F.No. V.39/03-17/10-11/Div-IV/DA
BRIEF FACTS OF THE CASE:
M/s. Meghdoot Laminart Pvt. Limited, 88,89, N.I.D.C.Estate, Lambha
Road, Narol, Ahmedabad-382 405 (hereinafter referred to as the "said unit" for the sake
of brevity) are engaged in the manufacture of Decorative Laminated sheets falling under
CH No. 39029410 of the First Schedule appended to the Central Excise Tariff Act,1985.
The said unit was registered with Central Excise Department with Registration No.
AABCM 4333LXM001.
2.
The intelligence gathered was that the said unit is indulging in evasion of
duty by suppression of daily production in full and not accounted for in daily production
register (R.G.-l) and cleared the goods without issue of invoices and without payment of
Central excise duty on the goods manufactured by them.
3.
Based on said information, a group of the Officers of Central Excise
(Preventive), GR-II, HQ, Ahmedabad-I, searched the factory premises of the said unit
situated at 88,89, N.I.D.C. Estate, Lambha Road, Narol, Ahmedabad-382 405, on
05.02.2010, in the presence of two independent Panch witnesses and Shri Jenish P.
Patel, Director of the said unit. During the course of search, the officers having
physically taken stock of the inputs as well as finished goods and on comparison of the
same with the R.G. 1 register as well as R.G. 23 A Part-I maintained by the said unit,
noticed shortage of finished goods in three varieties to the extent of 2,094 laminated
sheets valued at Rs. 5,42,085/- on which Central Excise duty involved was Rs. 43,367/-,
Edu. Cess Rs. 867 and higher education Cess was Rs. 434/- totalling Rs. 44,668/- (as£
detailed in the Annexure-A to the Panchnama dated 05.02.2010) which was not paid by
the said unit. Further on verification of inputs lying in stock in the said premises,
shortage in three inputs namely Kraft Paper (Absorbent), Barrier Paper and T.G.Urea
on comparison with the stock recorded in the records i,e, in RG 23A pt. I was also
noticed. The Cenvat credit availed in RG 23 A pt.-II was Rs. 13,421. The details are
shown in Annexure-B to the panchnama recorded on 05.02.2010/-. Further the officers
in the presence of the Panchas questioned Shri Jenish P. Patel the reason for shortage
of the physical stock of finished goods as well as input stock, Shri Jenish P. Patel, the
Director of the said unit, stated that he agreed with the shortage of goods i.e. finished
goods as well inputs. However, he did not know the reason there of. But he agreed to
pay the Central excise duty involved thereon willingly. On further verification of the stock
of samples lying in the factory premises it was found that there were some samples of
the laminated sheets lying in the factory premises duly cut in various sizes. On being
asked, Shri Jenish P. Patel, the Director of the said Unit stated in the presence of the
Panchas that they cut the pieces in various sizes of samples from laminated sheets
manufactured in their unit and give them to their different buyers for smooth running of
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F.No. V.39/03-17/10-11/Div-IV/DA
their business. They cut the laminated sheet into various small sizes of pieces as
sample. However they did not pay the Central Excise duty thereon at the time of
preparing and clearing the sample pieces from the laminated sheet. On being further
asked, he further stated that they maintained a record in the note book under which they
put a note of such sample cutting relating to the period from June-2008 to October2009, which were withdrawn under the panchnama dated 05.02.2010 as Annexure-D
Sr. No. 16. As per the said note, it was found that they made use of 9809 folders of
samples laminated sheet during the period June -2008 to October -2009, he stated that
out of one laminated sheet of 8' x 4' decorative Laminated sheet, they are making 737
pieces, as such for preparing 9809 folders they used 399 Decorative Laminated sheets.
Further he stated that they had not maintained such sample stock for another period,
however he stated that they made use of such laminated sheet for last five years
approximately 1430 sheets. On being asked he stated that they did not take such
laminated sheet manufactured and converted into samples pieces of laminated sheet on
record in R.G.-l register and not paid any Central Excise duty on them. The details of
such clearance meant for sample pieces of laminated sheet are mentioned in AnnexureC to the panchnama dated 05.02.2010 and accordingly they manufactured and cleared
1430 laminated sheet valued at Rs.3,69,848/- and Central Excise duty involved was
Rs.30,475/-, the details of which are mentioned in Anexure-C to the panchanama dated
05.02.2010. On being asked, Shri Jenish P. Patel, the Director of the said unit stated
that they are ready to pay the duty involved in respect of the clearance of samples
made. On further search of the premises, the Central Excise Officers found some
incriminating documents and some record lying in the premises of the said unit, which
was on reasonable belief that they were useful for the purpose of investigation of the
case and as such they withdrew the same for further investigation, as enlisted in
Annexure-D to the panchnama dated 05.02.2010.
4.
Whereas a statement of Shri Jenishbhai Pramodbhai Patel, the director
of M/s. Meghdoot Laminart Pvt. Ltd., 88, 89 N.I.D.C. Estate, Lambha Road,
Narol,
Ahmedabad
before
the
Superintendent
(Preventive),
Central
Excise,
Ahmedabad was recorded on 05.02.2010 under Section 14 of the Central Excise
Act, 1944. He stated that, on 05.02.2010 by surprise check, the stock taking of
the finished goods as well as raw materials was taken in their factory premises
by the Central excise officers, he was present during the search and stock taking.
He was also present during the course of drawal of panchnama on 05.02.2010.
He had gone through the panchnama dated 05.02.2010 alongwith Annexure VA'
for shortage of finished goods, Annexure 'B' for shortage of Raw Materials and
Annexure 'C' for removal of samples without payment of duty and without
accounting for in the records, drawn at their factory premises i.e. Meghdoot
Laminart Pvt. Ltd., 88, 89 N.I.D.C. Estate, Lambha Road, Narol, Ahmedabad. He
agreed to its Contents and as a token of his agreement he had signed the said
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F.No. V.39/03-17/10-11/Div-IV/DA
panchnama, that he stated that they were engaged in manufacturing Decorative
Laminated Sheets falling under Chapter 39 of Central Excise Tariff Act, 1985 and
registered with Central Excise with C. Ex. Registration No. AABCM 4333L XM001
for the said purpose, that he agreed with the verification of records with
physical stock by officers and shortage of finished goods i.e. 756 Nos. of
Decorative Laminated Sheets - Decor plus 1.00 MM valued at Rs. 2,59,527/-,
733 Nos. of Decorative Laminated Sheets - Decorelux 0.8 MM valued at Rs.
1,62,000/- and 605 Nos. of Decorative Laminated Sheets - Meghdoot 0.70 MM
valued at Rs. 1,20,558/- and the total Central Excise duty involved was
Rs. 44,668/- (as shown in the Annexure XA' to the Panchnama dated 05.02.2010.
