Usha Udyog Vs. Collector of Central Excise

1. These applications have been filed for waiver of pre-deposit and stay of recovery of duty confirmed on the applicants herein who are manufacturers of bars, rods and angles falling under Chapter 72 of the Central Excise Tariff Act, 1985 by denying the Notification No. 202/88, dated 20-5-1988 and penalties imposed upon the applicants herein for contravention of the Central Excise Rules. Details are as under :- Sl. No. Appeal No. Duty Penalty 2. Learned Counsel Shri Lahoty submits that the applicants have been purchasing scrap from Kabaris and had also purchased old and used sleeper rails etc. of iron or steel which were specified as inputs in Column No. 2 of the table annexed to Notification 202/88, and manufacturing specified final products described in Column 3 of the table and, the department has not discharged the burden of proving that the inputs received by the applicants were clearly recognizable as being non duty paid, and therefore the benefit of Notification 202/88 has wrongly been denied to them. He submits that the basis on which the department has concluded that the inputs were non-duty paid bazar/kabari scrap is the examination of input suppliers, who have uniformly stated that what they supplied to the applicants were old and used scrap containing used and broken pieces of bars, angles, old machinery parts, old automobile parts etc., and the department has relied only upon the statements of the inputs suppliers, without allowing their statements to be tested by cross-examination, inspite of the specific request therefor. In these circumstances he submits that the evidence in the form of the statements of the suppliers of inputs cannot be relied upon to come to the conclusion that the applicant were utilising unspecified and non-duty paid inputs for manufacturing their final product so as to deny them the benefit of Notification 202/88. On the aspect of time bar, he submits that the show cause notice has been issued on 21-7-1995 covering the period from 1-8-1990 to 28-2-1994 which is beyond a period of six months from the relevant date, and since the applicants had disclosed details of inputs in their purchase registers during the entire period the charge of suppression and of the applicability of the extended period of limitation does not arise in this case. Lastly he pleads financial hardship, referring to the balance sheet for the year ending 31-12-1997 which reflects a loss. He therefore pleads for waiver of pre-deposit of duty and penalty amount.

3. Opposing the prayer Shri D.S. Negi, learned SDR draws our attention to the order contending that it was found on examination that inputs supplied to the applicants were not of the categories specified in column two of the table of Notification 202/88, and further the department has been able to prima facie discharge the burden of showing that the inputs received were clearly recognizable as non-duty paid, as seen from the statements of the nine suppliers of inputs to the applicants. He, therefore, submits that the condition prescribed has not been fulfilled and hence the benefit of Notification 202/88 is not available to the applicants. On the aspect of limitation his contention is that the applicants had declared that they were purchasing ingots bars, etc. and other rolling materials (duty paid) which are then cut into required size and rolled, while it had been found that what had actually been received was nothing but old and used scrap arising from wornout and old automobile and railway material parts. The declaration of description of the inputs in their purchase registers was that the goods supplied to them were ingots or billets or blooms. Therefore, learned SDR submits that a clear case of misdeclaration and suppression has been made out and therefore extended period is available to the department.

4. On refusal by the adjudicating authority to allow cross-examination, he submits that, statements of the suppliers only established that they have been supplying material purchased from other dealers/open market, and hence there was no need for allowing the cross-examination. Lastly, on the plea of financial hardship he submits there is a high sales income and other income available as seen from the balance sheet and therefore it would not cause undue hardship if the applicants are directed to deposit the duty and penalty.

5. We have carefully considered the rival submissions. Prima facie it appears that the department has been able to show that the benefit of Notification 202/88 is not available to the applicants in view of the fact that inquiries conducted from all the inputs suppliers clearly revealed the nature of the inputs which was scrap and not any of the inputs specified in the table to the notification, and further that the inputs supplied had not discharged duty burden. The original railway parts and automobile parts would have discharged duty liability at the time of manufacture but they have been used and then become MS scrap which was supplied to the applicants. In this view of the matter the applicant has not made out a prima facie case for waiver on the merits viz. eligibility to the benefit of the notification, and on the other hand it is the department which appears to have a prima facie case regarding non-availability thereof. The aspect of time bar is also prima facie against the applicants since what was declared was found to be contrary to the factual position i.e. other than what was declared in the declaration. It can therefore prima facie be said that the applicants have not supplied vital information necessary for the department to determine whether they are eligible to the benefit of the notification.

5. As for the plea, of allowing cross-examination, we find that prima facie it cannot be held that there is any legal infirmity in the facts and circumstances of this case. The financial position is also not so bleak as to preclude depositing of amount noting that the balance sheet of Usha Udyog for the year ending 31-3-1997 reflects sales income of over Rs. 6.78 crores and other income of approximately Rs. 15 lakhs.

Further, balance sheet for the year ending 31-3-1997 reflects a balance of Rs. 2.30 crores brought forward from the last account. In the case of R.H.L. Profiles, the provisional balance sheet for the year ending 31-12-1997 shows a sales income of over Rs. 24 crores and other income of approximately Rs. 2.74 crores. In addition to this a profit has also been brought forward from the last account. We, therefore, direct the 1st applicants to deposit a sum of Rs. 50 lakhs and 2nd applicants to deposit Rs. 60 lakhs towards duty within a period of 8 weeks from the date of receipt of this order and on such deposit, requirement of pre-deposit of balance duty and the penalty shall stand waived and recovery stayed pending the appeals. Failure to comply with this direction shall result in automatic vacation of stay and dismissal of appeals without further notice.