ORDER
S.N. Busi, Member (T)
1. This appeal is directed against the Order-in-Original No. 18/CH 40/CollrCE/Cal-II/91 dated 31-10-1991 of Collector of Central Excise, Calcutta Commissionerate II, wherein Central Excise duty of Rs. 1,89,82,357/- for the period from November, 1984 to February, 1988 was confirmed in respect of tyres not properly accounted for in the statutory accounts and clandestinely removed without payment of the appropriate central excise duty, and also imposed penalty of Rs. 20,00,000/- on M/s Dunlop India Ltd., Sahagunj, Hooghly, Calcutta.
2. The matrix of the case is that on the basis of prior information, the officers of the Directorate of Anti-evasion and the officers of Central Excise searched various premises of the appellants on 17-3-1988 and seized/ recovered records which inter alia include Progressive Moulding Registers, RG-1 registers, RG-23A Part I registers, Weigh Bridge Cards for Carbon Black, Receipt Tally Sheets of Carbon Block, Bin Cards of Carbon Black. From scrutiny of the seized records it revealed that the appellants were maintaining a register named as “Progressive Moulding Register” (PMR). This register was said to be a ‘personal’ record of Senior Supervisor, planning but elaborate details like the firm order (target of production), delivery figures at the end of week etc. The delivery figures correspond to the number of OK tyres only which have been delivered to the Base Stores (which is the non-duty paid bonded store room) which corresponds to the OK figures mentioned in the RG-1 register. However, it was noticed the differences between the figures in the PMR arid RG-1 were required to be reconciled after considering scrap, seconds and test tyre figures. It was observed that the appellant company itself monitors the production figures on the basis of delivery to the Base Stores (BSR). Hence, an attempt was made to tally the figures of the moulded tyres with the RG-1 figures after taking into consideration the seconds, scrap and test figures for long periods. Having regard the above aspects, the differences between mould figures and the RG-1 figures, scrap, seconds and test tyre figures were duly considered and net difference with the RG-1 was calculated. From the above calculation, it appeared to the Department that the appellants suppressed the actual production of tyres and clandestinely removed the same during the period from November, 1984 to February, 1988 thus evading payment of central excise duty to the tune of Rs. 1,89,82,357/-. It, therefore, appeared to the Department that the appellants violated Rules 9(1), 51A, 52, 52A, 53, 54,173F and 173G read with Rule 226 of the Central Excise Rules, 1944 and, therefore, liable to for penal action under Rule 9(2), 209 (1), 209 (2) and 173Q ibid. Accordingly, a Show-cause Notice dated 5-12-1989 was issued to the appellants demanding the said duty and also proposing penalty under the aforementioned Rules. In their reply, the appellants denied all the allegations contained in Show-cause Notice. They submitted that the PMR being a planning register was not a part of the accounting record of the factory; that it was principally a planning reference register containing information regarding history of each size and type of tyre manufactured in the factory, moulding date of any advance type and date and time of off-programme type; that the difference between the delivery and the cumulative figures recorded in that register would not agree with the actual production because of the reasons that the register did not take into account stocks lying with the shop floor, rejection of tyres after tests, tyres treated as seconds after test and a tendency to record higher moulding output than actual to establish efficiency and higher wage earning by piece-rated workers; that it was a private register maintained by the planning department for their own reference and use in relation to above mentioned issue; that the credibility of the figures in Annexure ‘C’ to the Show Cause Notice was not free from doubt and no proceedings in the interest of equity and natural justice could be sustained on the basis of higher doubtful and unreliable figures; that there was no evidence whatsoever of irregular accounting of other inputs, namely, rubber, textile fabrics and chemicals; that demand of duty could not be sustained without actual evidence of clandestine removal; that the manufacture of tyres was under physical control and thus every truck leaving the factory with finished goods was checked and authenticated by the Central Excise Officer posted in the factory; that the department was not able to quote examples of actual figures in support of all the allegations which were based on conjectures and surmises. As the Commissioner was not convinced by the above submissions, he confirmed the said demand and imposed the said penalty vide the impugned order which is under challenge before us.