He also agreed to the shortage of raw materials i. e. 7588 Kgs. of Kraft Paper
(Absorbent) valued at Rs. 2,45,472/-, 726 Kgs. of Barrier Paper valued at
Rs. 61,492/- and 400 Kgs. of T. G. Urea valued at Rs. 9,400/- and the total
Central Excise duty involved was Rs. 13,421/- (as shown in Annexure 'B' to the
Panchnama dated 05.02.2010 and also agreed to the removal of samples
manufactured by them from 2005-06 to 2009-10 (upto 05.02.2010) without
payment of central excise duty and without accounting for in the records i.e. 520
Nos. of Decorative Laminated Sheets - Decorplus 1.00 MM valued at Rs.
1,78,511/-, 460 Nos. of Decorative Laminated Sheets - Decorelux 0.8 MM valued
at Rs. 1,01,665/- and 450 Nos. of Decorative Laminated Sheets - Meghdoot 0.70
MM valued at Rs. 89,672/- and the total Central Excise duty involved was
Rs. 30475/- (as shown in Annexure VC to the Panchnama dated 05.02.2010),
that
the
shortage
of
finished
goods
of
Decorative
Laminated
Sheets
on
comparison with daily stock register 2009-10, he stated that he could not
recollect at that time and he would submit the reasons for the same in due
course, that he further stated that he didn't know the reason for such shortage of
inputs (as per Annexure 'B') as they have come across such situation for the first
time and also confirm such shortage of inputs, that as regards the sample goods
manufactured and cleared without payment of central excise duty and without
accounting for in the records (as mentioned in Annexure 'C'), he stated that
during the past five years they had manufactured and cleared approximately
1430 Nos. of Decorative Laminated Sheets of size 8'x4' valued at Rs.3,69,848/involving Central Excise duty of Rs. 30,475/-. On being asked regarding one note
book at Sr. No. 16 of Annexure 'D' to the panchnama dated 05.02.2010, he
stated that the details of samples mentioned therein for the period June,. 2008 to
October, 2009, that they made 9809 folders from Decorative laminated sheets
and made total 2,94,270 pieces for which they utilized approximately 399 Nos. of
Decorative laminated sheets, that on the basis of above stated facts, they had
utilized approximately 1430 Nos. of Decorative laminated sheets during last five years
which were not accounted for and without payment of central excise duty, that he further
agreed to pay the total Central Excise duty as per Annexure 'A', 'B' and 'C' which comes
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F.No. V.39/03-17/10-11/Div-IV/DA
to Rs.88,564/- willingly and without any threat or force.
5.
The said unit vide their letter dated 10.02.2010 addressed to the Assistant
Commissioner (Prev.), Central Excise, Ahmedabad-I has submitted a copy of challan
dated 06.02.2010 as proof of having made the payment of Central Excise duty along
with Education Cess and higher education cess involved on illicit clearance of the goods
shown in Annexure- A, B and C to the panchnama dated 05.02.2010 in Bank of Baroda,
Bhadra Branch, Ahmedabad amounting to Rs. 88,566/-.
6.
The scrutiny of the records withdrawn from their factory premises under
the panchnama dated 05.02.2010 have been done and the rest of the documents which
were needed for the investigation for last five years have been called for from them. It is
also observed that they gave the labour contract for two contractors for manufacturing &
packing of the laminated sheets which they manufactured from their factory and on
finished of their work, they gave the report month wise and gave the details of the goods
they manufactured and packed during the month and accordingly they got the payment
from the said unit. To verify the correctness of the details of contractor's bill, this office
called for the Invoice copies of two contractors from their end and compared the details
with R.G. 1 register as well as ER 1 month wise; they filed with the Range office. The
details were verified for last five years, month wise. Most of all the details were tallied
with actual manufactured by them and shown in the records except in seven cases. For
the month of April- 2005, August-2005, Oct. 2005, November-2005, March-2006 and
May-2009, the quantity in E R 1 were shown more than the payment made to the
contractor. For the month of Sept. the quantity shown in E R 1 is less than the payment
made to the contractor. The said unit was asked the reason there of. They give the
reason for excess quantity made in ER 1 as compared to contractor's bill that the
quantity which was shown at the excess is the quantity shown in ER 1 return in kg. This
quantity is the quantity of scrap of sheets which arose during the manufacture of
laminated sheet. They are shown in R.G 1 register and E R 1 register but for the scrap
quantity, they were not making any payment to the contractor as such in the contractor's
bill it was not reflected. However it can be seen from the E R 1 it self that it was a
quantity of scrap and they made the excise duty payment on them. For the month of
Sept.-2006, it was found that they showed the production in R.G. 1 register as well as E
R 1 statement, the quantity of manufacturing laminated sheet as 17,848, whereas they
made payments to the contractor for 18,140 laminated sheets. Hence it appears that
they made less payment for 292 laminated sheets for this month.
7.
A statement of Shri Jenishbhai Pramodbhai Patel, the Director of the unit
recorded on 23.08.2010 under Section 14 of the Central Excise Act, 1944. In his
statement, he stated regarding the pattern of packing of the finished goods i.e
Decorative laminated sheet produced in their factory and entries made in the registers,
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F.No. V.39/03-17/10-11/Div-IV/DA
he stated that the practice in the said unit was that, they appointed the contractors for
the work of manufacturing and packing goods i.e Decorative laminated sheet of various
varieties, M/s. Durlabhji Chaturbhai Dhumalia, D-3, Alok Apartment, Behind Smruti
Temple, Isanpur, Ahmedabad and M/s. Patel Mukeshbhai Somabhai, Laxmipura,
Nanadasan for the period from 01.04.2005 to 31.07.2007 and 01.08.2007 to 31.03.2010
respectively, were appointed for this work during the above period. No other contractor
or person or any body could do this work except the above contractors. They finished
their work and as and when the goods manufactured and finished as ready for delivery
they made an entry in their production register as well as R.G. 1 register, variety wise. It
is further to state that the said unit made the payments to the contractor month wise, on
the basis of the goods manufactured by the said unit during the month. The contractors
give their report month wise how much they manufactured the laminated sheet during
the month and the said unit made payments month wise to them. On the basis of
contractors invoice, where the actual production made by the said unit and the
production figures shown in ER-1 statement submitted by the said unit to the Range
office, month wise, a detailed work sheet has been prepared for the period from April2005 to March-2010, showing the figures of production as per ER-1 statement,
production shown by contractor (and payment made to them) and difference thereof,
month wise. The statement has been verified by him and after verifying the same with
the records/documents, he agreed with the same being prepared correctly.
