944 to 100% of the duty. I consider that imposition of penalty under Section 11AC on the assessee is sufficient and therefore no other penalty is proposed. DIFFERENCE OF OPINION 1. Whether the Member (Technical) is correct in observing that Revenue has challenged the finding of limitation arrived at by the adjudicating authority or whether the observation of learned Member (Judicial) is right in holding that Revenue has not challenged the finding of the Commissioner regarding limitation. 2. Whether the demand for duty invoking extended period is required to be upheld as held by Member (Technical) or to be set aside as held by learned Member (Judicial)? 3. Whether the appeal filed by the assessee against confirmation of demand of Rs. 18,93,141/- is to be allowed as held by learned Member (Judicial) or to be rejected as held by Member (Technical). 4. Whether the penalty u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es have issued Show Cause Notice on 5-11-2001 for the demand of duties for this period. It is his submission that the entire demand is nothing but demand of 8% of the value of the exempted goods as provided under Rule 57CC of Central Excise Rules, 1944. It is his submission that at Para 22, as has been reproduced by Ld. Member (Judicial), the adjudicating authority has clearly held that the entire demand relating to period October 1996 to July 1998 is barred by limitation. But, for the period from July 1998 to March 2000, the adjudicating authority has confirmed the demand. It is his submission that if the adjudicating authority has held that the demand for the period from October 1996 to July 1998 is hit by limitation, the same logic should be applied for the period upto March 2000. It is his submission that the Show Cause Notice was issued in November 2001, which is beyond the period of limitation. He would submit that the ld. Member (Technical) s findings as regards extended period of limitation is incorrect as the Committee of Chief Commissioners has not given any reason for challenging the factual finding of the limitations entered by adjudicating authority. 25. Ld. SDR, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments submitted by the assessee, it can be reasonably inferred that they had maintained some kind of records, although they did not satisfy the requirements of Rule 57CC but from those evidences now produced during the de novo proceedings, it could be established that they had, in fact, undertaken job work on material supplied by their principles. I find that it is a well settled position in law that to sustain the allegation of suppression of facts with intent to evade payment of duty, mere inaction on the part of an assessee was not sufficient and that something positive to establish the mala fides were required. In this case, the mere fact that the assessee did not maintain records for the purposes of Rule 57CC during the year 1996 to 1997 or that even though they did maintain that; they were unable to produce the same before the investigating officers, can not by itself be a ground to allege suppression of facts. Suppression could be only of something which was otherwise done ostensibly as if in full compliance of the requirements under the law, but when discreetly enquired would show that something was really not disclosed. Therefore and also in view of the fact that the CE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e department s appeal consists of only four grounds of appeal. These 4 grounds are recorded by ld. Member (Technical) in his order. It can be seen from the said grounds of appeal that the Revenue has not challenged the finding of ld. Commissioner as regards dropping of proceedings for the period October 1996 to July 1998 on the ground that therebeing no suppression, mis-statement, collusion or fraud. I find that there is not even a murmur or challenge in grounds of appeal of the Revenue, as regards such categorical finding of the adjudicating authority on the non-invocation of the extended period of limitation. I find that, the only in the prayer clause Committee of Chief Commissioners has directed the Commissioner of Central Excise, Ahmedabad to apply to the Tribunal for correct determination of points arising out of Order-in-Original wherein they have directed the Commissioner to ask for interest and imposition of penalty on the duty demand dropped by Ld. Commissioner. In my considered view, this cannot be the ground of appeal and cannot be considered as challenge to the finding of the Commissioner on limitation. The challenge to the finding of limitation should be categorical in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a ground for the Tribunal to interfere with an order passed by the adjudicating Commissioner unless the Committee of Chief Commissioners does its own home work and verification, and points out the basis on which it finds the order under review to be not legal and proper. As such, we find that the ground of appeal taken in this case is vague and it does not provide any basis for holding any part of the relief granted by the Commissioner to be not legal or proper. It appears to us that the review undertaken by the Committee is rather superficial and the same has resulted, in filing these avoidable appeals before the Tribunal. The adjudicating Commissioner has dropped a total demand of about Rs. 1.90 Crores but the Committee of Chief Commissioners has not provided any documentary evidence on the basis of which the Tribunal can either modify the adjudicating Commissioner s order or confirm any part of said demand of Rs. 1.90 crores. The above reproduced finding in the order of Areva case, will squarely apply in this case in hand before me, where is there a difference of opinion. 32. In my view, the adjudicating authority having recorded clear cut finding that there is no suppre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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