3. The burden of song of the appellants in the appeal petition is that the findings of the Commissioner are based on incorrect appreciation of divergence in tyre production figures recorded in their private register (PMR) and the statutory register (RG-1). From the very beginning they have been contending that the PMR which forms the basis for raising the demand is neither a statutory record nor a part of the appellant’s accounting records. They point out that the depositions made by the executives of the appellants, both during and after search, being categorical to the effect that none have either checked the entries or relied upon it for any accounting purposes being planning reference register, it cannot form basis of such a grievous charge against the appellants. As regards the allegation of excess receipt of carbon black, the appellants contend that it has not been established with any concrete evidence except for occasional mistakes which are only stray cases of human error. They are quite emphatic that it is impossible to carry out malpractices of the nature alleged by the Department as every movement of goods, both within and outside the factory is supported by Mill Delivery Ticket or challan and all the goods entering in and going out of the factory are invariably weighed at the weighbridge and appropriately documented. Countering the findings contained in the impugned order, the appellants contend that the Commissioner erred in arriving at the conclusion that the PMR in question was being maintained with reference to the Trade Notice No. 137/Tyres-2/CE/83, dated 31-8-1983. Although the appellants maintained mould register in accordance with the Trade Notice, the PMR relied upon by the Department, is only a private register of the Planning Department and has nothing to do with the Mould register as contemplated in the said Trade Notice. In any event, contend the appellants, the authenticity of the PMR in relation to recording of the quantities of tyres stands disproved by the fact that the actual production as per RG-1 register is almost double of what is shown in the PMR.
4. When the stay petition was under consideration on 2-5-1997, the Tribunal observed as under :
“The present case has been built on Progressive Mould Register seized by the Revenue from the factory premises of the applicant company herein. Production shown in the PMR has been compared with the production of figures taken from RG-1 register in respect of various sizes of tyres. The difference between the figures of PMR and of RG-1 in respect of each size has been taken as the basis of clandestine manufacture and removal and duty has been demanded on such differential production between PMR and RG-1. These figures are given by the Revenue in Annexure-C to the Show-cause Notice.
2. On the other hand, the applicant’s case is, apart from several other pleas, that figures for each size attributed to RG-1 in Annexure-C are not correctly shown. According to their calculation, figures of each size mentioned in Annexure-C to the Show-cause Notice as attributed to RG-1 are different. In other words, there is one set of figures arrived at in the Show-cause Notice by the Revenue Officers in another set of figures arrived at by the applicant company in respect of the same size. Both these sets of figures – one by the Revenue and another by the applicant company – are admittedly based on the same record i.e. RG-1.
3. In order to arrive even at a prima facie decision, it is necessary to reconcile the two figures.
4. Both sides point out that this reconciliation will take substantial time when the officers from the Revenue as also from the applicant’s side sit together.
5. We agree with the suggestion from both sides. Therefore, we direct them to act together and reconcile the figures of production as given in the RG-1 record under seizure and in the possession of the Directorate of Anti-evasion. The reconciled figures should be presented to the Bench on 4-7-1997.
5. In pursuance of the aforementioned direction of the Tribunal, the representatives of the appellants and the officers of the Directorate of Anti-evasion, held several rounds of discussion and exchanged extensive correspondence. The net result of such an exercise is compilation of entirely different set of moulding and production figures which are at wide variance with the figures of Annexure-C to the Show-cause Notice. The revised moulding figure, as worked out by the Directorate of Anti-evasion, comes to 21.68 lakhs tyres in place of 13.69 lakh tyres as had been shown in the Show-cause notice and the revised production figures, culled out from the PMR, have been arrived at 22.91 lakh tyres in place of 12.70 lakh tyres as per the Show-cause Notice. Thus, the production figure of 22.91 lakh tyres as compiled from the PMR is more than the moulding figure of 21.68 lakh tyres which reflects a totally different picture from the Show-cause Notice wherein the moulding figures were more than production figures resulting in demand of duty on the differential quantity alleging to the clandestine production. The said position was brought to the notice of the Tribunal.
