Mysore Crystal Glass Industries Vs. Collector of Central Excise - Court Judgment

Excerpt:
1. the above applications have been filed for waiver of pre-deposit of duty of rs. 17,95,490.59 and penalty of rs. 1,00,000 on the petitioner company; rs. 25,000 on petitioner basha, managing partner; rs. 1,000 on petitioner abdul rahman under the impugned order of the collector of central excise, bangalore, dated 31.3.1993.2. shri sampath, the earned counsel for the petitioners, submitted that duty has been levied for the period 1984 to 1985 by issue of a show cause notice dated 7.10.1985 alleging that the petitioners manufactured and cleared glass and glassware without payment of central excise duty.it was submitted that the main allegation of the department is that the invoices and also gate passes and delivery notes recovered from the possession of the petitioners by the authorities would indicate manufacture and clearance of excisable goods without pay-merit of duty.the earned counsel submitted that in the show cause notice recovery of the various invoices and gate passes have been categorised under an-nexures b, c and d and these annexures relate only to the invoices, delivery notes, gate passes etc. even though initially a show cause notice on the basis of recovery of the said delivery notes, invoices, gate passes, etc. was issued demanding a sum of rs. 48 lakhs the adjudicating authority dropped the proceedings in respect of the fake gate passes, invoices and delivery notes referred to in annexures c and d and the total duty remission in this respect is about rs. 18 lakhs.the earned counsel further submitted that even in respect of similar invoices and documents referred to in annexure b in the show cause notice, part of the same in favour of the assessee was allowed. the earned counsel contended that if one were to apply the same logic on the basis of which the learned adjudicating authority dropped proceedings against the petitioners in respect the evidence referred to in annexures c and d, the entire proceedings should be dropped more particularly when the nature of the evidence viz. invoices, gate passes and delivery notes are almost identical and similar. the earned counsel further submitted that admittedly investigation was done in regard to the various documents and the investigating officer has clearly admitted that except in a small number of cases in respect of the goods the persons mentioned in the 67 invoices and delivery notes did not receive any goods at all. the earned counsel submitted that the petitioner resorting to the manipulation of the invoices and fake gate passes was only with a view to obtain financial accommodation by way of loans from various banks in order to run the business and so far as the department is concerned the burden is squarely on the department to prove that excisable goods were actually manufactured and cleared and in the absence of the same the petitioner would not be liable to pay any excise duty at all. the earned counsel referred to the observations of the adjudicating authority in interjial page's 54, 59, 63 to 65 and contended that the adjudicating authority has clearly given a finding in favour of the assessee holding that the plea of the as-sessee is corroborated by the deposition of the investigating officer and, therefore, in the absence of any evidence prima facie the petitioner would not be liable to pay any duty at all. the earned counsel also referred to the admission of the investigating officer in cross-examination on 30.12.1992 admitting that he did not examine the managing partner in regard to annexure bl to b4 and further his investigation revealed that "all the 100% particulars mentioned in the annexures have not been received in the respective destinations." regarding the financial position, the earned counsel submitted that since april, 1993 the factory remains closed and is under lay off with 200 workers have been laid off. it was further submitted that by a communication dated 6th may, 1993 the karnataka electricity board, bangalore, has issued a notice of recovery of the electricity dues which remained unpaid referring to the cheques issued by the petitioners which were dishonoured. the earned counsel also referred to the communication from the employees state insurance corporation, karnataka, dated 5.4.1993 issuing show cause notice proposing criminal prosecution against the petitioner for non-compliance of employees state insurance act, 1948 read with employees state insurance regulations, 1950 and also to the demand notice issued by the recovery officer for recovery of the contribution from the petitioner. the earned counsel also referred to the show cause notice issued by the enforcement officer, regional provident fund office, bangalore, proposing legal action for non-contribution of employees' share since november, 1991 to march, 1993. the earned counsel further submitted that already criminal prosecution has been launched against the petitioner by the central excise department in the criminal court where petitioners are accused and the petitioners have moved the karnataka high court and obtained an order of stay of further proceedings in the criminal prosecution. the earned counsel referring to the balance sheet of the petitioner for the year ending 31.3.1992 stated that more than rs. 1.48 crores is due to canara bank and this is in addition to a sum of more than rs. 21.46 lakhs due to various sundry creditors listed in schedule