9911796707
TMI Blog2015 (1) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the said permission, the Assistant Commissioner of Central Excise issued a Private Bonded Warehouse Licence No.1/95 for manufacture and export of Plastic Carry Bags classifiable under Chapter 39 of the First Schedule to the CETA, 1985 at the premises of 500A, Perali Road, Virudhunagar. The Assessee was permitted to import the raw materials namely HDPE/LDPE/LLDPE/PP granules (in short, plastic granules) duty-free in terms of Customs Notification No.53/97-Cus. dated 6.3.1997, through Tuticorin Port, subject to the conditions amongst others that the imported duty-free plastic granules would be used by the Assessee for in-bond manufacture of export goods (plastic carry bags). 2.1 On 12.1.2001, the Central Excise Officers of Headquarters Preventive Unit of the Madurai Commissionerate visited the Assessee's factory. As a follow up action, the said officers, visited the Assessees sister unit namely M/s. Priya Mills, (M/s. Priya), M/s. Rajalakshmi Mills, (M/s. Rajalakshmi) and M/s. Universal Poly Bag situated adjacent to Assessee's factory premises and also searched various other premises and seized several documents and recorded statements. 2.2 On the same day i.e. 12.1.2001, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and separate penalty under Rule 209A of the erstwhile Central Excise Rules, 1944. There was also a proposal to impose penalty on high-sea seller of duty-free imported plastic granules to the Assessee, namely:- M/s. Alagendran Group Companies, Chennai, M/s. Ramya Polymer Agencies Pvt. Ltd., Madurai, M/s. Sri Lakosha Polymer (P) Ltd., Coimbatore and M/s. Seven Seas Polymers Pvt. Ltd., Karur, under Section 112 of the Customs Act, 1962. All the noticees were directed to submit their reply to the Commissioner of Central Excise, Madurai. 4. The Assessee and the other co-noticees submitted reply to show-cause notices. On 23.9.2003 and 24.9.2003 the Assessee cross-examined various persons including the concerned Central Excise officers who attended export-import formalities at the Assessees factory, as permitted by the Adjudicating authority. The Assessee and others appeared in personal hearing on 31.3.2011 and 1.4.2011 before the adjudicating authority. The Assessee raised a preliminary objection insofar as show-cause notice dated 26.3.2002 is not valid and liable to be dropped on the ground that the Superintendent of Central Excise is not the proper officer to issue notice under the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f demand of central excise duty. 7. All these appeals were heard extensively on 29.6.2014, 23.7.2014, 24.7.2014 and 25.7.2014. Both sides argued at length and also filed written submissions with compilation of case laws. The learned Special Counsel appearing for Revenue reiterated written submission, also referred to grounds of appeal, earlier written submission and case laws filed by them. He explained the modus operandi of diversion of duty-free virgin granules by the Assessee, as they obtained such granules either purchasing from High Seas Sellers (HSS) or directly importing them. The imported granules reached their private bonded warehouse and removed the same through their sister concerns M/s. Priya Mills and Rajalakshmi Mills under out-passes. Thereafter, the said sister units sold the imported granules to the same HSS and other local buyers under the cover of their invoices. It is stated that 6966 MTs of duty-free virgin plastic granules were resold to HSS and 1176 MTs were sold to others. The Out-Registers/Out-Passes maintained at the Assessees premises are corroborative with the records of HSS and other dealers/manufacturers, invoice and bills, stock registers, purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed a compilation of 'Statutory Provisions for Issue of SCN - Finance Act, 2000 - Commissioner Orders'. 8. The learned Senior Advocate on behalf of the Assessee and other co-noticees submits that the entire proceeding suffers from gross illegality. It is submitted that show-cause notice dated 26.3.2002 was issued by the Superintendent of Central Excise (SPAC) in violation of 3rd proviso to Section 28(1) of the Act, 1962 as it stood at the relevant time. It was issued without prior approval of the Chief Commissioner of Customs. It is also submitted that the Superintendent of Central Excise is not the proper officer under the Act 1962. All the appeals filed by the Revenue should be dismissed on this ground alone. He relied upon various decisions. 8.1 On 12.1.2001, the Central Excise officers of the Headquarter Preventive Unit visited and searched the factory premises and other premises of the sister units of the Assessee. The goods seized from the sister unit M/s. Priya on 12.1.2001 were re-processed granules. The officers drew the samples of the seized material but no test report was communicated. It is implied that the goods were not virgin duty-free imported plastic granules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Superintendent of Customs, Tuticorin, permitted the Assessee to transact business with Customs House, Tuticorin as self-exporter / importer. 9.2 The main raw materials for manufacturing plastic carry bags are HDPE, LLDPE, LDPE and PP granules and master batches. They imported the plastic granules without payment of duty directly and also through High Sea Sellers under exemption Notification No.53/97-Cus. dated 6.3.1997 subject to the condition that the duty-free imported granules shall be used for the manufacture in-bond export goods. They procured master batches from the domestic markets. As per Notification No. 53/97-Cus. the Assessee is required to fulfill the conditions amongst others, as under:- (1) The imports, clearance, export, transfer and usage of the goods and goods manufactured there from and the net foreign exchange earning as a percentage of export shall be subject to the conditions of the "Export and Import Policy" (2) The importer has been granted necessary license for the import of the goods for the said purpose. (3) The importer carries out the manufacture, pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... propriate to examine as to whether the Assessee had discharged the export obligation as per EXIM Policy. 