ORDER
P.G. Chacko, Member (J)
1. All these appeals filed by the department are against orders passed by the Commissioner of Central Excise pursuant to a remand order of this Tribunal (Final Order No. 608/94 dated 01.08.1994 passed by this Bench).
2. The respondents in these appeals were working as SSI units during the material period. M/s Jaya Soap Works had a factory manufacturing ‘acid slurry’ and another factory manufacturing ‘detergents. The other respondents were mainly engaged in the manufacture of detergents. The relevant show-cause notice had alleged that, during the period 1986-87 to 1990-91, M/s Jaya Soap Works (respondents in Appeal No. E/478/1999) had clandestinely manufactured acid slurry and cleared the same, without payment of duty, to M/s Moogambigai Soap works, M/s Priya Soap Works, M/s Jayam Soap Works, M/s Ambal Chemicals and M/s Jaya Detergents (respondents in other appeals). It had further alleged, against M/s Jaya Soap Works, clandestine removal of detergent cakes also during the above period. Further, it was also alleged that, upon inclusion of unaccounted clearances in the aggregate value of clearances for the years 1988-89, 1989-90 and 1990-91, the aggregate value for each of these years exceeded the limit prescribed under Notification No. 175/86-CE (as amended) and hence M/s Jaya Soap Works were not eligible for SSI exemption for the succeeding year. As against the other respondents, the main allegation raised by the department was that, during the years 1989-90 and 1990-91, they were not eligible for SSI benefit under the above Notification in respect of the detergents (affixed with the brandname belonging to M/s Jaya Soap Works) cleared without payment of duty inasmuch as, during the said period, the brandname-owner was not eligible for the benefit of the Notification. This allegation was based on para (7) of the Notification as it stood during the said period. Accordingly, the department demanded duty from M/s Jaya Soap Works in respect of acid slurry and from the other respondents in respect of detergents (branded) for the respective periods. As against M/s Jaya Soap Works, the Collector of Central Excise, Madras confirmed demand of duty to the extent of over Rs. 55 lakhs and imposed on them a penalty of Rs. 11 lakhs, besides ordering confiscation (with option for redemption) of plant, machinery etc. As against the other parties, the Collector confirmed demands of duty to varying extents and also imposed penalties on them, besides ordering confiscation in the above manner. Against the orders passed by the Collector, the department and the assessees preferred appeals to this Tribunal and the same were disposed of as per Final Order No. 608/94 ibid. The relevant part of the said final order is reproduced below:
We have carefully considered the submissions made before us. Indeed extensive and long arguments were heard in the appeals. On going through the entire records and on consideration of the entire submissions, we find that the primary question that arises for determination is whether Acid slurry was manufactured and cleared by Jaya Soap Works clandestinely without payment of duty as alleged. The adjudicating authority has correctly addressed himself to the relevant issues in this regard as extracted above. It is not disputed that for manufacture of Acid slurry, the two important raw materials are Sulphuric acid and LAB. So far as Sulphuric acid is concerned, the contention is that the same was purchased by Jaya Soap Works from five units and out of the five units, purchases from three units i.e., Shawalace & Company, Kumar Chemicals and Andhra Sugars, have been fully accounted for and is not in dispute. The dispute is only with reference to the purchase made from the other two units i.e., Gee Gee Khay Chemicals Industry, Krishna Industrial Chemicals Ltd. In regard to Gee Gee Khay Chemicals Industry, the only evidence relied upon by the department is a letter dated 10.05.1991 and the statement of one Gurumurthy dated 08.05.1991. The plea in regard to contradiction between the statement and the later is apparent and the same has been set out above. We also note Shri Gurumurthy of Gee Gee Khay has totally disowned his version; in the cross-examination extracted above. In the above circumstances, the evidence on record does not inspire confidence in our mind and therefore reliance cannot be placed on the same for levy of duty. We are of a view that in such a situation the authorities should have made over the original records which were seized from the appellants in fairness by giving an opportunity to put forth their case. We note that it might be impossible for any person however competent he might be to recollect from memory the past transactions that took place particularly with reference to the quantity of Sulphuric acid supplied, the names of various parties to whom such supplies were made the date of supply particularly when supplies are affected continuously. We note that the various basic records which have been relied upon by the Department have not been made available to the appellant. We also note that the records of transport of LAB with vehicle numbers were also not made available to the appellant. Likewise in respect of the supplies made by Krishna Industrial Chemicals, reliance has been placed only on the letter of Shri V.S. Krishnan dated 10.05.1991 copy of which was not given to the appellant. In this letter average quantity of Sulphuric acid supplied to appellant Java Soap Works has been given without referring to any basic records. The basic records were seized by the Department and they should be made available to the appellant to enable the appellant to meet the challenge. In this connection we also refer to the admission of Shri V.S. Krishnan in his cross-examination dated 05.03.1992 extracted above. Therefore, we are of the view that no reliance can be placed against the appellant either on the statement of Shri V.S. Krishnan or on his letter dated 10.05.1991, copy of which was not given to the appellant. We emphasise that the original basic records that have been seized should be made available to the appellant if the Department wants to place reliance on the same in support of the charge of clandestine removal of the goods not accounted for and manufactured out of the same. Therefore, on consideration of the entire evidence on record, we are satisfied that the various basic records on which reliance has been placed by the Department against the appellant have not been made available to the appellant. We therefore, set aside the impugned order No. 5/92 dated 27.05.1992 relating to Jaya Soap Works and remand the issue reconsideration in the light of the observations made above. We make it clear the Department cannot embark upon further investigations nor collect any new evidence against the appellants.
