9911796707
TMI Blog2014 (12) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... Directors are Shri Narendra Agrawal, Mrs. Kaila Devi, mother of Shri Sanjay Agrawal, Mrs. Kalpana Agrawal, w/o Shri Narendra Agrawal, Mrs. Neena Agrawal, w/o Shri Sanjay Agrawal and Mrs. Ritu Agrawal, w/o Shri Manoj Agrawal, all of them have 20% shareholding. The period of dispute in this case is from 1995-1996 to 1998-1999. During the period of dispute, heading 7901 of the Central Excise Tariff covered "unwrought zinc" and this zinc, when not alloyed, was required to be of not less than 97.5% purity, as in terms of sub-heading note to Chapter 79, the "zinc, non-alloyed" in this chapter means the metal containing by weight at least 97.5% zinc. The alloyed zinc must contain not less than 94% by weight of zinc. Heading 26.20 of the Tariff covered "slag, ash and residue (other than from manufacture of iron and steel) containing Arsenic, metals or their compounds" and accordingly this heading covered zinc residue also. It is not in dispute that the appellant during the period of dispute were manufacturing prime quality zinc ingots, zinc ingots (secondary) and also the zinc metal residue. 1.2 Sometime in October, 1998, the Jurisdictional Central Excise officers conducted inquiry i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the period from 1995-1996 to 1998-1999 along with interest thereon under Section 11AB; (b) imposition of penalty on M/s. IZL under Section 11AC; (c) imposition of penalty under Rule 209A of Central Excise Rules, 1944 on M/s. IMTL and Shri Sanjay Agrawal; and (d) confiscation of land, building, plant and machinery of M/s. IZL under Rule 173Q(2) of Central Excise Rules, 1944. 1.5 The above show cause notice was adjudicated by the Commissioner vide order-in-original dated 31-8-2001 by which - (a) The above-mentioned duty demands were confirmed against M/s. IZL along with interest thereon under Section 11AB; (b) penalty of Rs. 32,20,818/- was imposed on M/s. IZL under Rule 173Q(1) of Central Excise Rules, 1944 read with Section 11AC of Central Excise Act, 1944; (c) penalty of Rs. 5,00,000/- each was imposed under Rule 209A of Central Excise Rules, 1944 on M/s. IMTL and Shri Sanjay Agrawal; and (d) land, building, plant and machinery of M/s. Indo Zinc Limited was ordered to be confiscated with option to be redeemed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire material was placed in that regard before the Commissioner, but unfortunately the Tribunal has not considered that material while deciding the question of undervaluation. On the second ground of clandestine removal, the case of the Department is that zinc ingots were removed at the time of clearance in the guise of zinc metallic residue. This issue has also not been gone into by the Tribunal. For the aforestated reasons, we set aside the impugned judgment of the Tribunal dated 6th January, 2005 and remit the matters to the Tribunal for fresh de novo consideration of the entire matter in accordance with law. Department's Civil Appeals are accordingly allowed with no order as to costs". Accordingly, the matter was taken up for de novo decision. 2. Heard both the sides. 3. Shri L.P. Asthana, Advocate, and Ms. Tuhina Sinha, Advocate, the learned Counsels for the appellants, pleaded that M/s. IZL during the period of dispute were manufacturing prime quality zinc ingots, zinc ingots (secondary) and also zinc metallic residue, that the duty demand of Rs. 25,73,500/- for the period from 1995-1996 to 1998-1999 has been made in respect of clearances of zinc metallic resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the zinc content should be at least 97.5% while there is absolutely no evidence that the zinc, in question, was of at least 97.5% purity, that as regards the duty demand of Rs. 7,74,218/- on the basis of allegation of undervaluation, the department's allegation that M/s. IZL and M/s. IMTL are related persons is without any basis, that just because there is one common Director, the two companies cannot be treated as 'related persons', that it is also admitted position that all the sales of M/s. Indo Zinc Limited were not to or through the alleged related persons - M/s. IMTL and, therefore, even if M/s. IZL and M/s. IMTL are treated as "related persons", the provisions of Rule 6(c)(iii) of the Central Excise Valuation Rules, 1975 cannot be invoked and in respect of sales to M/s. IMTL the assessable value would be the price at which the goods were sold to independent buyers, that in fact, the price at which the goods were sold to M/s. IMTL is the same as the price at which the same goods were sold to independent buyers and that in view of this the duty demand of Rs. 7,74,218/- based on the allegation of undervaluation is without any basis. 