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TMI Blog2017 (11) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... e have, therefore, no hesitation in holding that the entire quantity of raw materials to the tune of 1071.3863 MTs sent by Agarvanshi Ltd has been received by Alumeco Ltd. Whether the job work profiles cleared by Alumeco Ltd were manufactured out of the materials supplied by Agarvanshi Ltd? - Held that: - There is nothing in the impugned order to show that the raw materials used for manufacture and clearance of profiles to Agarvanshi Ltd was procured clandestinely. There is nothing to show that profiles have been sold clandestinely in the open market. No such instance has been given in the impugned order. In fact, Agarvanshi Ltd has submitted that all the profiles received from Alumeco Ltd were cleared on payment of duty after due accountal in their books of accounts. Shri Bhaskar Rao during hearing has drawn our attention to the raw material inventory reconciliation statement annexed with the appeal paper book. According to him, every kilo of materials was accounted by Alumeco Ltd, monthly reports were also submitted to the Management. The Investigating Officers had taken all these documents and it is beyond imagination that if there are cash purchases of raw material and cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that job worked profiles received by Agarvanshi Ltd has been finally cleared on payment of duty. Thus, there has been no loss of Revenue in the present case - Alumeco Ltd is not liable to pay duty on 1063.6222 M.Ts of profiles cleared after job work to Agarvanshi Ltd in terms of N/N. 214/86-CE. As regards confirmation of duty demand on 46.0166 M.T's of aluminium extrusions to Agarvanshi Ltd, we find that there is no finding by Adjudicating Authority. The Adjudicating Authority has not even rejected the submissions made by Bhaskar Rao, former Managing Director of Alumeco Ltd. This demand is also, therefore, set aside. Appeal allowed - decided in favor of appellant. - E/1767/2011-DB, E/1658-60/2011-DB & E/1494/2011-DB - A/31758-31762/2017 - Dated:- 6-11-2017 - Mr. M. V. Ravindran, Member (Judicial) And Mr. Madhu Mohan Damodhar, Member (Technical) Mr. M. Chandrasekharan, Sr. Adv Mr. Sunil Adv Shri G. Natarajan, Shri P. Dwarakanath and Shri V.J. Sankaran ld.Advocates for M/s Agarvanshi Aluminium Ltd For the Petitioner Mr P.S. Reddy, A.R. for the Respondent ORDER [Order Per : M. V. Ravindran] These five appeals are directed against Order-in-Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ob work of homogenization upto 31.05.05. But homogenization of logs in Alumeco Ltd prior to June 2005 was an impossibility and, therefore, the claim of homogenization of logs/billets on job work appeared to be false. (c) Alumeco Ltd has not sent logs received or alleged to have been received from Agarvanshi Ltd further to any other firm for Homogenization. (d) Alumeco Ltd had sent the already homogenized NALCO logs for Homogenization Cutting during the period between Sept 02 to Feb 05. Prior to September 2002 and after February 2005, Agarvanshi Ltd has not sent such logs for Homogenization. Technically, there was no need to further homogenize the already homogenized logs. (e) Cutting of NALCO logs sent by Agarvanshi Ltd to Alumeco Ltd for job work of Homogenization and Cutting is documented in Billet Cutting Reports of Alumeco Ltd but such logs after conversion into cut billets were used by Alumeco Ltd in the manufacture of extrusions in its factory. (f) 281.695 M.Tons of in-house manufactured logs shown to have been dispatched by Agarvanshi Ltd to Alumeco Ltd for job work of Homogenization and Cutting were not used for cutting by Alumeco Ltd, inasmuch as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , implying that Agarvanshi Ltd had availed Cenvat Credit on these materials. However, two consignments of inputs were imported under DEEC without payment of duty and no Cenvat Credit was availed on these goods. Therefore, these inputs could not have been sent under Rule 4(5)(a), ibid, for job work. (o) Sometimes material was not sent by Agarvanshi Ltd along with the job work challans and that sometimes the material sent was different, in quantity and description from that mentioned in the challans. (p) 281.695 M.Tons of Agarvanshi Ltd's in-house manufactured logs were not received by Alumeco Ltd. Instead, equal quantity of NALCO logs appeared to have been received clandestinely. (q) There is no evidence of the job work processes having taken place in Alumeco Ltd for goods except the job work records of Agarvanshi Ltd and Alumeco Ltd. (r) Alumeco Ltd has created false job work records showing dispatch of logs, ingots, sows, wire rods, scrap and profiles for homogenization and cutting or conversion into billets or ageing . (s) Alumeco Ltd have also created false job work records showing performance of the alleged job work processes. (t) Agarvans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how Cause Notice on merits. The Adjudicating Authority did not agree with the submissions made by the Noticees. The Adjudicating Authority inter alia framed following issues for consideration: (i) Whether Alumeco Ltd manufactured extrusions/profiles out of their own raw material for Agarvanshi Ltd and cleared the same without payment of duty during the period from September 2002 to August 2005 by showing them as having been manufactured out of the raw materials supplied by Agarvanshi Ltd