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TMI Blog2022 (8) TMI 830X X X X Extracts X X X X X X X X Extracts X X X X ..... idence relied by the department is the computer printouts obtained from Income Tax Department as well as from the hard disc of the CPU seized from the factory premises of VPPL. The Ld. Counsel for appellant has argued that such computer printouts cannot be relied upon as evidence as the required procedure under Section 36B of the Central Excise Act, 1944 has not been complied by the department. Sub-section (2) of Section 36B provides that the document seized should be accompanied by a certificate which states that the computer printout containing the statement was fed into the computer during the period over which computer was used regularly to store or process information etc. and it should contain a certificate that throughout the said period computer was operating properly. Such procedures have not been complied - The Hon ble High Court of Delhi in the case of CCE DELHI -1 (NOW PRINCIPAL COMMISSIONER OF GST DELHI NORTH) VERSUS JINDAL NICKEL AND ALLOYS LTD ORS. [ 2019 (11) TMI 122 - DELHI HIGH COURT] held that provisions of Section 36B of Central Excise Act, 1944 are mandatory and to be complied with before admitting the said printouts as an evidence. In the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which have already been held to be inadmissible in evidence. Thus, the department has failed to establish the allegations for confirming the duty that the appellant has not passed on the discounts to their customers. The demand cannot sustain - appeal allowed - decided in favor of appellant. - Excise Appeal No.41747-41750 of 2018 - FINAL ORDER No. 40295-40298 / 2022 - Dated:- 18-8-2022 - MS. SULEKHA BEEVI, MEMBER (JUDICIAL) AND MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) Shri N. Viswanathan, Advocate For the Appellant Shri Arul C. Durairaj, Superintendent (AR) For the Respondent ORDER The appellant M/s.Vaivel Pyrotech Pvt. Ltd. (hereinafter referred to as M/s.VPPL) are engaged in the manufacture of fireworks. On the basis of specific intelligence gathered by the investigation wing of the Office of the DGCEI, Chennai Zonal unit, that Shri V. Arumugasamy (appellant in Appeal No.E/41749/2018), Managing Director of M/s.VPPL was evading Central Excise duty by clearing the goods in the name of other firms namely M/s.Karthi Fire Works, M/s.Revathi Fireworks Industries, M/s.Vadivel Pyro Park, M/s.Venus Fireworks and thereby suppressing the actual sales turnover of M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of Rs.36,29,632/- (Rupees Thirty six lakh twenty nine thousand six hundred and thirty two only) (BED Rs.35,23,915/- + Education Cess Rs.70,478/- + Secondary Higher Education Cess Rs.35,239/-) from M/s.Vadivel Flame Factory under Section 11A (10) of Central Excise Act, 1944. 4. I confirm the demand of duty amount of Rs.43,35,085/- (Rupees Forty three lakh thirty five thousand and eighty five only) (BED Rs.42,08,821/- + Education Cess Rs.84,176/- + Secondary Higher Education Cess Rs.42,088/-) from M/s.Venus Fire Works under Section 11A (10) of Central Excise Act, 1944. 5. I confirm the demand of duty amount of Rs. 62,18,927/- (Rupees Sixty two lakh eighteen thousand nine hundred and twenty seven only) (BED Rs.60,37,793/- + Education C ess Rs.1,20,756/- + Secondary Higher Education Cess Rs.60,378/-) from M/s.Vadivel Pyro Park under Section 11A (10) of Central Excise Act, 1944. 6. I confirm the demand of duty amount of Rs.20,50,238/- (Rupees Twenty lakh fifty thousand two hundred and thirty eight only) (BED Rs.19,90,523/- + Education Cess Rs.39,810/- + Secondary Higher Education Cess Rs.19,905/-) from M/s.Vadivel Pyro Park Karthi Fire Works Section 11A (10) of Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merged with M/s.VPPL pursuant to a Succession Agreement entered into between the firms. Accordingly, the assets and liabilities of these small units were taken over by M/s.VPPL which was the ongoing concern. This fact of merger of small units have been admitted and accepted by the department as seen in para-3 of the OIO. The said paragraph reads as under : 3. Ownership of firms of Vadivel group: Sri.V.Arumugasamy, Managing Director of VPPL vide his statement dated 22/8/2013, (Annexure A-22) has given details about the partners of the firms viz. M/s.Karthi Fire Works, M/s.Revathi Fireworks Industries, M/s.Vadivel Flame Factory, M/s.Venus Fire Works and M/s.Vadivel Pyro Park and also about their present status which is as follows : S.No. Name of the Firm Proprietor / Partner Present Status 1 M/s.Vadivel Flame Factory Partnership firm: V.Arumugasamy Athiban (son) Sujatha (daughter in law) Merged with M/s.Vadivel Pyrotech P Ltd during 2013 2 M/s.Revathy Fireworks Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, Vadivel Flame Factory, Venus Fire Works, Vadivel Pyro Park and M/s.VPPL for the period from 01.04.2012 to 09.07.2013. The entire duty demand has been quantified on the basis of the above document. Though the said document No.109/1 is said to contain print outs / documents received from Income Tax department