lhek “kqYd ,oa dsUnzh; mRikn “kqYd vk;qDrky;]
dsUnzh; mRikn “kqYd Hkou]
jsl dkslZ] fjax jksM jktdksV-360001
OFFICE OF THE COMMISIONER OF CUSTOMS & CENTRAL EXCISE
RACE COURSE RING ROAD, RAJKOT-360001
(0281) 2442030/2456233
FAX:(0281)2452967
BY R.P.A.D. /
F.No.: V.72/15-251/Adj/2010
vkns”k dh frfFk
Date of Order:-
Ekwy vkns”k Lka.
Order
in
NO.20/ADC/2011
Original
Ekwy vkns”k Lka.
Order
vkns”kdrkZ in
dk uke :Original
NO.20/ADC/2011
Passed by:
ds lanHkZ esa :
In the matter of
dkj.k crkvksa uksfVl la- &frfFk
Show Cause Notice No. & Date.
1.
HAND DELIVERY
16.09.2011
tkjh
frfFk
djus
dh
30.09.2011
Date of Issue:-
(MkW-Ckychj flag)
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ds0 m-0 “kqYd vk;qDrky;]
jktdksV
M/s. Rainbow Engineering Co., 2,
Amarnagar Street No. 7-B, B/h Bashuchar
Vidhyalaya,
Near
Bajarang
Chowk,
Chandreshnagar Main Road, Mavdi Plot,
Rajkot
SCN.No.V.84/AR-III/ADC/128/2010
dtd. 31.05.2010
;g izfrfyfi ml O;fDr dks futh mi;ksx ds fy, fu%”kqYd nh xbZ gS] ftls ;g
tkjh fd;k x;k gSA
bl vkns”k ds fo:) vk;qDr (vihy) ds- m- “kq- vk;qDrky;] jktdksV esa
vihy dh tk ldrh gSA
vihy QkeZ bZ-,-&1 esa dh tkuh pkfg, ,o adsUnzh; mRikn vihy fu;e
2001 dh /kkjk&3 dh mi/kkjk (2) dh “krsZ mfYyf[kr O;fDr }kjk gLrk{kfjr
gksuh pkfg,A
dsUnzh; mRikn “kqYd vf/kfu;e 1944 dh /kkjk 35 dh mi/kkjk 1 ds
vuqlkj vkns”k dks izkIr fd, tkus dh rkjh[k ls 60 fnuksa ds vUnj vihy
Qkby dh tkuh pkfg,A
bl vihy ds lkFk fuEufyf[kr dkxtkr gksus pkfg,%
2.
3.
4.
5.
(a)
LVkEi vf/kfu;e 1870 ds /kkjk 1 dh mi/kkjk 6 ds vuqlkj bl vkns”k
dh izfrfyfi ;k nwljs dh izfrfyfi&ftl ij uhps n”kkZ, v/khu fu/kkZfjr
dksVZ dh LVkEi Qhl gksuh pkfg,%
(i)
;fn lcTSkDV eSVj dh jde ewY; 50 :Ik;s ;k mlls de gks rks 25
iSls gksA
(ii) ;fn ;fn lcTSkDV eSVj dh jde ewY; 50 :Ik;s ls vf/kd gks rks 50
iSls gksA
(b)
vihy dh izfrfyfi ftlij :Ik;s 2-50 dh dksVZ Qh LVkEi gksuh pkfg,A
6- vihy QkZe ds lkFk M~;wVh@isUkYVh vkfn ds Hkqxrku dk ewyHkwr
izek.ki= layfXur gksuh pkfg,
Notes: - [These notes are for broad general guidance only. The original text of the Central Excise
Act, 1944 and the Rules framed there under may be referred to before taking any action in terms of these
Notes.]
BRIEF FACTS OF CASE:
M/s. Rainbow Engineering Co., 2, Amarnagar Street No.-7-B, B/h Bahuchar
Vidhalaya, Near Bajrang Chowk, Chandreshnagar Main Road, Mavdi Plot, Rajkot,
(hereinafter referred to as “noticee No.1”), is engaged in the manufacture of
power driven Borewell pumps (submersible pumps), Open well pumps & Turbine
Pumps primarily designed for handling water and falling under CETSH 8413 710
and 8413 7094 of the Central Excise Tariff Act, 1982, and was not registered with
the Central Excise department.
2. On receipt of
information that the noticee No.1 was engaged in the
manufacture and clearance of power driven pumps, which do not conform to the
Bureau of Indian Standards (BIS) and therefore, said goods were not eligible for
exemption under Notification No. 8/2003-CE dated 1.03.2003; however the noticee
was clearing the said pumps without payment of Central Excise duty, a team of the
officers of the Head Quarters Preventive Unit of Central Excise, Rajkot, visited and
searched the factory premises of the noticee No.1 on 07.12.2009. During the
course of panchnama proceedings, Shri Sureshbhai Babubhai Vasani, Proprietor of
noticee No.1, explained that since last five years, they were manufacturing V-3, V4, V-6 bore sized submersible pumps and Open well pumps of different capacities,
from the premises of noticee No.1 and that they had not obtained ISI certificate for
any of their products. During the search of premises of noticee No.1, various
chits/challan, transport receipts and two pen-drives were recovered. Regarding
these pen drives, Shri Sureshbhai Vasani informed that these belong to the
accountant of noticee No.1 and he did not know the data contained in them. Both
the pen drives and other incriminating documents/records, as per Annexure A,
were resumed for futher investigation under Panchnama dtd. 7.12.2009. During
the search of the factory premises of noticee No.1, 10 Open well Pumps (5HP
3phase), 10 submersible pumps of V3 bore size (0.5HP 1phase) and 6 Submersible
pumps of V4 bore size (2 each of 0.5HP, 0.75HP & 1.5 HP, single phase), were
found in finished condition. Total 26 pumps valued at Rs.1,12,600/-, not
conforming to BIS standards were found from the premises of noticee No.1. The
said 26 power driven pumps, as listed in the panchnama dated 07.12.2009, were
placed under seizure under the reasonable belief that the same were manufactured
with intent to clear them without payment of excise duty by the noticee No.1. The
seized goods were then handed over to Shri Sureshbhai B. Vasani, Proprietor of
noticee No.1, under supratnama dated 07.12.2009, for safe custody. Shri
Sureshbhai Vasani, Proprietor, was explained that the pumps produced by noticee
No.1 were used for drawing water and if ISI certificate is not obtained thereof, they
were not eligible for SSI exemption and he was required to pay Central Excise duty
on sale thereof after 1.1.2007.
3. Statement of Shri Sureshbhai B. Vasani, Proprietor of the noticee No.1, was
recorded under Section 14 of the Central Excise Act, 1944 on 07.12.2009, wherein
he, inter alia, stated that the noticee No.1 was engaged in the manufacture of
series of V-3, V-4 and V6 bore size of submersible pumps and V-8 bore size Open
well pumps and sale thereof since last five years; that their products were used for
drawing ground water; that they had applied for ISI certificate, but the same was
not issued in respect of any of their series of submersible pumps or open well
pumps; that they were manufacturing and clearing around 150 submersible and
open well pumps per month; that they were affixing “Rainbow”, “S.K.” and “Boss”
brands on their pumps, out of which the first two were their registered brands; that
for manufacture of submersible and open well pumps, first, finishing process is
carried out on casted parts, then stampings are set in the steel pipe; then after
processes of machining, Copper wiring and fitting is carried out, and then the
assembled pumps are tested; that sometimes the finishing of the casted parts is
getting done on job work basis; that they had applied for ISI certificate for their
products, but, as the testing facilities were situated in the premises located
opposite the premises of noticee No.1, the certificate was not issued; that he
admitted that, by not obtaining the ISI certificate and by not paying the dues of the
Central Excise duties on submersible pumps and openwell pumps manufactured by
them, he had evaded Central Excise duties; that they had not prepared bills, for
the clearances made under LRs and ‘kachha’ chits, recovered during the search of
noticee No.1; that the reasons for their clearances, without preparing bills were
that, no customer was ready to purchase goods from them with bills and that he
also wanted to avoid the Central Excise duty liability; that their main customers
were, M/s Amar Motor Rewinding, Chamardi, Babra, M/s Maruti Motor Rewinding,
Babra, M/s Shyam Agro, Amreli, M/s Shakti Motor Rewinding, Derdi, M/s Murlidhar
Motor Rewinding and M/s Ganesh Traders, Ratlam; that the sale proceeds for their
sale without bills were received by him through “angadiyas” and sometimes, he
was collecting cash payments by arranging personal visits; that they were utilizing
the services of M/s Jalaram Transport, Mochi Bazar, Rajkot and M/s National
Transport, Kaisar-e-Hind Bridge, Rajkot for transportation of their products to
Amreli district and M/s Girnar Transport for their sale outside Gujarat state; that
they were purchasing raw materials without bills on cash payments from M/s
Dinesh Casting, Umakant Pandit Udhyognagar, Street No.4, Rajkot, M/s Satyam
Steel Pipe, Samrat Main Road, Rajkot, M/s Perfect Stamping, 1, Amulnagar, Rajkot,
M/s Mittal Copper, Rajkot, M/s Shiv Traders (Jadavbhai) Rajkot. Admitting the duty
liability, he voluntarily handed over two cheques each of Rs. 2.5 Lakh, drawn on
Rajkot Peoples Co-Op. Bank Ltd, which were deposited in the government account.