10.1 The Revenue relied upon the various corroborative evidences and supporting evidence to establish that the Assessee exported bogus items and the imported goods were diverted in the local market. On the other hand, the Assessee placed various substantial evidences to establish that the goods exported were genuine. It has also refuted the allegations made in the show-cause notice. 10.2 Revenue in Grounds of Appeal contended as under:- (i) Evidences on inflated Weight, Value and Export of bogus items:- The modus adopted by the Assessee for inflating quantity and value of export of bogus items revealed manipulation jointly for mutual benefit of the Assessee and M/s. Dart (i.e. customer). By a fax message recovered from the premises of Inspecting agency, M/s. Dart had requested for over invoicing for claiming rebate. Inflated weight and different weight shown in the customs documents and Purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 900-50-60-10 when the total amount of the invoice is identical to our P.O) $116 added for resin)? I dont understand why you are complicating the invoicing'. The fax message dated 8.4.2000 of M/s. Dart along with proforma invoice would show that the Assessee had supplied more items instead of one item ordered by M/s. Dart. (iv) Evidence on Role of Inspecting Agency:- Shri P.S. Nathan, Proprietor of M/s. Apporva Agency (Inspecting Agent of M/s. Dart) in his statement dated 6.9.2001 had clearly explained how the price had been fixed. It is obvious from the statement that Shri Nathan was fully aware of the price. As the inspection report was based on value of export goods the inspecting agency had to be aware of the basis on which price was fixed. Shri Nathan in his statement dated 15.5.2001, stated that he was not aware of the existence of the Singapore firm. Shri Govindarajan, employee of SGS Ltd. Teynampet, Chennai (another inspecting agency of M/s. Dart) in his statement dated 6.6.2001 stated that weight parameters were not tallying with the specifications of the buyer and in one case he had clearly stated that instead of 26 lakh pieces only 22 lakh pieces were provided. All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from M/s. Apoorva Agency (Inspecting Agency) stated that their total capacity was 11 containers per month. It was stated by the Assessee in their letter to Mr. Eugune that their capacity, both printed and plain, was 10 containers per month. On reading of the fax message and the letter, it is clearly evident that in the year 2000, the production capacity was around 10 to 11 containers only. Even the other corroborative evidences with respect to the documents recovered from the Assessee and the job worker proved that they have not produced much quantity on job work basis and only intermediate process had been done on job work. 11. The Assessee in their reply to show-cause notice as well as cross-objection filed before the Tribunal and written submissions refuted the allegations, which are briefly as under:- (a) During the entire investigation at the factory or elsewhere i.e. the port of shipment, the Department did not find any material evidence in basing its estimations for excess weight or inflated invoice value. The Department at no point of time had recovered any cut waste being stocked as finished goods meant for exports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be twice or thrice of the normal machines). The company had to import around 5 machines more to accommodate their requirements. (iv) Since bags have to be supplied to supermarkets, Assessee was forced to use more percentage of master batches to create better opaqueness for the bags. (v) They also wanted the bag to be delivered in a printed form and to achieve good printing quality company had to buy graver printing machines. (vi) They were insisting that both the handle width should be uniform and identical and in the process there is bound to be higher rejection which had to be costed to the product value. (f) M/s. Dart insisted that the Assessee should continue to issue proforma invoice for a lesser weight and value as this would enable them to settle lesser commission to the inspecting agencies and also facilitate them to enjoy certain benefits at the time of clearance by them. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take the goods failing which the consignment would be rejected (ii) It is therefore suggested that the normal operations of selling the goods to merchant exporters and clearing the documents through bank can be avoided since Dart was unwilling to remit the monies before it could sell the consignment to customer (iii) It is therefore suggested that a direct invoice be raised by the Assessee on Dart without involving the bank (iv) Since RBI regulations do not approve of this the Assessee continued with the existing practice of selling the goods to merchant exporters. (h) As regards the documents of Annexure to Show Cause Notice, there was a last minute request from Nafla orally to add a few items and this was acceded to as a business request. The added items were duly invoiced and sale proceeds realized. Since proforma invoice was already sent to Dart, there was a difference between the documents and actual shipment and may be they had problems at the time of clearance and this is an outburst of such a situation. (i) Annexure C58 is a fax sent by the Assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis for deciding 300 transactions. Normally, the reports are prepared a day or two before the actual export and there is room for rectification before the export which has been done in the instant case. Inspection was done on 27.9.2000 and the export was done on 10.10.2000 and therefore