ORDER
T.K. Jayaraman, Member (T)
1. All these four appeals have been filed against Order-in-Original No. 10.2002-ADJN.CEX dated 22.4.2002 and Order in Original C.Ex No. 18/2004 dated 3.11.2004 passed by the Commissioner of Customs and Central Excise, Hyderbad-II & IV Commissionerate, respectively.
E/737 and 738/2002 of M/s. Dhananiwala Textiles (P) Ltd, and Shri Kamalnavan Dhananiwala, M.D.
2. M/s. Dhananiwala Textiles (P) Ltd. (DTPL) manufacture Polyester Textured and Twisted Yarn which are excisable commodities. Shri Kamalnayan Dhananiwala is the Managing Director of DTPL. On the basis of investigations, it appeared that M/s. DTPL were receiving Partially Oriented Yarn (POY) from M/s. Sanghi Polyesters Ltd. in the name of five fictitious units. It was alleged that they manufactured textured yarn out of POY received from M/s. Sanghi Polyesters Ltd. (SPL) and cleared them clandestinely without payment of duty. The Show Cause Notice was issued on 14.3.1997 proposing to recover an amount of Rs. 1,19,30,254/- being the duty on the goods removed. Penalty was also proposed. The Adjudicating Authority passed an order 28.11.1997 confirming the demand of duty. Further penalties were imposed on the appellants. Interest under Section 11AB was also demanded. The appellants approached CEGAT, Chennai in appeal. The CEGAT vide its order dated 8.12.2000 remanded the matter the original authority with certain observations. One of the directions was to take into account the modvat credit eligibility in computing the duty liability. Consequent to the CEGAT’s order, the Adjudicating Authority passed the impugned order, which is before us in appeal. The appellants strongly challenge the findings of the Adjudicating Authority.
3. S/Shri R. Raghavan and T.S. Balasubramanian, learned advocates appeared for the appellant and Shri K.S. Bhatt, learned SDR appeared for the Revenue.
4. The learned advocates urged the following points.
(i) No seizure of excess quantity of raw material i.e. POY from the factory.
(ii) The 59 invoices referred in Annexure -I to Show Cause Notice were also not seized from any of the appellant’s premises.
These are copies of invoices filed by SPL with Central Excise Dept. with their monthly returns.
(iii) No statement recorded from SPL who are said to have removed the POY under the cover of the 59 invoices referred in Annexure-I.
(iv) If DTPL have paid for the 59 consignments of raw material POY as in Annexure I to the Show Cause Notice details of such payments should be available on record. Nothing is brought on record.
(v) No statements obtained from the persons in whose names the 59 invoices had been issued by SPL for supply of POY.
(vi) No statements have been recorded from the persons who are said to have transported the 59 consignments of POY from SPL to DTPL, who had paid for the transportation charges is also not available on record.
(vii) No seizure of excess quantity of Texturised Yarn (final product produced out of POY) from the factory.
(viii) No seizure of Texturised Yarn in transit (while being removed allegedly without payment of duty).
(ix) No seizure at job workers premises who are said to have received non duty paid texturised yarn for conversion into grey fabrics.
(x) No record regarding receipt of grey fabrics converted out of non-duty paid texturised yarn and disposal thereof.
(xi) The impugned order confirms the demand only based on the statement of Shri Kamalnayan Dhananiwala. This statement also does not contain details regarding unaccounted receipt of POY or non-duty paid despatch of texturised yarn. From the averments in this statement receipt of POY in fictitious names, clandestine manufacture and removal of texturised yarn cannot be confirmed.
(xii) It is by now well settled, if demands on clandestine removals are to be confirmed attendant particulars as below should be available.
(xiii) Details of receipt of raw material – payment made for such receipt.
Person from whom raw material was received.
The transport by which the goods (raw material) were received.
Extra electricity consumption for manufacture of unaccounted quantities of finished product.
Details of despatch finished product
Payment received for such unaccounted finished product.
As already noted, none of the above are available either in the statement of Shri Kamalnayan Dhananiwala or in the statements recorded in this proceedings from the persons.
(xiv) There is only a bare allegation regarding despatch of texturised yarn without payment of duty. Only statement recorded in this regard is that of Shri B. Anil Kumar of Hyderabad VLT Co. His statement also does not give particulars regarding despatch of texturised yarn. He only says there had been dispatches with or without central excise documents.
(xv) There is no warrant to receive unaccounted POY and clandestine manufacture of texturised yarn and their removal without payment of duty if one were to consider that the value addition is less than 10% and the input credit available will be almost equal to the duty payable on the finished product manufactured out of the inputs.
(xvi) The appellant seek credit if it is to be held that there had been receipt of 59 consignments of POY as noted in Annexure-I to Show Cause Notice for clandestine manufacture and removal of texturised yarn without payment of duty.
(xvii) The gist of the argument before the Hon’ble Tribunal was that there is no evidence to show that raw materials (POY) removed/cleared by SPL under 5 different names indicating such persons as consignee were received by the appellants. The Show Cause Notice would only refer to few instances where certain vague admissions have been made by third parties regarding receipt of less than 10% of the consignments by the appellants referred to supra. It is noticed the Bangalore Bench of the Hon’ble Tribunal in in the matter of CCE, Bangalore v. Bremal Ruber Industries P. ltd. has occasion to deal with identical facts. The Tribunal found, there was no case for the Revenue and dismissed the Revenue’s appeal.
5. The learned SDR urged that there is ample evidence with regard to the clandestine activity of the appellants and the Adjudicating Authority has given a well reasoned order confirming the allegations against the appellants. He requested the bench to uphold the order in original.