8.
On the basis of the work sheet, it is found that almost all the data/figures
agreed with the production figures shown in ER-1 and contractors bill except in seven
cases as mentioned below:Period
Description of goods
Production
as Production
as Difference
per ER-1 No. per contractor's laminated
of sheets
bill
No.
of sheets
sheets
April-
Laminated
2005
sheets
sheets
(HC)
DL 13145
19110
Sheets 1567
57
export (Rebate) Sheets 1400
______
DL 13264
9379
sheets
(HC)
Sheets
700
export (Rebate) Sheets 700
_______
export (Bond)
24043
13026
184
1454
______
14664
August - Laminated
2005
2838
7460
_______
23572
export (Bond)
+ 1567
sheets
6
22005
+ 9379
of
F.No. V.39/03-17/10-11/Div-IV/DA
Oct.2005
DL 10246
761
sheets
(HC)
Sheets
700
export (Rebate) Sheets 9394
_______
export (Bond)
21101
Laminated
Nov.-
Laminated
2005
sheets
sheets
(HC)
export (Bond)
March-
DL 6754
1608
Sheets
11756
______
20118
sheets
DL 7219
2100
sheets
(HC)
Sheets
12752
export (Rebate) Sheets ______
22071
export (Bond)
Laminated
sheets
Sept-
Laminated
sheets
2006
sheets
2006
(HC)
export (Bond)
May2009
DL 6986
10862
Sheets
_______
17848
DL 10272
8034
sheets (HC)
14972
20118
Sheets export (Rebate) _______
33278
Sheets export (Bond)
Laminated
sheets
17784
+ 761
2556
_______
20340
16127
2383
______
18510
+ 1608
20088
55
1509
_____
21652
+ 419
15175
2965
______
18140
- 292
25094
150
_______
25244
+ 8034
On the basis of the worksheet and difference in Production shown in ER-1
statement and payment made to the contractor, he gave the explanation as under.-
9.
On being asked, he stated that in column 3 of the statement, figures were
shown above as regards for April, 2005, which was the first entry in above statement, it
is seen that production as per ER-1 numbers in column 3 includes a figure of 1567
which was actually not the quantity in numbers as could be seen from ER-1 of April,
2005; and it would be found from the said ER-1 of April, 2005 that quantity
manufactured shown under column 3 of clause 3 of the said ER-1 included 1567 kgs.
This quantity of 1567 kgs. was actually scrapped sheets in the nature of broken
laminated sheets, and therefore, such broken laminated sheets being scrapped goods
were always cleared as scrap on the basis of weight i.e. in kgs. This was the general
practice followed in the entire Decorative Laminated Sheets Industry. This quantity of
1567 kgs. would however, not be found in the bills of the contractors because it is the
accepted practice in the laminated sheets industry to make payment to the contractors
engaged in production purpose in the factory on the basis of the laminated sheets of full
size, but no payment was made to the contractors for broken and scrapped laminated
sheets. Therefore, in the corresponding bill of April, 2005 issued by the contractor, a
quantity of 22005 laminated sheets was shown because payment was made to the said
contractors by the said units only for 22005 laminated sheets which were of full size and
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F.No. V.39/03-17/10-11/Div-IV/DA
proper quality. It would also see that in ER-1, other figures are shown in numbers
whereas the above figure of 1576 is shown in Kgs. Because, as explained above, these
were not laminated sheets of full size and they are of the un-even size and not proper
quality, and therefore, they are sold as scrap on the basis of the weight, and not on the
basis of number of sheets. It is this error in reading the "unit of quantity" under clause 3
of column 2 of ER-1 which has led the Department to believe that there was a
discrepancy in the quantity i.e. number of laminated sheets recorded in ER-1 on one
hand and the bills of the contractors on the other hand. Similarly for August, 2005,
October, 2005, November, 2005 and May, 2009 also, the difference is arrived at in the
last column of the statement on account of the same error, because the figures shown
for these months in the last column of the statement were also not in number but in kgs.
as could be seen/verified from the corresponding ER-l. It was to be appreciated that
there was no difference or discrepancy in the quantity of laminated sheets recorded in
RG.I/ER-1 by them and in the bills of the contractors for the same month. It is further to
state that there was no loss of revenue in this case. As explained above, there is no
discrepancy or difference in the figures of production in RG.I/ER-1 vis-a-vis the
contractor's bills, but even if there was a higher quantity shown in their Central Excise
records as compared to the contractor's bills, it would mean that the said unit have
cleared on payment of duties higher quantity of laminated sheets and therefore, they
have paid excise duty on excess quantity as compared to the quantities billed by the
contractors. However, as explained above, there was no such case of any difference in
quantities but the incorrect impression appears to have been created on part of the
Department because for the quantity of scrapped laminated sheets which were not of
full size duly shown in ER-1 in kgs. is considered as numbers, and hence, the confusion
made. As regards the difference for the month of march, 2006, the production as per E
R 1 was more than the production as per contractor's bill, it would mean that the said
unit had paid higher duties on the quantity shown as above, due to the mistake of
calculation made by his staff. There was no revenue loss but on the contrary higher
duties were paid.
10.
As regards the difference seen in the month of September, 2006, the
production as per E R 1 is less than the production as per the contractor's bill. Though
this was a genuine human error and the said unit had paid amount of Rs.11,213/- (i.e.
Rs.10,993/- Basic + Rs.220/- Edu. Cess and Higher Edu. Cess) vide challan dated
20.08.2010 of State Bank of India, Lal Darwaja branch, Ahmedabad towards the duties
chargeable on value of such excess quantity.