the Assessee had made good the defects pointed out before export of the goods. The actual tonnage of export is only 18.28 Tons under AR4 124 dated 10.10.2000. The role of Shri P.S. Nathan is very limited and it cannot be equated with the role of the Government officials. (l) The Assessee purchased cartons from regular vendors and statements were obtained from them. In addition to the above, the Assessee had themselves manufactured cartons from the good quality corrugated sheets that were received as inter-leaving partitions in the imported containers to hold the slippery plastic granule bags. The above fact is also supported by the seizure of 850 numbers of such paper board of different sizes at Priya Mills. The Assessee used simple tools (stapler and scissors) to convert inter-leaving partitions as corrugated sheets. With the ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 by fax was sent by the Deputy Commissioner of Central Excise (Preventive) to Shri Amid Fried of Dart. But no reference was made by the Revenue in the show-cause notice and even before the Tribunal. The Adjudicating Authority has observed as under:- Regarding the allegation that the units at Singapore are fictitious entities, as rightly argued by Global, ECGC, a Government of India undertaking having certified the genuineness and credit worthiness of the said merchant exporters and further standing as guarantor in cases of default in payment, the credibility and existence of the overseas merchant exporting firms cannot be called into question without credible and unimpeachable evidence which is totally absent in this case. 100. It is on record that the Branch Manager, Tamilnadu Mercantile Bank, Virudhunagar furnished the statement showing export bill-wise claim negotiated by Global during the period covered by the notice. The Branch Manager also said that ECGC policies were accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be no objection for clearing the consignment. Thus Shri P.S. Nathan as an Inspecting Agent has a very limited role to play and he has absolutely no role to play in fixing price or to comment upon the genuineness of either the quantity exported or the existence of overseas firms. In his statement dated 6.6.2001, when asked as to whether Dart had any buying agents in the names of Trinity Concepts, Trident Concepts, Nafla Trading, Oasis Resources and others, he replied that some of the names mentioned were familiar and he had to ascertain from Dart as to whether Dart had any connection with those firms or any of these firms acted as Dart agents. However, in the statement recorded on 6.9.2001, he deposed that the documents shown to him established that the firms Nafia and Trinity were floated by Global to cover up their shady transactions. His volte face defies logic. Besides, in the reply filed by Global, it was pointed out that the suggestion made by Shri P.S. Nathan in para 82 of the SCN (dealt within para 12.3) for tallying the weight with reference to the shipping documents was incorrect since shipping bill No.1 295 connected with purchase order referred by Shri P.S. Nathan sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expressions 'manipulated or fabricated' in his statement should not have been used by him as they are incorrect. 12.3 After going through the deposition of Shri Nathan, Inspecting Agency, during cross-examination, it appears that the fax and phone numbers of M/s. Dart were given to the investigating officer for clarification of fax message, purchase order, proforma invoice etc. The adjudicating authority observed that Deputy Commissioner of Central Excise (Preventive) made correspondences but, it was not disclosed in the show-cause notice and therefore it is difficult to accept manipulation of export on the basis of the said evidences. The supply of the goods to the Singapore firms were under ECGC scheme and the details of the said firm are available on record. It cannot be expected that the buyer would come forward to verify their transaction, unless any enquiry would be initiated by the investigating agency and the contention of the Revenue in the grounds of appeal cannot be accepted. It appears that M/s. Dart, Germany is the main customer of the Assessee, who arranged the business of Singapore Firm and claimed more benefit, which is a normal feature in the trade parlance. Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt the plea taken by the Revenue in their appeal as stated above. The failure to examine the export consignment by the investigating officers would raise a benefit of doubt, which would go in favour of the Assessee. 12.7 The Central Excise officers have narrated the procedures of verification of export and import consignment in detail in their deposition during the cross-examination before the adjudicating authority. (I) Shri T. Rajendran, Superintendent of Central Excise during the cross-examination in his deposition dated 23.9.2003 stated that he had served as Superintendent in-charge of the assessee-company. It is stated that after receipt of the intimation of arrival of imported goods, he deputed the officers and based on their report and records, issued the Warehousing Certificate. It is also stated that on receipt of the AR4 Form, he deputed the Inspector to carry out the checks and the export formalities in accordance to the Rule 187 of the erstwhile Central Excise Rules, 1944. It is categorically stated that during the final hours of stuffing, he used to visit and supervise the sealing and also count ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examined. Once the description in the Bills of Entry tallies with the particulars, the goods will be unloaded into the bonded store room. He also narrated the procedure of import and export followed by him as stated by the earlier officers. It is categorically stated that to comply the procedure of export, it would take about two to three hours. They have also examined the finished goods area, which is part of the