The Department is directed to make available the basic original records admittedly seized from Gee Gee Khay Chemical Industry and Krishna Industrial Chemicals Pvt. Ltd. which formed the basis for Shri Gurumurthy and Shri V.S. Krishnan to give out their figures in support of the charge against the appellants. Without furnishing the basic records, reliance cannot he placed either on their statements or on their letters.
With considerable hesitation we are remanding the matter only with a view to give an opportunity to the Department to make available the basic records without which the appellants in fairness cannot be expected to meet the charge of clandestine removal of the goods. We note that the proceedings being penal in nature the onus is on the Department. It is only keeping these factors in mind we remand the appeal in the interests of the justice.
Since the proceedings against the sister concerns flow basically out of the proceedings against appellant Java Soap Works and since Acid slurry is the main raw material for manufacture of detergent cakes, we set aside the impugned orders in respect of the other 5 units also and remanded the issues for re-adjudication, in accordance with law.
The Departmental appeals have been filed questioning the legality and correctness of the impugned orders of the Collector seeking confirmation of the duty in full in terms of the show-cause notices besides appropriate penalty relatable to the gravity of offence and the duty sought to be evaded. Since the matter has been remanded for reconsideration in accordance with law for the reasons set out in this order, the appeals filed by the Department would also stand dismissed as all the issues arising for determination will be considered by the adjudicating authority afresh in terms of the order of remand.
[emphasis added]
3. The orders impugned in these appeals were passed by the Commissioner pursuant to the above remand order.
4. We have heard learned SDR for the appellant and learned Counsel for M/s Jaya Soap Works. There was no representation for the other respondents despite notice. Learned SDR reiterated the grounds of these appeals, which themselves are a reproduction of the grounds of review by the Board. Learned Counsel submitted that none of the records which were directed, in the remand order, to be supplied to his clients was supplied by the adjudicating authority as those records were not available with the department. In the circumstances, the order passed by learned Commissioner in favour of M/s Jaya Soap Works for want of evidence of clandestine manufacture and removal of goods should be sustained. Learned Counsel also cited a plethora of decisions in support of his submission that the available materials were not enough to establish clandestine removal of goods by M/s Jaya Soap Works. He urged that the appeals of the Revenue be dismissed.
5. We have given careful consideration to the submissions. The appellant’s case is that M/s Jaya Soap Works clandestinely manufactured acid slurry during the period of dispute out of sulphuric acid purchased from two units Viz., Gee Gee Khay Chemical Industry and Krishna Industrial Chemicals Ltd. and Linear Alkyl Benzene (LAB, for short) purchased in fictitious names from M/s Tamil Nadu Petro Products Ltd. (TPL, for short) through their agent Industrial Chemical Agency (ICA, for short), Madras. As regards the alleged procurement of Sulphuric acid (one of the raw materials) by M/s Jaya Soap Works, it was clearly held by this Tribunal in its remand order (Final Order No. 608/94 ibid) that the evidence on record was not reliable, in the absence of the basic records. The Commissioner was directed to take a fresh decision after supplying these basic records (which had been relied upon in the show-cause notice) to the assessee, but he could not supply these documents, which were not available with the department. In the circumstances, there is a kind of status quo ante in regard sulphuric acid in this case. In other words, the finding recorded in the remand order to the effect that the evidence on record in relation to the alleged procurement of sulphuric acid by M/s Jaya Soap Works from the aforesaid two units was not reliable for levy of duty on acid slurry, continues to operate against the department which accepted the said finding and chose not to challenge it in appeal. In the result, the department’s case that acid slurry was manufactured clandestinely by M/s Jaya Soap Works out of sulphuric acid procured from M/s Gee Gee Khay Chemical Industry and M/s Krishna Industrial Chemicals Ltd. fails.
