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TMI Blog2008 (4) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... and and imposition of penalty by the adjudicating Commissioner, Kolkata II. One of the appeal is filed by the Department against the order of Commissioner, Kolkata V dropping the duty demand. 2. The appellants have filed detailed written submissions in respect of Excise Appeal No. 550/2006 and the ld. Sr. Advocate, Shri S. K. Bagaria, states that the said written submissions are being adopted by his clients in respect of five appeals. A copy of the submissions is annexed to this order in Annexure A for ready reference. The main ground taken by the appellant assessees is that similar cases where demands were confirmed on same set of allegations have been decided by the Tribunal earlier as in the case of M/s Delta Plastics Anr. v. CCE., Kolkata I - 2003 (56) RLT 85 (CEGAT-Kol.) and in several other cases and since the department has not gone in further appeal against those orders of the Tribunal, the present demands have to be set aside following the ratio of those earlier CESTAT Orders. In respect of one appeal, where the department has filed the appeal, the respondent assessees contend that since the adjudicating Commissioner has followed the cited earlier decisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that "CESTAT as well as Adjudicating Authority erred in understanding the contents of the CIPET's letter dated 15-2-02 and did not give any cognizance to their technical opinion which seemed contrary to legal provisions as envisaged in Modvat credit/Cenvat Credit Rules". We are surprised and anguished that such a statement against the CESTAT order has been made by the ld. Member of the Board while passing an order in exercise of his statutory powers under Section 35E of the Central Excise Act, 1944. Let it not be forgotten that the CESTAT is a higher authority than the Board as evident from Section 35B(1) (C) of the Central Excise Act, 1944 empowering it to hear appeals against the orders of the Board. It does not behove the ld. Member of Board to question and criticize the understanding of the CESTAT while reviewing the adjudicating Commissioner's order. It is deplorable that even though the Board was aware of the contrary orders of the Tribunal, it took no steps whatsoever to safeguard revenue interest and file appeals against the same in the appropriate higher judicial forum and yet chose to criticize the same while passing a statutory review order. It also shows a major lacuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute about the following factual position (a) HDPE Pipes in question were manufactured at and cleared from the Appellants' factory. (b) The said pipes could only be manufactured out of granules. (c) The Appellant had purchased the granules in question and the said granules came to its factory under cover of proper duty paying documents and it took Modvat credits of the duties paid on the said granules. (d) There is no evidence or material whatsoever that save and except the granules on which Modvat credits were taken by the Appellant, any other granules were ever received at its factory for manufacture of the pipes supplied to DOT. (e) The said granules which were the Appellants' raw materials and the said pipes which were their final products were all along duly covered by the Modvat Scheme and the notifications issued thereunder. (f) All required procedural formalities under the Modvat Scheme were always duly complied with by the Appellant. 4.2 In the order passed by the Commissioner there is no material or evidence or basis to show that the Appellants ever received any other granules for manufacture of their final products or that the granules on which Modvat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by RIL and that accordingly the pipes in question must have been manufactured by the Appellant only out of the said grade. 6.4 If the said case made out by the Department is to be accepted (though the Appellant denies the same) it would mean that for manufacture of HDPE pipes supplied to DOT, the Appellant must have been received from RIL or its dealers HDPE Granules of Grade "Relene E 41003". It is not the Department's case that any granules were cleared from the factory of RIL without payment of duty. Thus, obviously, if the granules of Grade Relene E 41003 were to be procured by the Appellant, this could be only done either from RIL or from its distributors/dealers and even in that situation, the Appellant would have taken Modvat credit of the duties paid on the said granules of Grade "Relene E 41003". 6.5 It is absurd to suggest that even though the Appellant received duty paid granules of Grade "Relene E 41003", it did not take Modvat credits on the said granules but took Modvat credits on the granules of some other grades which were not used by it. The wholly untenable nature of the said allegation would be evident from the fact that it is based on the following base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the Appellant could have never manufactured HDPE Pipes in question inasmuch as it had never received any other granules. 6.6 It is submitted that all the aforesaid assumptions/presumptions are totally baseless and unfounded and are nothing else but mere surmises on the Department's part. When admittedly there is absolutely no evidence to show that the modvatted granules were removed from the factory as such or were not used for manufacture of pipes, there can be absolutely no scope to disallow the Modvat credits on such baseless and unfounded assumptions and presumptions. 