manufacturing hall. He has noticed the production activities and it is confirmed that the assessee had applied for clearance of wastes and rejects. It is stated that on 12.1.2001 (i.e. the date of visit by the Preventive Officers), he supervised export consignment and the officers were doing investigation and allowed the export of the goods. (IV) Shri M. Subramanian, Superintendent of Central Excise, in his deposition on 23.9.2003 stated that he served as an Inspector of Central Excise in the Range Office of the assessee during the period May 1999 to May 2000. The duty of the Inspector is to visit the 100% EOU whenever there is receipt of raw material and similarly whenever there is an export made out of those inputs. The assessee was intimating the Superintendents who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tons by way of files and columns. (c) They took three cartons at random. It is the Departmental officers' prerogative to choose the carton at random. There will be a cellophone tape closing the carton, they would open the carton and would see the contents of the carton and there will be plastic carry bags. The cartons are again closed. Then test the weight of the cartons selected and the weights and tally with the declared weight. They had never found waste in the cartons. (d) There may be minor variations, on an average it should tally with the declared weight. Mild variations are possible and they take 3 numbers of cartons and arrive at the weight. AR4 will be with them. After the sample weighment is over, the goods will be allowed to be loaded. (e) He confirmed the permission letter vide C,No. V/16/108/99 dt. 1.12.2000 for sale of waste and rejects into DTA arising out of production and permission granted, the copy of which is also marked to the Supdt. of C.Ex., VNR-I Range for information and necessary action. He had gone on two occasions and have verified the clearance of wastes and rejects. (f) The value as indicated in the AR.4 and in their commercial invoices has du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the officers, were within one and half years from the date of show-cause notice and adjudication order was passed after about 9 years. There is no allegation of collusion between the Central Excise officers and the Assessee. So, we accept the depositions of the officers as legal and proper and reject the contention of the Revenue that the depositions lacked credibility. 12.10 Section 137 of Evidence Act, 1872 provides that examination of the witness, subsequent to the cross-examination by the party who called him, shall be called his re-examination. Section 138 of Evidence Act, 1872, provides that re-examination shall be directed to the explanation of matters referred to in cross-examination. The very purpose of re-examination is to explain matters which have been brought down in cross-examination. We find that no effort was made to re-examine the Central Excise Officers and therefore such statements of Central Excise officers based on statutory records would liable to be accepted. 12.11 In the case of P.V. Varghese Vs. CEGAT - 2008 (232) ELT 420 (Ker.), the Hon'ble Kerala High Court observed that statement of third party cannot be sole basis for imposing demand especially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and non-export by another governmental authority. In a three legged race for export promotion by the Customs and Export Promotion authority, the two authorities cannot run in opposite directions. Lack of clarity, if any, should be resolved in a manner facilitating the advancement of the policy and not in a manner that defeats public policy. In the case of CCE, Hyderabad Vs. Sanghi Spinners (I) Ltd. - 2007 (209) ELT 43 the Tribunal rejected the appeal filed by the Revenue and observed that Development Commissioner examined the issue in the light of EXIM Policy and permitted to dispose of goods in DTA. Customs Department cannot take a view contrary to that Development Commissioner. In any event, this fact has a persuasive value to hold that the goods were exported. 13. The other part of the appeal of Revenue is that the Assessee received the imported plastic granules at their factory and thereafter the same were clandestinely removed / diverted from their premises, which had been proved through various documents recovered from the premises of HSS. These documents are corroborated by the records of out-passes and outward registers of the Assessee and inward and outward registers ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; (d) If the transaction was genuine and involved transfer of title of goods and amount, the HSS should have received post-dated cheques and not blank cheques. Shri Muralithan, as a partner of M/s. Priya Mills has deposed in his statement dated 23.4.2001 that major quantity of reprocessed granules was received from the Assessee. (e) The Assessee in their letter dated 5.12.2000 had informed the Range Officer that the rejects diverted contained master batches which include inks and materials to render these goods of lesser value as it could be used in the manufacture of buckets, marks etc. So, the claim of the Assessee that the said waste could be reprocessed and sold at a higher value should be rejected. (f) The virgin granules were meant for first use and the reprocessed virgin granules manufactured out of waste and rejects arising out of first use, its stability and strength and definitely inferior in quality. The difference between the virgin granules and the reprocessed granules would be seen from the shape itself and from the cutting edge i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnments have been sent from Global. There is no indication to this effect in the document seized. (iii) The documents referred to as Annexure C-13 is a document sent by Shyam Plastics to Arun Thangam. This is pure calculations and workings and does not suggest any sale of granules or reprocessed etc. In fact this document only goes to vindicate the