4. Further statement of Shri Sureshbhai B. Vasani, Proprietor of noticee No.1,
was recorded under section 14 of the Central Excise Act, 1944 on 14.12.2009,
wherein he, inter alia, stated that the noticee No.1 was engaged in manufacture of
Turbine pumps, submersible kits, bore well and open well pumps of different sizes
and selling them under their “S.K” and “Rainbow” brands; regarding manufacturing
process, he explained that they assemble the various parts of pump viz., SS Pipe,
‘Pawala’, Stampings, Shafting, Bushing, Casting (Channel Housing casing), Copper
etc.; then the assembled pumps are tested, painted, labeled and packed for sale;
that the processes were same for each of their products for V-3, V-4, V-6 bore
sizes submersible kit and open well pump kits of 0.5HP to 7.5HP capacities as well
as the turbine pumps of the bore sizes V-6 and V-8; that the noticee No.1 was
having lathe machine, press machine, balancing machine, grinder and drill machine
on which, different parts of pumps were machined or sized by the workers before
assembling into pumps; that he had not obtained ISI certificate for any of the
products manufactured by noticee No.1; that his products were used in drawing
water in which turbine pumps and open well pumps were used to draw water from
wells, in which the turbine pumps operates at ground level/above well and openwell
is being operated under water; that the bore well submersible pumps of V-3, V-4 ,
V-6 etc. boresizes were used in drawing water from different sized bores; that he
was using only “SK” and “Rainbow” brands for his products, since year 2003, and
he had not used any other brands; that he had not sold any of his products without
brand names; that as he was not having ISI certification for any of the pumps
manufactured by noticee No.1, he was effecting most of the clearances without
preparing bills and only preparing chits or delivery challan for booking the same
with transporters; that after receipt of payments, he was destroying the chits and
transport receipts; that the different transport receipts, guarantee cards, summary
slips and delivery challans/chits recovered from the premises of noticee No.1
reflected sale of their pumps without bills; that such sale did not show the
consignor’s name, and the consignee’s name were mostly shown in codeword; that
they were also carrying out the repairing of old pumps brought from nearby
villages; that the kits manufactured by them were the pumps without windings and
their values would be around Rs.1500/- lesser than that of normal pump; that he
was shown the descriptions of the pumps which were cleared on bills shown them
as kits; that they have sold turbine pumps to different farmers within Gujarat
state.
5.
The submersible pumps and open well pumps were sold, mostly to M/s
Kasama Pump, Hyderabad, M/s J.T. Indore, M/s Sai Shreenivasa traders,
Secunderabad, M/s Dildar Machinery, Aurangabad, M/s Gupta Machinery, Gwaliar
and M/s Shree Geetha Enterprise, Secundrabad; that he could not say from the
transport receipts (LR) as to which pumps were sold to these firms, but, if the
same were shown in summary list of that date, he could explain the clearance of
the said pumps under that transport receipt (LR); that all the financial transactions
of such clearances were made in cash and
during his personal visit, after
realization of the due amounts, the chits were destroyed; that he was purchasing
required raw materials from the parties of Rajkot viz. Impeller castings from M/s
Popular Foundry, Bhaktinagar, Rajkot, Winding wire form M/s Anmol Wire, Samrat
Industrial Area, Rajkot or M/s High Tech Wire, Patel agar, Copper Rods, SS Pipes
from M/s Western Pipe, Gondal Road, Rajkot, Panel Boards from M/s Mahadev
Panel, Atika, Housing castings from M/s Somnath Castings, Vavdi; that mostly the
raw materials were purchased on chits and payments thereof were made in cash;
that the chits/challan resumed from noticee No.1 on 07.12.2009, and shown in file
No. 2,3,5 & 7 of the panchnama, reflected their raw material purchases without
bills; that the pen drives resumed from noticee No.1 belonged to Shri Shaileshbhai
Savaliya, accountant of noticee No.1, who would be available after next three-four
days.
6. The sealed cover, containing two pen drives resumed from the noticee No.1,
serially numbered as “19” in the annexure-“A” to the panchnama dated
07.12.2009, was opened under panchnama on 18.1.210, in presence of two
panchas, Shri Sureshbhai Vasani, Proprietor of noticee No.1 and Shri Shaileshbhai
Savaliya, Accountant of noticee No.1. During the panchanama, Shri Shaileshbhai,
accountant, intimated that the files were in “Tally” programme and can be accessed
to only if that software was installed in the system. Hence, the tally software was
installed in the system and the white pen drive was accessed. On being asked
about the data displayed on computer from white pen drive, Shri Shaileshbhai,
accountant, informed that the details reflected sale without bills by M/s Rainbow
Engineering Co., Rajkot, during year 2008-09, which he had entered, on directions
of Shri Sureshbhai, from the chits; that the printouts of such sale were taken and
were serially numbered as page number 1 to 47, in a made up file. In the same
manner, on assessing the black pen drive, the sale details of February 2009 and
March 2009 were obtained, which were given page numbers 49 to 87, in the same
made up file. Apart from the above accounts, a scanned page was also found while
assessing the the pen drive, for which, Shri Sureshbhai informed that, it reflects
the total sales to his customer M/s Kasama Pump, Hyderabad, during month of
February 2009 and the sale proceeds received by him against it.
7. A Statement of Shri Shaileshbhai Manjibhai Savaliya, accountant of the
noticee No.1, was recorded on 18.1.210, under section 14 of the Central Excise
Act, 1944, wherein he, inter alia, stated that the two pen drives resumed from
noticee No.1, under panchanama dated 07.12.2009, belongs to him; that he was
handling the accounting work of noticee No.1 since last five years; that his work
was to take the chits/records from the noticee No.1 to his office, and, after
entering the same on his computer he used to return the chits and printouts to Shri
Sureshbhai, Proprietor of noticee No.1; that he was not having any data saved
anywhere else other than the two pen drives or any records in his possession; that
the printouts obtained from these pen drives reflected the sale of different pump
sets by noticee No.1 to their different customers, during the period from December
2008 to March 2009; that the chits and lists, from which this data was prepared,
were given by Shri Sureshbhai; that after entering the details in computer, he had
returned the chits/lists along with the printouts, to Shri Sureshbhai; that the chits
were having the details like dates, name of customers, types of pumps and the
amounts of sale values, which were shown under the debit side in ledger accounts;
that the lists were showing recoveries from those customers against whose names
the dates and amounts were written; that he had handled the entry work for the
noticee No.1 only for the period December 2008 to March 2009 ; that the data of
clearances for four months saved in pen drives for back up, on instructions from
Shri Sureshbhai, on completion of financial year 2008-09.
8. Further statement of Shri Sureshbhai B. Vasani, Proprietor of noticee No.1,
was recorded on 18.1.210, under Section 14 of the Central Excise Act, 1944,
wherein he, inter alia stated that he agreed to the panchnama dated 18.1.210, as
well as the file containing page number 1 to 87, having the data of printouts
obtained from the two pen drives in his presence; that he had also read the
translation of the statement dated 18.1.210 of Shri Shaileshbhai Savaliya,
Accountant of noticee No.1, and agreed to the contents thereof; that the reason for
preparing computerized data of their sale was for frequent revision/change in the
sale values of their products; that in case of return of pumps within guarantee
periods, if the replacements were made without considering the subsequent
revisions and without collecting the differential amounts, their profit margins would
wipe away; that for this purpose only, he had got the computerized entries for the
period from December 2008 to March-2009; that after getting the details, entered
in pen drives, he had destroyed the chits and had not preserved the hardcopies of
printouts; that he had not got the details of earlier periods entered in soft form,
and for the subsequent period, the chits/challans had already been seized by the
department; that apart from the seized records, he had not preserved any other
records; that he had not shown the full details and sale prices of the pumps in the
summary lists/chits recovered from noticee No.1; that the persons coming from
nearby villages are coming with their own vehicles and purchase pumps on cash
payments, hence no amounts has been shown against those pumps and no entry
was made anywhere else, in this regard, but the particulars of the pumps sold were
as shown in the respective chits; that sometimes, the pumps within warranty
periods, were returned to the noticee No.1 for repairing, which were returned back
to customers after repairs, hence no particulars were available for several LRs,
where only “sub pumps” or “water pump” or “open well pump” and “number of
packages” were shown; that the main sale of submersible pumps was of V-4 bore
sized pumps and in open well category, major sale was of their mini-open well type
pumps.
9. Statement of Shri Pravinbhai Bhikhabhai Ranparia, Manager and authorized
person of Shri Dhanjibhai Bhikhabhai Ranparia, Partner of M/s P.I.Manufacturing
Co., 2- Laxminagar, Mavadi Plot, B/h Valand Samaj Wadi, Rajkot (hereinafter
referred to as the Noticee No.2) was recorded on 02.02.210, under Section 14 of
the Central Excise Act, 1944,
wherein he, inter alia
stated that M/s P.I.
