(A.K. Sikri and Rohinton Fali Nariman, JJ.)
Commnr. of Central Excise, Rajkot _________ Appellant
v.
M/s. Satyam Technocast & Anr. ____________ Respondent(s)
Civil Appeal Nos. 5820-5821 of 2005, decided on July 23, 2015
The Order of the court was delivered by
Order
1. The respondents in these two appeals are M/s. Satyam Technocast and M/s. Prince Time Industries. The proceedings against these two respondents (hereinafter referred to as ‘the assessees’) were initiated on the basis of show cause notice dated 10.2.2003. In this show cause notice main allegation was that both the units were run by Sh. Someshbhari Satishbhari Malik who was directing all the activities of both these firms. This notice gives the details and the material on the basis of which aforesaid allegation was made. The said details and the material was collected during the course of search of the two premises on 13.8.2002. It was, inter alia, found during the search that some processes were carried out through job workers but neither the details of job work done at M/s. Sumcon Auto Ltd. nor the details of the assembling work of watch cases being done at M/s. Ravi Tution Classes were being maintained by these two firms. They were also not maintaining any records on production and stock for their products. The statement of Sh. Harishbhai Thakar, Manager of M/s. Satyam Technocast as well Sh. Someshbhari Satishbhari Malik were also recorded and in these statements they had accepted that the two firms, namely, Alpa Hardware and Alpa Watch Industries were firms having no legal existence and it was Somesh Malik who had floated these two bogus and fake firms.
2. Reply to the show cause notice was given and ultimately Order-in-Original was passed by the Commissioner on various issues which the Commissioner had framed. Issue No. I was whether clearances of excisable goods were made by the noticees on fictitious invoices showing much lower quantities/value than the actual? The findings on this issue were based on the statements of the aforesaid two persons accepting the two bogus and dummy firms and on that basis it was concluded that the goods were cleared on fictitious invoices showing lower quantities and value.
3. Another relevant issue framed was issue No. IV, namely, whether M/s. Satyam Technocast could not be considered to be the manufacturer of excisable goods which are alleged in the show cause notice to have been manufactured by them?
4. The defence of M/s. Tecnocast was that they were only the traders of hardware items. This defence has not again been accepted on the basis of statements of the aforesaid two persons and the finding arrived at by the Commissioner was that M/s. Satyam Technocast was the manufacturer of excisable goods as was stated in the show cause notice.
5. Next issue which concerns us is issue No. VI: – whether clearances of M/s. Satyam Technocast and Pioneer Hardware could be clubbed for the purpose of SSI exemption? The findings on this issue read as under:-
“M/s. Pioneer Hardware Industries was a partnership firm which was dissolved on 16-07-2001. Shri Somesh Malik was a partner in this firm and was managing its affairs. The firm was dissolved by Dissolution Deed dt. 16-07-2001. As per this Dissolution Deed, the business of M/s. Pioneer Hardware Industries including its assets and liabilities, were to be taken over by Shri Somesh Malik who is also the proprietor of M/s. Satyam Technocast. The evidence on record shows that Shri Somesh Malik continued to raise invoices in the name of M/s. Pioneer Hardware Industries (as are indicated in Annexure ‘D’ to the SCN) ever after the firm M/s. Pioneer Hardware stood dissolved on 16.07-2001. The details of the sales made by M/s. Satyam Technocast and M/s. Pioneer Hardware Industries were found in the data retrieved from the seized computer. The payments received for supplies by M/s. Pioneer Hardware industries were also reflected in the note books seized from the residence of Shri Somesh S. Malik. M/s. Satya, Technocast manufactured the same product with the same infrastructure as was manufactured by M/s. Pioneer Hardware Industries and M/s. Satyam Technocast merged in such a way during the period relevant to this show cause notice that both these units are inseparable and the clearances made by both these units have to be clubbed on the ground that both these units belong to the same person i.e. Shri Somesh Malik during the relevant period. The facts and figures of this case establish that these units did not have separate legal entity even though M/s. Pioneer Hardware Industries was a partnership firm till 16-07-2001 with Shri Somesh Malik (Proprietor of M/s. Satyam Technocast) evidence ownership interest in the partnership and also managing all its affairs during the period relevant to the instant SCN.”
6. The last issue i.e. issue NO. XI pertains to the duplication of duty demand in respect of same consignment and on this the Commissioner gave the following findings:
“As already determined, M/s. Satya, Technocast as well as M/s. Pioneer Hardware Industries were clearing the goods under fictitious invoices, which accompanied the consignment. Such invoices showed lesser quantity/value than the actual quantity/value which was correctly recorded and reflected in the ‘Order Estimate’, ‘Debit Note or ‘Memo’. Therefore, a consignment dispatched under an L.R. was covered in the fictitious invoice as well as in the ‘Order Estimate’ or ‘Debit Note’. The Noticees vehemently plead for exclusion of such duplication from the clearance value.”