6. The question now is whether a finding of clandestine manufacture of acid slurry should be recorded against M/s Jaya Soap Works on the basis of consumption of LAB the other raw material. Learned Counsel contended that, on this basis alone, such a finding could not be reached. In this connection, he relied on the following decisions of the Tribunal:
1. Lili Foam Industries (P) Ltd. v. Collector of Central Excise .
2. V.K. Thampy v. Collector of Central Excise, Kochi .
3. Krishna Bottlers (Vijayawada) Pvt. Ltd. 1999 (32) R.L.T. 845 (CEGAT).
4. Brims Products v. Commissioner of Central Excise, Patna
In the case of Lili Foam Industries, the department’s allegation against the assessee was that they had clandestinely manufactured ‘polyurethane foam’ and removed it without payment of duty. A chemical called ‘TDI’ and another one called ‘Polyether’ were the essential raw materials required for the manufacture of polyurethane foam. It was contended on behalf of the assessee that, to prove that they had produced a higher quantity of polyurethane foam than what was accounted for, it was not enough for the department to show higher consumption of TDI but proportionately higher consumption of Polyether was also required to be shown. There being no allegation of excess consumption of Polyether, the Tribunal ruled out clandestine manufacture of polyurethane foam by M/s Lili Foam Industries (P) Ltd.
In the case of V.K. Thampy a shortage of 1,000 kgs. of reclaimed rubber was found in the assessee’s premises and it was alleged by the department that tread rubber had been clandestinely manufactured out of the said quantity of reclaimed rubber and removed without payment of duty. The Tribunal found that the department had not even investigated into the question whether other raw materials had also been consumed by the assessee during the period of dispute and accordingly the benefit of doubt was given to the assessee and the demand of duty raised on them was set aside.
In the case of Krishna Bottlers, the assessee was alleged to have indulged in clandestine removal of ‘aerated water’. This allegation was based on alleged consumption of the input ‘concentrate’. Even according to the department, ingredients such as sugar, carbon dioxide, caustic soda etc. were also required for the manufacture of the final product, but it was found by the Tribunal that there was not an iota of evidence to show that these ingredients were procured and utilized in the manufacture of the final product during the period of dispute. On the basis of this and other findings, the Tribunal set aside the demand of duty on the assessee.
In the case of Brims Products, the question considered by the learned Single Member of the Tribunal was whether there was evidence of clandestine removal of pan masala from the assessee’s premises during the relevant period. Clandestine removal was alleged by the department on the basis of receipt of some raw materials in the factory during the said period. The Tribunal found that there was no evidence of receipt of other raw materials required for the manufacture of pan masala and, therefore, the benefit of doubt was given to the assessee.
7. In the present case, we have already found no evidence of the alleged procurement of sulphuric acid by M/s Jaya Soap Works. Acid slurry could not have been manufactured out of LAB alone. Hence we are unable to accept the plea made by the appellant for recording a finding of clandestine manufacture of acid slurry by the assessee on the sole basis of consumption of LAB. The line of decisions cited by learned Counsel would forcefully repel the appellant’s plea. No binding judicial authority to the contra was cited by the appellant. Therefore, following the above case law, we grant the benefit of doubt to M/s Jaya Soap Works and hold that the Revenue has failed to establish that they had clandestinely manufactured and removed acid slurry during the period of dispute. In the result, the order passed by the Commissioner in favour of M/s Jaya Soap Works is sustained and Appeal No. E/478/1999 is dismissed.
8. Now that no clandestine manufacture or clearance of acid slurry by M/s Jaya Soap Works has been found, the aggregate value of clearances of specified goods by them in each of the fiscal years comprised in the period of dispute was within the limit prescribed under Notification No. 175/86-CE (as amended) and hence they were eligible for SSI benefit during such period. According to the appellant, the respondents in Appeal Nos. E/476, 477, 479, 480 & 481/1999 were not eligible for exemption under the above Notification in respect of the detergents (affixed with the brandname of M/s Jaya Soap Works) removed from their factories during the period during which M/s Jaya Soap Works were not eligible for SSI benefit. This case of the department is based on para 7 of the Notification, in terms of which the exemption under the Notification was not available to specified goods cleared under the brandname of another person who was not eligible for the benefit of the Notification. We have already found, in the case of M/s Jaya Soap Works, that the benefit of the Notification was available to them during the relevant period. It would follow that the respondents in the 5 appeals were clearing goods affixed with the brandname of another person (M/s Jaya Soap Works), who was eligible for the benefit of the above Notification. Such clearances were not hit by the bar created in para 7 of the Notification. Thus all the respondents were eligible for the benefit of the Notification during the period of dispute. The impugned orders vacating the demand of duty raised on them by the appellant are only to be sustained. In the result, these 5 appeals also get dismissed.
(Operative portion of the order was pronounced in open Court on 29.06.2006)