iv of the balance sheet. the earned counsel submitted that at the initial stage the petitioner moved the karnataka high court in writ petition no. 13940/86 and as directed by the high court by order dated 30.7.1986 the petitioner had to deposit rs. 2 lakhs towards duty on 7.8.1986 and prays that the same may be retained towards pre-deposit in this appeal. the learned counsel, therefore, prayed for waiver of pre-deposit of duty balance and penalty and stay of recovery of the same on prima facie grounds for the above reasons.3. shri subramaniam, the learned dr, adopted the reasoning of the adjudicating authority in the impugned order and contended that in respect of manufacture and clearance of goods without payment of duty the burden is also on the petitioner to prove that he did not manufacture the goods by adducing evidence of the persons referred to in the invoices. regarding the plea about the closure of the factory and other financial hardship the learned dr submitted that he has no specific instructions contrary to what is urged by petitioner.4. we have carefully considered the submissions made before us. the short issue before us is whether the pleas adduced before us by the earned counsel for petitioner are prima facie acceptable for the limited purpose of grant of waiver of pre-deposit of duty and penalty pending disposal of the appeal. on going through the entire impugned order and the other records, we find that in respect of identical allegation by the department of manufacture and clearance of goods without payment of duty against the petitioner on the basis of recovery of invoices, fake gate passes, delivery notes etc., the learned adjudicating authority has dropped action in respect of the demand made on the basis of the evidence relating to annexures c and d of the show cause notice and the original demand in the show cause notice was for rs. 48 lakhs and by dropping action in respect of the demand referred to in annexures c and d rs. 18 lakhs were dropped in favour of the assessee. we also note that part of the demand in annexure b has also been dropped. we note that investigation was done by the investigating officer, who has also been cross-examined during adjudication. the learned adjudicating authority in respect of the invoices and delivery notes and gate passes and also the investigation done in regard to the same has made the following observations in the impugned order: if the duty has to be demanded based on the delivery made, then it is mandatory on the part of the department to come up with by way of customers statement or such other documents. i also find that no efforts have been put forth toy the department so as to prove whether there was actually any delivery against these delivery notes mentioned or not. there is categoric admission on the part of the investigation officer that in the investigation report received by him did not reveal that all the goods mentioned in the annexure were received. i have also noticed that the department have not made any efforts to come out with any supportive evidence. such being the case the benefit of doubt has to be necessarily to the assessee who has been at least able to produce some evidence. as already mentioned the department has made no efforts to establish with corroborative evidence that the goods mentioned in these delivery notes have actually been removed clandestinely without payment of duty. i find it relevant to repeat the deposition of the investigation officer before me on 30.12.1992 when a specific question was put by the learned advocate. with reference to annexure 'd' as to whether he verified the goods mentioned therein were duty paid goods received for re-production and supplied after re-production. the officer admitted that he has not verified. here again i find that no investigation has been made by the department to prove that the goods have been clandestinely removed. wherever a charge of clandestine removal is made it is the duty cast on the department to prove the allegation with supportive and corroborative evidence.one other factor we would like to take note of at this stage is the fact that during adjudication in respect of the allegations referred to in annexure b1 relating to 43 parties, action was dropped by accepting the petitioner's claim in respect of 6 parties from whom appellants produced letters and the petitioners have produced letters from other parties only before us. likewise, letters produced by the petitioner from 6 parties in respect of annexure b2 and 4 parties in respect of annexure b3, and 18 parties in respect of annexure b4, have been accepted by the adjudicating authority and proportionate rebate granted. shri sampath, the leaned counsel, submitted that the petitioner could not contact the other parties as they were living in far off places and could procure them only now and produced letters before us from others. we are not expressing any opinion on them at this stage. taking note of the financial position of the petitioner as set out above and also the other aspects referred to above and also having regard to the fact that the petitioner has already deposited rs. 2 lakhs and the factory remains closed, we grant on prima facie grounds waiver of pre-deposit of balance of duty and penalty and also stay the recovery of the same pending disposal of the appeals. we direct that the petitioner shall not alienate any immovable property without the leave of the tribunal pending appeals.

