Jai Balaji Industries Limited (Unit-IV) Vs Commissioner of Central Excise (CESTAT Kolkata)
CESTAT Kolkata held that the shortage ascertained during the course of stock-taking are on the basis of assumption and presumption. Accordingly, duty demand on account of shortage of finished goods unsustainable.
Facts- The assessee is having five units, but this matter relates to Unit No.I and IV of the assessees and one Shri Jai Salasar Balaji Industries Limited. On the basis of an intelligence that all these firms are evading payment of duty by way of suppressing their actual quantum of manufacture of excisable goods and subsequently removal of such unaccounted manufacture of finished goods, a search was conducted in their premises on 05.10.2008 on 13.30 hrs. The physical stock-taking of inputs and finished goods was conducted wherein shortage of finished goods was detected.
It was also alleged that the suppliers namely Neo Metaliks Ltd. and KIC Metaliks Ltd. issued 36 invoices to the appellant, but the assessees received only the invoices and not the physical goods which has been diverted and therefore, the assessees are not entitled to take Cenvat credit of 750 MT of Pig iron on the strength of 36 invoices issued by the above said suppliers. It was also found that the assessee has cleared melting scrap without payment of duty.
Further from the records, it was revealed that during the financial year 2004-05 the quantity of iron ore of 1,06,309 MT was consumed to manufacture 70,872 MT of Sponge Iron therefore, input output ratio works out to 1.50:1.
Show cause notice was issued to the assessees alleging clandestine removal of goods without payment of duty and availment of Cenvat credit on pig iron without receiving the same in the factory premises, to demand of duty and reversal of Cenvat credit along with interest and penalty upon the appellant.
The adjudicating authority dropped the demand sought to be evaded by the assessees on the basis of the input output ratio, but confirmed the demand of duty on account of shortage of finished goods and denial of Cenvat credit on pig iron and also imposed various penalties on the appellants. Being aggrieved, both assessee and revenue has preferred the present appeal.
Conclusion- Held that stock verification was done physically in the presence of the offices of the assessees, but it is very strange that such a huge quantity of 6189.32 MT be weighed with a short span of time of 10.30 hrs. which is next to impossible and in such a big plant, negligible quantity of shortages were found as per recorded stock and physical stock as claimed. Therefore, we hold that the shortage ascertained during the course of stock-taking are on the basis of assumption and presumption.
Held that the said input-output ratio cannot remain fixed due to variable factors prevailed in the character of all the constituent raw material, especially, that of Iron Ore, largely due to variation in Fe(T) of the Iron Ore. Therefore we hold that the Ld. Adjudicating authority has rightly dropped the demand on the basis of input output ratio.
FULL TEXT OF THE CESTAT KOLKATA ORDER
Both sides are in appeal against the impugned order and Shri Gaurav Jajodia has also filed appeal against imposition of penalty thereon. The adjudicating authority has passed the following order:-
(i) I confirm the demand of the CENVAT duty amounting to Rs.2,23,110/-, Education Cess amounting to Rs.4,462/- and Secondary & Higher Education Cess amounting to Rs.2,231/- altogether amounting to Rs.2,29,803/- (Rupees two lakh twenty nine thousand eight hundred three only) evaded by the Noticee No.1 in respect of finished excisable goods namely Pig iron, Sponge iron, Silico Manganese, & Ferro Manganese found short in course joint physical stock taking in terms of proviso to sub-section (1) of Section 11A read with Section 11A(2) of the Central Excise Act, 1944;
(ii) I confirm the demand of CENVAT duty amounting to Rs.99,255/-, Education Cess amounting to Rs.1,985/- and Secondary & Higher Education Cess amounting to Rs.992/- altogether amounting to Rs.1,02,232/- (Rupees one lakh two thousand two hundred thirty two only) evaded by the Noticee No.1 out of the total demand of Rs.4,79,62,368/- (Rupees four crore seventy lakh sixty two thousand three hundred sixty eight only) in respect of finished excisable goods namely Sponge Iron cleared during the period from 2006-07 to 200910 in terms of proviso to sub-section (1) of Section 11A read with Section 11A(2) of the Central Excise Act, 1944 and the rest of the demanded amount to the extent of Rs.4,78,60,136/- (Rupees four crore seventy eight lakh sixty thousand one hundred thirty six only) is set aside;
(iii) I also charge the interest to the tune of Rs.16,083/- (Rupees sixteen thousand eightly three only) against the Noticee No.1 leviable on the aforesaid amounts of duty in terms of Section 11AB of the Central Excise Act, 1944;
(iv) I impose penalty to the tune of Rs.83,008/- (Rupees eighty three thousand eight only) upon the Noticee No.1 in terms of Section 11AC of the Central Excise Act, 1944 allowing the benefit of payment of reduced penalty i.e. 25% (twenty five percent) of the duty amount as confirmed since the said Noticee No.1 has fulfilled the conditions laid down in 1st and 2nd proviso to Section 11AC of the Central Excise Act, 1944.