on job work and in the process evaded payment of Central Excise Duty of ₹ 1,86,23,571/-? (ii) Whether Alumeco Ltd had cleared 46.0166 MT of extrusions to Agarvanshi Ltd in the guise of billets during November 2002 and December 2002, without payment of duty to the extent of ₹ 7,73,079/-? (iii) Whether Alumeco Ltd is liable to pay duty so evaded along with interest? On the issue as to whether Alumeco Ltd manufactured extrusions/profiles out of their own raw material for Agarvanshi Ltd, it has been held by the Adjudicating Authority that since the materials received for job work and the material procured by Alumeco Ltd are maintained in common pool, there is nothing to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been received by Alumeco Ltd. In the impugned order, the Adjudicating Authority while dealing with the nature of the goods cleared by the appellant to Agarvanshi Ltd and the duty liability has referred to the fact that even the show cause notice admits that 691.130 MTs of raw material was received by the appellant from Agarvanshi Ltd. The submission of the appellant regarding balance quantity of 380.256 MT has been rejected by the Adjudicating Authority stating that in the reply dated 24.07.08 and 29.04.10 no cogent evidence has been produced to show receipt of aforesaid 380.256 MT of materials except contending that the allegation that they used their own raw material is without any basis and is totally unsubstantiated and there is overwhelming documentary and other evidence that the entire quantity of extrusions were manufactured by them on job work basis with the raw material suppled by M/s Agarwanshi Aluminium Ltd. The documents resumed from the appellant's premises have completely been overlooked by the Adjudicating Authority. These documents/records pertained to production, packing and clearance of extrusions, job work records, credit notes, purchase bills relating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profiles. Without these processes, the appellant could not have manufactured profiles by way of job work. Notification No.214/86-CE does not stipulate any one-to-one correlation in the identity of the raw material which was used by the Job Worker with the raw material supplied by the Principal Manufacturer while making the finished goods (in the present case, profiles). Nor has Agarvanshi Ltd made any complaint to the appellant on this score. They had, instead, accepted the profiles sent by the appellant and later cleared them on payment of duty. The quantities of finished Products manufactured by the appellant and cleared to Agarvanshi Ltd tallied with the quantity of raw material received by the appellant from Agarvanshi Ltd keeping in view melting losses. (iv) The benefit of Not.214/86-CE has been denied on the reasoning that there is no evidence regarding the fact that job work activity has been done on the materials supplied by Agarvanshi Ltd as no separate accounts are maintained by Alumeco Ltd in respect of material received for job work. All the materials formed the common pool. Therefore, it has to be concluded that there is no evidence that the profiles that were s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses mentioned in the Job Work Challans viz. homogenisation and cutting and conversion into billets. It is, therefore, the submission of the appellant that since the processes indicated in the job work challans are necessary for manufacture of profiles the benefit of Not.214/86-CE cannot be denied. (ii) With regard to reasoning of the Adjudicating Authority that no separate accounts are maintained for materials received for job work, it is the submission of the appellant that if the raw materials were put in a common pool, no efforts were apparently made during the investigation to see how the quantities which were so pooled were used by Alumeco Ltd as would be seen from the records all of which have been resumed by the department during the raids or furnished to them by the appellant as called for during the investigation. The allegation that the raw materials were pooled together is a totally lame justification to come to such a finding that they were not used, since, if one looks at the requirements under the Notification as summarized by the Adjudicating Authority in para 30 of his Order, it would be clear that, but for the undertaking to be given by Agarvanshi Ltd to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Job Work Challans by mentioning billets. As submitted earlier, the raw materials were for conversion and any such conversion has to be into billets, something which the Adjudicating Authority has missed to notice. Repeated reference by the Adjudicating Authority to record being not kept (like Daily Stock Account etc.) have all been relied out of context, without understanding the process involved in the job work entrusted with the Appellant, calling the goods as profiles in the guise of 'job worked billets'. It was the clear case of the appellant before the authorities that the raw material had been converted into billets which were dispatched to Agarvanshi Ltd who cleared the same as profiles on payment of appropriate duty. There was no under the guise of clearances as billets. Since job work challans had indicated conversion into billets of the raw materials in some of the job work challans, there was no need for the appellant to resort to such 'so-called guise'. There was, therefore, no mockery of the procedures and conditions of