IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2830 OF 2005
M/S. MAAN ALUMINIUM LTD. .... Appellant
VERSUS
COMMISSIONER OF CENTRAL EXCISE, INDORE .... Respondent
J U D G M E N T
A. K. SIKRI, J.
The appellant herein is engaged in the business of
manufacturing of Aluminium Profils, bars and roads, tubes and papers.
These items which are finished goods are subjected to excise duty and
classified under chapter 76 of the Schedule to the Central Excise Act.
Substantial quantity of the aforesaid goods manufactured by the appellant
is exported. Some officials of the Central Excise Department visited the
factory of the appellant on 16.08.1996 and checked the physical stock of
the finished goods viz-a-viz, the stock recorded in its books. On
verification, these officials found that several quantities of goods are
unaccounted. These goods were, accordingly, seized. The raiding party
also visited the office premises of the appellant. It went to the dealers
of the appellant and recorded their statements as well. Statements of some
of the employees of the appellant company who were dealing with the affairs
of the appellant were also recorded.
On the basis of the aforesaid material and the statements
recorded, the Department took the view that the appellant had been
clandestinely removing some of the quantities of the finished goods. On
this basis, a show cause notice dated 03.03.1999 was issued to the
appellant company as well as its managing director. Making out the case of
evasion of excise duty and suppression of facts on the part of the
appellant, extended period of limitation was invoked, as per proviso to
Section 11A(1) of the Central Excise Act.
The appellant submitted its reply to the said show cause notice
contesting the position which was taken by the Department in the said
notice. The appellant submitted that there was no clandestine removal of
any quantity of finished goods and the raw material was in fact used in
manufacturing the finished goods.
After hearing the appellant, the adjudicating authority passed
the Order-in-Original dated 28.08.2002, raising the demand of Rs.64,82,565/-
as differential duty payable by the appellant. The appellant went in
appeal, which appeal was dismissed by the Customs, Excise and Services Tax
Appellate Tribunal (hereinafter referred to as 'CESTAT') as well vide its
orders dated 22.12.2003. Relevant portion of this order which contains the
discussion on the essential aspects is reproduced below:-
“3.1 The company had cleared goods for export also. The export documents
showed the “catalogue weight” of the goods, which was more than the actual
(physical) weight recorded in RG-1 register. Consequently, the weight of
goods actually exported was less than what was shown I the export documents
viz. AR4s. Invoices etc. The SCN alleged that the differential quantity of
goods had not been accounted and the same had been clandestinely cleared
without payment of duty during the period February 1994 to January 1999.
this allegation was also based on the finding that the “gate register” and
other records seized from the factory premises had shown that goods had
been cleared without invoice and without payment of duty. The demand of
Rs.1,05,67,090/- was raised on a total quantity of 641.145 Mts of goods
which was allegedly cleared in the above manner during the above period,
corresponding to which the total quantity of exports as noted by the
Commissioner was 6507.073 Mts. The adjudicating authority has found that
out of this quantity of total exports, the exports made to M/s Man
Intertrade Co. (UAE) are not to be taken into account for demanding duty
and accordingly it has requantified the demand as Rs. 64,82,565/-. That
authority has worked out this demand on the basis of the appellants own
records and statements. For instance a letter issued by Sh. U. D. Selvan,
Senior Engineer of the company, to their Indore office showed the catalogue
weight of certain Aluminium Sections as 21986 Kgs. and its physical weight
as 21404.2 Kgs. Shri Selvan, in his statement, confirmed this fact. Some
official correspondence between functionaries of the company also indicated
that the catalogue weight of export goods was 5-10% more than the actual
weight. Shri Deepak Das, Senior Manager (Tool Room) who was confronted
with the letters, admitted that the catalogue weight (despatch weight) was
always more than the physical weight. Shri Prahalad Das Sarda, Excise
(Officer & Authorised Signatory, stated that it was his function to make
entries in RG-1 Register on the basis of the Packing departments reports
which were prepared on the basis of actual weight. But he could not
explain as to how the differential quantity of goods was disposed of. He
further stated that he had only acted as per the directions of the Managing
Director and the latter alone could offer any explanation. Shri J.C.
Mansukhani, in his statement, admitted that in some cases of exports, the
catalogue weight was higher than the physical weight and the differential
quantity of goods remained in the factory. However, he could not say as to
how this quantity was disposed of. In the aforesaid example, the quantity
of Sections exported under GP2 No. 58 dated 29.12.93 was shown as 21986
Kgs. (catalogue weight) whereas the actual weight was only 21404.2 Kgs.