Manufacturing Co. was a partnership firm of Shri Dhanjibhai Bhikhabhai Ranparia
and Shri Bharatbhai Bhikhabhai Ranpariya, who were his brothers; that he was
handling all work of that firm in capacity of manager; that they are manufacturing
copper winding wire under the brand of “Hi-Tech” since last four years from their
firm; that he was handling the work related to purchase, sale and collection of sale
proceeds and his elder brothers are handling production and quality related works
at the factory; that their products, winding wires of different sizes are used in
manufacture of electric motors and submersible pumps; that his main customers
were M/s Rainbow Engineering. Co., Rajkot and M/s Krishna Industries, Rajkot;
that he had also cleared some of their production under “Hi-Tech” brand without
preparing bills on requirement of his customers; that the sale proceeds against
such sale was collected in cash only; that he had cleared winding wires to the
noticee No.1. However, he has not preserved any records thereof neither he
remember the exact details of such clearances; that as per his knowledge, “HiTech’ brand was not the registered brandname of any firm; that he knows Shri
Sureshbhai B. Vasani, proprietor of noticee No.1, since last three years and most of
their transactions were dealt with him only; that he had seen the page No.153 to
159 of file No.2, page No. 139 to 147 of file No.5 and page No.157 of file No.7, all
resumed from noticee No.1, under panchnama dated 07.12.2009, and the entries
reflecting “Hi-Tech Wire”, “Hi-Tech Wire (Pravin) or “Hi-Tech A/c (Pravinbhai)”
referred to his firm, namely M/s P.I. Manufacturing Co., Rajkot, only; that the
respective pages of file No.5 were reflecting the sale value of goods, sold to noticee
No.1, by them, without preparing any bills and the amounts payable to them, for
the period from April-09 to September-09; that the page No.157 of file No.7, was
not about their sale to noticee No.1, as from the applied rate of Rs.360/- per Kg.
shown therein, it must be for copper purchase; that in same file No.7, at page 329,
the chit dated 06.11.2009 reflected their sale, in which, the rates of Rs.530 per Kg.
or Rs.495 per Kg., are shown for different sized winding wires, sold to noticee
No.1; that after perusing the file No.2, resumed during panchnama dated
07.12.2009, he stated that the page Nos.153 to 159 thereof reflects the sale of
copper winding wire to noticee No.1, and the amount paid by Shri Sureshbhai,
proprietor of noticee No.1; that the amount therein has been shown by deleting
last two zeros of the actual amount in the ledger book(rojmel) numbered 12, of the
panchnama dated 07.12.2009; that he agreed to the statement dated 07.12.2009
of Shri Sureshbhai B. Vasani, in which their sale was referred to as the “purchase
from M/s Hitech Wire or M/s Hitech Industries” and in token thereof he put his
dated signature.
10. Summons were issued to the proprietor/partner/authorized persons of major
customers of noticee No.1, viz. M/s Kasama Pump, Shop No.18/1, 350/A-1, near
Omar restaurant, DRDI Main Road, Hyderabad (herein after referred to as “the
noticee No.3”), M/s Sai Srinivasa Traders, 5-1-529/E, Murthi Building, Ist Floor,
Nr. Indian Bank Secundrabad(herein after referred to as “the noticee No.4”), M/s
Sri Geeta Enterprises, 5-1-529/B, Murthy Building, Ist Floor, Opp. Indian Bank
Lane, Hill Street, Secundrabad (herein after referred to as “the noticee No.5”),
M/s Gupta Machinery Stores, A.B.Road, Gole Pahariya (Lathe Machine Workshop),
Lashkar, Gwaliar (M.P.) (herein after referred to as “the noticee No.6”), and M/s
Dildar Machinery, Near Maruti Mandir, Garkheda, Aurangabad (herein after referred
to as “ “noticee No.7”), for giving evidences and producing all the records for
purchase of pumps from noticee No.1 since 1.1.07. In response to the first
summons dated 22.04.210, the noticee Nos.3 to 6 forwarded letters, through Shri
Sureshbhai B. Vasani, to the effect that statement(s) of Shri Sureshbhai Vasani, on
their behalf would be binding to them. Further, in their letters, they expressed their
inability to remain present on scheduled dates, for giving evidences, with reasons.
The noticee No.3 cited unavoidable circumstances and also stated that he is not
having any record regarding business transactions with noticee No.1. The noticee
No.4 stated that he was busy with some social work on the given date and that
their firm was not maintaining any record of business transactions with noticee
No.1. The noticee No.5 stated that it was not possible for him to remain present on
the date and time given in the said summons, as well as, he was having little
transactions with noticee No.1. The noticee No.6 showed his inability to attend
SUMMONS on scheduled date due to some pre-commitments and had very rare
transactions with noticee No.1. The noticee No.7 did not respond to the summons.
11. Subsequent summons were issued to noticee Nos. 3 to 7, on 05.05.210, calling
for all the records related to their purchase from the noticee No.1, and to give
evidence. However, all the noticees failed to turn up for giving evidence and put up
their case. It appears that, they have also abetted the noticee No.1 in the entire act
of duty evasion, by way of purchasing the pumps not conforming to BIS standards,
without proper duty paying documents and obstructing investigation, refrain to give
response to the summons. It is admitted by the proprietor of noticee No.1, that he
has affected such clearances to their regular customers for continuous period of
time. The noticee no. 3 to 7 could have turned up on the scheduled dates of
summons, with the records called for; however they choose not to respond to the
summons. These acts, on their part have rendered each of these five noticees, liable
for personal penalties, under rule 26 of the Central Excise Rules, 2002.
12.
Further statement of Shri Sureshbhai B. Vasani, Proprietor of noticee No.1,
was recorded on 14.05.210, under section 14 of the Central Excise Act, 1944,
wherein he, inter alia, stated that he agreed with the records resumed during search
as well as with his earlier statements dated 07.12.2009, 14.12.2009 and 18.1.210;
that he agreed to the stated facts in the statement dated 02.02.210 of Shri
Pravinbhai Bhikhabhai Ranparia, on behalf of noticee No.2; that they had purchased
required raw materials for their productions on challan/chits, as seen in the
documents placed in file No.2,5 and 7 of panchnama, and effected cash payments to
the respective suppliers including the noticee No.2; that he had carried out majority
of sale of products of noticee No.1, by not preparing any bills/invoices and on
strength of chits/challans only; that the turbine pumps, they had manufactured,
were capable of drawing groundwater from depths of upto 200 feet; that turbine
pumps were mostly sold to local farmers and sold with warranties and these were
adaptible to be run either by diesel engine or by electrical motor of sufficient
horsepower; that he had seen the details of computerized printouts, as shown under
Annexure-A, Annexure-B and Annexure-C, showing the clearances of noticee
No.1 and prepared from the particulars of (i) the two pen-drives, (ii) the bills/
Warranty cards and (iii) the chits/challans/LRs, respectively, resumed from noticee
No.1; that he had destroyed all the remaining records related with their clearances of
pumps during the period from 1.1.2007 to 07.12.2009; that he agreed to the fact
that their mini-open well pumps and V-4 bore sized submersible pumps were much
in demand as compared to their other pumps; that for the prices of products/pumps
not reflected on the corresponding chits/slips and LRs, as listed in Annexure-C, the
prices shown were as per his price lists; that they were giving discounts of 7% to
20% on the rates shown in the pricelists, to their customers; that as after 1.1.2007,
his products became dutiable under Central Excise and, as they had not obtained ISI
certification for any of their products, he had cleared very few pumps on bills, by
showing them either under “repairing bills” or as “submersible kits”, but these
referred to the pumps manufactured and sold by them, in finished condition only;
that in fact, the prices of kits shown on bills and those of pumps were equal when
compared with their bills for pumps; that he had received the letters of four of his
main customers (noticee No.3 to 6), by post, and submitted them on 12.05.210, to
the department; that his major customers were the noticee No. 3 to 7, to whom he
had effected clearances without bills; that he had cleared most of his production
without preparing bills on strength of chits and/or challans only so that Central
Excise duty can be avoided; that he had checked and agreed with the computerized
lists- i.e Annexure A,B & C, of their clearances, prepared from the records and pen
drives resumed from the premises of noticee No.1, and signed the same in token of
having agreed; that as his sale was mostly without bills, he was purchasing raw
materials without bills, for which cash payments were given, which are shown in the
purchase chits/summaries and ledger accounts seized from noticee No.1; that the
daily cash book(rojmel), resumed from his factory premises, was showing the
transactions in cash, with his customers as well as suppliers; that no
bills were
available for most of the transactions shown therein; that the entries of daybook
were written by not showing the final two zeros of the actual amounts, to show the
amounts in thousands and lakhs to appear as if they were in tens and thousands
respectively.
13. The scrutiny of all the records resumed from the Noticee No.1 and produced
during different statements, was taken up wherein it was established that,
(i)
The Noticee No.1 was engaged in manufacture and clearance of V-3, V-4, V6, bore size of submersible pumps, V-6 & V-8 bore size Turbine pumps and
various models of open well pumps from 1.1.2007 to 07.12.2009, for which
they had neither obtained BIS certification nor prepared bills at the time of
clearance.
(ii)
All the products of noticee No.1 were power driven pumps primarily designed
for handling water and classified under CETH 8413 of the Central Excise
Tariff Act, 1985.
(iii)
None of the products manufactured by noticee No.1 were conforming to the
standards specified by the BIS and in light of Notifications 08/2003-C.E
dated 1.03.2003(as amended), read with Notification No.39/2006-C.E. dated
10.08.06, were not eligible for SSI exemption, after 31.12.2006.
(iv)
The comparative demand in market, for their models of V-4 type
submersible pumps and mini open well pumps, was higher as compared to
their remaining pumps.
(v)
The clearances of their above pumps not conforming to the BIS
specifications, the proprietor had cleared them on chits and had received the
payments in cash against such sale and had also destroyed the related
records.