Assessees stand that Seven Seas arrive at a landed cost including duty and being a sale to 100% EOU excludes the duty components. Commercially it is not viable to purchase the product at a landed cost including duty since whether through high sea sales or through direct import when a 100% EOU imports, the goods are free from duty. Therefore, credit of the duty difference is a very transparent mode of price finalization and nothing adverse could be drawn from such printing pattern. (iv) Goods have been sold with these dealers and manufacturers only by Priya and Rajalakshmi and not by the Assessee. There is no evidence to support this. Any out pass of the Assessee only goes to show that the vehicles have entered in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rought out these facts in the mahazar. (vii) Even during the investigation Murali had gone on submitting that waste and rejects will emerge at various stages, extrusion rejects, bag making rejects, printing rejects, quality rejects and rejects which can arise on account of inspection. The chart referred to has only recorded rejects at one stage and that too it pertains to rejects out of few machines out of the total machines. (viii) Now coming to waste, the policy permits the maximum limit of 5% of the total quantity of imported granules. The Assessee were however averaging around 17% and the matter was referred to MEPZ and MEPZ had in turn had referred the matter to Ministry of Petroleum. A technically qualified person deputed by Ministry visited the factory and examined the process and after studying its details forward its report to MEPZ fixing the wastage at 12%. The Assessees were clearing the balance quantity of wastage on paying full rate of duty. (ix) The alleged discrepancy in the serial nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n other words, what were sold only reprocessed granules but the packing materials used were original import of virgin granules. Traders were also insisted on this, since they were able to command a better price if reprocessed granules are sold in outer cover bags with these brand names, since it had a better price. Therefore, the brand name sabic, equate etc. are nothing but the brand names found on the packing materials which contained reprocessed materials arising out of waste and rejects. It is categorically stated that the traders received reprocessed materials from M/s. Priya, M/s. Rajalakshmi and they issued a blank cheque in one for confirming transaction, but the said units were not made party of the proceedings and they are not noticees in the Show Cause Notice. (xi) Revenue relied upon the statement of Shri Alagendran, Chairman of Alagrandran Exports Ltd. and Alagendran Polymers Pvt. Ltd. It is contended that they had maintained the stock and purchase register according to the brand name of the imported granules received from the Assessee and the payments of difference amount between the high ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea Sale 1834.00 D-3 To Alagendran Group - On Direct Sale 360.75 D-4 To Seven Seas Polymers - On High Sea Sale 2050.60 D-5 To Seven Seas Polymers - On Direct Sale 1889.28 D-6 To their sister concerns (CPP/Sree Raja) 116.95 D-7 Direct Sale to Local Dealers and Manufacturers 1058.99 D-8 Total 8142.57 14.1 The Assessee in reply to show-cause notice stated that the total quantity of about 3000 MTs as mentioned in Annexure D-1, D-2, D-3 and D-4 are related to sale of reprocessed granules by the sister units, out of about 4290 MTs cleared by the Assessee to their sister units as waste and rejects as mentioned hereinabove. Annexure D-5 and D-6 relate to the calculation sheets furnished by M/s. Seven Seas of their own transaction. The findings of the Adjudicating Authority are as under:- 111. From the notice, I have taken out a few cases in which the oral evidence does not lend credence to the charge of Shri P. Murugesan, Managing Partner of M/s. Palaniappa Poly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat his note book form or diary form available in the computer as referred in his statement is the memory pad. He clarified that the noting 'market price = HSS consideration + clearing charges + customs duty' as mentioned in the show-cause notice in respect of supplies of imported plastic granules by Shyam Plastic to the Assessee. It is stated that the abbreviation 'RP' means re-processed granules, in other words, granules are re-claimed from waste which were supplied by M/s. Priya, M/s.Rajalakshmi. It is further stated that the investigating officer did not seize any record or document to show that 2050.60 MTs and 1889.28 MTs had been delivered by the Assessee. He categorically stated that the investigating officer did not seize any single consignment during transit relating to 2050.60 MTs. 14.3 The staffs/employees of the Assessee-company in their depositions made by them during the cross-examination before the Commissioner of Central Excise on 24.9.2003, clarified their statements recorded before the officers insofar as out-pass is a document to be submitted to the security when any vehicle carrying goods leave Assessee's premises. The security would verify the out-passes with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19.1.2001. The Assessee in reply to show-cause notice stated that the goods were detained in three premises of the high sea sellers but there was no seizure of the goods and no show-cause notice was issued which would establish that the goods were reprocessed granules and not virgin granules. 14.5 Revenue in the grounds of appeal before the Tribunal stated that high sea sellers had admitted the fact of receipt imported virgin granules and no show-cause notice was issued for confiscating these detained goods, which is apparently a mistake. Furthermore, it is seen from the deposition of Shri Arun Thangam, Director of M/s. Seven Seas Polymers Ltd. before the Commissioner of Central Excise on 23.9.2003 that the investigating officers did not seize any consignment of 2050.60 MTs in their depot (Qn. No. 41 to 43). 