ORDER
Krishna Kumar, Member (J)
1. Heard both sides. These appeals have been filed against the 4 orders-in-original passed by the same Commissioner. The issue involved in all these appeals is the same. The Id. SDR appearing for the revenue submitted that the appellant have sought for early hearing in these appeals and they have taken several adjournments in the past. Therefore, their request for adjournment may be rejected. He also pointed out that on 14-2-2005, when the appellants have sought for adjournment, it was clearly recorded that the adjournment is being given as a last chance for 16-2-2005. Therefore, agreeing with the SDR, we reject the request of the appellants for adjournment.
2. The learned DRs appearing for the Revenue reiterated the findings of the Id. Commissioner and stated that the Appeals need to be rejected since there were no merits in the Appeals filed by them.
3. We find that all these Appeals arise out of four Order-in-Originals Nos. 29, 30, 33 and 34, dated 17-11-2003, 25-11-2003, 17-12-2003 and 18-12-2003 respectively passed by the Commissioner, Central Excise, Thane II.
4. The main Appellants are M/s. Durian Industries Ltd. and M/s. Palghar Plywood Product Pvt. Ltd. (hereinafter referred to as the Main Appellants). The other Appellants are the co-appellants of the main appellants and are the dealers and employees of the main Appellants’ factories.
5. It was alleged that main Appellants had manufactured and cleared decorated plywood bearing the brand of ‘Durian’ from the factory of the main Appellants without payment of duty and in the case of Palghar Plywood Product Pvt Ltd. i.e. second main Appellant it was submitted that they remain within the exemption limit provided under Notification 1/93, dated 28-2-1993, although they were undertaking job work for M/s. Durian Industries Ltd. It is seen that the brand, ‘Durian’ belonged to M/s. Durian Industries Ltd. However, they have not registered the brand as on date of investigations.
6. Department conducted enquiry. They visited the premises of the various dealers who are also Appellants herein, and have seized all such stocks, and other incriminating records/documents in the said dealer’s places, on the grounds that the dealers have failed to produce duty paying documents to evidence payment of duty. The department seized brand Durian decorative plywood found as well as decorative plywood at the dealers end and which were found without accompanying any Central Excise documents. Scrutiny of these stocks revealed that they were of Durian brand and were identifiable as belonging to the Appellants through the labels /stickers pasted on the reverse of the decorative plywood identifying the actual variety written/stamped on them, which also correlate with the product catalogue/pamphlets seized at the various dealers premises. It is also revealed during enquiry that the Appellants had issued trading invoices for these consignments mentioning the description therein as ‘Veneer’, rate per square meter, the quantity in square meters and the total amount including taxes, if any. The dealers had received the quantity of Durian brand decorative plywood from the factory of the main Appellants and these dealers had not received any Central Excise invoices for these consignments. The investigations reveal the modus operandi that the consignments of Durian brand decorative plywood had been received under the description, ‘Veneer’ and a private document called as chits were also used as part of transactions. This chits would show actual description of the variety, quantity in pcs, and sq metres, etc. and would be handed over to these dealers in duplicate by the driver of the vehicle accompanying the consignments and one copy of the same was handed over to the customers by the said driver after obtaining the acknowledgement for receipt of the material delivered from the customers on one copy of the said private document. Later on, within two days to three days, main appellant would deliver trading bill copy of the said consignment giving the description as ‘Veneer” without mentioning the actual description given in the said private document and collected back the second copy of the private document left with them at the time of delivery of the material. The payments for all the trading bills issued by DIL by cheque no, Central Excise Invoices were issued covering such consignments though all these materials were cleared from the Main Appellants factory. These facts were confirmed by the dealers in their statements. The investigations also revealed that dealers had made payment in cash also for such consignment though all consignments were, where no trading bills were issued by Main Appellants to such dealers. Scrutiny of the seized records from the office premises of Main Appellants revealed that they issued such trading bills to the dealers giving the description as Veneer during the said period. This as per the notices were nothing but clearances of Durian brand decorative plywood manufactured and cleared from the factory of Main Appellants without payment of duty etc. Hence it was concluded that the amount mentioned in the bills represented the actual realisations by Main Appellants. Show cause notices were issued by the Commissioner to the Appellants hereinabove. SCN proposing confiscation was issued to the Main Appellants against the seized goods found at the dealers end and not from the dealers who were the owners of the goods in question. Hence the demands and other proceedings under the above show cause notices calling upon them to show cause as to why:
(a) The sheets of decorative plywood /Durian Brand Decorative plywood seized from the dealer’s premises should not be confiscated.