(vi)
The Noticee No.1 has maintained exhaustive price list covering most sizes of
submersible pumps, Turbine Pumps and Open well pumps of different models
manufactured by them.
(vii)
For the period after date 31.12.2006, when SSI exemption was not available
to their products, the Noticee No.1 had effected sale of some of the pumps
by showing them on record as “submersible kits” or by raising “repairing
bills” only;
(viii) For computing the total clearance of pumps, the records of their clearances
were trifurcated as (i) ‘Annexure-A’-i.e. clearance details obtained from the
two pen drives; (ii)‘Annexure-B’-showing the clearance details from
bills/challans raised as well as the Warranty Cards(for turbine Pumps) and
the records where sale values were available, and (iii) ‘Annexure-C’showing clearance details on records i.e. LRs, chits, slips etc. where only
description of pumps as “submersible pump” or “open well pump” was
available, with the dates of bookings and the customer’s name/destination.
(ix)
For calculation of value of pumps, for which no corresponding particulars viz.
bore size, stages, phases and HP were available on records, the submersible
pumps were considered as V-4 bore size submersible pumps and openwell
pumps were considered as mini-openwell pumps and respective prices were
considered, after allowing the highest discount of 20%.
(x)
Some of the pumps were sold (i)to retail customers without bills for which
pump specification and cash received for the same only is mentioned on
records (ii) by referring them as either “submersible kit/motor kit” on sale
bills.
(xi)
Noticee No.1 had cleared about 282 numbers of pumps to noticee No.3,
125 numbers of pumps to the noticee No.4, 25 numbers of pumps to the
noticee No.5, 75 numbers of pumps to noticee No.7, out of total 513
pumps, for which records were recovered/produced.
14. On computation of total clearances from the records resumed, it appears that
the noticee No.1 has effected clearances aggregating to Rs.1,30,490/- during
1.1.2007 to 31.03.2007 (Annex-B), Rs.4,1,750/- during financial year 2007-08
(Annex-B), Rs. 1,07,42,321/- during F.Y. 2008-09 (Annex-A & Annex-B) and Rs.
96,89,945/- during 2009-10 (up to December 2009) (Annexure-B & Annexure-C).
The Central Excise duty to the tune of Rs. 9,14,212/- with Education Cess of Rs.
18,283/- and Sec. & Higher Edu. Cess of Rs. 9059/- appears to have been evaded
by the noticee No.1, as calculated, at Annex.” A”, Annex.-“B” & Annexure “C”, of this
SCN. Thus, the Central Excise duty totaling Rs. 9,41,554/- (Rupees Nine lakh Fortyone thousand five hundred and Fifty- Four only), has been evaded by the Noticee
No.1, as detailed in annexure “A”, “B” & “C” to this SCN.
15. The Noticee No.1 had, on 22.12.2009, applied for provisional release of seized
pumps from their factory premises. The Additional Commissioner(AE), Rajkot
ordered on 1.1.210 for provisional release of the seized goods on furnishing B-11
bond of Rs. 1,12,600/-, supported with a security of 25% of the value of the bond
amount. The Noticee No.1 executed the B-11 bond and furnished proportionate fixed
deposit to the Assistant Commissioner, Central Excise, Division– I, Rajkot, which
were accepted. Accordingly, the seized goods were ordered for provisional release on
28.1.210.
16.
From the above facts, it appears that the noticee No.1 was engaged in the
manufacture of power driven pumps primarily designed for handling water and falling
under CETSH 8413 710 and 8413 7094 of the Central Excise Tariff Act, 1985; that
the noticee No.1 has manufactured and cleared at least 513 pumps, not conforming
to BIS standards, from 1.1.2007 to 07.12.2009. The duty demand is as per annexure
“A”, “B” & “C”, according to which the Noticee No.1 has evaded the Central Excise
duty to the tune of Rs.9,41,554/-, during this period. Further, on 07.12.2009, it was
found that they had manufactured and stored 26 pumps, totally valued at
Rs.1,12,600/-, with an intent to clear them clandestinely, as the benefit of the SSI
notification was not available to the noticee No.1, as the same were not conforming
to the standards specified by the BIS.
17. In view of the above facts, it appears that the said noticee No.1 has
contravened the provisions of –
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
Rule 4 read with Rule 8 of Central Excise Rules, 2002 inasmuch as they have
removed the excisable goods without discharging the Central Excise duty in
the manner prescribed under the said Rules.
Rule 6 of the Central Excise Rules, 2002 in as much as they failed to assess
the duty payable on the clearance made by them.
Rule 9 of the Central Excise Rules, 2002 in as much as they have failed to
obtain Central Excise registration with the Department;
Rule 10 of the Central Excise Rules, 2002 in as much as they have failed to
maintain true and correct account of the manufacture and clearance of their
finished products.
Rule 11 of the said Rules in as much as they failed to issue the proper invoices
for clearance in respect of the said finished goods cleared from their factory.
Rule 12 of the said Rules in as much as they failed to correctly file the
Monthly returns regarding manufacture and clearance of finished goods with
the Central Excise department.
Failed to file a declaration with the department as provided under notification
36/201-CE (NT) dated 26.06.201, for the financial year 2008-09 &2009-10,
when their clearances had crossed the specified limit of Rs.90 Lakhs.
Therefore, all these acts of contravention on the part of the noticee No.1
appear to have been committed with the sole intention to evade payment of duty.
The noticee No.1 has suppressed the fact of the manufacture of pumps which did not
conform to the standards specified by the Bureau of Indian Standards(BIS) from the
department and cleared the said pumps without payment of duty through fraud,
willful misstatement and by suppression of the material facts and therefore duty not
paid is required to be demanded and recovered from them under the proviso to
Section 11A (1) of the Central Excise Act, 1944, by invoking extended period of
limitation of five years along with interest under Section 11AB of the said Act.
Further, the noticee No.1 has rendered himself liable to penalty under Section 11AC
of the said Act for the acts and omissions as described above. The noticee No.1, by
his acts of manufacturing, keeping and storage of the excisable goods without
obtaining Central Excise registration and without maintaining proper records, has
rendered himself liable for penal action under Rule 25 of the Central Excise Rules,
2002.
18. It also appears that the noticee No. 2, Shri Dhanjibhai Bhikhabhai Ranparia,
partner of M/s P.I. Manufacturing Co., 2, Laxminagar, B/h Valand Samajwadi,
Rajkot-2, had supplied their finished goods, i.e. winding wires of different sizes to
the noticee No.1, without preparing any bill/invoices and received payments in cash;
that no record of any type, was preserved by them, evidencing such supply. When
confronted with the delivery challans and accounts, the authorised person and
manager of noticee No.2, admitted their transactions with noticee No.1. Hence, the
noticee No.2 is knowingly concerned in the act of supply of the raw materials without
bills, which were used in manufacture of excisable goods for which he knew or had
reasons to believe that the same were liable to confiscation, under the said Act or
the rules framed there under. These acts, on his part, have made him liable for
personal penalty under Rule 26 of the Central Excise Rules, 2002
19. It appears that noticee No.3, Proprietor, M/s Kasama Pump, Shop No.18/1,
350/A-1, near Omar restaurant, DRDI Main Road, Hyderabad; noticee No.4,
Proprietor, M/s Sai Srinivasa Traders, 5-1-529/E, Murthi Building, Ist Floor, Nr.
Indian Bank Secundrabad, noticee No.5, Proprietor of M/s Sri Geeta Enterprises, 5-1529/B, Murthy Building, Ist Floor, Opp. Indian Bank Lane, Hill Street, Secundrabad,
noticee No.6, proprietor of M/s Gupta Machinery Stores, A.B.Road, Gole Pahariya
(Lathe Machine Workshop), Lashkar, Gwaliar (M.P.) and noticee No.7, Propreitor of
M/s Dildar Machinery, Near Maruti Mandir, Garkheda, Aurangabad are knowingly
concerned in the acts of transporting, procuring, purchasing etc. of the excisable
goods for which they knew or had reasons to believe that the same were liable to
confiscation under the said Act or the rules framed there under. Further, noticee
No.3 to 6 appear to have actively abetted the acts of duty evasion by Noticee No.1,
by destroying the relevant documents and accounts for purchase of pumps from
Noticee No.1. They have further abetted the act of duty evasion and by not cooperating and turning up for giving evidence during the investigation. These acts on
their part have made each of them liable for personal penalties under Rule 26 of the
Central Excise Rules, 2002.
20.
In view of above facts and documentary evidences the Noticee No.1, i.e.
