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TMI Blog2011 (9) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... s visited by the Central Excise officers on 4-12-2003, who conducted various checks and verifications. As a result, stock of copper pipes to the extent of 1567.25 kgs. in ready to dispatch condition was found in excess than the recorded balance in RG-1 register. The same was put under seizure by the officers on the reasonable belief that the same was meant for clandestine clearance. 2. On further scrutiny of the record, it was found that the appellants had availed Modvat credit on copper foils by declaring the same as one of the raw materials. Shri Sanjay Shantilal Mardia, Managing Director of the company, in his statement dated 4-12-2003, explained that the entry of finished goods could not be made in RG 1 register as the clerk responsible for making entry was on leave for last 2-3 days. As regards availment of credit on copper foils, he explained that they have taken the credit on the basis of Central Excise invoices without actually receiving the copper foils. He also reversed the credit of ₹ 8,35,000/- involved in respect of copper foils during the period from 11-4-2001 to 2-9-2003. Distinguished 3. On the basis of the above, the appellants were issued a show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the production of 7 days remained unaccounted with intent to remove the same clandestinely. 7. As against the above, the learned advocate has submitted that the same very argument of the adjudicating authority goes against the Revenue. If the production is of 7 days and was meant for clandestine removal, they could have removed it within that period instead of keeping the same in the factory premises. Apart from the fact that the same was not recorded, there is no other evidence to show that the goods were either in the process of being removed or were meant for clandestine removal. Tribunal, in number of cases, has held that mere non-entry of production in RG-1 register by itself is no proof that the goods were meant for clandestine removal, unless there is evidence reflecting upon the same. 8. Tribunal in the case of C.C.E., Rajkot v. M/s. Amrut Ceramics as reported in 2007 (209) E.L.T. 390 (Tri.-Ahmd.), has observed that mere non-entry of the goods in RG-1 register will not amount to non-accountal of the goods unless it is supported by past conduct of the assessee in removing the goods or the raw material used in the manufacture of such finished goods have not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he adjudicating authority has forgotten that they are also using other raw material i.e. copper waste and scrap. Copper pipes are not being manufactured by them exclusively out of copper foils. He has drawn our attention to a chart placed by the assessee before the adjudicating authority based on the actual purchase invoices of foils and sale invoices of pipes for all the 3 years i.e. 2001 to 2004. As per the said chart, the cost of their final product is higher even after taking into account the labour charges, etc., and they have made some profits on the sale price of copper pipes. As such, submits the learned advocate that no conclusive view can be taken merely based upon the comparison of the copper foils price and copper pipe price, without any other evidence to that effect. 11. The learned advocate has further contended that the consideration for the price of the foils was made to the supplier by cheque. Not only that, even the payments to the transporter were made by cheque. The copper foils in question were duly entered in their Annexure IV register. The said foils were subsequently sent to their job workers under delivery challans for melting and extrusion. The same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tubes (P) Ltd. have charged ₹ 15/- per kg. for extrusion only. He has, accordingly, concluded that the inputs have undergone the process of extrusion only and as such, the same are bound to be other than copper foils. Apart from the fact that job charges recovered by the job workers cannot be indicative of the nature of the inputs, we also note that the above observation of Additional Commissioner is contrary to the facts on record. Learned advocate has shown us the ledger in respect of goods sent to M/s. Shri Ram Tubes (P) Ltd. clearly indicate that the same are for melting and extrusion i.e. both processes of melting and extrusion. Further, reference to one of the fact made by the adjudicating authority to the effect that verification of the ledger account of Metal Jems, does not include some challans, cannot be made the basis inasmuch as the maintenance of record by the job worker cannot reflect upon the nature of inputs used by the principal manufacturer. 13. We further find that the strong reliance stand placed by the adjudicating authority on the statement of the Managing Director. Apart from the fact that the appellants have strongly contended that such statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Member (Judicial). With utmost respect I find myself unable to agree with the conclusion, I propose to pass a different order. 17. The facts have already been explained briefly and hence the same are not being reiterated. 18. There are two issues involved in the present appeal. I would like to take up the second issue, whether the Modvat credit availed by the appellant in respect of copper foils was in accordance with the law or not first and consider the first issue whether copper pipes found in excess at the time of visit of the officers are to be confiscated and penalty imposed or not later. 19. During the visit of officer on 4-12-2003 and during the scrutiny of records, it was noticed by the officers that copper foils were used in the manufacture of copper pipes by the appellants. In the presence of pancha witnesses, Shri Sanjay S. Mardia, the Director was asked about utilization of copper foils in the manufacture of finished goods and he confessed that they were only receiving the Cenvat invoices for availing and accumulating Cenvat credit and in the presence of pancha witnesses, officers worked out the total Cenvat credit availed on such invoices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y were also using other raw materials namely copper waste and scrap. Appellants had submitted 18 challans/invoices relating to job work done by the job workers for them. The scrutiny of all these challans showed that not even in one of the challans, copper waste and scrap was sent to the job workers. Perusal of all these documents shows that it was copper foils that were sent to the job workers for extrusion and melting and extrusion. 