(b) Duty demand of Rs. 9,97,712.87 on the goods seized from the dealers premises should not be demanded from M/s. Durian Industries Ltd.
(c) Duty of Rs. 26,52,429.89 in respect of clandestinely manufactured and cleared from their factory should not be demanded from M/s. Durian Industries Ltd.
(d) Duty of Rs. 7,03,071.85 in respect of clandestinely manufactured and cleared from their factory should not be demanded from M/s. Palghar Plywood Products Pvt. Ltd.
(e) Why Duty demand of Rs. 84,349/- on the goods seized from the dealers premises should not be demanded from M/s. Palghar Plywood Products Pvt. Ltd.
(f) Interest @ 20% on the duty determined to be payable should not be demanded from the Main Appellants.
(g) Penalty should not be imposed upon each of the Appellants as per the SCN.
7. In adjudication proceedings, the Id. Commissioner rejected the reply submission made by the Appellants and upheld the allegations and also accepted the evidences adduced by the department in the SCN and ordered payment of the duty and interest. The Commissioner also imposed penalties upon the Appellants and also have ordered payment of interest upon the manufactures above named: denied the Appellants the benefits of SSI Exemption claimed by them under Notification No. 1/93, dated 28-2-93 since they had crossed the exemption limit and ordered that they pay duty at tariff rate without availing SSI on the branded goods. The Id. Commissioner also imposed penalties upon the noticees who are in Appeal before us.
8. Being aggrieved by the Orders, the Appellants filed the Appeals. The Appellants submitted that the Id. Commissioner failed to consider the submissions which were crucial to the case:
a. The order of confirming duty on the alleged clandestine removals has been passed merely on assumption and presumptions that the same were cleared to the dealers under the trading bills of Veneers.
b. That, Appellants only manufactured repressed plywood and did not manufacture decorative plywood. The dealers have tried to implicate the Appellant. No specific document has been relied upon by the department to prove that decorative plywood was manufactured by the Appellants.
c. That, no investigations had been carried out to prove that the name, “Durian” appearing on the seized plywood was in the same style and fashion as that used by M/s. Durian Industries Ltd. The brand, ‘Durian’ was not registered and any one could have used it and the appellant could not have taken any action for infringement of trade mark. Therefore the order confirming the duty on goods that were never proved to be manufactured by them was bad in law.
d. That, no evidence to prove excess purchase of raw material, use of labour, electricity, transportation etc. to manufacture decorative plywood as alleged in the notice was produced.
e. That, no investigation or finding has been brought on record specifically proving that the seized goods had been manufactured by the appellants.
f. In case of the appellants M/s. DIL, they denied the findings of the Id Commissioner at Para 36 of the order that the 3 statements as well as the 2 statements of the dealers that they have admitted to the non-accountal of production and clearances. Respondents did not appreciate that out of 7 dealers, 4 dealers have admitted that they have purchased from the distributors of the Appellants and submitted duty paying documents in respect of repressed plywood. 2 dealers also had submitted stock statements which tallied with physical stock and book balances at that time. The Department has investigated 6 dealers in respect of case of clandestine removals; however they recorded statements of only 2 dealers to get the same confirmed. The appellants pointed out that the dealers whose statements were recorded namely M/s. Royal Veneer and M/s. Kanti Plywood were dealing only in trading goods and did not purchase goods from them. In the case of M/s. Palghar Plywood (1), they contended that the absence of physical availability of the subject goods, the findings that they bore the brand name Durian was without any evidence. In this connection reliance on the statement of Shri Omprakash BSahu Partner of M/s. Sahu Enterprises has been placed erroneously to hold as, “there is also evidence on record to show that the plywood processed/manufactured from such semi-finished plywood were affixed with Durian Brand. Shri Sahu in his statement admitted that what they received without the cover of duty paying documents under such chits and later on covered up by trading bills of Veneers were in fact decorative Veneered plywood of Durian Brand——.” This statement was in connection with the goods seized at their premises and they are not veneers. They are claimed to be repressed plywood and it was never acclaimed of the appellant as to those goods to be veneer. Therefore this seizure will not substantiate the findings that there was a seizure of goods covered under the subject trading bills and delivery chits.
g. The appellant’s reliance on the above statement dated 25-1-99 of Shri Radheshyam Kanoria, Technical Director, M/s. Durian Industries Ltd. and statement dated 13-1-99 of Shri Sajjan Dokania, page No. 13, answer No. 18 was ignored.