11.
On being asked the following questions, he gives the answers as below:
Q.-1:- What is meant by the full size of the sheet?
A.-1:- Their regular size is 244cmsX122cms. for some export orders, they manufactured
246cmsX124cms. Normally, they manufactured the sheets in thicknesses of 0.5 mm/0.6
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F.No. V.39/03-17/10-11/Div-IV/DA
mm/0.7 mm/0.8 mm/1.0 mm/ 1.5 mm and 6.0 mm.
Q.2:- For scrap, what is the size?
A.-2:- In case of uneven sizes, the pieces could be either more than 16 sq.ft. or less
than 16 sq.ft. Mostly, they were cleared in Kgs. basis. But, sometimes, pieces of more
than 16 sq.ft. were cleared in sq. ft. basis also.
12.
In the statement recorded under Section 14 of the Central Excise Act,
1944 of Shri Jenishbhai Pramodbhai Patel, the Director of the firm on 05.02.2010
it was asked to give the reason for the shortage found during the visit of the
officers and counting of the stock of the finished goods as well as raw material
and also some sample sheets have been cleared without payment of duty, the
Jenishbhai stated at the time that he would explain the reason there after. As
such he was again called to the Preventive office to give the explanation for
shortages as mentioned above and he was called on 25.08.2010 to give his
statement.
13.
Therefore, a statement of Shri Jenishbhai Pramodbhai Patel, the Director
of the firm was recorded on 25.08.2010 under Section 14 of the Central Excise Act,
1944 under which he stated that he had been shown his earlier statement recorded on
05.02.2010 and panchname drawn in his factory premises and withdrawn some
documents/records, on 05.02.2010. He had seen, verified the same and agreed to the
facts narrated in the statement as well as pancnnama. Accordingly he gave the detailed
reasons for shortage of raw materials, finished goods as well as samples cleared
without payment of central excise duty and found during the Panchnama drawn in the
factory premises on 05.02.2010, as under:-
Q.1:-
What is the reason of shortage of raw materials?
A.1:- There were three raw materials which were found short physically as compared
to the R.G.23A pt.I, on the date of counting raw materials physically on 05.02.2010. The
main reason was that huge stock of raw materials was stored in his unit. After receipt of
raw materials, they were entering in R.G.23 A Pt. I and In R.G.23 A Pt.II they were
taking its credit. The raw materials which received in the said unit, were lying in huge in
quantity. The usage of the raw materials was last in first (LIFO) out method as the
storage of the raw materials as and when receipt was made in such manner. There
were storage losses which were not written off from the books of accounts. Reasons for
shortage raw- material wise are as follows:(a)
Kraft Paper Absorber as well as Barrier paper:- Losses occurred due to moisture
and heat especially during the summer. It may also be possible that the person in
charge person was on leave on that day and the other person was given the charge to
get it count the raw material with the officer, but due to new person, who had counted
the raw material committed some mistake. It is also fact that that day there was huge
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F.No. V.39/03-17/10-11/Div-IV/DA
stock in account. To count the stock physically was difficult without an experienced
person. It is the difficulty and it had led to commit a mistake.
(b)
Urea T.G.:- It is Hygroscopic and absorbs moisture on account of long storage
and exposing to air and weather. The urea got melted and it could not be put to use.
Such loss was not written off from the accounts.
However, to keep an amicable relation with the department, that day they debited the
Excise duty on the spot. But, they never issued any raw material without accounting for
in the records and never sold the raw material without the invoices.
Q. 2:- What is the reason of shortage for finished goods?
A.2:- (i) Counting difference on account of huge stock on the day of raid, (ii) Sale was
not affected, (iii) The finished products were found short on that day was still in the
stock. Even today it can be seen, (iv) The department to prove the sale and realization
and further to whom the goods were sold. Actually it was not sold but still in the factory
premises, but there was a counting error because of huge stock.
However, to keep an amicable relation with the department, that day, they debited the
Excise duty on the spot. But, they never sold any finished goods i.e. Decorative
laminated sheets without accounting for in the statutory records and without the issue of
invoices as well as without payment of central Excise duty.
Q. 3:- What is the reason for samples cleared to the dealers, without invoices and
without payment of Central Excise duty?
A. 3:- Samples were of even size i.e. 2x2 inches. They were not sold. They were
supplied to the prospective buyers and dealers in order to finalise the deal as per the
market practice. This was only the trade practice and no money for the supply of this
sample was collected. However, in order to keep a good relation with the department,
they had paid the Central Excise duty on the spot and they also continued to pay the
duty there after.
Q. 4:- What is the reason for short/less laminated sheets shown in R.G.I/E R 1 as
compared to the actual payment made to the contractor for manufacturing and packing
such laminated sheets in the month of Sept.2006?
A. 4:- They gave the labour contract to the contractors for manufacturing and packing
the laminated sheets since long and they made payments month-wise according to their
work. For many years, no difference was found in the quantity shown in contractor's bill
and in R.G.I/ E R 1. Five years records they had submitted to the department and in this
period only first time in one case there was difference found for less accounted for in
R.G.I/ E R 1 for 292 laminated sheets. It was only on account of clerical mistakes. No
intention for evasion of central Excise duty. They were manufacturing the laminated
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F.No. V.39/03-17/10-11/Div-IV/DA
sheets in the huge quantity in the year and this quantity was very negligible. However,
they paid the Central excise duty with interest immediately on taking objection by the
department.
Q. 5:- Whether the act and omission on your part as mentioned hereinabove were
covered in the clause Section 11AC of the central Excise Act, or other wise and was
there any suppression of facts or intention to evade the central excise duty?
A. 5:- The act and omission made by them and as explained the reason there of
described in their answer was clearly shows that there was no suppression of facts in
any act made by them. They had reflected everything in records. The shortage of raw
materials as well as finished goods found physically was not a suppression of facts and
there was no intention to evade the payment of central Excise duty in any stage. They
were a genuine tax payer and in some many years there was not a single instance
occurred where the department found that they evaded the Central Excise duty. The
reasons of shortage of raw material as well as finished goods were already explained by
him. There was no intension to evade the Central Excise duty and there was no
suppression of facts. This clearly leads that they were a genuine tax payers and Section
11 AC of the Act could not be invoked in their case. However, they paid all the Central
Excise duty with interest as and when the department asked to do the same. As such in
his case there is no requirement for issuing the Show Cause Notice. It can be
concluded now only.