Notification No.214/86-CE as held by the Adjudicating Authority. (iii) That both, the inputs and final products are, admittedly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The same duty amount would have been availed by Agarvanshi Ltd as Modvat. There was, therefore, no Revenue implication to prompt the appellant to such a mis-declaration. Further, even if the allegation is true, duty had been paid by the appellant on a basic price of ₹ 90/- per kg. The SCN has demanded duty on the entire basic price of ₹ 105/- per kg, which is assumed to be the average profile price during that period. Even an adjustment was not made of the duty paid. If at all the demand was justified, the duty which was not paid would have been only ₹ 1,10,440/- as against ₹ 7,73,079/-, which had been demanded. Obviously enough, to the Department, a demand of ₹ 7,73,079/- was of no consequence in a case where there was also another demand of ₹ 1,87,59,205/-. In the absence of any finding by the Adjudicating Authority, the confirmation of duty demand of ₹ 7,73,079 has to be set aside. 8. On behalf Agarvanshi Ltd and its directors, it was submitted before us that: (i) Agarvanshi Ltd has received duty paid raw materials in their registered premises and duly accounted for the same in their statutory records. (ii) Alumeco Ltd recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation. There is no such findings in the impugned order. (d) It is therefore submitted that 1063.6222 Mts of profiles were not manufactured out of Alumeco's own Raw material. 1071.3863 Mts of raw material was sent by Agarvanshi Ltd through 128 Nos. of Job work Challans as listed in the Annexure E.1 to E.6 of SCN. (ii) That the SCN itself accepts that 691.130 Mts. of raw material is received by Alumeco Ltd along with job work challans. This means there is no dispute that profiles manufactured out of this 691.130 Mt of raw material is on job work basis. The balance quantity of 380.2563 Mts of raw material (consisting of the following types of raw material) is also received through Job work challans. No. of job work challans Description Quantity of (Mts) 34 Aluminium Billets / Logs 281.6950 11 Aluminium Scrap 84.1400 2 Aluminium Wire Scrap 8.6100 1 Remelt ingots 5.6900 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoices presented in page No.188 to 272 of the appeal reveals that the entire lot of profiles supplied by Alumeco Ltd on job work basis were cleared by payment of duty by Agarvanshi Ltd during the relevant period. 9. The department has also done similar analysis as above and shown at para 31.3 and para 37.2.4 of Show Cause Notice. No serious attempt has been made by the department to analyze all the invoices of Agarvanshi Ltd's for the period under investigation. It was the opinion of the Department that such an exercise is not possible. (v) The finding of the department that Alumeco Ltd has not maintained the Job work register in the prescribed format is also not tenable as the appellant had enclosed the copy of the job work register of Alumeco Ltd in 'pages 295-306 of Appeal'. This was obtained from IO by the appellant. During investigation, when the job work challans and registers in Annexure IV and V are indentified and shown to the department, the IO has come to the conclusion that these registers are manipulated without giving reasons for coming to such conclusion. Both Agarvanshi and Alumeco maintained the job work registers in Annexure-IV and V respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garvanshi Ltd under the guise of job-work of homogenisation/cutting of billets/processing billets were cleared by Agarvanshi Ltd on payment of duty is not established by any evidence. The document furnished by Shri P. Bhashkar Rao indicates equivalent profile number of Alumeco Ltd and claimed that the said profile was manufactured by them, Agarvanshi got the profiles manufactured from Alumeco Ltd obviously to sell in the market and accordingly, the profiles manufactured by Alumeco Ltd would be corresponding to the profile designs of Alumeco Ltd. In such a scenario, mere indication of equivalent number of profile in the sale invoice of Agarvanshi Ltd does not ipso facto prove duty payment by Agarvanshi in respect of profiles manufactured and cleared by Alumeco Ltd in the guise of job-worked goods. (vii) That in the entire episode, either Alumeco Ltd or Agarvanshi Ltd failed to indicate any probable reason for mis-declaring the process of job work and thus, they did not discharge the onus to prove their bonafides or exemption from tax liability. (viii) Penalty has rightly imposed upon Shri Bhaskar Rao and also on Alumeco Ltd, Agarvanshi Ltd and other Directors of Agarvansh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence that the process of homogenization and cutting of logs, conversion of billets from scraps, wire rods and ageing of profiles received as shown as, did not take place in Alumeco Ltd. The Adjudicating Authority has failed to examine the contents of documentary evidence resumed from the premises of Alumeco Ltd. The contents of documents and records could have easily revealed the fact that 380.256 MTs of materials have been received by Alumeco Ltd or not. Appellant in this context has relied upon the decision of the Hon ble Supreme Court in Shiromani Gurudwara Prabandhak Committee v Mihan Singh (1993) 3 SCC 650. We have seen the said judgement. The said judgement clearly holds that onus to prove the issue lay on the person ascertaining