6. We have gone through the records of the case carefully. In this case, the main allegation is that the appellants received POY from SPL under 59 invoices in the names of fictitious firms viz., Sunder Synthetics, Mahesh Textiles, Tribunal Textiles and Ravi Textiles. The Transport agency was M/s. Sai Sri Transport, Hyderabad. The Commission agent is M/s. RP Agency who placed orders on SPL for POY on behalf of DTPL, The statement of all the concerned person revealed that DTPL were receiving POY from SPL in the name of the above mentioned fictitious firms. The Commission Agent and the Transporter, both corroborate the above allegations. The truck movement register maintained by the Transporter indicate the name of Dhananiwala (next to the fictitious firms). Shri Kamalnayan Dhananiwala has also accepted that POY was received under five different fictitious names. Statements have been taken from Shri Govinda Ravi and Shri V.K. Narayana of Sirsila who undertook manufacturer grey fabrics on job work basis for DTPL. After receiving texturised polyster yarn cleared by the appellant without payment of duty. It is also revealed that M/s. Hyderabad VLT Co., Hyderabad transported texturised yarn manufactured by DTPL to the job workers in Sirsila confirming the receipt of POY by DTPL. Even though the same was invoiced to other firms. In view of these overwhelming evidences, the Adjudicating Authority has come to the conclusion that the appellants received POY for clandestine manufacture and clearance. All the contentions of the appellant have been thoroughly examined by the Adjudicating Authority. It is seen that K. Dhananiwala has not retracted his statements. The contention of the appellant that investigation has not found out the details of payments for the 59 consignments is not acceptable. In all clandestine activity, payment will not be made by cheque or DD. Normally, unaccounted money in the form of cash will be used for these transactions. It will be too much to expect the investigating officers to trace every link in the chain of clandestine activities. In our view, there is sufficient corroboration to hold that the appellants received POY in the name of fictitious firms and used them for clearance of goods without payment of duty.
7. In para 24 of the order in original, the Adjudicating Authority holds that in the absence of production of duplicate or original copy of the 59 Central Excise invoices issued by SPL, modvat credit cannot be given to the appellants. The appellant pleaded before us that the credit available in respect of 59 consignments of inputs cleared on payment of duty by SPL comes to Rs. 1,01,79,369/-. The Adjudicating Authority’s decision does not appear to be correct. The Revenue on the basis of investigation is very certain that the goods covered by the 59 invoices were received by DTPL. Since DTPL denies having received those goods, they would not produce any invoice, at least in order not to weaken their case. Since, the triplicate copy of the invoice is available and also in view of the fact that Revenue has established that the goods have been received by DTPL, it is proper that modvat benefit should be given in respect of the duty paid on all the 59 invoices. Therefore, while upholding the duty demand, we order that modvat benefit should be given in respect of all the 59 invoices on the basis of the triplicate copies available. The point raised by the Adjudicating Authority that the possibility of the duty paying documents having been misused elsewhere cannot be a ground for denying modvat credit to the appellants especially when the department has made a strong case that the goods have been received by the appellants for manufacture and clearance without payment of duty. It is seen that the appellants have already deposited Rs. 11,78,750/-, this amount should also be taken into account to arrive at the net duty liability. For this limited purpose, the issue is remanded to the original authority for computing the net duty liability. The appellant has stated that after taking into account the above factors, the net duty liability would be only around Rs. 6,00,000/-. In view of this, the penalty of Rs. 50,00,000/- on DTPL and Rs. 10,00,000/- on K. Dhananiwala appears to be excessive. In our view, the ends of justice would be met if the penalty on DTPL is reduced to Rs. 2,00,000/- (Rupees Two Lakh Only) and that on K. Dhananiwala under 209A is reduced to Rs. 1,00,000/- (Rupees One Lakh only). The appeals are disposed of in the above manner.
E/1424 and 1425/04 of M/s. Saachi Textiles (P) Ltd. and Shri Ashwin Modi, Director
8. The allegations against M/s. Saachi Textiles (P) Ltd. (STPL) are similar to those against the DTPL. After the initial adjudication, this case also went up to CEGAT, Chennai. The CEGAT in its order dated 22.9.2000 remanded the matter to the original authority for denovo consideration. There were also observations regarding entitlement to modvat benefit. In this case also, POY from SPL has been received by the appellant in the name of fictitious firms. The POY has been used to manufacture texturised yarn, which in turn has been removed clandestinely without payment of duty for manufacture of grey fabrics. The Commission Agent, Transport Agent and etc., are the same as in the case of DTPL. In these circumstances, we do not want to discuss elaborately this case. The findings in the earlier case would be applicable for this case also. However, we have to mention that there were seizures of texturised yarn and POY, which were not properly accounted for. In the impugned order, the Commissioner while upholding the clandestine clearance without payment of duty has demanded duty of Rs. 1,01,17,322/- towards BED and Rs. 15,17,598/- towards AED. He has also adjusted an amount of Rs. 13,18,750/- already paid towards AED. Further the Commissioner has given the benefit of Cenvat credit to the tune of Rs. 83,43,301/-towards BED and Rs. 12,51,769/- towards AED paid on POY. The goods, which were seized, have been confiscated under relevant central excise rules. However, the Adjudicating Authority has given an option to redeem them on payment of fine. Thus, we find that the order of the Adjudicating Authority is fairly legal and proper. Hence, we uphold the same with the following modifications. In our view, the ends of justice would be met if the penalty on STPL is reduced to Rs. 2,00,000/- (Rupees Two Lakh Only) and that on Shri Ashwin Modi, MD of STPL under 209A is reduced to Rs. 1,00,000/- (Rupees One Lakh only). The appeals are disposed of in the above manner.
(Pronounced-in open Court on 26.02.2006)