h. She also ignored the fact that no samples were sent for testing. Therefore mere advertising material alone cannot be the basis for the purpose of classification. It was submitted that specimen copies of sales bills of two such customers who had further sold the goods, namely M/s. Durian International, New Delhi, and M/s. Nakita Trade, that the customers themselves had sold the said goods bought and sold in the market as repressed plywood. It was therefore submitted that in the absence of any sample test, goods manufactured by the appellant cannot be held as Decorative Plywood. That with reference to the goods seized at the dealers end, no investigations were done to ascertain as to who are the manufacturers of the goods and she failed to appreciate that the goods were not manufactured by the appellant. The Commissioner did not offer her findings to the submissions made by the appellant of the applicability of the decision in the case of B.G. Plywood Ind. (Pvt.) Ltd. (2001 (96) ECR 709 (Tri.) to contend that the Hon’ble Tribunal in an almost identical circumstances, held that the samples were not sent for testing, advertising material alone cannot be the basis for the purpose of classification.
i. Though the entire quantity of disputed goods were said to have been cleared to various dealers, during the search operations at these places, the officers did not find even a single sq mt of Durian brand decorative plywood, alleged to have been manufactured by the appellant. The order is passed only on the basis of uncorroborated statements of these dealers, without application of mind and without appreciating their submission.
j. That, the Id. Commissioner had ignored the crucial fact that in addition to manufacture of repressed plywood they are also engaged in trading in Veneers. That trading activity is not carried out from the factory premises and the stock meant for trading has been never taken to the appellants factory premises. The Veneers for trading are stored in godowns elsewhere. The trading bills also are not raised from factory. Whenever, imported veneers has been sold, sales tax has been charged in the bill. In case of sales of locally purchased veneer, the same has been sold as second sales without sales tax. They have also given details of the trading activities to prove their contention that the demands are not on all the quantity of veneer traded by the appellants, which would itself admit that the department accepts that the appellants were trading in veneer. There is no reason arrived at in the order why the appellant should show trade in veneer not only to the subject dealers, there are several other dealers and their evidence has not been taken. Thus it was submitted that the appellants trading account, independent of manufacturing account and separately assessed to income-tax department and other statutory cannot be held to be of trading in manufactured decorative plywood.
k. Appellants submit that duty is imposed on the presumption that the Veneers that were DP and was manufactured by them. They pointed out that Veneer was one of the raw material used in the manufacture of Decorative Plywood. All along they maintained a separate account for Veneer. No one will give the bill for Veneer that is raw material and collect money for veneer (raw material) and leave the rest amount to the dealers to enjoy. There is a difference in the value of veneer and decorative plywood in the market. There is no material of collection of difference of other means. The trading invoices being rejected by the department for veneer do not show the value of Decorative Plywood. There is no material on record relied upon by the department for the difference having been received by them by any other means.
l. In fact, the Respondent has set aside the charges of collection of any extra consideration therefore there was no reason to conclude that they would have issued bills and received values as per this bills by cheque and supplied costlier goods.
m. The goods valued at Rs. 1,47,35,722.81 were not found in the dealer’s premises nor were they seized. Reliance has been placed on the statements of nine dealers, in this connection, whereas, there were in all nineteen dealers who were visited and it is their submission that these nineteen dealers were not covered in investigation.
n. Dealer’s statement was not determinative of the classification of the goods. Reliance was placed on the decisions in the case of Blue Star Ltd. v. UOI and Toshiba Anand Batteries Ltd. v. Commissioner .
o. The Commissioner ignored the submissions that the allegation was one where they had manufactured and cleared without payment of duty on Decorative plywood by passing it of as Veneer by issue of trading bills. They have denied this allegation and in support, they have pleaded that they have sold the goods to the dealers as described in the respective invoices. Wherever they have sold ‘veneer’, they have issued bills for the ‘veneer’ and wherever they have sold ‘repressed plywood’ they have issued invoices accordingly and paid duty. The Commissioner has also ignored their submission that their purchase of inputs and raw materials of ‘repressed plywood’ have been duly accounted. These records regarding consumption of inputs and materials have been verified by the Jurisdictional Central Excise Officers from time to time. They have also maintained RG-23A register and accordingly, availed Modvat credit of the duty paid on the inputs used in the manufacture of the final products. There is no allegation in the show cause notice regarding excess consumption of raw materials and inputs. There is also no evidence of transport of the unaccounted production from their factory to the dealers. Merely because the dealers have misused our bills relating to Veneer to cover up their unaccounted stock, it does not mean that they have manufactured and removed without accounting re-pressed plywood clandestinely. They also relied upon the Tribunal decisions in the following cases which have held that to uphold clandestine removals, the entire chain of circumstances must be established right from the consumption of excess raw material up to the transport of such unaccounted production:
1. Ganga Rubber Industries v. Collector
2. Kashmir Vanaspati v. Collector
3. Shree Packaging Corporation v. Collector
p. They submitted that their purchase of Veneer was commensurate with the sale of Veneer as also our total productions of the goods deals with the total sales. There is no allegation that their total purchases of Veneer as shown and recorded in their balance-sheets were not correct. The balance-sheet is a statutory record as part of which returns filed with the various authorities like income tax etc…, it is therefore, submitted that having regard to our statutory records like central excise records as well as balance-sheets and in the absence of factors held by the Hon. Tribunal to prove the clandestine removal of the allegation that they have suppressed the production of Durian brand decorative plywood and cleared the same without payment of excise duty was unjustifiable and untenable in law.