14.6 The Revenue in the grounds of appeal contended that there is no necessity to establish the virgin nature of imported granules by test reports as the goods in original packing bears foreign markings. But, we find that in other grounds of appeal it is contended by Revenue that there is difference between the virgin granules and reprocessed granules. All these incidents wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Muralidharan nor any other staff admitted to the offending nature of goods. Fourth, though samples were drawn for test under test memos addressed to the Chemical Examiner, Customs House, Chennai, the result of chemical test is not known. Under these circumstances, I have no reason to hold that the goods seized were imported plastic granules belonging to Global. Since right from inception Global and Priya had been maintaining that the goods seized were reprocessed granules, I agree that the goods are as they said and not as alleged in the notice. 14.7 The Hon'ble Supreme Court in the case of Polyglass Acrylic Manufacturing Co. Ltd. Vs. Commissioner of Customs, Vishakapatnam - 2003 (153) ELT 276 (SC) observed that test report obtained at the instance of the Department itself had great force and it should not have been ignored. In the case of M.P. Industries Vs. Commissioner of Customs (Port), Kolkata - 2002 (145) ELT 448, the Tribunal held that report of the Departmental Chemist / Chief Chemist cannot be brushed aside without giving any reason and is to be preferred to opinion of outside agencies. In the case of CIBA Speciality Chemicals Ltd. Vs. CCE - 2000 (119) ELT 358, it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the adverse party have a right to cross-examine and in the facts and circumstances of the present case, the adjudicating authority righty had given such opportunity to do so. 14.9 In this context, the observation of the Tribunal in the case of Tejwal Dyestuff Industries Vs. CCE, Ahmedabad - 2007 (216) ELT 310 (Tri Ahmd.) may be referred as under:- It appears that, having obtained confessional statements the Revenue Officers did not carry out the detailed investigation into the relevant aspects of the case, particularly, the Bank accounts of Bhimanis and the working of the assessee's factory. Recording of the confessional statement would not put an end to the investigation and the Revenue Officers should be careful to ensure that they are not tricked out of a regular and detailed investigation by making strategic confessions which are retracted by preparing affidavits soon after they are made and which affidavits are again strategically withheld from the Revenue Officers, so that they become complacent and do not carry out a fuller investigation. It appears that the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssibility of Modvat/Cenvat credit as reached by the Commissioner. 14.10 In the present appeal, the main thrust of the Revenue is that the investigating officers conducted searches of 40 premises from 18.1.2001 and ending on 8.9.2001 and recorded 51 statement of various persons. There is seizure of voluminous records recovered from various premises and on that basis the charges were framed in show-cause notice. The charges were framed, mainly on clandestine removal of duty-free imported plastic granules from warehouse and sold in DTA and the export of bogus consignment. On the other hand, the Assessee submitted that 40 premises were searched but not a single gram of duty-free imported granules was found. Similarly, the goods were exported on different dates under the supervision of Central Excise officers and properly sealed, accompanied with about 367 numbers of AR4s, packing list, export invoice and not a single consignment was found as bogus items. Department made correspondence with foreign buyer, which was not disclosed in show-cause notice. Perhaps, the investigating officers were under impression that the statements and seizure of documents are sufficient to establish the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court in the case of Collector of Customs, Madras & Others Vs. D. Bhoormull - 1983 (13) ELT 1546 (SC). In the case of Santhanam (supra), the issue involved is that principle of natural justice have been violated, inasmuch as the statement recorded from several persons have been relied upon, without furnishing a copy of statements to the petitioner. In the case of D. Bhoormull (supra), the issue involved is that the effect of application of Section 106 of Evidence Act to cases under Section 167(8) of the Sea Customs Act, which relates to discharge of burden of proof. In the facts and circumstances of the present case, both the case laws relied by the Revenue are not applicable, as stated above. 15. Revenue in the grounds of appeal stated that the manipulation of statutory production reveals so as to show excess production and excess export. Revenue in their appeal contended that the packing material purchased was not in proportion to the quantity exported. It is also contended that the Assessee had not informed them that they had such carton printing machines. The Assessee in their reply to show-cause notice stated that Shri Muralitharan, M.D. of the Assessee in his statement da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor of Central Excise - 1992 (60) ELT 451 (f) Kale Khan Mohd. Hanif Vs. Collector of Central Excise, Nagpur - 2001 (132) ELT 374 In all these cases, the Tribunal had observed that the Central Excise officers visited the factory of the Assessee as it was in physical control by the Department. So, it cannot be concluded that there has been deliberate suppression of facts with intent to evade payment of duty. In the present case, after considering the deposition of the Central Excise officers, as stated above, that the Departmental officers were in a position to have sufficient knowledge of the process of manufacture, receipt of raw materials and clearance of finished product. 