The differential quantity (581.8 Kgs.) was not actually cleared and
exported, though, in RG-1, it was shown as debited for clearance for
export. Shri Mansukhani in his statement conceded this factual position
but could not say as to how the 581.8 Kgs. of Sections remaining in the
factory were disposed of. The Consultant for the appellants submitted
before us that J.C. Mansukhani and Deepak Das had been wrongly quoted in
the SCN and the Commissioner's order. He added that the allegation of
clandestine removal of goods had not been proved by the department. Yet
another submission made by the Consultant was that the difference in weight
of the goods was less than 5 which according to him, was too negligible to
be taken into account. The DR submitted that he demand of duty was based
only on the differential quantity admitted by the appellants and hence was
irresistible. We are unable to accept the Consultant's arguments as we
have noted that the demand of duty of Rs. 64,82,565/- is based on the
unrebutted documentary evidence gathered from the appellants premises as
well as the unretracted statements of the Managing Director and other
responsible functionaries of the company. We have perused these statements
and find that the adjudicating authority has correctly quoted and
appreciated the same. The statements were never retracted, nor, was any of
the documents disowned. The result was that the differential quantity of
goods i.e. the difference between the actual (physical) weight and the
weight shown to have been cleared for export was proved to have been
removed from the factory without invoices and without payment of duty. The
differential quantity was admitted but its accountal and clearance in terms
of the legal provisions were not shown. (In view of the admission of the
differential quantity by the company authorities, it was not necessary for
the adjudicating authority to allow them to cross-examine any officer of
the department). The department's allegation of clandestine removal of the
said quantity stood proved. The appellants have stated that the total
exports quantity noted by the Commissioner (6507.073 Mts) is not correct
and that the correct figure must be less by 95.614 Mts and, on this basis,
the demand of duty should be reduced. We are unable to accept this claim
as we find that the Commissioner has noted the above quantity from a report
of the Deputy Commissioner of Central Excise Division II, Indore, which has
not been called in question in these appeals. Yet another ground of
challenge to the demand of duty is that many of the exports taken into
account by the Commissioner had taken place prior to the period of demand.
This, again, cannot be accepted as J.C. Mansukhani admitted that the
differential quantities remained in the factory. Such quantities which
accumulated from past exports could well be removed during the period of
demand. We uphold the above demand of duty for the reasons recorded.”
The appellant preferred further appeal to the High Court under
Section 35G of the Central Excise Act. This appeal has also been dismissed
by the High Court primarily on the ground that the two authorities below
have looked into the facts and law in confirming the demand and a finding
of fact has been arrived that it was a case of evasion of duty by resorting
to clandestine manner in removing the finished goods and therefore, these
findings do not call for any interference. Since the High Court has
dismissed the appeal with the aforesaid observation, that was a reason for
reproducing in detail, the discussion carried out by the CESTAT in its
order.
This is how the present appeal comes up for hearing which
challenges the orders of the authorities below.
In the first blush, the impression that would be gathered is
that a finding of fact is arrived at by the authorities below holding that
there was clandestine removal of the goods from the factory premises of the
appellant without the payment of excise duty and therefore, no question of
law is involved in the present case. However, the submission of Mr. S.
Ganesh, learned senior counsel appearing for the appellant, is that from
the reading of the order of the CESTAT, it becomes apparent that the CESTAT
has primarily been influenced by the statements of two employees of the
appellant company viz., Mr. Deepak Das and Mr. J.C. Mansukhani and the
entire order is rested on the so called admissions contained in the
statement of these two employees. He submitted that from the reading of
the statement of the two employees it would be crystal clear that there was
no such admission made by them at all and what is sought to be read into
those statements is not there at all and is conspicuously missing in these
statements. It was thus, argued that the present case is a case of perverse
findings. It is additionally argued that when the Commissioner or for that
matter, the CESTAT relied upon the so-called admissions of the aforesaid
two employees, it failed to look into any explanation furnished by the
appellant in reply to the show cause notice and also in the form of other
materials produced before the adjudicating authority. It was also argued
that even in the statements of the said two employees, these employees had
amply demonstrated and clarified the doubts pertaining to the differential
in quantity but the authorities have blissfully ignored those parts of the
statements of these employees, which has resulted in miscarriage of
justice.
In order to substantiate the aforesaid statement, Mr. Ganesh
took us through the reply to the show cause notice, other documents filed
as well as the statements of Mr.J. C. Mansukhani and Mr. Deepak Das. On
going through this record, we are inclined to accept the argument of
Mr.Ganesh that the findings arrived at by the CESTAT which are accepted by
the High Court are totally perverse and there is no such admission made by
these two persons which has become the basis of the orders passed by the
authorities below.
Before we advert to these statements, it would be pertinent to
mention here that the appellant had explained that there is a variation in
the die hole between 5% to 7.5%, i.e., in the manufacture of dye. It was a
specific case put by the appellant that the hole of the die, after its
continuous use at Press machine for extruding the required section/ finish
goods, the internal diameter always expanded to some extent and therefore
the dies are being manufactured accordingly so that the produced output
should match the specifications. It had also taken support of the
technical literature that is available in the market, to prove the
aforesaid assertion. On this basis, it was stated that in the export
catalogue which was prepared and issued by the appellant in order to take
care of the final production with varying specifications because of the
aforesaid reason, 10 per cent actual weight would be 5% more or less than
the weight as mentioned in the catalogue. It was further explained that
even as per the show cause notice, the difference in quantity was hardly 2
per cent.
We find from the reading of the statements of Mr.Deepak Das and
Mr. J. C. Mansukhani that this aspect is explained in abundance by them in
their statements. After reading the statement of these two persons, we
find that no such admission was made by them, as recorded in the order of
the CESTAT which is extracted above. Mr.Deepak Das had only stated that
“In export dies, catalogue weight should be always equal or 10% than the
physical weight”. This is in reply to Question No. 4 which was put to Mr.