(v) I do hereby appropriate a sum of Rs.4,31,846/- (Rupees four lakh thirty one thousand eight hundred forty six only) out of the amount of Rs.70,00,000/- (Rupees seventy lakh only) voluntarily deposited by the Noticee No.1 towards Central Excise duty, interest and penalty to the Government Account.
(vi) I confirm the demand of the CENVAT duty amounting to Rs.1,57,958/-, Education Cess amounting to Rs.3,159/- and Secondary & Higher Education Cess amounting to Rs.1,580/- altogether amounting to Rs.1,62,697/- (Rupees one lakh sixty two thousand six hundred ninety seven only) being the amount of duty evaded by the Noticee No.2 in respect of finished excisable goods namely Rejected Melting Scrap cleared during the period from 27.01.2008 to 21.10.2008 in terms of proviso to sub-section (1) of Section 11A read with Section 11A(2) of the Central Excise Act, 1944;
(vii) I hereby drop the demand of CENVAT duty amounting to Rs.6,30,83,612/- as Central Excise duty, Rs.12,61,672/- as Education Cess and Rs.5,05,360/- altogether amounting to Rs.6,48,50,644/-(Rupees six crore forty eight lakh fifty thousand six hundred forty four only) being the amount of duty alleged to have been evaded by the Noticee No.2 in respect of finished excisable goods namely Sponge Iron cleared during the period from 2006-07 to 200910;
(viii) I deny Cenvat credit and confirm the demand of the CENVAT duty amounting to Rs.19,14,400/-, Education Cess amounting to Rs.38,288/- and Secondary & Higher Education Cess amounting to Rs.19,144/- altogether amounting to Rs.19,71,832/- (Rupees nineteen lakh seventy one thousand eight hundred thirty two only) being the amount of Cenvat credit irregularly availed and utilized by Noticee No.2 in terms of Rule 14 of the Cenvat Credit Rules, 2004 read with proviso to Section 22A(1) of the Central Excise Act, 1944 read with Section 11A(2) of the Central Excise Act, 1944;
(ix) I confirm the demand of the CENVAT duty amounting to Rs.10,50,749/-, Education Cess amounting to Rs.21,015/- and Secondary & Higher Education Cess amounting to Rs.10,508/-altogether amounting to Rs.10,82,272/- (Rupees ten lakh eight two thousand two hundred seventy two only) being the amount of duty evaded by the Noticee No.2 in respect of finished excisable goods namely pig iron, sponge iron, Silico Manganese & Ferro Manganese found short in course joint physical stock taking in terms of the first proviso to Section 11A(1) of the Central Excise Act, 1944 read with Section 11A(2) of the Central Excise Act, 1944;
(x) I also order payment of interest leviable on Noticee No.2 in terms of Section 11AB of the Central Excise Act, 1944 and Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AB of the Central Excise Act, 1944 on the amounts of duty evaded as demanded in clause (vi), (viii) and (ix) above;
(xi) I impose penalty to the tune of (Rs.1,62,697/- + Rs.10,82,272/-)Rs.12,44,969/- (Rupees twelve lakh forty four thousand nine hundred sixty nine only) upon the Noticee No.2 in terms of Section 11AC of the Central Excise Act, 1944. However, I allow the benefit for payment of reduced penalty i.e. 25% (twenty five percent) of the duty amount to the Noticee No.2 subject to fulfillment of conditions laid down in 1st and 2nd proviso to Section 11AC of the Central Excise Act, 1944.