16. Revenue in their appeal contended that the adjudicating authority had not followed the direction of Settlement Commission. It is stated that the observation of the Settlement Commissioner, while rejecting the case, were not duly considered and appreciated by the adjudicating authority in the impugned order. We find from Order No. 24/2004-Cus. dated 12.3.2004 of the Settlement Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true liability of the main applicant-company, for admission of this application. This is, as already stated above, without any prejudice to the legal validity and the correctness of the pleas raised by the applicant against the allegations in the SCN and their plea that the notice has not adduced adequate and acceptable evidence in support of the said allegations, on all of which the Bench refrains from any view. In view of the above, we are unable to accept the contention of the Revenue that the adjudicating authority had not considered the observation of the Settlement Commission. In other words, the adjudicating authority tested the case on the touch stone of admissibility as evidence by in-depth inquiry, including by way of cross-examination as observed by the Settlement Commission. The Settlement Commission observed that there is no voluntary disclosure on the part of the Assessee. 17. It is contended by Revenue in the appeal that the adjudicating authority did not counter each and every specific allegations leveled against the respondents in the two show-cause notices covered in the impugned order and therefore it is a non-speaking order. They have relied upon the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee. In that case, the Hon'ble Supreme Court observed as under:- In the instant case, the Investigating Officers did not examine themselves. The authorities under the Act as also the Tribunal did not arrive at a finding upon application of their mind to the retraction and rejected the same upon assigning cogent and valid reasons therefor. Whereas mere retraction of a confession may not be sufficient to make the confessional statement irrelevant for the purpose of a proceeding in a criminal case or a quasi criminal case but there cannot be any doubt whatsoever that the court is obligated to take into consideration the pros and cons of both the confession and retraction made by the accused. It is one thing to say that a retracted confession is used as a corroborative piece of evidence to record a finding of guilt but it is another thing to say that such a finding is arrived at only on the basis of such confession although retracted at a later stage. In that case (i.e. Vinod Solanki), the Tribunal proceeded on the basis of issuance and service of a show-cause notice subserv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating authority who passed the adjudication order in exercise of quasi-judicial power is not proper. The Tribunal in the case of Indian Petrochemicals Ltd. Vs. Collector of Central Excise - 1992 (61) ELT 138 (T) observed as under:- In the face of the officials having physical control and the records being checked and scrutinised every day and in that event to hold that there is a calculated fraud with connivance of the officials of the Department does not behold to the status of the learned Collector. It is now well settled that the adjudicating officers or Appellate Court should use temperate language and as held in the case of Iswari Prasad Misra v. Mohammad Isa as reported in AIR 1963 S.C. 1728 and it has also been held that use of unduly strong words in expressing conclusions or adopting of intemperate or extravagant criticism against contrary view should be avoided. 18.1 The Hon'ble Supreme Court in the case of Oryx Fisheries Ltd. Vs. Union of India - 2011 (266) ELT 422 (SC), though relied upon by the Revenue, in our view, again, would help the Assessee. In that case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; 28. It is no doubt true that at the stage of show cause, the person proceeded against must be told the charges against him so that he can take his defence and prove his innocence. It is obvious that at that stage the authority issuing the charge-sheet, cannot, instead of telling him the charges, confront him with definite conclusions of his alleged guilt. xxxx xxxx xxxxx xxxxx xxxx xxxxx 33. The principle that justice must not only be done but it must eminently appear to be done as well is equally applicable to quasi judicial proceeding if such a proceeding has to inspire confidence in the mind of those who are subject to it. There is no doubt that the Revenue would defend the allegations made in the show cause. On the other hand, the exercise of quasi-judicial power of the adjudicating authority must not be arbitrary and vague, but legal and regular. It is important, in this context, the adjudicating authority entrusted to exercise quasi-judicial power in a rational and reasonable manner and not merely to defend the allegation of show-cause notice a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the duty of interest has been erroneously refunded by reason of collusion or any willful misstatement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this sub-section shall have effect as if for the words "one year" and "six months", the words "five years" were substituted. Provided further that where the amount of duty which has not been levied or has been short-levied or erroneously refunded or the interest payable has not been paid, part paid or erroneously refunded is one crore rupees or less, a notice under this sub-section shall be served by the Commissioner of Customs or with his prior approval by any officer subordinate to him : Provided also that where the amount of duty which has not been levied or has been short-levied or erroneously refunded or the interest payable thereon has not been paid, part paid or erroneously refunded is more than one crore rupees, no notice under this sub-section shall be served except with the prior approval of the Chief Commissioner of Customs. 