vide letter dated 10.10.2013 (para 18.1 18.2 of SCN), these were actually seized form the factory premises. Such printouts are not admissible in evidence. Ld. Counsel adverted to Section 36B of Central Excise Act, 1944 and argued that the procedure contemplated in the said section has not been complied by the department while collecting or retrieving the evidence from the computer/laptop/notepad/pen drive and therefore such documents/ printouts are not admissible evidences . He submitted that the appellant has put forward the said grievance in para-5 of his reply to the SCN. Ld. Counsel argued that the hard disc obtained from the factory premises from which printouts were taken at the CFL, Hyderabad also cannot be relied for confirming the duty demand as these have been obtained without following the procedures provided in Section 36B of the Central Excise Act, 1944. As p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven alleged that the other units are dummy units created as a legal fa ade to evade payment of duty. It is not alleged that other units do not manufacture goods on their own or are fully funded by M/s.VPPL. The case put forward by the department is not in consonance with the allegation that small units were violating the conditions of the SSI Exemption Notification No.8/2003-CE dt. 01.03.2003. 8. It is submitted by Learned Counsel that apart from the file marked as Sl.No.109/1 and the hard disc recovered from the factory premises, the other evidence relied by the adjudicating authority is the statement of Shri S.G.Subbiah who is the Sales Tax Consultant of the appellant. The said statement cannot be accepted as evidence without complying with the procedure contemplated in Section 9D of Central Excise Act, 1944. The appellant was not afforded an opportunity of cross examining of Shri Subbiah. Therefore his statement cannot be relied. 9. The show cause notice further alleges that the units have maintained two sets of invoices. The department has not recovered or produced any such invoice and only the statement of Shri Subbiah has been relied to hold that the appellant has issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le unless the department is able to establish flow back of funds from such units and also that the other units were dummy units to camouflage clearance of the main unit. In the present case, each unit was truly independent unit and even department has not stated that the other units were dummy units and did not exist at all. This is clear from the demand of duty against each unit. Further, the maintenance of accounts of other independent units in a common office for cost conservation purposes cannot be a ground for clubbing clearance of various units. 12. It is also seen that clubbing of value of clearance of all units including VPPL has been done in the preceding years upto merger of these units. Thereafter, the demand has been separately confirmed on M/s.VPPL for the period 01.04.2013 to 30.06.2013. This exposes the inconsistent stand adopted by the department as they have no clear allegation that M/s.VPPL has been suppressing the value of their clearance by using small units. There is no iota of evidence to show that the appellant indulged in any unaccounted production and clandestine clearance. The department has not been able to establish any mutuality of interest or cash f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputer printout (File No.109/1), computer printout of party wise ledger and the entries in sales ledger of few customers. 16. Ld. Counsel submitted that based on the computer printouts obtained from GEQD Laboratory at Hyderabad, it was alleged by department that sales details of such clients did not reflect the discount given and that it tallied with similar details available in file No.109/1. He argued that the appellant had supplied goods to about 200 dealers out of which only a few invoices have been relied by the department. Only 7 invoices out of 117 invoices retrieved with regard to Shiv Crackers and 3 out of 126 invoices in regard to M.R Fire Works were relied to allege that the discounts were not passed on to the customers. 17. The allegation of non-passing of the discount amount to dealers has been made without reference to the statement, if any, obtained from the customer or at least on the basis of the accounts of such customer obtained during the search operations. In fact, the ledger account of the firms namely M/s.Shiv Crackers, Surat, M.R. Fireworks, Ludhiana, Baldev Raj Co., Ludhiana which are made available as part of Relied Upon Documents would show a dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2013. These are photocopies of documents seized by the Income Tax Department from the premises of M/s.VPPL. Copies of documents seized by I.T department were forwarded to the Excise officers which have helped the investigation. The data contained in these printouts tallied with the data of the printouts retrieved by CFL, Hyderabad from the CPU / hard disc seized during search conducted in the factory premises. 