I also impose penalty to the tune of Rs.19,71,832/- (Rupees nineteen lakh seventy one thousand eight hundred thirty two only) upon the Noticee No.2 in terms of Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. However, I allow the benefit for payment of reduced penalty i.e. 25% (twenty five percent) of the duty amount to the said assessee subject to fulfillment of conditions laid down in 1st and 2nd proviso to Section 11AC of the Central Excise Act, 1944.
(xii) I also order for appropriation of Rs.18,00,000/- (Rupees eighteen lakh only), voluntarily deposited by the Noticee No.2 against the instant demand, interest, penalty etc. to the Government Accont.
(xiii) I confirm the demand of the CENVAT duty amounting to Rs.6,27,129/-, Education Cess amounting to Rs.12,543/- and Secondary & Higher Education Cess amounting to Rs.6,271/- altogether amounting toRs.6,45,943/- (Rupees six lakh forty five thousand sine hundred forty three only) being the amount of duty evaded by the Noticee No.3 in respect of finished excisable goods namely MS Rejected Ingots/Shorts and Light Melting/Local Scrap cleared during the period from September 2008 to November 2008 in terms of proviso to subsection (1) of Section 11A read with Section 11A(2) of the Central Excise Act, 1944;
(xiv) I confirm the demand of the CENVAT duty amounting to Rs.90,758/-, Education Cess amounting Rs.1,815/- and Secondary & Hgher Education Cess amounting to Rs.908/- altogether amounting to Rs.93,481/-(Rupees Ninety three thousand four hundred eighty one only) being the amount of duty evaded by the Noticee No.3 in respect of finished excisable goods namely 0.075MT of Alloy Ingots and 18.71 MT of Non Alloy Ingots found short in course joint physical stock taking in terms of proviso to sub-section (1) of Section 11A read with Section 11A(2) of the Central Excise Act, 1944;
(xv) I also order payment of interest leviable on Notice No.3 in terms of Section 11AB of the Central Excise Act, 1944 on the amount of duty evaded as demanded in clause (xiii) and (xiv) above;
(xvi) I impose penalty to the tune of (Rs.6,45,943/- + Rs.93,481/-) Rs.7,39,424/- (Rupees seven lakh thirty nine thousand four hundred twenty four only) upon the Notice No.3 in terms of section 11AC of the Central Excise Act, 1944. However, I allow the benefit for payment reduced penalty i.e. 25% (twenty five percent) of the duty amount to the Notice NO.3 subject to fulfillment of conditions laid down in 1st and 2nd proviso to Section 11AC of the Central Excise Act, 1944.
(xvii) I also order for appropriation of Rs.4,00,000/- (Rupees four lakh only), voluntarily deposited by the Notice No.3 against the instant demand, interest, penalty etc. to the Government Account.
(xviii) I impose penalty to the tune of Rs.10,00,000/- (RupeesTen lakh only) upon Shri Gaurav Jajodia, Director (Notice No.4) of M/s. Jai Balaji Industries Limited Unit-1 [Notice No.1], M/s. Jai Balaji Industries LImtied Unit-IV [Notice No.2] and M/s. Jai Salasar Balaji Industries (P) Limited, (Notice No.3) in terms of Rule 26(1) of the Central Excise Rules, 2002.
(xix)I impose penalty to the tune of Rs.5,00,000/- (Rupees Five lakh only) upon Shri Satya Narayan Dey Proprietor of M/s. Shyam Sons India (Noticee No.5), 18, Atul Ghosh Lane, Salkia Howrah-711106 in terms of Rule 26(1) of the Central Excise Rules, 2002.
Again the said order, both sides are in Appeal.
2. The facts of the case are that the assessee is having five units, but this matter relates to Unit No.I and IV of the assessees and one Shri Jai Salasar Balaji Industries Limited. On the basis of an intelligence that all these firms are evading payment of duty by way of suppressing their actual quantum of manufacture of excisable goods and subsequently removal of such unaccounted manufacture of finished goods, a search was conducted in their premises on 05.10.2008 on 13.30 hrs. The physical stock-taking of inputs and finished goods was conducted wherein shortage of finished goods was detected as under:-
