Judgment:
1. These five applications relate to five appeals arising out of the same impugned order. These applications are, therefore, being disposed of vide this common order.
2. M/s. National Torch & Tubes manufactured aluminium cans. For making such cans they made intermediate product called slugs. Shri A.V.Phadnis, advocate appearing with Shri G.C. Biradar, advocate for M/s.
National Torch & Tubes, informed us that these slugs were punched out of aluminium sheets. S.G. Lakhotia was power of attorney holder and also the main functionary in the business of M/s. National Torch & Tubes. The assessees were taking credit of the duty paid on the input namely sheets. It is the claim of the department that for making such slugs the assessees could use only those sheets which were of thickness of 2.5 mm and more. This assumption was confirmed by Shivcharan S.Bansodia, supervisor as also S.G. Lakhotia. The investigations resulted in the finding that what was purchased by the assessee company was sheets of much lesser thickness than could be used by them. The demand made and confirmed in the impugned proceedings is on the ground that the credit was taken where inputs received were not physically capable of being used in the manufacture of the slugs and thereafter of the cans. On this ground duty amounting to Rs. 23,97,432 was confirmed against the assessee company. A penalty of Rs. 5,00,000 was imposed upon the assessee company and penalties of Rs. 2,50,000 were imposed on S.G. Lakhotia and G.R. Lakhotia who is not before us today.
3. Shri Phadnis submits that the statements that the assessees received sheets of thickness less than 2.5 mm were recorded under duress. He, however, fairly states that these statements were never retracted at a later date. Shri Phadnis also pointed out that the ten gate passes cited in evidence did not mention the thickness of the sheets at all and therefore no force could be derived there from. On the same ground he argued that the fact that the invoices given by the traders did not show any thickness is also not material inasmuch as the invoices were based on the gate passes which in turn did not show any thickness. It is his argument that all the goods purchased by the assessee company were such as would be used by them, that they were so used and that the assessee company had paid a very substantial amount of duty, i.e. about Rs. 45 lakhs during the period under dispute. He further submits that whereas the period covered under the present proceedings is 1.3.1989 to 31.10.1992, on a similar issue the demand had been dropped by the Additional Collector by his order dated 7.1.1998 where the period of dispute was August 1988 to January, 1990. He relies upon the Tribunal judgment in the case of Nicholas Piramal India Ltd. v. CCE to state that the demand made on similar grounds for earlier period could not sustain.
4. We have considered the submissions made and have seen the evidence.
In several of his statements Shri S.G. Lakhotia had confirmed that the physical goods received by the assessee company were of a thickness less than what could be used by them. These statements have not been retracted. It has come in the statement of Futarmal B. Mehta that he was specifically directed not to state the thickness of the sheets supplied by them to the assessee company and the specific instructions were issued by Lakhotia. Shri Phadnis submits that the goods were purchased by the assessee company for which payment was made by cheques. He further submits that these goods were received and were used. We do not want to enter into the aspect of payment by cheques to the suppliers of the goods because it is not directly relevant to the deliberations arising out of the stay applications. We have also examined the order of the Additional Collector cited in evidence and find that the grounds leading to that dispute covered an entirely different areas. Therefore the ratio of the judgment in the case of Nicholas Piramal India Ltd. v. CCE does not apply.
Prima facie we find that the assessees have not made a strong case on merits.
5. We have also examined the plea of financial hardship. On record is a photostat copy of final accounts for the year ending 31.3.1999 in which an operating loss is shown. The final accounts, however, do not show entirely an unviable position. We, therefore, direct the applicant assessee M/s. National Torch & Tubes to deposit Rs. 7,00,000 towards duty confirmed. On such deposit being made the requirement of pre-deposit of the remainder duty as well as the penalty imposed on the assessee company and S.G. Lakhotia shall be waived and the recovery stayed. The assessees are given a time of eight weeks from the receipt of this order to make the deposit.
6. The other three applicants namely Futarmal B. Mehta, Chandraprakash U. Bhansali and Ashok Kumar Jain are traders who had supplied the materials. Shri R.J. Parakh arguing on behalf of F.B. Mehta and C.U.Bhansali claimed that at the material time, there was no requirement that the traders issue their invoices in a particular format. During the period the dealers were not under the Central Excise control at all. It was his further statement that the dealers were not aware of the specific requirement of the assessee company. It was further claimed that where the parent gate passes did not show the thickness, no adverse inference could be drawn from the fact that the dealers invoices did not mention it. Shri D.D. Gwalani arguing for the applicant Chandraprakash U. Bhansali adopted this argument and further stated that at the material time Rule 209A could not be attracted at all. He submits that prior to the introduction of Rule 173Q(bbb) the registered dealers were not the people to whom Rule 173Q would apply.
This was done only in 1994. Where the liability to confiscation could not arise, Rule 209A would not apply.
7. We have considered the submissions. We have also seen the state of evidence. We find that the statement of Bhansali as reproduced in the Commissioner's order does not bring out his culpability at all. On perusal of the evidence we find that the traders have made a strong prima facie case in their favour. We, therefore, grant unconditional stay and waiver of the penalties imposed upon them.