q. The Commissioner also did not offer her findings to the allegations of the discovery of delivery chits which were found and seized with various dealers during the course of stock taking at each of these dealer’s premises. They have denied having issued any such delivery chits. These documents referred to in the show cause notice do not contain any signature or stamp and authentication of their company or any of their various representatives or officials. There is nothing to corroborate the statements of the dealers relied upon in Para 5 of the notice. Except for making bald and generalise the statements which are believed by the department itself. Namely, the so called delivery chits, there is no other evidence much less of the degree held by the Hon. Tribunal to prove the clandestine removal. They therefore, submitted that the allegation of clandestine removal is without any substance and devoid of merits. In the written submission dated 17-7-2004 submitted by the advocate it was further submitted that the total purchase and sales of “Veneer” by the appellant tally with the statement of veneer purchase and sale referred to above proves that there is no clandestine removal.
r. The appellant drew attention to page No. 55 of the order wherein the Commissioner has held”…. However, it is not forthcoming to be of decorative plywood were got tested and if so what were the test results…. They have further challenged the departments imputation on the grounds that no test results of samples of seized goods is forthcoming in the SCN….” In view of the above findings the respondent was required to hold that merely on some chits and uncorroborated statements it was not open for the respondent to hold the disputed goods as “decorative plywood” in the absence of any test results or material. It is pertinent to note here that there were no alleged decorative plywood available with the dealers and get the same tested.
s. In the absence of physical availability of the subject goods the finding that they bore the brand name Durian was without any evidence.
t. Therefore the impugned Order alleging the clandestine removals of the goods which the appellant had never manufactured was not in accordance with law and deserves to be quashed and set aside.
9. We have carefully considered the rival submissions, and perused the case records. No cross-objections have been filed by the Respondent Commissioner.
10. We find that the issues that are required to be settled by us are as under:
(a) whether the main appellants had manufactured and cleared decorative plywood; Durian Brand decorated plywood without payment of duty to their dealers.
(b) whether the main appellants and others were liable for penalty and interest payment etc. and
(c) whether the seized goods are required to be confiscated.
11. We find that the entire case is based on trading bills, delivery chits and statements of dealers.
12. Notification No. 215/86, dated 27-3-1986, D.G. anti-evasion was declared as Chief Commissioner. This notification is still in force. Therefore, the show cause notices issued with the approval of D.G., C.E., intelligence is within jurisdiction.
13. The main appellants had filed a classification declaration on 15-2-1996 and claimed SSI Exemption. This exemption has not been dislodged by the Commissioner in her order. We also find that the second main appellant had filed similar classification declaration on 15-2-1996. This exemption has been denied by the Commissioner in her order, since this appellant had manufactured branded goods of brand not belonging to them. It is, however, their case that they had manufactured goods of the description, “plywood repressed” and cleared the same to their dealer. They were also engaged in trading of the product, Veneers. This trading was conducted outside their factory premises.
14. It is the case of the Department that they found branded goods in the dealers premises and also found labels/stickers on the said goods termed by them as decorative plywood which they allege were manufactured and cleared without payment of duty from the factory of the main appellants. We find that the main appellants have denied the allegations made by the Department and have cited several evidences as well as countered the statements of the dealers. We note that the factory and dealers premises were simultaneously visited by the officers and that the factory was in individual condition. It is seen that the Department did not come across any stock of the alleged branded goods in the factory nor did they draw any test samples. The Department has also ordered release of the seized goods unconditionally. The Department did not also find other raw materials nor found any recipe/formula to manufacture such branded plywood. These evidences are crucial and absence of the above would not justify to hold that the main-appellants had manufactured branded plywood.
15. The Department has relied upon the statements of the various dealers who have admitted to have received branded decorative plywood. In the light of the what we have found above, these statements of dealers are not striking at the root of the evidence, namely manufactured and receipt of branded decorative plywood and such statements are not trust worthy. Such statements need to be discarded as having no evidentiary value.