6.7 The aforesaid position has in fact also been admitted by the Commissioner himself in the impugned order. In the said order at internal Page 13 of the impugned order, the Commissioner has held as under - "Following are the points, which have mainly been stressed in the Hon'ble CESTAT's decisions in the case laws relied upon by the said assessee :- (I) The Department has not been able to produce any evidence that the granules purchased by them were sold in the market. (H) They have also not been able to produce any evidence to show that the granules, which were allegedly used in the manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s letter, RIL specifically mentioned about blow moulding grade, film grade, film extrusion grade, extrusion coating grade etc. of granules and certified that all these grades "are blended into various proportions to produce a blend conforming to the specifications mentioned by Department of Telecommunications". (c) Thus, the said letter of RIL relied by the Department and annexed to the Show Cause I itself clearly certifies and confirms that HDPE Pipes conforming to DOT Specifications can be manufactured by blending various grades of HDPE Granules in different proportions. Thus, this letter of RIL relied by the Department in fact strikes at the very basis of the Department's case and totally uproots the same. 7.4 Re: Letter dated 7-10-99 of IPCL - This letter of IPCL was also annexed to the Show Cause Notices. In the said letter, it was clearly stated by IPCL that "blending of various polymer resins sometimes improve the processing and quality of the end product". 7.5 Letter dated 29-3-2001 of M/s. Gas Authority of India Limited - The said letter was also annexed to the show cause notices. GAIL in its said letter categorically stated that the applications of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vident from the details given in the show cause notice and its annexures, most of the granules used by the Appellant were of Grade Relene B56003, Relene F46003, 54GB012/54GB012A, B52A0003A/B/G etc. Density of all these grades varied between 946 Kg. to 956 Kg/M 3 as against DOT specifications of 946 Kg./M 3 . MFR required by DOT specifications was 0.4 to 1.1 gms/10 mts. As against this, MFR of the aforesaid materials varied between 0.32 to 1.2. Thus, the density and MFR of the granules used by the Appellant were quite near to the required parameters and by proper blending/mixing, the required parameters were easily achieved. 8.3 The aforesaid position was also fully clarified by the Appellant's representative in his statements recorded by the Central Excise Authorities. In the said statement of Sri Ashok Kumar Bajoria, he had inter alia clarified as under - "The raw materials purchased by us are of various grades but after processing we are sure it meets the specified density and MFR (Answer to Question No. 9) "Fact is that HDPE Pipe grade material is not always available and we have also used HDPE Pipe Grade material at times when they are available and as mentioned earl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppression of facts or mis-statement, wilful or otherwise, or contravention of any of the provisions of law with intent to evade payment of duty or otherwise. The entire relevant facts relating to the Appellant's manufacturing activities were fully and truly disclosed to and were known to the Department. This would also be evident inter alia from the following - (a) During the entire relevant period the Appellant was holding proper Central Excise Registration Certificate and complied with all required statutory formalities. (b) For availing the Modvat credits the Appellant duly filed its Modvat Declarations and complied with all the required procedural formalities. (c) All consignments of granules were received at the Appellant's factory under cover of proper documents evidencing payment of duties thereon and the Appellant took Modvat credits only of the duties actually paid on the goods as per such documents and not a penny more. (d) The duty paying documents were regularly being filed with and/or examined by the Central Excise authorities. In fact, the duty paying documents in respect of the said granules received at the factory were also defaced by the jurisdictional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut even giving any finding whatsoever as regards applicability of the proviso to Section 11A(1) and without giving even a single reason to invoke the extended period, the Commissioner confirmed the entire demand by invoking the longer period of limitation of five years and he had no right, authority or jurisdiction to do so. 11. Levy of penalty under Rule 57-I(4)/57AH(2) and demand of interest under Rule 57-I (5)/57AH(2) were and are also wholly illegal and invalid 11.1 The Commissioner erred in levying 100% penalty upon the Appellant under Rule 57-I(4)/57AH(2) of the 1944 Rules. The said credits were taken by the Appellant fully in accordance with law and the Appellant never violated any of the relevant provisions of law nor was guilty of indulging in anything due to which any penalty could be levied upon it. The said penalty has been levied by the Commissioner on a complete of mind and mechanically for the same reason. The Commissioner also erred in directing the Appellant to pay interest under Rule 57-I(5)/57AH(2) of the 1944 Rules. For the reasons aforesaid and those stated in the Appeal Petition it is submitted that it is just, reasonable and proper that the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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