6. Shri D.B. Desai, learned Chartered Accountant representing the appellants, while reiterating the grounds of appeal, submits that during the relevant period, the appellant’s factory was under physical control and as such it would be impossible to carry out malpractices of the nature alleged by the Department. He emphasised that right from the beginning the appellants have been contesting the figures arrived at by the Department and also disputing the production and moulding figures as reflected in the Show-cause Notice and also has been questioning the very basis of these figures. He pleads that their view point stands vindicated by the revised figures, compiled by the Directorate of Anti-evasion during the reconciliation exercise as ordered by the Tribunal which strike at the very foundation of the Show-cause Notice. He pleads that the Show-cause Notice is based on imaginary documents/evidences and as such cannot sustain. Arguing on limitation, the learned Chartered Accountant submits that every activity undertaken in the factory was known to the department as it was under physical control during the relevant period. Moreover, the appellants neither suppressed any information nor indulged in the activity of duty evasion. He, therefore, pleads that the demand of duty is hit by time bar.
7. Shri R.K. Roy, learned JDR appearing for the Revenue, reiterates the reasoning contained in the impugned order. He clarifies that the Show-cause Notice is based on the appellant’s own documents such as PMR delivery figure and weekly receipt issue statements (RIS) which is the source document for maintaining the RG-1. He sought time to file his written submissions and accordingly, he was granted 15 days time from 26-7-2000.
8. In his written submission dated 2-8-2000, the learned JDR points out that the figures which were submitted at the time of hearing before the Tribunal was subsequently re-checked/reverified by the Department and “after such reverification the quantity of finished tyres was found as 22,84,734 instead of 21,68,300 for private record figure and 22,25,552 instead of 22,92,457 for RG-1 figures respectively”. In view thereof, the learned JDR submits that there is an excess quantity of 59,182 (22,84,734 – 22, 25, 552) of finished tyres as per the private records for which appropriate duty is payable during the period in question and penalty was liable to be imposed on the appellants. To the said written submission dated 2-8-2000, the learned JDR has enclosed a copy of the letter dated 1-8-2000 of the Directorate General of Anti-evasion based on which he made the aforementioned additional submission.
9. In his written rejoinder dated 6-9-2000 to the said additional submission of the learned JDR as mentioned in para 8 supra, the learned Chartered Accountant takes a strong exception to introduction of Department’s additional evidence in the form of the letter dated 1.8.2000 of the Directorate General of Anti-evasion. He submits that after conclusion of the hearing, in the guise of the written submission, no side can have liberty to introduce additional evidence which does not form part of the records of proceedings at all. In the present case, according to the learned Chartered Accountant, the said report dated 1-8-2000 of the Directorate has been generated after conclusion of the hearing by the Tribunal. He argues that as per Rule 23 of the CEGAT (Procedure) Rules, 1982 no additional document even at the stage of hearing can be taken cognizance of unless specially permitted by the Tribunal. He went on to submit that in any case the question of taking cognizance of a document which comes into existence after conclusion of the hearing does not arise at all. This apart, he argues, that the said additional report is devoid of any merit and accordingly, he makes a strong plea for outright rejection of the said additional document as the same has not been made on the point of law but on a fresh material. In support of this conclusion, the learned Chartered Accountant relies upon the decisions/judgments in Jain Exports Pvt. Ltd. v. U.O.I. – 1993 (66) E.L.T. 537 (S.C.); Collector of Customs, Bombay v. XLO Machine Tools Ltd. – 1996 (86) E.L.T. 375 (Tribunal); United Machinery Works (P) Ltd. v. C.C.E., Coimbatore – 1995 (79) E.L.T. 477 (Tribunal); Sanjiv Woollen Mills v. C.C. -1992 (62) E.L.T. 478 (Tribunal); Kerala State Electronics Dev. Corporation Ltd. v. C.C. – 1990 (50) E.L.T. 561 (Tribunal); and Hindustan Lever Ltd., Bombay v. C.C.E., Bombay -1985 (19) E.L.T. 562. The learned CA argues that the appellant’s case is on a much stronger footing than the principles laid down in the aforementioned cases wherein the additional evidence was sought to be admitted at the stage of hearing before the Tribunal and whereas in the present case the additional evidence is sought to be introduced after conclusion of the hearing before the Tribunal which in any case not permissible under the law.