23. Further, the statement of Mr.Subbiah who is the Sales Tax Consultant supports the case put forward by the Department in the SCN. He has stated that out of several items mentioned in the sales invoices, he was directed to include only few items in the sales journal; that he was asked to make sales journal in such way in respect of most of the transactions of the companies of Vadivel Group which has resulted in suppression of sales turn over. The tax consultant of the appellant-company having admitted that they have been suppressing sales turn over, the clandestine clearances has been established. 24. With regard to the demand of duty on the ground that discount has not been passed on to the customers, Ld. A.R adverted to para 41.24.9 of the impugned order. He stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided that nothing contained in this notification shall apply to a manufacturer who has availed the exemption under notification No. 39/2001-Central Excise, dated the 31st July, 2001, published in the Gazette of India vide number G.S.R. 565 (E), dated the 31st July, 2001, in the same financial year. Provided further that exemption contained in this notification shall not apply to goods which are chargeable to nil rate of duty or are except from the whole of the duty of excise leviable thereon. Table S. No Value of clearances Rate of duty (1) (2) (3) 1. First clearances up to an aggregate value not exceeding * one hundred and fifty lakh rupees made on or after the 1st day of April in any financial year. Nil 2. All clearances of the specified goods which are used as inputs for further manufacture of any specified goods within the factory of production of the specified goods. Nil *The word one hundred and fifty lakh rupees effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of clearances mentioned against each of the serial numbers in the said Table and not separately for each manufacturer; (vii) the aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories, or from a factory by one or more manufacturers, does not exceed rupees three hundred lakhs in the preceding financial year. 3. For the purposes of determining the aggregate value of clearances for home consumption, the following clearances shall not be taken into account, namely : - (a) clearances bearing the brand name or trade name of another person, which are ineligible for the grant of this exemption in terms of paragraph 4; (b) clearances of the specified goods which are used as inputs for further manufacture of any specified goods within the factory of production of the specified goods; (c) clearances of strips of plastics used within the factory of production for weaving of fabrics or for manufacture of sacks or bags made of polymers of ethylene or propylene. 28. As per the notification the clearances upto Rs.1.50 crores can avail the benefit of SSI exemption. As already stated, M/s.VPPL, the main appellant was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st each unit by the department would cut the root of the case framed by the department. It is argued by him that when duty has been demanded against each individual unit for different periods, then it cannot be alleged that they are dummy units. We have to say that in an allegation of wrongful availment of SSI exemption, the clearances of the dummy units are usually clubbed together with the main unit and the demand of duty is raised only against the main unit. In such cases, the dummy units will not have any independent existence and are sham units used for making clandestine clearance of the main unit so as to suppress its sales turnover. In the present case, all the six units including M/s.VPPL do have their own factory and machinery for producing finished products (fireworks). So also, they have separate PAN allotted by the Income Tax Department, Sales Tax and CST Registration etc. They have been registered with the Director of Industries as Microunit producing fireworks. Further, in para 41.24, the adjudicating authority has observed that individual units are separate legal entities and are liable for penalty as separate legal entities. The department having demanded duty sepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outs cannot be relied upon as evidence as the required procedure under Section 36B of the Central Excise Act, 1944 has not been complied by the department. 34. Sub-section (2) of Section 36B provides that the document seized should be accompanied by a certificate which states that the computer printout containing the statement was fed into the computer during the period over which computer was used regularly to store or process information etc. and it should contain a certificate that throughout the said period computer was operating properly. Such procedures have not been complied. The requirement to comply with the procedure under Section 36B has been emphasized in various decisions. The Hon ble High Court of Delhi in the case of CCE Vs Jindal Nickel Alloys Ltd. - 2020 (371) ELT 661 (Del.) held that provisions of Section 36B of Central Excise Act, 1944 are mandatory and to be complied with before admitting the said printouts as an evidence. The relevant paragraphs of the Hon ble High Court decision are reproduced as under : 15 . Mr. Ahluwalia, Learned Counsel appearing for the appellant also sought to find fault with the observations, by the CESTAT, that it was not perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation supplied to the computer in the ordinary course of the said activities. 