4. Shri Yashpal Sharma, the learned DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mity in the impugned order passed by the Commissioner. 5. We have considered the submissions from both the sides and perused the records. 6. The first allegation against the appellant is that while in respect of sales of zinc to M/s. IMTL, the description of goods was misdeclared as zinc metallic residue and were classified under Heading 26.20, where the rate of duty is 8% ad valorem/10% ad valorem, the goods sold were actually prime quality zinc ingots classifiable under sub-heading 7901.10 attracting duty at higher rate of 15% ad valorem. In this regard the evidence relied upon by the Department is - (a) statement dated 11-3-1999 of Shri Ashok Singh, Manager of M/s. IZL, wherein he stated that M/s. IZL had sold only zinc ingots to M/s. IMTL but on the instructions of Shri Sanjay Agrawal, Managing Director, the description of the goods in the invoices was shown as zinc metallic residue; (b) statement dated 15-12-1988 of Shri Pawan Kumar, Director M/s. Agrawal Tubes, wherein he stated that they had purchased only zinc ingots from M/s. IMTL; and (c) Statement dated 15-12-1998 of Shri Manoj Agrawal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under heading 7901.10 would not be sustainable. Moreover, we also find that the entire basis of the allegation is the statement of Shri Ashok Singh, Manager, M/s. IZL, Shri Pawan Kumar, Director, M/s. Agrawal Tubes and Shri Manoj Agrawal, Director, M/s. Nilkanth Tubes and while cross-examination of these persons had been requested the same was not allowed, which in view of judgment of Hon'ble Delhi High Court in the case of Basudev Garg v. CC, reported in 2013 (294) E.L.T. 353 (Del.) and also in the case of J&K Cigarettes Ltd. v. Collector, reported in 2009 (242) E.L.T. 189 (Del.) = 2011 (22) S.T.R. 225 (Del.) is necessary. Since in accordance with the provisions of Section 9D(2) of Central Excise Act, 1944, the witnesses whose statement are sought to be relied upon by the Department were not examined by the Commissioner and thereafter offered for cross-examination, the statements of these persons cannot be relied upon as evidence, as there is no finding by the Commissioner that these witnesses are not available or are being prevented by the M/s. IZL or IMTL from appearing before the adjudicating authority or on their appearance for cross-examination would involve expense and time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each other. Moreover in accordance with Rule 6(c) of Central Excise Valuation Rules, 1975 which were in force during the period of dispute, only when an assessee so arranges that the excisable goods are generally not sold by him in course of whole sale trade except to or through a related person, the sale price in respect of sale to such related person is to be rejected and the assessable value is to be determined in terms of the provisions of Rule 6(c). In this case, there is no dispute that entire sales of M/s. IZL were not to or through M/s. IMTL and there were substantial sales to independent buyers. In view of this, Rule 6(c) of Central Excise Valuation Rules, 1975 could not be invoked and, as such, the entire basis of duty demand by treating the price at which the M/s. IMTL sold the goods to independent buyers is incorrect. With regard to invoking Rule 6(c) of Central Excise Valuation Rules, 1975 when the sales are to or through a related person, the percentage of sales of an assessee to or through related person is not relevant. For invoking this rule, what is relevant is as to whether entire sales are to or through related person and only in that case, this rule would be i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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