14.
(i)
In view of the above discussion, it was observed that:
During the physical verification of finished goods in stock and on comparison with
the R.G.-l register, shortage of finished goods i.e. 756 Nos. of Decorative Laminated
Sheets - Decor plus 1.00 MM valued at Rs. 2,59,527/-, 733 Nos. of Decorative
Laminated Sheets - Decorelux 0.8 MM valued at Rs. 1,62,000/- and 605 Nos. of
Decorative Laminated Sheets - Meghdoot 0.70 MM valued at Rs. 1,20,558/- involving
the total Central Excise duty of Rs. 44,668/- (as shown in the Annexure 'A' to the Show
Cause Notice) was noticed.
(ii)
It was also found the shortage of raw material stock i. e. 7588 Kgs. of Kraft Paper
(Absorbent) valued at Rs. 2,45,472/-, 726 Kgs. of Barrier Paper valued at Rs. 61,492/and 400 Kgs. of T. G. Urea valued at Rs. 9,400/- and involves the total Central Excise
duty of Rs. 13,421/-(as shown in the Annexure 'B' to the Show Cause Notice).
(iii)
It was found that there was removal of samples manufactured by them from
2005-06 to 2009-10 (upto 05.02.2010) without payment of central excise duty and
without accounting for in the records i.e. 520 Nos. of Decorative Laminated Sheets Decorplus 1.00 MM valued at Rs. 1,78,511/-, 460 Nos. of Decorative Laminated Sheets
- Decorelux 0,8 MM valued at Rs. 1,01,665/- and 450 Nos. of Decorative Laminated
11
F.No. V.39/03-17/10-11/Div-IV/DA
Sheets - Meghdoot 0.70 MM valued at Rs. 89,672/- involving the total Central Excise
duty of Rs. 30475/- (as shown in the Annexure 'C to the Show Cause Notice);
(iv)
It was further found that the said M/s. Meghdoot Lminart Pvt. Limited shown less
manufactured laminated sheet in ER1 submitted for the month of September, 2006 as
compared to the actual manufactured laminated sheet and shown in contractors
bill/invoice. In the month of September-2006, they actually manufactured 18140
laminated sheets, as shown in contractor's bill and they shown in ER 1 for the month of
Sept. 2006 only 17,848 laminated sheets. As such they had shown (-) 292 laminated
sheets in ER 1 and paid less amount of duty of Rs. 11,213/- (Central Excise duty +
Edu.cess and Higher Education Cess) on the value of Rs. 68,708/-. The details shown
in the Annexure D to the S.C.N. On being asked the reason there of the Director of the
unit clarifies that as regards the difference noticed in the month of September, 2006, the
production as per E R 1 is less than the production as per the contractor's bill. Though
this was a genuine human error and the said unit had paid amount of Rs.11,213/- (i.e.
Rs.10,993/- Basic + Rs.220/- Edu. Cess and Higher Edu. Cess) vide challan dated
20.08.2010 of State Bank of India, Lal Darwaja branch, Ahmedabad towards the duties
chargeable on value of such excess quantity and interest there of Rs. 5,710/- paid in
S.B.I, vide challan dated 27.08.2010.
At the time of visit of the officers, the said factory could not give the satisfactory
reason for the shortage of the raw material and finished goods and for the clearance
made by them in the form of sample sheets, without payment of Central Excise duty. It
clearly shows the intention of the said unit to make clearance the goods without
payment of duty by way of suppressing the fact of production. It is further appeared that
they had shown in short the manufactured goods i.e. laminated sheets in E R 1
submitted for the month of Sept.-2006 as compared to the actual manufactured sheets
by them and shown in their contractor's invoice, with an intention to evade Central
Excise duty and in that way they suppressed the actual production and accordingly the
proviso to the Section 11A(1) of the Central Excise Act, 1944 is clearly applicable to
them as regards invoking the extended period for recovery of the duty not paid.
15.
From the facts narrated in the foregoing paras and depositions, it
was observed that the said unit is liable to pay duty on the shortage of finished
goods as well as inputs and the payments not made by them on samples
of laminated un-even pieces supplied by them to the dealers during the
course of marketing. The said factory on the spot made the payment of
Rs.
made
88,566/-.
short
difference
which
they
Further
payment
shown
paid
in
in
during
of
investigation,
Rs.11,213/-
E.R.-1
S.B.I
the
as
vide
for
Sept.-2006
compared
challan
12
it
to
dated
was
on
found
that
the
quantity
contractor's
20.08.2010
bill
with
they
of
payment,
interest
of
F.No. V.39/03-17/10-11/Div-IV/DA
Rs. 5,710/- on 27.08.2010.
16.
From the above cited acts of the assessee, it was observed that there was
suppression
to
evade
of
production
payment
of
and
duty.
clearance
The
of
assessee
finished
achieved
goods
its
with
object
intention
fully.
The
contention of the assessee that they did not suppress the production and
clearance
is
devoid
of
any
substance.
The
extended
period
as
provided
for under Section 11A of the Central Excise Act, 1944 is rightly invocable.
The assessee is also liable to penalty under Section 11AC of the Central
Excise Act, 1944. The benefit of non-service of the Show Cause Notice
could
not
be
extended
in
view
of
the
presence
of
suppression
of
production/clearance coupled with intention to evade payment of duty.
17.
It was observed thus that they did not pay Central excise duty by reason
of suppression of production as well as clearance and accordingly extended
period as provided under proviso to Section 11A(1) of the Central Excise
Act,
1944
is
applicable
to
the
present
case.
All
these
acts
of
contravention on the part of the said assessee appear to have been committed with
willful intent to evade payment of Central excise duty by reason of suppression of
production and clearance, and therefore the said duty not paid is required to be
demanded and recovered from them under the provisions of Section 11A of the Central
Excise Act, 1944 by invoking extended period of five years. All these acts of
contravention appear to constitute an offence of the nature and types as described in
clauses (a),(b),(c) and (d) of Rule 25 of Central Excise Rules, 2002 read with Section
11A of the Central Excise Act, 1944, and therefore they have rendered themselves
liable for penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 25
of Central Excise Rules, 2002.