M/s Rainbow Engineering Co., 2, Amarnagar Street No.-7-B, B/h Bahuchar
Vidhalaya, Near Bajrang Chowk, Chandreshnagar Main Road, Mavdi Plot, Rajkot, was
served with show cause No.SCN NO.V.84/ARIII/ADC/128/210 dated 31/05/210., as
to why:-
(i)
the 26 power driven pumps, not conforming to the BIS standards,
totally valued at Rs.1,12,600/-, placed under seizure, under the
panchnama dated 07.12.2009, should not be confiscated under Rule 25
of the Central Excise Act, 2002; as the said goods are provisionally
released, why the Bond and security furnished should not be enforced;
Central Excise duty of Rs.9, 41,554/- (including Education Cess and H.E. Cess)
(Rupees Nine Lakh Forty One Thousand Five hundred and Fifty Four only), as
detailed in the “Annexure – A, B & C” to this notice, should not be recovered from
them, under the proviso to Section 11A (1) of the said Act. As they have paid an
amount of Rs.5,00,000/- (Rupees Five Lakh only) voluntarily, why the said amount
should not be appropriated against the abovementioned duty amount; interest at
appropriate rate, on the aforesaid duty amount, should not be recovered from them,
under Section 11AB of the said Act, the penalty, under Section 11AC of the said Act,
should not be imposed upon them, penalty under Rule 25 of the Central Excise
Rules, 2002 should not be imposed upon them. The noticee No. 2, Shri Dhanjibhai
Bhikhabhai Ranparia, Partner of M/s P.I. Manufacturing Co., 2, Laxminagar, B/h
Valand Samajwadi, Rajkot-2, the noticee No.3, Proprietor, M/s Kasama Pump, Shop
No.18/1, 350/A-1, near Omar restaurant, DRDI Main Road, Hyderabad; noticee
No.4, Proprietor, M/s Sai Srinivasa Traders, 5-1-529/E, Murthi Building, Ist Floor,
Nr. Indian Bank Secundrabad, noticee No.5, Proprietor of M/s Sri Geeta
Enterprises, 5-1-529/B, Murthy Building, Ist Floor, Opp. Indian Bank Lane, Hill
Street, Secundrabad, noticee No.6, proprietor of M/s Gupta Machinery Stores,
A.B.Road, Gole Pahariya (Lathe Machine Workshop), Lashkar, Gwaliar (M.P.) and
noticee No.7, Proprietor of M/s Dildar Machinery, Near Maruti Mandir, Garkheda,
Aurangabad were also called upon to show cause as to why the personal penalty
should not be imposed upon each of them under Rule 26 of the said Rules, for
the contraventions discussed in foregoing paras.
Defence:.
In this matter the noticee has filed defence reply dated 11-01-2011,
as follows:
It was stated that:
1. They are running a small scale unit engaged in the manufacturing of
submersible pumps and turbine pumps without motor being attached to
it since 2005-06 and are also engaged in repairing of the submersible
pumps and open well pumps since beginning. It was also stated that he
is not having any ISI certificate for manufacturing of power driven
pumps and hence he is only manufacturing pumps and selling as pump
kits only. This pump kit cannot run on itself and has to be attached with
the driving force i.e. motor to make it as power driven pump set. The
noticee stated that they do not have the capacity to manufacture the
motor of pump set. A power driven pump consists of a pump and a
motor which is a force for running the pump. The noticee stated that he
only clears the pumps without motors by showing as pump kits in our
sale bills. Similarly the noticee stated that they manufacture the turbine
pumps and is selling it without the electromotive force i.e. motor or
diesel engine. Hence, the sale bills show the sale of only turbine
pumps without any motor/engine attached with it.
2. It was stated that the main work of the noticee is to undertake
the repairing of the submersible pumps and open well pumps. The
noticee stated that their unit consists of only two rooms, where only
two workers are employed and that too not regularly but casually.
3. The noticee stated that they are a tiny industry where the proprietor
of the unit also personally does the production work unit with a small
turnover. They stated that the allegation made in the Show Cause
Notice that the noticee have evaded the Central Excise duty of Rs.
9415547- and have manufactured submersible pump sets, turbine pump
sets and open well pumps without BIS certification is far from truth and
are baseless allegation.
4. The noticee further says and submits that the pumps manufactured by
him i.e. submersible pumps, open well pumps and turbine pumps
were without motor i.e. it does not have any attachments of power or
electromotive force. The noticee is statedly selling the same as pump
kits, hence the buyer/customer has to attach the motor with pump kit
to make it a power driven pump set. Without the power being attached,
it cannot be termed as power driven pumps. Hence no ISI certification is
required if the goods manufactured by the noticee are not the power
driven pumps. Hence, the department's allegation are baseless and the
demand is not justified on pump kits manufactured and sold by
noticee as the same does not require the BIS certification. The noticee
is eligible for small scale exemption under notification no. 8/2003 for a
turnover up to Rs. 1.5 crore on pump kits manufactured and sold.
Sales of the unit of noticee is well below Rs. 1.5 crore, hence, there is
no case for the department to demand the Central Excise duty on the
pump kits.
5.
It was stated that the sale of turbine pump was without the
attachment of diesel engine and till the diesel engine is attached, it
cannot be termed as power driven pump which require BIS
certification. Hence, no duty can be demanded on the turbine pumps
without attaching diesel engine. Similarly the noticee has statedly only
sold mini open well kits which do not have any rewinding motor so as to
connect with electric power.
6. The noticee says and submits that he is engaged mainly in repairing of
the open well and submersible pumps and is having a good reputation in
the field of repairing. He undertakes the repairing work with
guarantee and hence they issue the guarantee card to their customers in
this regard.
7. The noticee submits that in the impugned SCN, the demand of Central
Excise duty has been made on the basis of lorry receipts of transporters
alleging that the same are V-4 type submersible pump sets cleared by the
noticee. In this regard, he urged the department as to how the LR have
been linked with the noticee as it does not contain any description of
pump or pump sets or its type. The noticees have never manufactured V4 type submersible pump sets as stated earlier. Even though lorry
receipt does not mention name of noticee as consigner and contains
some strange name, which have been alleged as if the noticee have
cleared the goods under the said LRs. The department has not proved
that the said LRs belongs to noticee nor any statement of the
transporters have been recorded or put forth as an evidence in SCN.
Without such necessary evidence, it is the onus on the department to
prove that the goods as alleged in lorry receipt of some unknown
transporters/parties are the pump sets manufactured and cleared by
noticee. Looking to manpower employed and the electricity bill, we
are not able to understand how the department says that 513 pumps
have been manufactured by noticee. Annual production capacity of the
unit is about 600 pump kits. We failed to understand the department's
stand of demanding duty on such huge quantity of pump sets which were
never manufactured by the noticee. For manufacturing such a huge
quantity of pump sets the unit would have required the necessary raw
material such as Casting, Stamping, Copper winding wire, shaft etc.
The department has not shown any single piece of evidence on record to
justify that the noticee have purchased the unaccounted raw material
from any supplier of raw materials. No pain has been taken to put forth
such evidence of raw material supplier in the impugned SCN. Without
procuring the raw material, how one can manufacture such big quantity
of pump sets as demanded in SCN.In this regard we rely on the
judgments which are mentioned in the defence reply submitted by us.
8. The noticee states that no evidence has been put forth in SCN to whom
such big quantity of pumps has been sold by the noticee. The
department has not recorded any evidence from any of the buyers to
prove that they had purchased the pump sets from the noticee
without bill On the contrary, the undertaking/affidavits of some
customers stating that they had purchased only pump kits without
motor from the noticee and that too only under cover of proper bill as
Exhibit-2 of our defence reply dated 11-1-211.
9.
The noticee submits that, the duty has been demanded on the basis of a
computer printout taken from pen drive, however the department fails
to prove that it is pen drive of the noticee. In fact, the pen drive
belongs to accountant of the noticee Shri Shaileshbhai Savalia. Shri
Shaileshbhai Savalia in his statement dated 18-1-210 has also
confirmed the same. He is the accountant of various other firms; hence
his pen drive also contains the details of other firms. We fail to
understand how the entire details of the same pendrive are considered
as transactions of the noticee's firm. The noticee further submits in this
regard that they do not have any computer system installed at their
unit. Further, the department has not proved where in the pen drive
was installed and worked upon. This printout does not contain name of
noticee's firm as supplier of goods. Some unknown names are
appearing in these printouts which have been alleged to be noticee's
clearance/sales. How the department have presumed that this
transaction is noticee's is not understandable. The allegations of
clandestine removal of the finished goods have been based on the
strength of computer generated printout allegedly taken from pen
drive vide panchnama dated 18-1-210.
The noticee has disputed the authenticity of the said papers as
"document in evidence" in terms of provision of Section 36B of the
Central Excise Act, 1944. Admissibility of the computer generated
Printout material under the said section has been made subject to the
fulfilment of certain conditions, detailed herein.
It is well settled proposition of law that evidentiary value of computer
generated printouts cannot be used to prove clandestine removal, if
they do not satisfy the very condition of their admissibility as
"documents in evidence" under section 36B(2) of the Central Excise
Act, 1944 relating to their production by the computer during the
period involved. It will be useful to go through the text of Section 36B
of the Central Excise Act, 1944 as under:
SECTION 36B.
Admissibility of micro films,
facsimile copies of documents
and computer print outs as documents and as evidence
(1) Notwithstanding anything contained in any other law for the
time being
in force, —
(a) a micro film of a document or the reproduction of the image or
images embodied in such microfilm (whether enlarged or not); or
(b) a facsimile copy of a document; or
(c) a statement contained in a document and included in
a Printed material produced by a computer (hereinafter referred to as
a” Computer prints out"), if the conditions mentioned in sub-section
(2)and the other provisions contained in this section are satisfied
inrelation to the statement and the computer in question all be deemed
to be also a document for the purposes of this Act and the rules made
there under and shall be admissible in any proceedings there under,
without further proof or production of the original, as evidence of any
contents of the original or of any fact stated therein of which direct
evidence would be admissible.