7. The instances of duplication are also mentioned but since those are not included it is not necessary to refer those.
8. After giving the findings on the aforesaid material issues, the Commissioner did the duty calculations in the following manner:
2001-02
upto 15-7-2001 (Annexure-C of SCN)
(a) Total clearance (OE + Alpa + PNR): | : Rs. 71,64,862 |
(b) Duplications: (i) 6 Invoices in the name of M/s. Alpa Hardware | : Rs. 58,796 |
(ii) One invoice of M/s. Pioneer Hard. Ind. | : Rs. 1,16,064 |
Total duplication | : Rs. 1,74,860 |
Clearance Value after deducting duplication (a-b) | : Rs. 69,90,002 |
From 16-7-01 to 31-3-02 (Annexure – D of SCN)
(a) Total clearance (OE +Alpa + PNR + SAT) | : 2,07,14,634/- |
(b) Duplications: (i) 27 invoices in the name of M/s. Alpa Hardware | : Rs. 3,02,325/- |
(ii) 33 invoices of M/s. Pioneer Hard. Ind. | : Rs. 7,32,055/- |
Total | : Rs. 10,34,380/- |
Clearance value after deducting duplications (a-b) | : Rs. 1,96,80,254/- |
Total clearance value for 2001-02 (I+H) | : Rs. 2,66,70,256/- |
Duty Liability for 2001-02:
(a) for first 100 lakhs Nil (as per Not. No. 08/2001) |
|
(b) On rest | : Rs. 1,66,70,256/- |
VALUE ON WHICH DUTY IS TO BE CHARGED:
Cum-duty value-Permissible deduction/1 + rate of duty = 1,66,70,256/- 1.16 = Rs. 1,43,70,910/-
Duty to be recovered (2001-02) Rs. 1,43,70,910/- × 16% = 22,99,346
(a) Total clearance (OE + DN + Alpa + Sat) | : Rs. 1,35,92,817/- |
(b) Duplication: (i) 5 invoices in the name of M/s. Alpa Hardware: | Rs. 57,446 |
(ii) 28 invoices of M/s. Satyam Technocast | : Rs. 2,87,945 |
Total | : Rs. 3,45,391 |
Clearance Value after deducting duplication (a-b): | : Rs. 1,32,47,426 |
Duty Liability for 2002-03:
(a) for first 100 lakhs: Nil (as per Not. No. 08/2002) |
|
(b) On rest: | Rs. 32,47,426/- |
VALUE ON WHICH DUTY IS TO BE CHARGED
Cum-duty value permissible deductions/1 + rate of duty = 32,47,426/- 1.16 | Rs. 27,99,505 |
Duty to be recovered (2002-03):
Rs. 27,99,505/- × 16% | = Rs. 4,47,921 |
Total duty liability during 2001-02 and 2002-03: | Rs. 27,47,267/- |
9. On that basis the final order which was passed reads as under:
“ORDER
In view of the above findings, I order as under:
(a) The seized 73,302 pcs. of watch cases, valued at Rs. 1,46,954, belonging to M/s. Prince Time Industries are confiscated with an option to the owner to redeem these on payment of a redemption fine of Rs. 10,000/- (Rupees Ten Thousand only). On redemption these goods may be cleared for home consumption only one payment of Central Excise duty payable. If any. I also impose penalty of Rs. 2000/- (Rs. Two Thousand only) on them under Rule 25 of the Central Excise Rules, 2002 read with Rule 173Q of the erstwhile Central Excise Rules, 1944.
(b) The seized 1,35,010 pcs. of miscellaneous fitting valued at Rs. 34,35,570/- belonging to M/s. Satyam Technocast are confiscated with an option to the owner to redeem these on payment of redemption fine of Rs. 5,00,000 (Rs. Five lakhs). On redemption, these goods shall be cleared for home consumption only after payment of Central Excise duty as due payable on the date on such clearance. I also impose a penalty of Rs. 1,00,000 (Rs. One lakh) on M/s. Satyam technocast through its proprietor Shri Somesh Malik.
(c) I confirm the demand of duty of Rs. 27,47,267 (Rupees Twenty seven lakh forty seven thousand two hundred and sixty seven only), as against M/s. Satyam Technocast and Shri Somesh Malik jointly, under section 11 A of the Central Excise Act, 1944, alongwith interest under Section 11 AB of the said Act. I also impose a penalty equal to the amount of duty confirmed, on them under section 11 AC of the said Central Excise Act, 1944.”
10. Both the respondents filed appeals before the CESTAT against the aforesaid order of the Commissioner.
11. The Tribunal vide the impugned judgment dated 11.3.2004 has set aside the order of the Commissioner. On going through the order of the Tribunal we find that the prime reason given by the Tribunal in support of its order is that there is hardly any evidence on record to prove the allegations made against the two respondents herein. We find this to be totally erroneous. We have already reproduced the material which was relied upon by the Commissioner in his order. It is for this reason that some of the discussion from the order of the Commissioner is extracted as well. Faced with the aforesaid position, Mr. L. Kumaran argued that the Commissioner was not entirely correct in his approach. Though it was found that two firms, namely, Alpa Hardware and Alpa Watch Industries were dummy but while calculating the amount payable, it has included the value of the job work which was got done from the other firms as well. Some of the other firms were totally independent and even the show-cause notice or the order of the Commissioner does not point out anything about the same. The Commissioner has included the value of job work which is got done from such outsiders only on the ground that the respondents firms could not produce any document which could not give any particulars of the jobs that were got done from the said parties.
12. That may be so. But it is not necessary to go into this aspect in detail or remit the case back on this aspect as the tax effect thereon is very minimal.
13. We, therefore, set aside the order of the Tribunal and allow these appeals by restoring the orders of the Commissioner. No costs.
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