22. The second claim made by the learned advocate was in relation to a chart, which was also produced to the adjudicating authority based on actual purchase invoices of foils and sales invoices of pipes for all the three years. It was submitted that according to the chart, cost of the final product is higher even after taking into account the labour charges etc. This claim was also verified by me. In the chart produced by the appellants, the net cost of copper foils was indicated as ₹ 171.80, ₹ 142.92 and ₹ 147.25 from 2001-2002 to 2003-2004 respectively. However, on verification of the record of the firm, it was found that the dealer price was calculated by the appellant on the basis of Cenvat credit taken and not on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods is not less than two months. Therefore, conversion of copper foils to copper pipes definitely takes minimum of two months. The interest element for the material lying with the appellant for these two months along with production cost of the appellant, overheads, transportation cost are to be taken into account and if proper work is done, it would clearly show that appellants would be incurring substantial losses and not being a charity organization and not having any income by way of donations, they could not have carried on like this. In fact, coupled with the investigation and statement given under Section 14 and admission made before the pancha witnesses and the debit made before the pancha witness, in my opinion, this is sufficient to come to the conclusion that appellants did not receive copper foils for conversion to copper tubes/pipes. 24. Another claim made was that copper foils purchased by them was of sub-standard quality. Original adjudicating authority has clearly observed that this could not be so because appellants themselves had sold copper foils as such at ₹ 220/- per kgs., vide invoice No. 31, dated 7-5-2003. According to the appellants, the average ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of zeal for a full and thorough investigation with a view to establish the case de hors the confession. It is often a sad experience to find that on the confession, later, being inadmissible for one reason or other the case flounders in Court." 26. In this case also, due to the fact that confession statement is admissible in law and there was an admission before two pancha witnesses in this case and other factors which have been discussed above clearly show that appellants did not receive copper foils, no further investigation (sic.). Once there is an admission by the Director coupled with the facts as discussed above, which is within the knowledge of the appellants, the burden shifted to the appellants to show that they had actually manufactured the copper pipes/tubes from copper foils. Instead of doing that the appellants have chosen to brazenly make incorrect statements and show a non-profitable activity as profitable one. Even to a lay man without any experience in cost accounting technique, the manufacturing activity in this case straightaway is non-profitable leave alone a cost accountant. 27. It was stated by the learned advocate that department case is based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admission before the pancha witnesses and secondly, analysis of records of the case discussed as above. 31. In view of the above circumstances, I have to hold that appellants did not receive copper foils at all but took credit and therefore the credit is inadmissible. Since the fact of non-receipt of copper foils and manipulation of record as elaborately discussed above clearly show that there was misdeclaration, mis-statement and suppression of facts on the part of the appellants, therefore penalty under Section 11AC also has to be upheld. Penalty has to be imposed on Shri Sanjay Shantilal Mardia since it was he who was present during the search, it was he who admitted the liability and this shows clearly that he was the person responsible for availment of irregular credit. However, penalty of ₹ 5 lakhs appears to be excessive and therefore, same is reduced to Rs. two lakhs. Further while I uphold the penalty equal to duty under Section 11AC of Central Excise Act, 1944, I find that option to pay duty demanded, interest and penalty to the extent of 25%, within 30 days has not been extended to the appellants. Therefore, appellants have to be extended this option in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r process or they had accounted in some private record. This clearly the elements which have been held to justify confiscation of excess material in above cited judgment exist in this case. Therefore, the confiscation of copper pipes of 1567.25 kgs. under Rule 25 of Central Excise Rules, 2002 in ready to dispatch condition is upheld. Since appellants will have to take this into account and in due course clear the same on payment of duty, no duty need be demanded. The value of the total quantity confiscated is ₹ 2,27,252/- only and duty involved is only ₹ 36,360/-. Therefore, the fine in lieu of confiscation of Rs. one lakh imposed is harsh. Accordingly, while confiscation and imposition of fine is upheld, fine in lieu of confiscation is reduced to ₹ 25,000/- (Rupees twenty five thousand only). Difference of Opinion 1. Whether credit of ₹ 20,74,449/- taken on copper foils by appellants is admissible as held by learned Member (Judicial) or not admissible as held by Member (Technical). 