18.
From the above said discussions it appears that M/s. Meghdoot Laminart
Pvt. limited have contravened the provisions of Rule 4, 5, 6, 8, 10, 11, 12 of the Central
Excise Rules 2002 in as much as they have manufactured and cleared excisable goods
without payment of duty; failed to determine the duty liability on the goods ; failed to
assess the duty; failed to pay duty payable on due date; failed to maintain daily stock
account in the prescribed manner; failed to issue valid Central Excise invoice while
removing excisable goods; failed to incorporate in the periodical returns the goods
manufactured and cleared properly.
19.
According to Rule 25 of the Central Excise Rules 2002, if a manufacturer
engages in the manufacture of excisable goods and does not account for any excisable
goods produced or manufactured or stored by them or removed any excisable goods in
13
F.No. V.39/03-17/10-11/Div-IV/DA
contravention of any of the provisions of these rules or notifications issued there under;
of the Central Excise Rules 2002, fails to maintain accounts for any excisable goods
manufactured, removes any excisable goods in contravention of any of the provisions of
central excise with intent to payment of duty then all such goods shall be liable to
confiscation and manufacturer of the said goods is liable to a penalty. In the instant
case, as discussed above, the said unit has manufactured and cleared the finished
goods without accounting for in R.G.-l register and without issue of invoices and without
payment of Central Excise duty also cleared the inputs on which Cenvat Credit was
taken cleared them without issue of invoice and without reversing the credit taken by
them, and without following allied procedure as envisaged under Rule 4,6,8,9,10,11,12
of the Central Excise Rules 2002 and the Cenvat Credit Rules, 2004 with intent to
evade the duty. It therefore appears that they have removed excisable goods which
they knew were liable to confiscation under the Central Excise Act 1944 and rules made
there under. Cenvat credit availed on short found inputs is liable to be recovered under
the provisions of the Cenvat Credit Rules, 2004.
20.
The Section 11AB of the Central Excise Act, 1944 envisages that where
any duty of excise has not been paid by the person liable to pay duty, the said person in
addition to the duty is liable to pay interest at the appropriate rate as notified by the
central government from time to time. In the instant case, as discussed above, no duty
was paid at the time of removal of the goods. It therefore appears that the said unit is
liable to pay interest under section 11AB Central Excise Act, 1944 on the duty payable
on the goods removed in the manner discussed above.
21.
Hence a show cause notice was issued to M/s. Meghdoot Laminart Pvt.
Limited, 88,89, N.I.D.C. Estate, Lambha Road, Narol, Ahmedabad-382 405 for showing
cause to the Assistant/Deputy Commissioner, Central Excise, Division IV, Ahmedabad-I
having his office at 5Lh floor Central Excise Bhavan, near Polytechnic, Ambawadi,
Ahmedabad-380015 as to why:
(i)
the Central Excise duty amounting to Rs 43,367/-(Rs. Forty Three Thousand
three hundred sixty seven Only), Education Cess Rs.867/-(Rs. Eight hundred Sixty
seven Only) and Higher Education Cess Rs. 434/-( Rs. four Hundred thirty four Only)
totally amounting to Rs.44,668/-( Rupees forty four Thousand six Hundred sixty eight
Only) involved on the goods manufactured and removed without payment of duty as
indicated in the Annexure A to this notice should not be demanded and recovered under
Section 11 A(1) of Central Excise Act, 1944 by invoking the extended period or five
years under proviso to Central Excise Act, 1944, as they have willfully suppressed the
fact of the production and clearance of finished goods in R.G.-l register and not issued
invoices at the time of clearance and not paying the Central Excise duty for the relevant
period. The amount of Rs.44,668/-(Rs. forty four Thousand six Hundred sixty eight
14
F.No. V.39/03-17/10-11/Div-IV/DA
Only) paid as discussed in forgoing paras voluntarily by the said unit should not be
appropriated and adjusted against the duty liability on such goods.
(ii)
the Central Excise duty of Rs. 13,031/- (Rs. thirteen thousand thirteen only),
Education Cess of Rs. 260/- (Rs. two hundred sixty only), and higher education cess of
Rs. 130/- (Rs. one hundred thirty only) a total amounting to Rs. 13,421/- (Rs. thirteen
thousand four hundred twenty one only) found short at the time of physical verification
of inputs on which Cenvat Credit taken by them on the inputs and cleared by them
without reversing the same, detailed shown in Annexure-B to the Show Cause Notice,
should not be demanded and recovered under Section 11A(1) of Central Excise
Act,1944 read with the Cenvat Credit Rules, 2004 by invoking the extended period of
five years under proviso to Section 11A(1) of the Central Excise Act, 1944, as they have
willfully suppressed the facts by not reversing the C.Ex. Duty not issued invoices at the
time of clearance and not reversing the Central Excise duty availed as credit for the
relevant period. The amount of Rs. 13,421/- (Rs. thirteen thousand four hundred twenty
one only) paid as discussed in forgoing paras voluntarily by the said unit should not be
appropriated and adjusted against the Cenvat credit availed on the shortage of inputs.
(iii)
the Central Excise Duty of Rs. 29,588/- (Rs. twenty nine thousand five hundred
eighty eight only), Education Cess of Rs.592/- (Rs. five hundred ninety two only) and
higher education Cess of Rs. 296/- (Rs. two hundred ninety two only) total amounting to
Rs. 30,476/- (Rs. thirty thousand four hundred seventy six only) involved on sample
pieces made out of unaccounted for laminated sheets in R.G.I Register and cleared
without payment of Central Excise duty due as detailed in the Annexure C to this notice
should not be demanded and recovered under Section 11A(1) of Central Excise
Act,1944 by invoking the extended period of five years under proviso to Section 11A(1)
of the Central Excise Act, 1944, as they have willfully suppressed the fact of production
and clearance of finished sample pieces in R.G.-l register and without issue invoices at
the time of clearance and without paying the Central Excise duty for the relevant period.