16. We find that in order to prove a case of mis-declaration, samples are required to be drawn and are required to be got tested by a competent authority. In this case, admittedly, at the time of visit these products were very much within the factory. Samples drawn and to be tested were crucial to the case. In this regard, the Tribunal decision in the case of B.G. Plywood (I) Pvt. Ltd. 2001 (96) ECR 709 – Tri. has held that where the samples, were not sent for testing, advertising material alone cannot be the basis for the purpose of classification. In this case, the advertising material in the shape of pamphlets etc. do not have evidentiary value unless it is supported by test results which proves that the goods seized at the dealers end were decorative plywood only and that to it must satisfy that these have been received from the factory of the main appellant.
17. We next take up the issue whether the appellants were engaged in the trading of Veneer. In the light of what we have noted above, that no stock of decorative plywood was found in the factory, the evidentiary value of the chits which were seized at the dealers end, is required to be discarded as there is no evidence of goods cleared from the factory without payment of duty and that the Department has failed in its attempt to prove clandestine removal of the decorative plywood from the factory. This being the case, we are inclined to agree with these appellants that Tribunal decision in the case of Ganga Rubber Inds. v. Collector , Kashmir Vanaspati v. Collector wherein it was held that to uphold clandestine removal, the entire claim of circumstances must be established right from the consumption of excess raw materials up to the transport of such unaccounted production might be established. In a very similar case, the Tribunal in the case of Sharon Veneers wherein the Tribunal on a Third Member reference had discarded the evidences relied upon by the Department as insufficient. We accordingly are inclined to apply the ratio of these case laws and to hold that the chits have not been subjected to strict test of evidences and that these chits do not have evidentiary value and we accordingly discard the same.
18. The Commissioner has ordered confiscation of the seized goods without giving notice to the dealers who were the owners of the goods. Such confiscation is, therefore, bad in law and is required to be set aside.
19. We, therefore, set aside the impugned orders and allow the appeals with consequential relief, if any.
(Pronounced in Court on______________)
Sd/-
(Krishna Kumar)
Member (J)
C. Satapathy, Member (T)
20. I find that all these Appeals arise out of four Orders-in-Original Nos. 29, 30, 33 and 34 respectively dated 17-11-2003, 27-11-2003, 22-12-2003 and 24-12-2003 passed by the Commissioner, Central Excise, Thane II. My findings in respect of these appeals are as follows :-
I. Appeal Nos. El597-607/04-Mum Arising out of Order-in-Original No. 29, dated 17-11-2003
21. M/s. Durian Industries Ltd. (hereinafter referred to as ‘the manufacturer’) is a manufacturer of Plywood of various grades falling under Chapter 44 of the Central Excise Tariff. Investigations were conducted with the dealers and the Company wherein some of the Decorative Plywood lying with some of the dealers was placed under Seizure. Subsequently, a Show Cause Notice dated 31-J-99 was issued on the ground that goods seized from the Dealers were those, which were cleared clandestinely by the Manufacturer and also demanded duty on goods lying in the factory premises of the manufacturer. Penalty was proposed to be imposed on the manufacturer as well as on the dealers. The value of the goods alleged removed was worked out to be Rs. 83,23,839/- and duty demand is Rs. 14,98,291/- was proposed in the notice. It was also proposed to confiscate the goods on the grounds that they have been clandestinely removed.
22. Upon adjudication, the adjudicating authority has dropped the demand of duty on the goods that were admittedly in a semi-finished state in the factory premises as also some of the demand, which was not demanded in the notice but was worked out in the Annexure. The rest of the duty demand was confirmed on the grounds that none of the dealers could come up with duty paying documents and in some cases, the dealers admitted to have purchased them without any duty and there was admission on the part of the manufacturer of not having properly accounted for in the statutory records. Accordingly, the adjudicating authority confirmed duty amounting to Rs. 9,97,713/- on the manufacturer for having removed the same clandestinely without payment of duty 100% penalty under Section 11AC of the Central Excise Act, 1944 was also imposed. Interest under Section 11AB was also confirmed. As regards the proposal for confiscation, the adjudicating authority held that goods that are in semi-finished nature and for those goods, where notice was not served, the same were not liable for confiscation. In respect of the other goods found without any duty paying documents and which were admitted for having purchased without payment of duty, the same were confiscated and allowed redemption on payment of fine. Penalty was imposed on the manufacturer, their Director and employees, as well as the dealers under Rule 209A of the Act.