2. Whether penalty of ₹ 20,74,449/- is imposable under Section 11AC of Central Excise Act, 1944, as held by Member (Technical) or no penalty is imposable as held by lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on payment of fine of ₹ 25,000/- (Rupees Twenty Five thousands only) as held by Member (Technical) or to be released unconditionally, as held by ld. Member (Judicial). (vii) Whether interest at appropriate rates applicable is required to be paid by the appellants as held by Member (Technical) or no interest is to be paid as held by Member (Judicial). 35. Heard Shri V.M. Doiphode, ld. Counsel and Shri R. Nagar, ld. SDR for the respective parties. 36. Ld. Counsel submits that there are two issues involved in this appeal. (a) Denial of Cenvat credit on the ground that the appellants had not received the material along with invoices. (b) Whether the finished goods which were lying in the factory premises are liable for confiscation and consequent penalty thereon. 37. He would draw my attention to the show cause notice. It is his submission that in the entire show cause notice, there is no other evidence other than the statement of Managing Director, which can lead to a conclusion that Cenvat credit has been availed only on the invoices and inputs were not received. It is his submission that the appellant had recorded the inputs received in their statutory b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of finished goods or have not been accounted for or goods have not been shown to be under process in either statutory or private records. It is his submission that in the absence of mens rea, confiscation as upheld by ld. Member (Technical) is incorrect. 40. Ld. SDR, on the other hand, submits that the judgment of Hon'ble Supreme Court in the case of C.C.E., Mumbai v. Kalvert Foods India Pvt. Ltd. - 2011-TIOL-76-SC-CX = 2011 (270) E.L.T. 643 (S.C.), which settled the law to the effect that statements which are recorded by Central Excise officers should be relied upon. It is his submission that in its judgment, Hon'ble Supreme Court has very clearly indicated that when statements which are made by the Managing Director of the company and other persons containing all details about the functioning of the company, which could be made only with personal knowledge of the persons and therefore could not have been brushed aside and should be looked into and relied upon. After this submission, he reads the statement of the Managing Director of the appellant company in this case before me. It is his submission that the Managing Director, in his statement, has categorically stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Rule 10 of the Central Excise Rules, 2002 inasmuch as they failed to account for the fully manufactured finished excisable goods in Daily Stock Register, as required under the above Rules of Central Excise Rules, 2002. Further, all such acts of contravention on their part appear to have been admitted by them by recourse to fraud and suppression of material facts from the department with an intent to evade payment of Central Excise duty which constitute an offence of the nature as described in Rule 25(1) of the Central Excise Rules, 2002 and thereby rendering themselves liable for penal action under said Rule with Section 11AC of the Central Excise Act, 1944. The Central Excise duty @ 16% of seized goods valued at ₹ 2,27,252/- comes to ₹ 36,360/- leviable on unaccounted finished goods seized by the Central Excise officers in presence of panchas under panchnama dated 4-12-2003, is required to be recovered from them under proviso to sub-section (1) of Section 11A of Central Excise Act, 1944. 8. In view of the facts and circumstances discussed in foregoing paras and material facts available on records, it appears that the unit has not followed the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1 to 50) 7 Input invoices for the year 2001-2002 (Page No. 1 to 135), 2002-2003 (Page No. 1 to 139), and 2003-2004 (Page No. 1 to 116) 45. It can be seen from the above reproduced list of documents/records relied for the purpose of issuance of show cause notice other than Panchnama and the statement of Managing Director, the authorities have resumed to RC 23A Part I & II and invoices for the period in question. It is also seen that the invoices on which credit was availed were a part of the documents which were withdrawn. On perusal of the said invoices which were annexed to appeal paper book clearly indicate the name of registered person and also the details of purchases made by such registered persons/dealers of copper foils. Nothing prevented the Revenue authorities from carrying out further investigation with the said suppliers of the copper foils who were within the jurisdiction of the officers at Gujarat. They could have carried out the investigation by summoning the dealers/registered persons who have supplied the goods to the appellant. It seems that the Revenue authorities have not conducted any further investigation in this regard. In the absence of any evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kalvert Foods India Pvt. Ltd., it is seen that the Revenue authorities has found a tempo/truck in the premises loaded with excisable goods without any duty paying documents, separate parallel set of invoices in the factory premises and finished goods lying in the factory premises. All this factual matrix were confirmed by the statements of Managing Director and other persons and hence it was held that statements need to be relied upon for upholding the demand of duty and penalty. In the case in hand, as reproduced earlier herein above, there is evidence to show that there was movement of the goods/inputs to job worker, which would indicate that definitely there was receipt of inputs, which travelled to the job worker for further processing. On this factual matrix, I am of the considered view that the Revenue has not been able to prove that the appellant had not received the inputs on which the credit was availed. In view of this, I am in agreement with the views taken by ld. Member (Judicial). 49. As regards confiscation of finished excisable goods viz. copper pipes, weighing 1567.256 kgs., it is not in dispute that the said goods were finished and ready in the factory premi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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