Judgment:
1. The above applications have been filed for waiver of pre-deposit of duty of Rs. 17,95,490.59 and penalty of Rs. 1,00,000 on the petitioner company; Rs. 25,000 on petitioner Basha, Managing Partner; Rs. 1,000 on petitioner Abdul Rahman under the impugned order of the Collector of Central Excise, Bangalore, dated 31.3.1993.

2. Shri Sampath, the earned Counsel for the petitioners, submitted that duty has been levied for the period 1984 to 1985 by issue of a show cause notice dated 7.10.1985 alleging that the petitioners manufactured and cleared glass and glassware without payment of central excise duty.

It was submitted that the main allegation of the Department is that the invoices and also gate passes and delivery notes recovered from the possession of the petitioners by the authorities would indicate manufacture and clearance of excisable goods without pay-merit of duty.

The earned Counsel submitted that in the show cause notice recovery of the various invoices and gate passes have been categorised under An-nexures B, C and D and these annexures relate only to the invoices, delivery notes, gate passes etc. Even though initially a show cause notice on the basis of recovery of the said delivery notes, invoices, gate passes, etc. was issued demanding a sum of Rs. 48 lakhs the adjudicating authority dropped the proceedings in respect of the fake gate passes, invoices and delivery notes referred to in Annexures C and D and the total duty remission in this respect is about Rs. 18 lakhs.

The earned Counsel further submitted that even in respect of similar invoices and documents referred to in Annexure B in the show cause notice, part of the same in favour of the assessee was allowed. The earned Counsel contended that if one were to apply the same logic on the basis of which the learned adjudicating authority dropped proceedings against the petitioners in respect the evidence referred to in Annexures C and D, the entire proceedings should be dropped more particularly when the nature of the evidence viz. invoices, gate passes and delivery notes are almost identical and similar. The earned Counsel further submitted that admittedly investigation was done in regard to the various documents and the investigating officer has clearly admitted that except in a small number of cases in respect of the goods the persons mentioned in the 67 invoices and delivery notes did not receive any goods at all. The earned Counsel Submitted that the petitioner resorting to the manipulation of the invoices and fake gate passes was only with a view to obtain financial accommodation by way of loans from various banks in order to run the business and so far as the Department is concerned the burden is squarely on the Department to prove that excisable goods were actually manufactured and cleared and in the absence of the same the petitioner would not be liable to pay any excise duty at all. The earned Counsel referred to the observations of the adjudicating authority in interjial page's 54, 59, 63 to 65 and contended that the adjudicating authority has clearly given a finding in favour of the assessee holding that the plea of the as-sessee is corroborated by the deposition of the investigating officer and, therefore, in the absence of any evidence prima facie the petitioner would not be liable to pay any duty at all. The earned Counsel also referred to the admission of the investigating officer in cross-examination on 30.12.1992 admitting that he did not examine the Managing Partner in regard to Annexure Bl to B4 and further his investigation revealed that "all the 100% particulars mentioned in the Annexures have not been received in the respective destinations." Regarding the financial position, the earned Counsel submitted that since April, 1993 the factory remains closed and is under lay off with 200 workers have been laid off. It was further submitted that by a communication dated 6th May, 1993 the Karnataka Electricity Board, Bangalore, has issued a notice of recovery of the electricity dues which remained unpaid referring to the cheques issued by the petitioners which were dishonoured. The earned Counsel also referred to the communication from the Employees State Insurance Corporation, Karnataka, dated 5.4.1993 issuing show cause notice proposing criminal prosecution against the petitioner for non-compliance of Employees State Insurance Act, 1948 read with Employees State Insurance Regulations, 1950 and also to the demand notice issued by the Recovery Officer for recovery of the contribution from the petitioner. The earned Counsel also referred to the show cause notice issued by the Enforcement Officer, Regional Provident Fund Office, Bangalore, proposing legal action for non-contribution of Employees' share since November, 1991 to March, 1993. The earned Counsel further submitted that already criminal prosecution has been launched against the petitioner by the Central Excise Department in the criminal court where petitioners are accused and the petitioners have moved the Karnataka High Court and obtained an order of stay of further proceedings in the criminal prosecution. The earned Counsel referring to the Balance Sheet of the petitioner for the year ending 31.3.1992 stated that more than Rs. 1.48 crores is due to Canara Bank and this is in addition to a sum of more than Rs. 21.46 lakhs due to various sundry creditors listed in Schedule IV of the Balance Sheet. The earned Counsel submitted that at the initial stage the petitioner moved the Karnataka High Court in Writ Petition No. 13940/86 and as directed by the High Court by order dated 30.7.1986 the petitioner had to deposit Rs. 2 lakhs towards duty on 7.8.1986 and prays that the same may be retained towards pre-deposit in this appeal. The learned counsel, therefore, prayed for waiver of pre-deposit of duty balance and penalty and stay of recovery of the same on prima facie grounds for the above reasons.