II. Appeal Nos. E/698-704/04-Mum arising out of Order-in-Original No. 30, dated 27-11-2003
23. M/s. Palghar Plywood Products Pvt. Ltd. (hereinafter referred to as ‘the manufacturer’) is a manufacturer of Plywood of various grades falling under Chapter 44 of the Central Excise Tariff. Investigations were conducted with the dealers and the Company wherein some of the Decorative Plywood lying with one of the dealers was placed under Seizure. Subsequently, a Show Cause Notice dated 31-5-99 was issued on the ground that goods seized from the Dealer were those, which were cleared clandestinely by the Manufacturer and also demanded duty on goods lying in the factory premises of the manufacturer. Penalty was proposed to be imposed on the manufacturer and the dealer. The value of the goods allegedly removed was worked out to be Rs. 58,91,883/- and duty demand is Rs. 10,60,539/- was proposed in the notice. It was also proposed to confiscate the goods on the grounds that they have been clandestinely removed.
24. Upon adjudication, the adjudicating authority has dropped the demand of duty on the goods that were admittedly in a semi-finished state in the factory premises. The rest of the duty demand was confirmed on the grounds that the dealers could not come up with duty paying documents and that the dealer admitted to have purchased them without any duty and there was admission on the part of the manufacturer of not having properly accounted for in the statutory records. Accordingly, the adjudicating authority confirmed duty amounting to Rs. 84,349/- on the manufacturer for having removed the same clandestinely without payment of duty and 100% penalty under Section 11AC of the Central Excise Act, 1944 was also imposed. Interest under Section 11AB was also confirmed. As regards the proposal for confiscation, the adjudicating authority held that goods that are in semi-finished stage, the same were not liable for confiscation. In respect of those plywood which was found at the dealer’s premises without any duty paying documents and which were admitted for having purchased without payment of duty, the same were confiscated and allowed redemption on payment of fine. Penalty was imposed on the manufacturer, their Director and employees, as well as the dealer under Rules 52(A), 226, 9(2) and 209A of the Act.
III. Appeal Nos. E/1024-1046/04, Mum arising out of Order-in-Original No. 33, dated 22-12-2003
25. M/s. Durian Industries Ltd. (hereinafter referred to as ‘the manufacturer’) is a manufacturer of Plywood of various grades falling under Chapter 44 of the Central Excise Tariff. Investigations were conducted with the dealers and the Company wherein some of the Decorative Plywood lying with some of the dealers was placed under Seizure. Subsequently, a Show Cause Notice dated 9-2-2000 was issued on the grounds that goods seized from the Dealers were those that were cleared clandestinely by the Manufacturer, that the goods supplied under regular invoices to the dealers were under-invoiced and that the Appellant having exceeded the limits specified in the SSI Notification and therefore SSI Benefit was not available to these clearances. Penalty was proposed to be imposed on the manufacturer as well as on the dealers. Duty amounting to Rs. 26,52,430/- was demanded on the goods alleged to have been clandestinely removed and demand of duty amounting to Rs. 2,18,64,157/- was made on account of under-valuation of the goods in the notice.
26. Upon adjudication, the adjudicating authority has dropped the demand of duty demanded on the charge of under-valuation on the ground that there is no evidence to show that any testing was done on the goods to prove that the goods were other than repressed plywood and that proposal in the notice to value on the goods on the basis of the highest clearance prices had not basis in law and that plywood cannot be valued on the basis of thickness alone but on variety of factors determine the pricing. As regards Clandestine Clearance, the lower authority rejected the plea of the manufacturer that these were actually Veneers that were being traded by them. The lower authority relied on the admissions and the modus operandi explained by the dealers, some of the stock actually found at the premises of some dealers and the fact that Exhibit submitted by the manufacturers do not show the purchase/sale details nor any clearance documents of the veneers were submitted during the proceedings. It was held that since the manufacturer has manufactured branded goods and removed them clandestinely, the merit rate of duty would be applicable. Therefore, the duty demand was confirmed on the manufacturer for having removed the same clandestinely without payment of duty and 100% penalty under Section 11AC of the Central Excise Act, 1944 was imposed. Interest under Section 11AB was also confirmed. Penalty was imposed on the manufacturer, their Director and employees, as well as the dealers under Rule 52(A), 226, 9(2) and 209A of the Act.