(2) The conditions referred to in sub-section (I) in respect of a
computer print out shall be the following, namely:—
(a) the computer print out containing the statement was produced by the
computer during the period over which the computer was used regularly
to store or process information for the purposes of any activities
regularly carried on over that period by the person having lawful
control over the use of the computer;
(b) during the said period, there was regularly supplied to the
computer in the ordinary course of the said activities, information
of the kind contained in the statement or of the kind from which the
information so contained is derived;
(c)throughout the material part of the said period, the computer was
operating properly or, if not, then any respect in which it was
not operating properly or was out of operation during that
partofthatperiod was not such as to affect the production of the
document or the accuracy of the contents; and
(d)the information contained in the statement reproduced or is
derived from information supplied to the computer in the ordinary
course of the said activities.
(3) Where over any period, the function of storing or p rocessing
information for the purposes of any activities regularly carried on over
that period as mentioned in clause (a) of sub-section (2) was regularly
performed by computers, whether —
(a) By a combination of computers operating over that period;
or
(b) by different computers operating in succession over that period;
or
(c) by different combinations of computers operating in succession
over that period; or
(d) in any other manner involving the successive operation over that
period, in whatever order, of one or more computers and
one
or more combinations of computers, all the computers
used for that purpose during that period shall be treated for the
purposes of this section as constituting a single computer; and
references in this section to a computer shall be construed
accordingly.
(4)
In any proceedings under this Act and the rules made there under
where it is desired to give a statement in evidence by virtue of this
section, a certificate doing any of tile following things, that is to say,
—
(a) Identifying the document containing the statement and describing
the manner in which it was produced;
(b)giving such particulars of any device involved in the production of
that document as may be appropriate for the purpose of showing
that the document was produced by a computer;
(c) dealing with any of the matters to which the conditions mentioned in
subsection (2) relate,
and purporting to be signed by a person occupying a responsible
official position in relation to the operation of the relevant device
or the management of the relevant activities (whichever is
appropriate) shall be evidence of any matter stated in the
certificate; and for the purposes of this sub-section it shall be
sufficient for a matter to be stated to the best of the knowledge and
belief of the person stating it.
(5)
For the purposes of this .section, —
(a)
Information shall be taken to be supplied to a computer if it
is supplied thereto in any appropriate form and whether it is so
supplied directly or (with or without human intervention) by means
of any appropriate equipment;
whether in the course of activities carried on by any official,
information is supplied with a view to its being stored or processed
for the purposes of those activities by a computer operated otherwise
than in the course of those activities, that information, if duly
supplied to that, computer, shall be taken to be supplied to it in
the course of those activities;
(b)
Document shall be taken to have
been produced by
a computer whether it was produced
by it directly or (with or
without human intervention) by means of any appropriate equipment.
Explanation. — For the purposes of this section, —
(a) ''computer' 1 means any device that receives, stores and processes
data, applying stipulated processes to the information and supplying
results of these processes; and
(b) any reference to information being derived from other information
shall be a reference to its being derived there from by calculation,
comparison or any other process.
The condition in respect of the computer printout laid down in that
section, as is evident from the reading of its sub section(2), is that,
the computer printout containing the statement was produced by the
computer during the period over which the computer was used
regularly to store or possess the information.
In the instant case document used as base is computer generated
printout as specified under clause (c) of sub section (1) of section
36B ibid. If the conditions mentioned in sub-section (2) and the
other provisions contained in this section are satisfied in relation to
the statement and the computer in question, the said computer
printout shall be deemed to be a document for the purpose of this act
and the rules made there under and shall be admissible in any
proceedings there under. Not a single condition contained under subsection (2) of section 36B ibid is satisfied in the instant case as regard
with said computer printout, as under:
•
•
•
•
The computer printout containing the details was not produced from
any computer of the noticee but the same was taken from the pen drive
of Shri Shaileshbhai Savalia;
The said computer printout was not produced by the computer during
the period over which the computer was used regularly to store or
process information for the purpose of any activities regularly carried
on over that period by the person having lawful control over the use of
the computer;
There is nothing on record which even suggest that during the said
period, there was regularly supplied to the computer in the ordinary’
course of the said activities, information of the kind contained in the
statement or of the kind from which the information so contained is
derived;infact there was no computer installed at our premises:
There is nothing on record which even suggest the information
contained in the computer generated printout reproduced or is derived
from information supplied to the computer in the ordinary course of the
said activities;
In the instant case provision of sub section (3) of section 36B ibid is also
not applicable, in as much as nothing on record or proved that the function
of storing or processing information for the purposes of any activities
regularly carried on over that period was regularly performed by computer
by any means either by a combination of computers operating over that
period or by different computers operating in succession over that period
or in any other manner involving the successive operation over that
period, in whatever order, of one or more computers and one or more
combinations of computer.
Most important in case of presumption of computer printout as
evidence in any proceedings under the Central Excise Act, 1944 and the
rules made there under, there is a requirement of a statement in
evidence by virtue of this section, and a certificate identifying the
document containing the statement and describing the manner in which it
was produced and giving such particulars of any device involved in the
production of that document as may be appropriate for the purpose of
showing that the documents was produced by a computer and/or dealing
with any of the matter to which the conditions mentioned in sub section(2)
relate, and purporting to be signed by a person occupying a responsible
official position in relation to the operati on of the relevant computer shall
be evidence of any matter stated in the certificate. Further, it is also
requires to be stated to the best of the knowledge and belief of the person
stating it.
In the instant case, only reliance is placed on a computer generated
printout taken from pen drive to charge the clandestine removal. To
sustain the admissibility of the computer print outs for proving the
charge of clandestine removal by noticee, admissibility of the printed
material under the said section 36B ibid, is required to be made
considering fulfilment of certain conditions detailed there in. In the instant
case, the print outs were not produced by the computer but it was taken
from pen drive of other person Shaileshbhai Savalia.
In view of the above, the computer print out used as evidence is not
admissible document in terms of section 36B of the Central Excise Act,
1944. Therefore, these computer generated printouts cannot be used to
prove clandestine removal as "document in evidence" in as much as the
same do not satisfy the very condition of their admissibility as
document in evidence under section 36B(2)(a) of the Central Excise act
1944.
It is alleged that the accountant of the noticee admitted the correctness of
the entries in the computer generated printout.
The recorded admission of the accountant of noticee is far from truth, in
as much as documentary evidence in this regard shows contrary to the
deposition. In this regard it is a well settled position, that when the
documentary evidence, the authenticity of which is not under dispute,
shows otherwise, the same has to be given more credibility than the oral
version. In the instant case the documentary evidence are showing
contrary to the deposition made by the accountant of noticee.
Without admitting and without prejudice to above submission, kind
attention of your honour is invited towards the fact that prejudice of the
department was still continued up to issue of show cause notice. The
department not only failed to establish factum of manufacture of pumps
but also failed to extend the benefit of cum-duty price.
The goods seized by the department and released provisionally were the
pump kits and not pump sets and hence not liable for confiscation as the
same are liable for SSI exemption.
No Central Excise duty can be demanded on pumpkits manufactured and
sold by the noticee as same is eligible for SSI exemption under Notification
No. 8/2003. No duty can be demanded on the repairing of the pumps.
Having said that the pump kits are eligible for SSI exemption, no duty can
be demanded; hence the question of levy of interest and imposition of
penalty does not arise.
In these circumstances, show cause notice demanding duty on the basis of
belief that goods were manufactured by noticee's firm is liable to be
quashed abintoto. And requested to drop the proceeding proposed under
the show cause notice.
Personal Hearing :
Personal hearing in the matter was held on 17.08.2011 during which
Shri Jagdish V. Busa, Consultant appeared on behalf of M/s. Rainbow
Engg. Co, Shri D. B. Ranparia, partner of P.I.Manufacturing Co.; Prop. M/s
Kasama Pump; Prop. M/s. Sai Srinivas Traders; Prop. M/s. Geeta
Enterprises and Prop. M/s. Gupta Machinery and reiterated the
contentions made by them in written submissions.
The Consultant also stated that the unit is an SSI unit and is also
engaged in repairs and selling of kits of pumps. He also made following
pleas;
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
They have cleared only Kits and not entire pump;
The figures worked from pen-drive are hit by the proviso contained
in section 36B and the same are not satisfied; hence the demand
based on pen-drive is not supported by evidence and therefore the
same cannot be confirmed.
The turbine pumps are sold without attachment of diesel engine i.e.
electromotive force to run the same, hence it is not ‘power driven
pump’
The clearances of kit are eligible for the SSI exemption Notification.
The Lorry Receipts relied by the department do not carry any
indication which shows that the pumps were sold by the noticee.
No statement of buyers has been recorded.
Cum-duty price benefit may be allowed, if not satisfied with the
above arguments; and
Affidavits of customers evidencing purchase of only pump kits
without motor, may be taken into consideration.
Nobody appeared for the Proprietor of M/s. Dildar Machinery, Aurangagad.
DISCUSSION AND FINDINGS:
I have carefully gone through the entire case records, Show Cause Notice, and the
contentions raised in written defense replies filed by the noticees as well as
arguments put forth during the course of personal hearing.
1) The issue to be decided in the present proceedings is whether Power Driven
Pumps manufactured and cleared by the noticee No. 1 are eligible for the value
based SSI exemption under Notification No.08/2003-CE dated 1.03.2003, as
amended, or not and whether the details derived from the seized pen drives are
hit by the proviso contained in Section 36B or otherwise.