The amount of Rs. 30,476/- (Rs. thirty thousand four hundred seventy six only) paid as
discussed in forgoing paras voluntarily by the said unit should not be appropriated and
adjusted against the duty liability on such clearances of finished goods;
(iv)
the Central Excise duty of Rs. 11,213/- (Central Excise duty + Edu.cess and
Higher Education Cess) involved on the goods decorative laminated sheets
manufactured and not entered in the E R 1 statement as well as R.G. 1 register and
cleared them without payment of central Excise duty on the value of Rs. 68,708/- should
not be demanded and recovered under Section 11A(1) of Central Excise Act,1944 by
invoking the extended period of five years under proviso to Section 11A(1) of the
Central Excise Act, 1944, as they have willfully suppressed the fact of the production
and clearance of finished goods in R.G.-l register and without issue of invoices at the
15
F.No. V.39/03-17/10-11/Div-IV/DA
time of clearance and without paying the Central Excise duty for the relevant period.
The amount of Rs. 11,213/- (Rs. eleven thousand two hundred thirteen only) paid as
discussed in forgoing paras voluntarily by the said unit should not be appropriated and
adjusted against the duty liability;
(2)
Interest at the rate applicable on the above said duty short paid as
indicated in at (i), (ii),(iii) and (iv) as above, should not be charged and
recovered under Section 11AB of the Central Excise Act, 1944 and the amount of
interest paid should not be appropriated;
(3)
Excisable goods manufactured and cleared without discharging of Central Excise
duty liability thereon detailed as mentioned here in above indicated in at (i), (ii), (iii) and
(iv) should not be confiscated in terms of Rule 25 (a), (b), (c) and (d) of the Central
Excise Rules 2002,
(4)
Penalty under the provisions of section 11AC of Central Excise Act, 1944 and
under Rule 25 of the Central Excise Rules, 2002 should not be imposed on them for the
reason that they suppressed the production and clearance of finished goods as well as
inputs without reversal of Cenvat Credit availed with intent to evade payment of duty in
contravention of the Central Excise Rules, 2002.
WRITTEN SUBMISSION & PERSONAL HEAIRNG:
22.
Personal hearing in this matter was held on 21.02.2011 which is
attended by Shri Dhaval K. Shah, Advocate, authorized representative of the
assessee. During the course of personal hearing he stated that the written
submission dated 16.10.2010 may be taken on the record and reiterated the
same. He produced the zerox copies of the judgements quoted in their written
submission.
23.
The assessee submitted their reply dated 16.10.2010 under which
they stated that the allegations of removal of excisable goods without payment of
duties are leveled on the basis of certain records and also on the basis of the
statements of Shri Jenishbhai Pramodbhai Patel, the Director of their Company;
and the facts explained by them during investigation have not been considered
while issuing this show cause notice. Be that as it may, the allegations against
them are about clearance of excisable goods without payment of duties and
thus, as regards clandestine manufacture and removal of goods.
16
F.No. V.39/03-17/10-11/Div-IV/DA
23.1
They referred the decisions in the cases like TGL Poshak Vs.
Commissioner of C. Ex., Hyderabad - 2002 (140) ELT 187, M.T.K. Guruswamy Vs.
Commissioner of Central Excise, Madurai - 2001 (130) ELT 344, Commissioner of
Central Excise, Chandigarh V/s Deshmesh Casting (P) Ltd. - 2000 (401 RLT 1077,
Punjab Oil & Silicate Mills Vs. Collector of Central Excise - 1993 (65) ELT 268, Suvarna
Polymers Pvt. Ltd. Vs. Commissioner of Central Excise, Hyderabad - 2000 (120) ELT
148, Rishab Refractories Pvt. Ltd. Vs. Commissioner of C. Ex., Chandigarh - 1996 (87)
ELT 93, Kirtibhai Maganbhai Patel Vs. Commissioner of Central Excise, Nagpur 2000 (36) RLT 211, Deena Paints Vs. CCE, New Delhi - 2001 (43) RLT 805, Ebenzer
Rubbers Ltd. Vs. Collector of Central Excise, Ahmedabad -1986 (26) ELT 997,
Shakti Chemical Industries Vs. Collector of Central Excise, Baroda - 1995 (76) ELT
410, Kashmir Vanaspati (P) Ltd. Vs. Collector of Central Excise- 1989 (39) ELT 655,
Ashwin Vanaspati Industries Pvt. Ltd. Vs. Collector of Central Excise, 1992 (59) ELT
175, Gurpreet Rubber Industries Vs. Collector of C. Ex., Chandigarh - 1996 (82)
ELT 347, T.M. Industries Vs. Collector of Central Excise - 1993 (68) ELT 807 and
Premium Packaging Pvt. Ltd. V/s Commissioner, Kanpur - 2005 (184) ELT 165
(Tribunal) may be referred to and relied upon in this regard because by virtue of the
above referred case law, it is clear that the Department must adduce evidence
regarding procurement of raw-materials, use of inputs like power, electricity,
water, and also regarding actual manufacture of goods and removal thereof by
agencies like transporters and ultimately evidence regarding receipt of payment
from the customer and also confirmation of the receipt of the goods by the
customers have to be proved in such cases.
In the present case, admittedly, no such evidence as discussed in
the above referred decided cases was brought on record by the Department, in
this view of the matter, the Revenue could not have relied upon the only evidence
in form of statements of various persons and the show cause notice issued only on
the basis of only these statements is therefore, wholly illegal and liable to be
dropped at once.
23.2
They further stated that the fact that they have deposited all the
amounts when the Excise authorities suggested about their liability also shows
their bonafide, when they deposited all the amounts as suggested by the
authorities without even waiting for a show cause notice, further proposals for
confiscation of goods and imposition of penalty would not be justified. They
therefore, request you to withdraw the proposals for confiscation of goods and
17
F.No. V.39/03-17/10-11/Div-IV/DA
imposition of penalty also.
Even otherwise, the proposal to confiscate the goods which were
allegedly cleared without discharging central excise duty liability is not
sustainable in the facts of this case because there is no seizure of any goods and
no goods are available for confiscation at this stage. It is a settled legal position
that when the goods were not seized and they were not available for
confiscation, there is no notional confiscation of goods that could be ordered in
the adjudication proceedings. They refer to and rely upon the decisions reported in
2008 (227) ELT 330 -Manjula Showa Ltd. and also 2009 (235) ELT 623 - Shivkripa
Ispat Pvt. Ltd. wherein it is held that when there was no seizure of any goods,
then confiscation of goods and/or imposition of redemption fine were not
permissible. Therefore, the proposal to confiscate the goods made vide para
16(3) of the show cause notice does not survive in the facts of this case.