Deepak Das. For the sake of clarity and better understanding, we reproduce
the exact question and answer given thereto:
“Question-4 Please see page No. 359 of file 2B, seized from factory
premises on 16.8.96 please explain the meaning of “we may follow the wt.
Range in export dies from – 10% to 0%” as mentioned in the above said
letter written by you to Mr. D. K. Chandwani Indore office on 8.8.94.
Ans In export dies, catalogue weight should be always equal or 10% than
the physical weight.”
We fail to understand how it amounts to admission on the part
of Mr. Das that the quantity disclosed was less. To the similar effect is
the statement of Mr. Mansukhani which is treated as his admission. In this
behalf, we reproduce question No. 5 and answer thereof which is taken as
admission of Mr. Mansukhani: -
“Question 5: Please see page No. 137 of File 49B where catalogue weight for
different Section shown as 21986 kg., and same goods were cleared under BP-
258, dated 29.12.1993 this BP 2 shows that in case of Export of goods the
same are cleared on catalogue weight.
Ans. 5. As per my knowledge in certain exports goods we will have to charge
them as per catalogue weight and there is possibility of (+-) litter
difference in the weight this is because of international rules.”
Apart from the aforequoted positions of the two statements,
learned counsel for the Revenue could not point out any other part of the
statements on which he could rely to demonstrate any admissions by any of
these witnesses.
Once we arrive at an conclusion that there was no such
admission on the part of these two persons which is erroneously read out to
be so, entire basis of the impugned orders passed by the Commissioner as
well as the CESTAT gets knocked off.
We would also like to mention at this stage that in reply to
show cause notice, a specific plea was taken by the appellant that the
allegations made in the show cause notice were purely hypothetical and the
difference occurred because of +/- 5 per cent tolerance which was
admissible in invoicing of export dispatches. It was also specifically
pleaded that the exporter always dispatches 10% less quantity and yet the
importer pays foreign exchange for full invoice amount, even for 10% less
quantity received by him. The statements made in the catalogue were also
justified in the following manner: -
“For export of the finished products to various countries, the noticee No.
1 has made out an Export catalogue which contains technical details of our
different section; weight per meter etc. and as per the international
practice, the invoicing of export dispatches is made on the basis of
Catalogue weight whereas the actual weight of the section may be as per
catalogue weight in most of the cases and in some case it may be 5% more or
less than the weight as mentioned in the catalogue. Each export
consignment consist of minimum 15-20 different varieties of section/
profiles and out of these different types, only in three four sections
there can be variation and in rest of the sections, the weight is almost
same. However, the aggregate value of the invoice is always as per the
actual weight of the total consignment. To elaborate further, if the
quantity of any particular section is 5% less than the catalogue weight,
the quantity of other section will be 5% more than that of catalogue
weight. The average weight of a container is thus always equal to the
actual weight.”
It was specifically pointed out that the Department had taken
only those samples of products with larger quantity and missed out those
with lesser quantity and in case all the items are taken together, there
would not be any difference in quantities. This was sought to be
demonstrated by a chart prepared as Annexure 'AE' to the show cause notice
in the following manner: -
“The chart as Annexure 'AE' prepared for differential quantity 4.044 MT
pertaining to the exports made during the period from 19.07.93 to 28.06.94
which is totally irrelevant as the relevant period of the proposed demand
duty is from Feb, 94 to Jan, 99. The difference worked out in this chart
comes to about 4.91% of total 82.391 MT quantity invoiced which is also
appeared to be well within the tolerable limit of 5%. Another aspect for
this chart is that the investigating officers while preparing the chart
“AE” deliberately have taken only those cases in which catalogue weight is
more than the actual weight and ignored the cases in which actual weight
were more than the catalogue weight. On going through whole para 6, it
appears that these were the only stray evidences which the investigating
officer of the department could collect after searching the files and
records of Noticee No. 1 by spending almost three years valuable time of
the Central Excise department. But these cases are also not relevant in
the case of Noticee No. 1 as the relevant period of proposed demand of duty
made in the impugned show cause notice is from Feb, 94 to Jan, 99.”
It is unfortunate that in spite of the fact that the aforesaid
plea was specifically raised by the appellant in explaining that there was
no difference in the quantities and thus, no question of any clandestine
removal of the goods from the premises, the said plea has not been adverted
to and there is no reference made to the aforesaid material produced by the
appellant. It is stated at the cost of repetition, that only on the basis
of so called admissions made by Mr.Mansukhani and Mr. Deepak Das, the
authorities jumped to the conclusion without undertaking any further
exercise. Such an order of the CESTAT which is confirmed by the High Court
does not stand legal scrutiny and therefore, these orders are liable to be
set aside. We, accordingly, allow this appeal and quash the demands raised
by the authorities.
No costs.
..........................., J.
[ A.K. SIKRI ]
..........................., J.
New Delhi; [ ROHINTON FALI NARIMAN ]
May 08, 2015.