19.2 During the course of hearing before the Tribunal, the learned Special Counsel on behalf of Revenue placed a compi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endent who has signed the present show-cause notice, assigned the work of issue of show-cause notice in respect of Dindigul and Virudhunagar including cases of Headquarters Preventive Unit. Hence, the Superintendent was competent to issue the show-cause notice, once the same was approved by the Chief Commissioner. In support of his contention the learned Special Counsel placed a copy of the letter C.No. V/39/15/6/MDU/2002-CZO dt. 08.03.2002 issued by the Additional Commissioner (CCO), O/o the Chief Commissioner of Central Excise, Chennai. The relevant portion of the said letter is reproduced below:- The Chief Commissioner, after careful consideration of the proposal and after satisfying that there exist a prima facie case for issue of show-cause notice to M/s. Global Poly Bags Industries (P) Ltd. Virudhunagar, accorded necessary approval for the same under third proviso to Section 11A(1) of the Central Excise Act, 1944. 19.4 In addition to that, the learned Special Counsel placed affidavit dated 18.7.2014 of the Chief Commissioner of Customs (Preventive), Trichy confirming the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended period of limitation for demanding duties through show cause notices can be issued by the Commissioner of Customs and the cases decided only by them. Modifications, if any, have been only in the limited extent of low revenue matters where it could be issued and adjudicated by the Additional commissioner. (d) Relied upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Bihar & Orissa Vs. Maharam Pratapsingh Bahadur of Gidhaur, (1961) 2 SCR 760 / AIR 1961 SC 1026 / (1961) 41 ITR 421, wherein the Hon'ble Court held that when the statute is enjoining a duty upon the Income Tax officer to obtain prior approval of the Commissioner and unless that approval was obtained, the notice could not be issued. The notices were thus invalid. (e) Relied on in the case of Gujarat State Fertilizer Vs Union of India 1988 (34) ELT 442 (Guj.) wherein the High Court was pleased to hold that show cause notice under the ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received for issue of SCN and denova notice in respect of the Division, which would be monitored by the Deputy Commissioner of Central Excise. It is settled rule of interpretation that where express provisions were made in the statute to exercise the power by a particular person then the doctrine of implied power cannot be invoked. After amendment of provisions of Section 28 of Act, 1962 and Section 11A of the Act, 1944, the Commissioner of Central Excise, Madurai, by letter dated 27.6.2000 stated that the concurrence by the Commissioner or Chief Commissioner based on monetary limit has become part of law for the purpose of issue of notice. So, we are unable to accept the submission of the learned Special Counsel that the Superintendent is empowered to issue the show-cause notice. The action of Superintendent to issue notice demanding duty under Section 28(1) of the Act, 1962 vide Notice dated 26.3.2002 is contrary to the provisions of law. 21.2 However, in our opinion the other aspect of this issue is required to be examined. We find that show-cause notice was issued on 20.6.2002. The Assessee was allowed to cross-examine various persons in the year 2003. It is seen that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that the Assessee had obtained approval from the Development Commissioner, MEPZ, increasing the percentage of waste only after the investigation of the Preventive Unit on 12.1.2001. The Assessee in their reply stated that they were averaging the waste around 17% and hence the matter was referred to MEPZ. So, this issue is required to be examined as per EXIM Policy. 23.1 In the case of L.R. Brothers Indo Flora Ltd. Vs. Commissioner of Customs 2008 (232) ELT 77, the Tribunal held as under:- 5. We have given careful consideration to the submissions of both the sides. There is no dispute about the fact that the duty exemption under Notification No. 126/94-Cus. and 136/94-C.E. is available subject to certain conditions - i.e. meeting the export obligation within the stipulated period and achieving the net positive foreign exchange earning. The point of dispute is as to who is to determine as to whether a 100% EOU has fulfilled the conditions regarding meeting the export obligation and achieving net positive foreign exchange earning. We find that on this very issue, the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty on the imported goods. Normally the customs authorities should immediately inform the Development Commissioner in case a 100% EOU ceases production prematurely or fails to commence production or export within the stipulated period. In case the Development Commissioner initiates action against the unit for non-fulfilment of export obligation etc. simultaneously, the customs authorities should issue show cause notice for failure to comply with conditions of Notification 13/81-Cus., dated 9-2-81. The demand of duty should be confirmed only after a definite conclusion has been arrived at by the Development Commissioner. xxxxx xxxxxx xxxxxx xxxxx We, therefore, set aside the impugned order and remand the matter to the Commissioner for de novo adjudication of this matter after ascertaining from the Development Commissioner/Board of Approval about their decision with regard to the question of fulfilment of the export obligation and achieving NFEP. The show cause notice issued to the appellant is to be adjudicated only after the Development Commissioner/Board of Approval gives the findings on the issue of meeting the export obligation and achieving the NFEP. The appeals are dispos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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