16 . There is nothing to indicate compliance with the strict stipulations contained in sub-sections (1) and (2) of Section 36B of the Act in the present case. We, therefore, find no reason to interfere with the findings of the CESTAT regarding non-compliance of Section 36B of the Act either. 35. The Tribunal in the case of S.N. Agrotech Vs CC New Delhi - 2018 (361) ELT 761 (Tri.-Del.) observed that in the absence of certificate required by section 138C (2) of the Customs Act, 1962 (which is pari materia to Section 36B of Central Excise Act, 1944), the Revenue cannot rely upon such document to confirm the duty. In the case of Ambika Organics Vs CCE Surat - 2016 (334) ELT 97 (Tri-.Ahmd) similar view was taken by the Tribunal which was upheld by the Hon ble High Court of Gujarat as reported in 2016 (334) A67 (Guj.) 36. In the present case, we find that the department has not complied with Section 36B of the Central Excise Act, 1944 while retrieving the data from the hard disc. The provision does not say that if the documents are sent to Central Forensic Laboratory, Hyderabad, it would become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also removing the finished products manufactured by them through the dummy units. It also has to be established that the dummy units do not have any existence or facilities for manufacture of goods on their own. Such evidences are absolutely absent in the present case. Merely because Shri V.Arumugasamy, his son and family members were partners in the different units cannot be a ground to say that there is mutuality of interest. Ld. Counsel has adverted to Circular No.6/92 dated 19.05.1992. The relevant part of the said circular reads as under : 1. Different firms will be treated as different manufacturers for the purpose the purpose of exemption limit. But if a firm consisting of certain partners say A,B, or C has got more than one factory, all these factories should be of course be combined. Limited companies whether public or private are separate entities distinct from the shareholders composing it. Hence, each limited company is a manufacturer by itself and will be entitled to a separate exemption limit. 2. If there are two firms with only some of the partners in common, each firm is entitled to separate exemption limit and hence the question of distributing the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of taking round in the factory premises of the Respondent No. 1 observed certain doors interconnected with an adjacent unit working in the name and style of M/s. Sharad Industries, Agra. It was reported that the Proprietor of the Respondent No. 1 is Mr. Avdesh Kumar Gupta and the Proprietor of the Respondent No. 2 is Smt. Kamlesh Gupta W/o Shri Avdesh Kumar Gupta. The officers during the course of investigation observed the following points :- (a) M/s. R.R. Iron Foundry and M/s. Sharad Industries had common office, situated at the factory premises of Appellant No. 1 in order to have better control, (b) the records of both the units were also kept and maintained therewith, doors between both the units were created and common labours were being utilized in both the units but according to convenience the labours were being deployed in any of the two units, (c) RRIF Brand was owned by Respondent No. 1 and the KIRTI VATAN Brand were owned by Respondent No. 2, whereas, seizure of 152 Pcs. of VATAN Brand C.I. Casting found in excess at the factory premises of Respondent No. 1 and 18,700,00 Kgs. of RRIF Brand C.I. Casting was recovered from the factory pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er product with the same brand name were related and their clearances were liable to be clubbed. ... 6 . We, after appreciating the submissions of both the sides find that there is not much dispute on factual position. It is not the Revenue s case that two units owned by Smt. Kamlesh Gupta and her husband Shri Avdesh Kumar Gupta not complete units having all the necessary machines and infrastructure for manufacture of their final product. Both the units have separate Sales Tax Registration, Industries Registration, Income Tax Registration, Electricity Connection, Telephone Connection ESI Registration etc. Merely because there is a door between the two units and power of attorney stand given to her husband to look after the job of her unit, by itself cannot be held to be a ground for holding both the units as one. Admittedly, husband and wife are entitled to their own business and if the husband is looking after the business of the wife that will not make the unit owned by the wife as a dummy unit. The prime requirement, for clubbing the clearance of two units is not having complete independent machinery and infrastructure to manufacture the goods. If both the units ar ..... 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