IV. Appeal Nos. E/1047-1057/04 arising out of Order-in-Original No. 34, dated 24-12-2003
27. M/s. Palghar Plywood Products Pvt. Ltd. (hereinafter referred to as ‘the manufacturer’) is a manufacturer of Plywood of various grades falling under Chapter 44 of the Central Excise Tariff. Investigations were conducted with the dealers and the Company wherein some of the Decorative Plywood lying with some of the dealers was placed under Seizure. Subsequently, a Show Cause Notice dated 27-6-2000 was issued on the grounds that goods seized from the Dealers were those, which were cleared clandestinely by the Manufacturer, that the goods supplied under regular invoices to the dealers were under-invoiced and that the Appellant having manufactured branded goods and the SSI Benefit was not available to these clearances. Penalties were proposed to be imposed on the manufacturei as well as the dealers. Duty amounting to Rs. 7,03,072/- was demanded on the goods alleged to have been clandestinely removed and demand of duty amounting to Rs. 2,01,16,733/- was made on account of under-valuation of the goods in the notice.
28. Upon adjudication, the adjudicating authority has dropped the demand of duty demanded on the charge of under-valuation on the ground that there is no evidence to show that any testing was done on the goods to prove that the goods were other than repressed plywood and that proposal in the notice to value on the goods on the basis of the highest clearance prices had not basis in law and that plywood cannot be valued on the basis of thickness alone but on variety of factors determine the pricing. As regards Clandestine Clearance, the lower authority rejected the plea of the manufacturer that these were actually Veneers that were being traded by them. The lower authority relied on the ad- missions and the modus operandi explained by the dealers, some of the stock actually found at the premises of some dealers and the fact that Exhibit submitted by the manufacturers do not show the purchase/sale details nor any clearance documents of the veneers were submitted during the proceedings. It was held that since the manufacturer has manufactured branded goods and removed them clandestinely, the merit rate of duty would be applicable. Therefore, the duty demand was confirmed on the manufacturer for having removed the same clandestinely without payment of duty and 100% penalty under Section 11AC of the Central Excise Act, 1944 was imposed. Interest under Section 11AB was also confirmed. Penalty was imposed on the manufacturer, their Director and employees, as well as the dealers under Rules 226, 52(A), 9(2), 173Q and 209A of the Act.
29. After examining the records, I find that while some tables of production and clearance have been submitted, no duty paying documents were submitted before the lower authority nor any duty paying documents were found during the search at any of the premises of the manufacturers or dealers. The learned DRs have relied on the judgments in the case of Royco Biscuit Co v. CCE 2000 (123) E.L.T. 1063 (Tri) and Commissioner of Customs v. D Bhoormull . I find these decisions are applicable to the facts of the case. I also find that the adjudicating Commissioner has dropped several charges and demands in the absence of corroborative evidences. However, she has confirmed the demands in a few cases where the incriminating goods have been seized and there is corroboration in the form of statements that these goods have been cleared to the dealer’s premises without payment of duty. There is also failure on the part or appellants to account for these goods or to show particulars of payment of duty for the same. Hence, the action of the Commissioner to confiscate the goods in these few cases and to demand duty and impose penalty cannot be faulted. Accordingly, I hold that the duty has been correctly demanded as detailed in the impugned orders. I, however, find that the penalties imposed are excessive and hence I reduce the same to 25% of the amounts determined by the Commissioner. I note that the fines imposed for redemption are only 20 -25% of the value of the goods and therefore, I do not propose to interfere with the same. As such, I am of the view that these appeals require to be dismissed except for reduction in the penalty amounts as indicated above. I order accordingly.
Sd/-
(C. Satapathy)
Member (T)
dated 15-7-2005
30. The following difference of opinion is referred to the Hon’ble President in terms of Section 35D(1) of the Central Excise Act, 1944 read with Section 129C(5) of the Customs Act, 1962:-
Whether the appeals have to be allowed setting aside the impugned orders as held by the Member (Judicial).
OR
The appeals have to be allowed partly reducing the penalties to the extent of 25% as held by the Member (Technical).
Sd/- Sd/- (C. Satapathy) (Krishna Kumar) Member (T) Member (J) dated 21-7-2005
31. [Order per : Archana Wadhwa, Member, (J)]. – The matter has been referred to me as a third Member to resolve the difference between the Id. Mem- ber (Judicial) Shri Krishna Kumar and the Id. Member (Technical) Shri C. Satapa-thy. While Member (Judicial) has allowed the appeals, Member (Technical) has confirmed the demand of duty against the main appellants but reduced the penalty to 25% of the amount determined by the Commissioner. He has also upheld confiscation of the goods with an option to redeem the same.
32. I have heard Shri M.H. Patil, Id. Advocate appearing for the appellants and Shri Hitesh Shah, Id. SDR appearing for the revenue and have gone through the order recorded by Id. brothers. The dispute in the present appeal relates to appreciation of evidence available on record for the purpose of arriving at finding of clandestine removal. Detailed facts have already been enumerated in the order recorded by the Id. Member (Judicial) as also in the order of the Id. Member (Technical) and, as such, the same are not being referred to again so as to avoid redundancy.