The exemption contained in Notification no. 08/2003-CE to power driven pumps
is subject to the condition that the same are manufactured according to BIS
specifications as envisaged in the Annexure to “list of goods eligible for SSI
exemption” to the aforesaid Notification under Chapter 84 which reads as
under;
“All goods other that power driven pumps, primarily designed for handling
water which do not conform to standards specification by BIS [Bureau of
Indian Standards] for such pumps”
From the above, it is evident that the power driven pumps viz. submersible
pumps, open well pumps and turbine pumps, etc falling under CETH 8413, (if
manufactured) which do not conform to standards specified by BIS, would not be
eligible for the benefit of SSI exemption under the above notification.
From the case records and the show cause notice, it is evident that the power
driven pumps, manufactured by the noticee No. 1 were not conforming to BIS
standards and hence they were not eligible for exemption under aforementioned
notification. This is also not disputed by the noticee No. 1 or his consultant
representing them.
2)
The point of dispute raised by the noticee consultant and in their written
submissions is as under:
[1] They have cleared only kits of the pumps in certain cases
[2] The figures taken from their pen drives for arriving at the demands are
hit by the provisions of Section 36B of the Central Excise Act and hence no
evidence can be relied on the same.
[3] Turbine pumps were cleared without the electromotive force i.e. without
attachment of diesel engine and hence it cannot be taken as power driven
pumps.
I find that the specific contention of the noticee no. 1, that they have cleared
pump kit without attaching any electromotive force and therefore eligible for the
benefit of Notification No. 08/2003-CE supra, merits consideration. Pump kit were
cleared without any motor attached with it, and therefore it cannot be called ‘power
driven’ and as per the above definition in the Annexure attached to the said
Notification, only “power driven pumps” are put under exclusion in the Annexure. If
no electromotive force is attached therein, then it cannot be termed as power
driven pump. The noticee in his statement also has stated that “the kits
manufactured by them were the pumps without windings and their values would be
Rs. 1500/- less than the normal pumps and the noticee no. 1 has shown the
descriptions of the pumps which were cleared on bills “as kits “. It is further
submitted by them that the buyer has to attach the motor with pump kit to make it
power driven pump set, hence, no BIS certification is required, if the goods
manufactured by them are not the power driven pump. They have also produced
the affidavits of customers/buyers; evidencing the purchase of only pump kits
without motors. Hence, I am of the considered opinion that the pumps cleared
without motor i.e. the electromotive force to run the said pump, do not require BIS
specifications and hence the same do not fall under the exclusion category and
therefore Kits cleared by the noticee no. 1 are eligible for SSI exemption under the
aforesaid notification. Hence, I am giving the benefit of Exemption under Noti.
8/2003-CE on the kits cleared to the extent of value of Rs. 7,39,589/-, which do
not merit demand of duty.
2. With reference to their second contention that the demand has been arrived at
by taking the figures retrieved from the two pen drives seized from the factory
premises of the noticee no. 1, I find that the same are not hit by the provisions of
Section 36B of the Central Excise Act, 1944, inasmuch as the same were recovered
during the course of search of the factory premises of the noticee no. 1. The details
of the said two pen drives were retrieved under the proceedings of panchnama in
presence of the proprietor and accountant of the noticee no. 1. The accountant Shri
Shaileshbhai Manjibhai Savalia, in his statement dated 18.1.210 has stated that his
work was to take the chits/records from the noticee No.1 to his office and after
entering the same on his computer, he used to return the chits and printouts to
Shri Sureshbhai, Proprietor of noticee No.1 and he was not having any data saved
anywhere else, other than the two pen drives or any records in his possession. The
printouts obtained from these pen drives reflected the sale of different pump sets
cleared by noticee No.1 to their different customers, during the period from
December 2008 to March 2009 and the chits and lists, from which this data was
prepared, were given by proprietor.
Similarly, the contents of the said pen drives have been confirmed by the
proprietor of the noticee no. 1 in his statement dated 18.1.210 stating that after
getting the details entered in pen drives, he had destroyed the chits and had not
preserved the hardcopies of printouts; that he had not got the details of earlier
periods entered in soft form, and for the subsequent period, the chits/challans had
already been seized by the department; that apart from the seized records, he had
not preserved any other records; that he had not shown the full details and sale
prices of the pumps in the summary lists/chits recovered from noticee No.1;
Further it is also confirmed during the course of investigation that the
accountant used to enter the transactions of the noticee no 1’s sale and other
entries in the said two seized pen drives on the instructions of the proprietors and
after entering them in the pen drive, the chits/challans were destroyed by them. It
is also evident from the record seized during the search on 07.12.2009 like various
chits/challans/LR’s, Warranty cards etc; that the practice of entering the same into
the soft version i.e. in pen drive for the past period must have been carried as
narrated by the proprietor of the noticee no 1. The seized documents were for the
subsequent periods, which were yet to be entered in the pen drive and the prior
data was found in the said two pen drives seized. Hence, I am of the view that the
pen drives recovered during the course of search and duly confirmed by their
accountant and proprietor contains the record of illicit removal of power driven
pumps by the noticee no 1 to their various customers.
The seized records, details contained in pen drives, LRs seized and other
documents further confirm that the noticee no. 1 was engaged in illicit removal of
the power driven pumps of sized V-3, V-4, V-6 [submersible] open well and turbine
pumps without obtaining Central Excise registration and without payment of
Central Excise duty on the same. The said pumps were manufactured and cleared
by the noticee no. 1 without having BIS standards, hence they are not entitled to
the exemption on such clearance of the Power Driven Pumps and they are required
to discharge the appropriate Central Excise duty on the same. The said fact is also
admitted by the proprietor of the noticee no. 1 in his various statements recorded
during the course of investigation. The same is also evident from the statements of
their various suppliers who have confirmed that they have sold the raw material of
P.D. Pumps to the noticee no 1. So, I am not inclined to accept the said defense
and therefore I am inclined to confirm the C. Excise duty on the clearance of P.D.
Pumps without BIS specifications as derived from the data recovered from the said
two pen drives and the other seized records. The case laws cited by the noticee no.
1 are not squarely applicable to the facts and circumstance of the present case and
therefore, reliance placed on the said case laws is of no avail.
As regards, the noticee no. 1’s third argument pertaining to clearance of
Turbine pumps without attaching diesel engine i.e. electromotive force to run the
same, hence it is not power driven pump, I am of the view that the said turbine
pump can also run on electricity, apart from diesel engine, which is also confirmed
by the proprietor of the noticee no.1. Hence, there is no force in this defense put
forth by them and the duty of Central Excise is required to be discharged on the
clearance of the said turbine pumps manufactured without BIS specifications.
It has been further contended by the noticee no. 1 that 26 pumps seized
from their unit on 07.12.2009 were nothing but the Kits and not fully manufactured
power driven pumps. In this regard, I find that all these 26 pumps have been
provisionally released to the noticee no 1; hence the same are not available for my
examination/inspection. This argument appears to have been put forth as an afterthought and does not merit any consideration. Hence, there is no force in their
argument and hence these seized goods merits confiscation.
The noticee no. 1’s contention that they were also engaged in repairing of
pumps has to be accepted without any element of doubt and cannot be denied,
inasmuch as they had issued the bills for the repairing of the pumps and also some
chits recovered also reflect the same. But it does not, by any stretch of
imagination, be considered that the noticee no.1 was only doing the job of
repairing. The repairing work appears to have been done by the noticee no.1 on
their own returned and defective pumps. However, the value of repairs to the
extent of Rs. 1,14,740/- is not liable to Central Excise duty and the demand made
in the SCN is to be liable to be reduced to that extent.
It has been further argued by the noticee no.1 that the demand of Central
Excise duty has been made on the basis of lorry receipts of transporters alleging
that the same are V-4 type submersible pump sets, does not mention their name
as consigner and contains some strange names. Further, it is argued that the
department has not proved that the said LRs belonged to their firm nor any
statements of the transporter have been recorded to put forth as evidence in SCN.
Without such necessary evidence, the onus is on the department to prove that the
goods as alleged in lorry receipt of some unknown transporters/parties are the
pump sets manufactured and cleared by them. In this regard, I find that the said
Lorry Receipts were recovered during the course of search of the premises of the
noticee no. 1 and the proprietor of noticee no. 1 has himself admitted in his
statement that the same were the documents under which they have cleared the
pumps without preparing invoice and without payment of duty. Once a thing or
matter is admitted and is not challenged, it is not necessary to further collect the
evidence in this regard and hence, no statement of transporters has been recorded.
I find that the said lorry receipts are nothing but the incriminating documents
evidencing illicit removals. I further find that the demand raised on the basis of the
two pen drives seized and the other documents shows the illicit removal of power
driven pumps which do not bear BIS specifications.
It is further argued by the noticee no. 1 that for manufacturing such a huge
quantity of pump sets, they would have required the necessary raw material such
as Casting, Stamping, Copper winding wire, shaft etc. The department has not
adduced single piece of evidence on record to justify that they have purchased the
unaccounted raw material from any supplier of raw materials. Without procuring
the raw material, how one can manufacture such big quantity of pump sets as
demanded in the Show Cause Notice. In this regard, I find that the above
argument is also baseless, in as much as the proprietor of noticee himself in his
statements have given the names of various suppliers of raw material for the goods
purchased by them without bill. I further find that the statement of Shri Dhanjibhai
B Ranparia, partner of noticee no 2 has been recorded by the department and he
has categorically admitted of having supplied the raw material to the noticee no.1
without cover of proper invoice. Hence, it is not correct to say that no evidence on
record is there to substantiate the claim of the department. Various case laws cited
by the learned consultant of the noticee no.1 are not squarely applicable to their
case and are of no help to the case of noticee no.1.