the same. It could not be discharged merely on merely on inferences drawn from the evidence of the objector. This decision would squarely apply to the facts of the present case. In the present case, the department has failed to establish from the record that 380.256 MTs of materials have not been received by Alumeco Ltd. Burden of establishing the fact of receipt of material cannot be shifted upon Alumeco Ltd. Whether Alumeco Ltd performed the decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial and approx. ₹ 11 crores towards sale of profiles. We do not find anything in the impugned order to substantiate such large cash transaction in the books of accounts. There is nothing in the impugned order to show that the raw materials used for manufacture and clearance of profiles to Agarvanshi Ltd was procured clandestinely. There is nothing to show that profiles have been sold clandestinely in the open market. No such instance has been given in the impugned order. In fact, Agarvanshi Ltd has submitted that all the profiles received from Alumeco Ltd were cleared on payment of duty after due accountal in their books of accounts. Shri Bhaskar Rao during hearing has drawn our attention to the raw material inventory reconciliation statement annexed with the appeal paper book. According to him, every kilo of materials was accounted by Alumeco Ltd, monthly reports were also submitted to the Management. The Investigating Officers had taken all these documents and it is beyond imagination that if there are cash purchases of raw material and cash sale of profiles, the inventory would tally month to month. There was no possibility of huge quantity of invoices without receipt of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and billets are used interchangeably. It is also the submission of the appellant that Homogenization is a process wherein the elements in the metal are equally distributed to get uniform properties for the metal to make it suitable for certain types of extrusions. From the records, we find that processes such as homogenisation and cutting or conversion into billets are necessary or essential process in the stage of manufacturing of extrusions/profiles. The Adjudicating Authority has not given any credence to the processes necessary for the manufacture of profiles. He has merely denied the benefit of Notification on the ground that the appellant has not failed to perform the processes mentioned in the job work challans. It is not the case of the revenue that the processes indicated in the job work challans were not required for manufacture of profiles. The only case, as we find, that has been made out against Alumeco Ltd is that instead of using the raw materials dispatched by Agarvanshi Ltd under job work challans they have used their own materials for manufacture of profiles. The reasoning given by the Adjudicating Authority that no separate records for raw materials received fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. Thus, the benefit of Notification 214/1986-CE cannot be denied to Alumeco Ltd. They are, therefore, not liable to pay duty on the clearance of profiles to Agarvanshi Ltd. 14. The last issue which arises for our determination is whether proper duty has been paid by the Principal Manufacturer (Agarvanshi Ltd) on the profiles sent by Alumeco Ltd. In this regard, it would be worthwhile to refer to the submission made by Shri Bhaskar Rao, one of the appellant before us, wherein he has submitted that he had analyzed the invoices of Agarvanshi Ltd during the period in dispute which is also annexed with the appeal paper book filed before this Tribunal. The month-wise invoices of Agarvanshi Ltd filed by him along with the appeal will give the following details of Agarvanshi's invoice no, date of invoice, party to whom profile has been sold, corresponding Alumeco's profile number, Quantity supplied under said invoice and value including duty. The analysis of Agarvanshi's invoices presented in page No.188 to 272 of the appeal reveals that the entire lot of profiles supplied by Alumeco on job work basis was cleared on payment of duty by Agarvanshi Ltd during the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Agarvanshi Ltd but the same has also been co-related with Alumeco's profile nos. In the absence of any evidence to the contrary, we hold that job worked profiles received by Agarvanshi Ltd has been finally cleared on payment of duty. Thus, there has been no loss of Revenue in the present case. The undertaking to pay duty by the Principal Manufacturer (Agarvanshi Ltd) in terms of Not.214/86-CE has been complied with by clearing the profiles received from job worker (Alumeco Ltd) on payment of duty. 15. In view of the foregoing, we hold that Alumeco Ltd is not liable to pay duty on 1063.6222 M.Ts of profiles cleared after job work to Agarvanshi Ltd in terms of Not.214/86-CE. The impugned order, therefore, confirming duty upon Alumeco Ltd on account denial of benefit of Not.214/86-CE is set aside. We also hold that imposition of penalties upon Bhaskar Rao, Agarvanshi Ltd and its Directors are unwarranted and unsustainable. The appeals filed by them are also allowed 16. As regards confirmation of duty demand on 46.0166 M.T's of aluminium extrusions to Agarvanshi Ltd, we find that there is no finding by Adjudicating Authority. The Adjudicating Authority has not even re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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