3. Shri Subramaniam, the learned DR, adopted the reasoning of the adjudicating authority in the impugned order and contended that in respect of manufacture and clearance of goods without payment of duty the burden is also on the petitioner to prove that he did not manufacture the goods by adducing evidence of the persons referred to in the invoices. Regarding the plea about the closure of the factory and other financial hardship the learned DR submitted that he has no specific instructions contrary to what is urged by petitioner.

4. We have carefully considered the submissions made before us. The short issue before us is whether the pleas adduced before us by the earned Counsel for petitioner are prima facie acceptable for the limited purpose of grant of waiver of pre-deposit of duty and penalty pending disposal of the appeal. On going through the entire impugned order and the other records, we find that in respect of identical allegation by The Department of manufacture and clearance of goods without payment of duty against the petitioner on the basis of recovery of invoices, fake gate passes, delivery notes etc., the learned adjudicating authority has dropped action in respect of the demand made on the basis of the evidence relating to Annexures C and D of the show cause notice and the original demand in the show cause notice was for Rs. 48 lakhs and by dropping action in respect of the demand referred to in Annexures C and D Rs. 18 lakhs were dropped in favour of the assessee. We also note that part of the demand in Annexure B has also been dropped. We note that investigation was done by the investigating officer, who has also been cross-examined during adjudication. The learned adjudicating authority in respect of the invoices and delivery notes and gate passes and also the investigation done in regard to the same has made the following observations in the impugned order: If the duty has to be demanded based on the delivery made, then it is mandatory on the part of the department to come up with by way of customers statement or such other documents.

I also find that no efforts have been put forth toy the department so as to prove whether there was actually any delivery against these delivery notes mentioned or not. There is categoric admission on the part of the investigation officer that in the investigation report received by him did not reveal that all the goods mentioned in the annexure were received. I have also noticed that the department have not made any efforts to come out with any supportive evidence. Such being the case the benefit of doubt has to be necessarily to the assessee who has been at least able to produce some evidence.

As already mentioned the department has made no efforts to establish with corroborative evidence that the goods mentioned in these delivery notes have actually been removed clandestinely without payment of duty. I find it relevant to repeat the deposition of the investigation officer before me on 30.12.1992 when a specific question was put by the learned Advocate. With reference to Annexure 'D' as to whether he verified the goods mentioned therein were duty paid goods received for re-production and supplied after re-production. The officer admitted that he has not verified.

Here again I find that no investigation has been made by the department to prove that the goods have been clandestinely removed.

Wherever a charge of clandestine removal is made it is the duty cast on the department to prove the allegation with supportive and corroborative evidence.

One other factor we would like to take note of at this stage is the fact that during adjudication in respect of the allegations referred to in Annexure B1 relating to 43 parties, action was dropped by accepting the petitioner's claim in respect of 6 parties from whom appellants produced letters and the petitioners have produced letters from other parties only before us. Likewise, letters produced by the petitioner from 6 parties in respect of Annexure B2 and 4 parties in respect of Annexure B3, and 18 parties in respect of Annexure B4, have been accepted by the adjudicating authority and proportionate rebate granted. Shri Sampath, the leaned counsel, submitted that the petitioner could not contact the other parties as they were living in far off places and could procure them only now and produced letters before us from others. We are not expressing any opinion on them at this stage. Taking note of the financial position of the petitioner as set out above and also the other aspects referred to above and also having regard to the fact that the petitioner has already deposited Rs. 2 lakhs and the factory remains closed, we grant on prima facie grounds waiver of pre-deposit of balance of duty and penalty and also stay the recovery of the same pending disposal of the appeals. We direct that the petitioner shall not alienate any immovable property without the leave of the Tribunal pending appeals.