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TMI Blog2017 (3) TMI 554X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that: - Since the discrepancy emerged, based on the declarations/information made/provided by GIL themselves to department, there is no need of further corroborating the same. In the event, here also there is no cause for interfering with the demand of differential duty of 8,35,693/-. Extended period of limitation - Held that: - investigation has successfully unearthed the questionable modus operandi of the racket who has caused prejudice to Revenue with intent to evade excise duty. Investigation has proved that clandestine removal of goods by the appellant was made following a pre-meditated design. Hence invocation of extended period of limitation in the notice under proviso to Section 11A of the Central Excise Act and its affirmation in the impugned order, are very much in order and does not require interference. Appeal dismissed - decided against appellant. X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants are before this forum. 6. On the date of hearing, Shri M. Mudimannan, ld. Advocate, appeared on behalf of the appellants. The major thrust of the Ld. advocate's arguments was focused on the contention that the demand per se was barred by limitation. It is seen that even in the grounds of appeal, the appellants have mainly argued on limitation. Appellants arguments can be summarized as follows :- (a) the date of show cause notice is 07-05-2007, however, the demand of differential duty is made for the period April 2002 to March 2007; (b) during the impugned period, i.e. April 2002 to March 2007, they were subjected to various periodical inspections/audits by departmental officers; (c) there is no requirement in E.R.1 returns to furnish cost of raw materials received, conversion charges collected etc., therefore appellant is not required to furnish these details; (d) investigation commenced in April 2006 as admitted in SCN, however, the SCN was issued after a lapse of more than one year on 07-05-2007; (e) in the impugned order, duty is quantified by adding 11% to the cost of raw material towards burning loss. However, 4% burning loss has already been include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked goods viz. CTD bars etc. to KSL under Central Excise invoices on payment of duty, adopting the cost of raw materials plus the conversion charges as value thereof. The agreement entered into between GIL and KSL for conversion of goods on job work basis indicates that GIL are entitled to claim 7% conversion loss on the raw materials processed by them. However, verification of documents such as Form IV Registers maintained by the assessee and enquiries conducted revealed that GIL were actually claiming conversion loss to the tune of 11%. Shri Balaji, Manager of GIL, in his statement dt. 28.12.2006 also admitted that they were incurring burning loss of 11%. For example, if GIL receives 100 M.T of raw materials, they return only 89 M.T of finished goods to KSL after deducting 11 MT as conversion loss. However, for discharging central excise duty liability on these clearances, actual cost of raw materials received for conversion was not taken into account while arriving at assessable value but only cost of raw material contained in final products considered and the cost of burning loss excluded to extent of 11%. There is no controversy that in respect of impugned goods manufactured o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being the case, GIL should have taken into account the cost of raw materials that were received from KSL and have gone into the manufacture of their final products and not the quantity of raw materials as may have been present in their end product. The reduction from such costing of higher burning loss to the extent of 11% and treating the same as assessable value for discharge of duty liability is then without any basis by the appellant and has resulted in short payment of duty. GIL have relied upon Board's circular dt.15.01.1988 in their defence. However, perusal of the said circular indicates that it only clarified that credit of duty on inputs cannot be denied on the ground that part of the inputs is contained in the waste and scrap which may even be exempted from Central Excise duty. Reliance of GIL on this circular is therefore misconceived since denial of credit on inputs is not the issue in dispute herein, but the fact of non-inclusion of value of inputs for working out the assessable value of final jobworked product. In the event, demand of differential duty on account of incorrect value of raw materials utilized for manufacture demanded in adjudication and confirmed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the freight charges were all paid by KSL. Adjudicating Authority has correctly observed that irrespective of the fact that whichever party incurred the cost of transportation, the said cost has to be taken into account for the purpose of arriving at the cost of raw materials. He has also pertinently highlighted the fact that cost of transportation has been dealt with separately in the agreement and that invoices issued by KSL contain only the assessable value and other taxes but do not show any transportation charges. In the event, we are of the considered opinion that there is no cause for interfering with the demand of differential duty in respect of non-inclusion of transportation charges in the impugned order. 12. Demand with respect to unaccounted clearances of CTD bars/rounds: From the investigation, based on the data provided by GIL themselves, vide their letter dt. 03-08-2006, it has emerged that the appellants have cleared 232.835 MTs of CTD bars/MS rounds more than what was reported by them in their ER-1 returns, resulting in undischarged duty liability of ₹ 8,35,693/-. This discrepancy in clearance quantities has been worked out only based on the information s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their periodical returns and declarations made to the department. In the circumstances, the plea of appellants on limitation does not hold merit. We are of the considered opinion that there has been intentional undervaluation of the goods and also unaccounted/clandestine removal of job-worked goods by GIL by subterfuge, suppression and wilful misstatement with the sole intention of evading legitimate duty payable to the exchequer. The contentions of the appellant fail in all counts. Nothing has been demonstrated by them to show that they have come with clean hands to prove their innocence. On the other hand, investigation has successfully unearthed the questionable modus operandi of the racket who has caused prejudice to Revenue with intent to evade excise duty. Investigation has proved that clandestine removal of goods by the appellant was made following a pre-meditated design. Hence invocation of extended period of limitation in the notice under proviso to Section 11A of the Central Excise Act and its affirmation in the impugned order, are very much in order and does not require interference. 15. Appeal No.E/790/2007 has been filed by Shri Ghisulal Kothari, Director of GIL agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, his acts and omissions surely fall within the ambit of Rule 26 and will get exposed to penalty therein. Considering that the appellant was the fulcrum of the Actio illicita in causa by GIL, resulting in short payment of differential duty of ₹ 1,81,76,436/-, the penalty of ₹ 10,00,000/- (Rupees Ten lakhs only) under the said Rule 26 on this appellant is very much proportionate to his acts and role and justified, hence there shall be no interference in the matter. Appeal filed by the appellant Shri Ghisulal Kothari will therefore have to be dismissed. We order accordingly. 16. In Appeal No.E/791/2007, filed by Shri J. Balaji, Excise Manager of GIL, the same contentions with regard to non-imposability of penalty under Rule 26 ibid raised by the other appellant Shri Ghisulal Kothari (Appeal E/790/2007) has been reiterated which, as already discussed supra, is a misconceived argument. On the other hand, the appellant as Excise Manager, cannot claim that he was unaware of the modus operandi and affairs of GIL which resulted in such large scale evasion of duty. This being so, relatively low penalty of ₹ 10,000/- (Rupees Ten thousand only) imposed on him by the adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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