9.1. Turning to the merits of the case, the learned Chartered Accountant in his written rejoinder dated 6-9-2000 submits that at every stage of proceedings (including reply to the Show-cause Notice, pleadings at the personal hearings, and in the course of hearings of the stay petition) the appellants have been emphasising that the PMR is not the prescribed statutory register as alleged but it is merely an unaudited register maintained manually by one of the junior executives in the Central Planning Section and it does not contain the correct quantification of actual production but it is only the figures of production which very often may not be correct but also programme and planning for the four weeks falling in a month. The written rejoinder also mentions that the figures of production as per the RG-1, as taken in Annexure-C to the Show-cause Notice, are incorrect. The actual production as per the RG-1 and the corresponding duty payment was much more than the production as alleged in the Annexure-C to the Show-cause Notice. Of the actual production as per the RG-1, on the basis of which the appellant had paid duty during the relevant period it would clearly transpire that the production declared by the appellant in the RG-1 and the actual duty paid by them is much more than the production reflected in the PMR as given in the workings of the Annexure-C of the Show-cause Notice and corresponding duty payable thereon. He amplifies it by stating that according to the Show-cause Notice, the duty liability as per the PMR and as per the RG-1 as alleged, comes to Rs. 54,42,33,543/- and Rs. 52,52,51,186/- respectively. However, the duty actually paid on tyres by the appellants during the period November, 1984 to February, 1988 was to the tune of Rs. 1,09,69,10,137/-. Hence, even on the basis of the quantum of duty paid on tyres during the relevant period, there cannot be any allegation of clandestine removal in actual sense resulting in alleged short payment. On the contrary, pleads the learned Chartered Accountant, that the appellants would be entitled to huge refund. Therefore, the entire Show-cause Notice falls through having no leg to stand upon, being factually incorrect based on incorrect data. The learned Chartered Accountant also invites attention to the statements prepared by the Department on 3-10-1997, 13-10-1997, 12-2-1998, 7-4-1998. He also refers to the Department’s final statement dated 26-10-1998, received by the appellants on 3-2-1999, wherein it has been confirmed that the revised production as per the RG-1 and PMR are 22.92 lakhs tyres and 21.62 lakh tyres respectively. In the course of hearing before the Tribunal, the learned JDR could not clarify the point as to why the production as per the PMR is more than that of RG-1 and though sought some more time for making additional submission. Thereafter vide his letter dated 2-8-2000, the learned JDR revises the PMR and RG-1 figures to 22,84,734 tyres and 22,52,552 tyres respectively. These revised figures are fundamentally incorrect as the same are based on unreliable sources and need to be rejected outright. The learned Chartered Accountant contends that the very fact that the Revenue have carried out revisions in the Show-cause Notice figures in the course of hearings before the Tribunal and since the figures as per the Show-cause Notice and various revised figures are so much different that the Show-cause Notice was grossly incorrect as based on absolutely wrong date and was issued without any application of mind and cannot be sustained. He points out that as per the appellants the RG-1 production during the relevant period is 25,06,988 tyres and this figure is undisputable since on that basis the appellants had actually paid duty of Rs. 109.69 Crore which is more than the duty payable even on the revised PMR figure as per the report dated 1-8-2000 of the Directorate General of Anti-evasion.