33. It is seen that the entire case of the revenue for the alleged clandestine removal is based upon the seizure of decorative plywood from the premises of the dealers and the statement of some of the dealers to the effect that such decorative plywood was received by them from the manufacturers i.e. M/s. Durian Industries Ltd., and M/s. Palghar Plywood Products Pvt. Ltd.”/without payment of duty and under the trading bills for Veneer. The appellants have strongly contended that they are not manufacturing decorative plywood and the said goods found and seized from the dealer’s premises are not manufactured by them. Merely because the said goods are affixed with a label/sticker showing brand name “Durian”, which at the relevant time was not registered in their name, will not go to prove that the said goods have been manufactured and cleared by them. The said brand name being a famous one, could have been used by the dealer to increase their sales or to dupe the customers. No tests were conducted to find out as to whether the said sticker fixed at the back of decorative plywood found at the dealer’s premises was identical to the one used by the appellants, further, it has been strongly contended that along with the search of the dealer’s premises, their factory premises were also put to search and nothing incriminating was recovered therefrom. There was no excess or shortage of raw materials detected at the time of the visit of the officers. Similarly, no materials requisite for manufacture of decorative plywood was found in their factory premises, thus leading credence to their submissions that they are not engaged in the manufacture of decorative plywood at all.
34. Countering the above submissions Shri Hitesh Shah, Id. SDR appearing for the revenue has drawn my attention to the observations made by the adjudicating authority and the evidence discussed by her. It has been strongly contended that majority of the dealers have disclosed the modus operandi adopted by the manufacturers appellants to clear the decorative plywood under the guise of trading of veneer. Decorative plywood was being cleared from the manufacturer’s factory under private chits, which were being replaced subsequently by the trading bills. He has specifically drawn my attention to the statements of some of the dealers as discussed in the impugned order.
35. After having considered the submissions made by both sides. I find that Member (Judicial) has detailed the submissions of the appellants in para 8 of his judgment, from (a) to (t). A reading of the same would show that the manufacturing appellants have categorically denied having manufactured decorative plywood at all. I find a lot of force in their submission that in the absence of any test or investigation having been conducted by the revenue to link the decorative plywood found at the dealer’s premises with the appellants manufacturer or to link the sticker with the sticker being used by the appellants, it cannot be conclusively held that the decorative plywood in question was manufactured by the appellants and cleared by them without payment of duty. In fact, it is on record that during the course of visit of the appellant’s factory not even a trace of decorative plywood or the raw materials required for manufacture of decorative plywood was found. If the appellants would have been engaged in the manufacture of decorative plywood, the officers would have definitely found some evidence to that effect. No investigations having been conducted by the revenue to ascertain as to who are the manufacturers of the plywood found at the dealers premises, the appellant’s contention that it is not their product, has to be accepted. I find that the reliance on the Tribunal’s decision in the case of B.G. Plywood Ind. (Pvt.) Ltd., by Member (Judicial) is appropriate, wherein under similar circumstances it was held that in the absence of the samples having been sent for testing, advertising materials in the shape of booklets does not have any evidentiary value.
36. It is well-settled law that the allegations of clandestine removal, which are quasi criminal in nature are required to be proved by the revenue by production of sufficient tangible evidence on record. As discussed by Member (Judicial), the evidence on record is not sufficient enough to inspire confidence to hold against the appellants. Reliance upon the statement of few dealers, which might be using the appellant’s brand name “Durain” with ulterior motive or to dupe the customers by encashing on the goodwill of the said brand name cannot be made the basis for holding against the appellants especially when the appellants have categorically stated that they are not manufacturing decorative plywood and nothing contrary to that has been found by the officers during the course of visit of the factory. As the case law relating to the above submissions have already been discussed in detail by Member (Judicial), I refrain from referring to the ratios of the same.
37. On the other hand, I find that the Id. Member (Technical) have primarily held against the appellants on the ground that they have not been able to produce any duty paying documents before the lower authorities nor any duty paying documents were found during the search at any of the premises of the manufacturers or dealers. However, it is the appellant’s stand that they are not manufacturing decorative plywood at all, in which case the question of presence and availability of duty paying documents does not arise at all.
38. In view of the above, I agree with findings of Id. Member (Judicial) Shri Krishna Kumar and allow all the appeals. The papers may be sent to the original bench for recording the final order.
Sd
(Archana Wadhwa)
Member (J)
dated 7-12-2005
MAJORITY ORDER
In view of the above majority decision, the impugned order is set aside and the appeals are allowed.
(Pronounced in Court on 14-12-2005)