Further it has been argued that the department has not recorded any
evidence from any of the buyers to prove their illicit removals. I do not find any
merit in this argument as the department has made the best efforts and has
summoned at least three times to the noticee nos. 03 to 07. Inspite, of giving three
summons, they failed to turn up on the given days and have shown the total
unwillingness in appearing before the department and in total disregard of the
various summons. They have cited untenable and vague reasons for their non
appearance. However, the proprietor of the noticee no. 1 has himself categorically
admitted the clearance of power driven pumps without BIS specifications to the
various customers, the names of such customers were found in the seized
documents and in the details of print-outs taken from the two pen drives. All the
noticees nos. 03 to 07 have given their authorization to the noticee no. 1, that
whatever the proprietor of noticee no 1 will submit, will be admissible for all of
them also. The noticee no. 1 has clearly admitted of having sold the power driven
pumps without BIS specification and without cover of invoice to all these five
noticees/customers. Hence, the plea taken by the noticee no.1 does not hold any
ground.
# It has been further pleaded by the noticee no. 1 that the department has
over-valued the prices of power driven pumps while demanding duty in the Show
Cause Notice. In this regard, I find that the show cause notice clearly states,
regarding the deposition made by the proprietor of the noticee no. 1, that their
major sales was of the V-4 type submersible pumps and Open-well pumps. Further,
they are allowing 20 % discount on the printed price of pump. Hence, the demand
as worked out in show cause notice has been arrived at by taking the price of such
pumps after allowing highest discount of 20 % i.e. the practice followed by noticee
no 1. Hence, the demand has been properly computed and the argument of overvaluation is without any base and not tenable. Notwithstanding above, the noticee
no. 1 has failed to give the valuation, any different from what is adopted while
computing, inspite of his above argument so as to sustain and support their
argument on valuation, which itself shows it is a defense for the sake of making a
defense, without providing evidence for the valuation.
# The noticee no 1 has further desired to allow them the benefit of cum duty
price on the power driven pumps illicitly cleared and for that they have put forth
the explanation to Section 04 which reads as under;
“For the removal of doubts, it is hereby declared that the price-cumduty of the excisable goods sold by the assessee shall be the price
actually paid to him for the goods sold and the money value of the
additional consideration, if any, flowing directly or indirectly from the
buyer to the assessee in connection with the sale of such goods, and
such price-cum-duty, excluding sales tax and other taxes, if any,
actually paid, shall be deemed to include the duty payable on such
goods.”
Further they have also relied on the Hon’ble Supreme Court’s Judgement in
case of GOI V/s Madras Rubber Factory Ltd reported in 1995[77]ELT-433[SC] and
larger bench judgment in Shree Chakra Tyres reported at 1999[108]ELT-361[tri].
In view of the above settled position, I allow the benefit of cum-duty price as
contained in the section 4, to the noticee no. 1 as the price charged from the
customer will have to be considered as inclusive of Central Excise duty leviable
thereof. The demand to that extent is reworked at Annexure A to this order.
# With reference to the recovery of interest and imposition of penalty, I find
that the noticee no 1 has committed the acts of omission and commission with the
sole intention to evade payment of duty. The noticee No.1 has suppressed the fact
of the manufacture of pumps which did not conform to the standards specified by
the Bureau of Indian Standards(BIS) from the department and cleared the said
pumps without payment of duty through fraud, willful misstatement and by
suppression of the material facts and therefore duty not paid is required to be
recovered from them under the proviso to Section 11A (1) of the Central Excise
Act, 1944, by invoking extended period of limitation of five years along with
interest under Section 11AB of the said Act. The noticee No.1, by his acts of
manufacturing, keeping and storage of the excisable goods without obtaining
Central Excise registration and without maintaining proper records and clearing the
same without BIS specifications, has rendered himself liable for penal action under
Section 11AC of the Act.
# I also find that the noticee nos. 02 to 07 are the suppliers/buyers of the raw
material and power driven pumps from noticee no. 1 in contravention of provisions
of the Central Excise Act and the Rules framed there under. They were fully
concerned in the transporting, removing, depositing, keeping, selling or
purchasing, etc. with the excisable goods, which they knew or had reasons to
believe that the same were liable to confiscation under the Central Excise Act or
the rules framed there under. These acts on their part have made each of them
liable for personal penalty under Rule 26 of Central Excise Rules, 2002. All of them
except noticee no.7 have put forth the similar argument of not having the
knowledge of Central Excise Law or they being small traders or not aware of any
condition attached to the notification no. 08/2003-CE regarding BIS specification
and have given the similar version of having purchased the pump kits and not the
fully manufactured power driven pump. The noticee no. 7 had neither filed defence
reply nor did any one appear on their behalf. I am disinclined to accept their
contention as they have all abetted to the noticee no 1 in evasion of the C. Excise
duty as mentioned above. As discussed above, they are concerned in purchasing,
depositing, keeping, selling, etc. of the excisable goods which they knew or had
reason to believe that the same were liable for confiscation. Hence, I find all of
them liable for penalty under Rule 26 of the Central Excise Rules, 2002.
# In view of the above, I pass the following order;
ORDER
1] I order the confiscation of 26 power driven pumps totally valued at
Rs.1,12,600/- not conforming to the BIS standards. As the said pumps have
been provisionally released, I order to redeem the same on payment of
redemption fine of Rs.30,000/-(Rupees Thirty thousands) in lieu of
confiscation under Rule 25 of the Central Excise Rules. This option should be
exercised within 30 days of receipt of this order and in failure; the Bank
Guarantee would be encashed.
2] I confirm the demand of C. Excise duty of Rs.8,36,530/- after allowing the
benefit of cum-duty price and reduce the demand on the value of pump kits
and repairing charges made under the proper invoice, under proviso to
Section 11A[1] of the said Act. As the noticee no 1 has already paid a sum of
Rs.5,00,000/-, the said amount would be adjusted in the aforementioned
confirmed amount of Central Excise Duty.
3] I order to recover the said amount along with the interest at the appropriate
rate under Section 11AB of the Central Excise Act.
4] I impose a penalty of Rs.8,36,530/- on the noticee No.1 under the provisions
of Section 11AC of the Central Excise Act, 1944. If the amount as determined
under Sr. No. 2 above is paid within 30 days from the receipt of the order
alongwith the interest payable then as per proviso to Section 11AC the
penalty will be only 25% of Central Excise duty determined at Sr. No. 2
above. The benefit of reduced penalty shall be available only if the amount of
penalty so determined is also been paid within the period of thirty days from
the receipt of these order.
5] I impose a penalty of Rs.One lac on the noticee no 02 under Rule 26 of
Central Excise Rules 2002.
the
6] I impose a penalty of Rs.One lac on the noticee no 03 under Rule 26 of the
Central Excise Rules 2002.
7] I impose a penalty of Rs.One lac on the noticee no 04 under Rule 26 of the
Central Excise Rules 2002.
8] I impose a penalty of Rs.One lac on the noticee no 05 under Rule 26 of the
Central Excise Rules 2002.
9] I impose a penalty of Rs.One lac on the noticee no 06 under Rule 26 of the
Central Excise Rules 2002.
10] I impose a penalty of Rs.One lac on the noticee no 07 under Rule 26 of the
Central Excise Rules 2002.
[Dr.Balbir Singh]
ADDITIONAL COMMISSIONER
To,
(1)
(2)
M/s Rainbow Engineering Co.,
2, Amarnagar Street No.-7-B,
B/h Bahuchar Vidhyalaya, Near Bajrang Chowk,
Chandreshnagar Main Road, Mavdi Plot, Rajkot.
Shri Dhanjibhai Bhikhabhai Ranparia,
Partner M/s P.I. Manufacaturing Co.,
2, Laxminagar,
B/h Valand Samajwadi, Rajkot-2.
Noticee No. 1
Noticee No. 2
(3)
The Proprietor,
Noticee No. 3
M/s Kasama Pump,
Shop No.18/1, 350/A-1,
near Omar restaurant,
DRDI Main Road, Hyderabad.
(4)
The Proprietor,
Noticee No. 4
M/s Sai Srinivasa Traders,
5-1-529/E, Murthy Building, Ist Floor,
Opp.lane of Indian Bank, Hill Street, Secundrabad- 500 003.
(5)
The Proprietor,
Noticee No. 5
M/s Sri Geeta Enterprises,
5-1-529/B, Murthy Building,
Ist Floor, Opp. Indian Bank Lane,
Hill Street, Secundrabad- 500 003.
(6)
The Proprietor,
Noticee No. 6
M/s Gupta Machinery Stores,
A.B.Road, Gole Pahariya (Lathe Machine Workshop),
Lashkar, Gwaliar- 474 001. (M.P.).
(7)
The Proprietor,
M/s Dildar Machinery,
Near Maruti Mandir, Garkheda,
Aurangabad.
Copy to:
01. The Assistant Commissioner (AE), Central Excise, HQ, Rajkot
02. The Assistant Commissioner, Central Excise Division-I, Rajkot.
03
The Superintendent, AR-III, Central Excise Division-I, Rajkot.
Noticee No. 7