9.2. The learned Chartered Accountant in his written rejoinder further states that the appellant’s factory was under physical control and supervision during the relevant period and as such any malpractice, if any, would have been automatically detected by the Central Excise Officers. He, therefore, submits that in several cases the Tribunal have decided that in the absence of any corroborative evidence, specially when the appellant’s factory is under physical control, there cannot by any case of clandestine removal. In this connection, he relies upon the decisions in LML Ltd. v. C.C.E.: 1991 (51) E.L.T. 434 (Tribunal), Leather Chemicals & Industries Ltd. v. C.C.E: 1984 (15) E.L.T. 451 (Tribunal); Abubakar M.Y. Shaikh v. C.C.E., Surat: 1999 (110) E.L.T. 917 (Tribunal); Sikhar Marbles (P) Ltd. v. C.C.E., Jaipur. 1999 (105) E.L.T. 195 (Tribunal); Modipan Ltd. v. C.C.E., Meerut: 1996 (84) E.L.T. 323; Kamal Plywood & Allied Inds. P. Ltd. v. C.C.E., Meerut: 1996 (82) E.L.T. 323; A.S. Periasamy, Proprietor Glass Beedi Factory v. C.C.E., Madras: 1988 (35) E.L.T. 664 ; and Associated Cylinder Industries v. C.C.E.: 1990 (48) E.L.T. 460.
10. We have carefully considered the rival contentions of both the parties and closely examined the aforementioned various statements compiled by them in mutual consultation and discussions held between themselves from time to time as per the specific directions of the Tribunal. The gravamen of the charge against the appellants is that they indulged in surreptitious manufacture and clandestine removal of the subject tyres thereby evading central excise duty to the tune of Rs. 1,89,82,357/-. The said charge was built up on the sole foundation of the PMR maintained by an executive of the Planning Department of the appellant company. From the very beginning the appellants have been contending that the said PMR is not a statutory register but a private record maintained by a junior executive of the Planning Department for the purpose of drawing up plans for future having regard to various factors. The appellants have also seriously disputed the figures of production culled out from the PMR as well as the RG-1. According to them, the production figures contained in Annexure-C to the Show-cause Notice were drawn from the incorrect sources. We find that at the instance of the Tribunal, reconciliation exercise was undertaken by both the parties which generated statements indicating therein varying production figures from the point of view of each of them and which in turn are at variance with the production figures shown in the Annexure-C to the Show- cause Notice. The Table below indicates the figures of production of tyres as per the Show-cause Notice, revised reports of the Directorate of Anti-evasion and as compiled by the appellants vide statement dated 7-4-1998, and the report dated 1-8-2000 of the DGAE :
———————————————————————–
Figures as the Figures as per Figures as per
SCN (Quantity revised report of report of ADGE
of tyres) the ADGE dated dated 1-8-2000
3-10-1997,13-10- (quantity of
1997 & 12-2-1998 tyres)
& as compiled by
the appellant
vide statement
dated 7-4-1998
(quantity of tyres)
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PMR Production 13,39,206 21,68,300 22,84,734
RG-1 production 12,77,182 22,92,457 22,25,552
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From the above Table, it is evident that there has been no consistency in the stand of the Revenue as regards the firm figures of production. One thing is crystal clear that the figures of production which have been generated during the course of reconciliation exercise are different from those mentioned in the Show-cause Notice based on which the superstructure of the case has been raised. The new set of production figures strike at the very foundation of the structure. Adding insult to the injury, the Revenue comes out with yet another set of figures vide their additional statement submitted on 2-8-2000. These inconsistencies that have come to the fore lead one to an inevitable conclusion that the basic foundation of the Show-cause Notice is weak being not supported by any concrete evidence. In such an event, as rightly pointed out by the appellant, the Show-cause Notice cannot stand on its own legs and as such must fall to the ground. On a careful consideration of the evidence brought on record, we are convinced beyond doubt that the figures of production as re- fleeted in the PMR and RG-1 have been drawn from incorrect sources which led to unjustifiable conclusion eventually led to a frightful duty demand of Rs. 1,89,82,357/-.
11. In view of the above discussion, we set aside the impugned order. As the impugned order is set aside on merits, we do not propose to go into the limitation aspect.
12. In fine, the impugned order is set aside with consequential relief, if any, to the appellants.