23.3
They also stated that the proposal for imposition of penalty invoking the
provisions of Section 11 AC of the Central Excise Act, 1944 read with the Rule 25
of the Central Excise Rules also deserves to be vacated as there is no justification
in demand of duty leveled against them in this case. There is no cogent and
reliable evidence in support of the charges levelled in the show cause notice
and therefore, no penalty would be justified on the basis of charges so levelled,
merely on assumptions and presumptions. Penalty is quasi-criminal in nature and
therefore, it cannot be imposed on mere assumptions and presumptions or
hearsay. Neither the facts of the case justify or warrant imposition of any penalty,
nor a specific allegation is made in the show cause notice for imposing penalty
on them. They had not acted dishonestly or contumaciously and therefore, not
even a token penalty would be justified. The present one is not a case where
they had committed contravention of any of the Rules with an intent to evade
payment of duty. There is no violation of any nature committed by them. They
have also not committed breach of any Rules with an intent to evade payment of
duty. In this view of the matter, no penalty or interest could be justifiably imposed
on them in law.
23.4
They furthermore submitted that the proposal to charge interest under
section 11AB of the Central Excise Act, 1944 is also without any authority in law
18
F.No. V.39/03-17/10-11/Div-IV/DA
inasmuch as the provision of section 1 T A B is not attracted in the instant case.
Section 11AB provides for interest in addition to duty where any duty of excise
has not been levied or paid or has been short levied or short paid or erroneously
refunded with an intent to evade payment duty. In the instant case, there is no
short levy or short payment or on-levy or nonpayment of any excise duty.
Therefore, the proposal to charge interest under Section 11 AB of the Act is also
not maintainable in the present case.
DISCUSSION & FINDINGS
24.
I have gone through the records of the case and the written submission
dated 16.10.2010 made by the assessee in reply to the show cause notice.
25.
I find that a case of clandestine removal of excisable goods has been
made by the preventive wing of Ahmedabad-I Commissionerate against the said
assessee on the basis of intelligence gathered. The total amount of duty involved works
out to `99,778/- (`44,668/-+`13421/-+`30,476/-+`11,213/-). The said evasion of duty has
been done by the sassessee by way of suppression of production/clearance with intent
to evade payment of duty, as discussed in the show cause notice.
26.
I find that the shortage in the stock of finished goods found during physical
stock verification and duty involved thereon has been recorded under panchnama dated
05.02.2010 and the Sri Jemishbhai Pramodbhai patel, director of Meghdoot Laminart
Pvt. Ltd., has deposed the same in his statement dated 05.02.2010 recorded under
Section 14 of the Central Excise Act, 1944. Undoubtedly there is shortage in stock at
the time of physical verification & the same has not been properly accounted by the
party hence the ratio of the judgement maintained are not applicable in this case.
27.
I find that the assessee has paid the total duty involved with interest during
the investigation and before issue of the show cause notice.
28.
As per Rule 25 of Central Excise Rules, 2002 subject to the provision of
Section 11AC of the Act, if any producer manufacture
a) Remove any excisable goods in contravention of any of the provision of these
rules or the Notification issued thereunder
b) Does not account for any excisable goods produced or manufactured or stored
by him, or
c) Engages in the manufacture production or storage of any excisable goods
without having applied for the regn. Certificate 4/56 of the Act, or
d) Contravenes any of the provision of these rules or the Notfication issued under
19
F.No. V.39/03-17/10-11/Div-IV/DA
these rules with intent to evade payment of duty then all such goods shall be
liable to confiscation and the producer or manufacturer shall be liable to a penalty
not exceeding the duty on the excisable goods in respect of which any
contravention of the nature referred to in clause a), b), c) or d) has been
committed, or ` 2000/- whichever is greater.
29.
Thus in this case confiscation of the goods as well as penalty equal to the
duty i.e. `99,778/- is applicable.
30.
In view of the above facts and circumstance, I pass the following order.
O R D E R
I confirm the demand of duty amounting to `99,778/-(Rupees ninety nine
1.
thousand seven hundred seventy eight only) against M/s. Meghdoot
Laminart Pvt.
Limited, under the provision of Section 11A (1) of the
Central Excise Act, 1944. As the assessee has paid the duty, I order for
appropriation of the duty paid against the demand of `99,778/- against
them.
2.
I confirm the demand of interest at applicable rates on the duty amount of
`99,778/- against Meghdoot Laminart Pvt. Limited, I order for appropriation
of the said amount paid against the demand of interest.
3.
I hold the goods manufactured and cleared
without discharging duty
liability thereon liable for confiscation under Rule 25(a), (b), (c) & (d) of
Central Excise Rules,2002. However as the goods are not available for
confiscation I refrain from passing any order regarding actual confiscation
of goods.
4.
I impose a penalty of `99,778/- on M/s. Meghdoot Laminart Pvt. Ltd.,
under Section 11AC of Central Excise Act, 1944 read with Rule25 of the
Central Excise Rules, 2002.
31.
However, as per proviso to Section 11AC, where any such duty as
determined under sub-section (2) of Section 11A, and the interest payable thereon
under Section 11AB, is paid within thirty days from the date of communication of the
order of the Central Excise officer determining such duty, the amount of penalty liable to
be paid by such person under this Section shall be twenty five percent of the duty so
determined.
20
F.No. V.39/03-17/10-11/Div-IV/DA
Provided further that the benefit of reduced penalty under the first proviso
shall be available if the amount of penalty so determined has also been paid within the
period of thirty days referred to in that proviso.
(U.B.Singh)
Deputy Commissioner,
Central Excise, Div-IV, Ahmedabad-I
F.No. V.39/03-17/10-11/Div-IV/DA
R.P.A.D.:
To,
M/s. Meghdoot Laminart Pvt. Limited,
88,89, N.I.D.C. Estate,
Lambha Road, Narol,
Ahmedabad-382 405
Date: 23.02.2011
Copy to:
1.
The Deputy Commissioner (RRA), Central Excise, Ahmedabad-I
2.
The Assistant Commissioner (Prev.), Central Excise, Ahmedabad-I
3.
The Superintendent, AR-IV, Division- IV, Ahmedabad I
4.
Guard file
21