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