| SooperKanoon Citation | sooperkanoon.com/944213 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Delhi |
| Decided On | Mar-12-2012 |
| Case Number | Excise Appeal No.4885-4886 of 2004 & No.4903 of 2004 |
| Judge | THE HONOURABLE MS. JUSTICE ARCHANA WADHWA, MEMBER (JUDICIAL) & THE HONOURABLE MR JUSTICE RAKESH KUMAR, TECHNICAL MEMBER |
| Appellant | M/S thermotech, M/S Flevel International Pradeep Khanna |
| Respondent | Cce, Delhi |
| Advocates: | For the Appellants: Naveen Mullick, Advocate. For the Respondent: Dr. R.K. Varma, Advocate. |
Per Ms. Archana Wadhwa, J.
1. All the three appeals, though arising out of two different orders, are being disposed of by a common order as they are interconnected and issue involved is identical.Appeal No.4885-4886 of 2004
2. Vide Order-in-Original No.CCE/ADJ/04-09/04, dtd. 15/22.01.04, in appeal No.4885-4886 of 2004, Commissioner has held as under:-
(i) Confirmed demand of duty of Rs.83,60,821/- against M/s Thermotech under section 11A of Central Excise Act,1944;
(ii) Imposed penalty of identical amount under Rule 173Q of Central Excise Rules;
(iii) Imposed penalty of Rs.8.50 lakhs on Shri Pradeep Khanna, Proprietor, M/s Thermoking under Rule 209A of the Central Excise Rules;
(iv) Confiscated 5 air conditioners with an option to the appellants to redeem the same on payment of redemption fine of Rs.30,000/- and on payment of appropriate amount of Central Excise duty.
(v) Confiscated 2 air conditioners from M/s Kashi Electricals (dealer) with an option to them to redeem the same on payment of redemption fine of Rs.50,000/-; and
(vi) Confiscated excisable goods, semi-finished goods and raw material seized from the factory premises of M/s Thermotech with a redemption fine of Rs.1 lakh and payment of appropriate duty of excise.
2. While dealing with said set of appeals, it is seen that M/s Thermotech are engaged in the manufacture of washing machines, room air conditioners, cooler trolleys with cooler. The said unit was floated in March, 1990 with Ms. Neera Khanna being sole proprietor of the same. It is also seen that earlier proprietary unit of Ms. Neera Khanna under the name of M/s Jass Kann International, was closed in December, 1989. There is another unit of Shri Pradeep Khanna husband of Ms. Neera Khanna, engaged in the manufacture of air conditioners under the name and style of M/s Thermoking. The said unit of M/s Thermoking is operating from the year 1977 onwards. Another unit under the name and style of M/s Flevel International, is also engaged in the manufacture of air conditioners since 1986.
3. The cases against the said appellants M/s Thermotech originated with the interception of one vehicle loaded with three room air conditioners with grill and filter (Kirloskar compressor) and two room air conditioners with Shreeram compressors. The said vehicle was intercepted on 27.02.92 and the driver of the vehicle produced invoice dtd. 27.02.92 issued by M/s Thermotech. As there was no duty paying documents accompanying the said goods, the officers detained the goods along with vehicle. In a follow up action, the premises of M/s Thermotech were put to search. Two room air conditioners in packed and ready to dispatch condition, one air conditioners in packed and ready to dispatch condition, one air conditioner in semi-assembled condition and 15 washing machines in semi-finished condition along with other raw material like sheet metal, bodies of washing machine etc. were found and seized. Various records kept by the said appellants in the ordinary course of their business were also resumed. Further investigations were conducted and the statements of various persons were recorded. Based upon the scrutiny of various documents, year-wise sales of the manufactured goods effected by M/s Thermotech on the basis of invoices issued by them was arrived at. Inquiries were also conducted at the various dealers of the said appellants. It was also found that all the three units of Ms. Neera Khanna, i.e., M/s Thermotech, M/s Jass Kann International and M/s Flevel International located in Sector-III, Noida, Sector-IV, Noida and Naraina Industrial Area, Phase-I, New Delhi, were availing the benefit of SSI exemption. It was also found that the appellants were using the brand name of Thermoking in respect of various goods manufactured by them. Revenue entertained a view that in as much as the said brand name Thermoking was the brand name of the unit owned by Shri Pradeep Khann husband of Ms. Neera Khanna, the appellants were not entitled to the benefit of SSI Notification. The denial of small scale benefit was also on the ground that the clearances of all the four units including the unit of her husband are to be clubbed, in which case clearances exceed the eligibility criteria of R1.50 crore Rs.2 crores so as to debar the assessee from availing the exemption during the next financial year.
4. Based upon the above investigation, proceedings were initiated against the appellants by way of issuance of a show cause notice (SCN), dtd. 25.08.92 proposing clubbing of clearances of all the four units, raising demand of duty against the appellants on the said ground to the extent of Rs.83,60,821/-; proposing imposition of penalty upon them; and proposing imposition of penalty on Shri Pradeep Khanna under Rule 209A of Central Excise Rules. Notice also proposed confiscation of the various goods seized either in transit or from the said factory of appellants.
5. In their defence pleadings, the appellants submitted that all the three units owned by Ms. Neera Khanna are independent units having independent existence. In fact it was pleaded that M/s Jass Kann International stopped manufacturing activities in the year 1989 itself. The appellants started manufacturing washing machines, room air coolers, cooler trolleys from 1990 onwards and the goods were being cleared by them after availing the benefit of Notification No.175/86. The appellants contended that earlier similar charges of clubbing of clearances among all the manufacturing units were initiated against M/s Jass Kann International proposing the denial of benefit of Notification No.175/86 and such proceedings against M/s Jass Kann International were adjudicated by the Commissioner who vide his Order-in-Original No.CCE/ADJ/JDS/02, dtd. 30.09.02 held that the clearances of M/s Thermoking which is a proprietary unit of Shri Pradeep Khanna cannot be clubbed with the other three units owned by Ms. Neera Khanna. Accordingly, Commissioner extended the benefit of Notification No.175/86 to M/s Jass Kann International. It was their contention that the entire facts were in the knowledge of the Revenue and as such it was not open to the Revenue to initiate the same very proceedings against the same appellants, on the same very ground.
6. They also contended that the clearances effected by M/s Jass Kann International have been held to be falling within the SSI Notification, and the issue on the clubbing stands decided by the Commissioner, the benefit of Notification cannot be denied to the present appellants. They also contended that while proposing the clubbing of clearances of M/s Jass Kann International, M/s Flevel International and M/s Thermotech to the clearance of the appellants, no SCN stands issued to the other units, whose clearances are proposed to be clubbed. In as much as the notice has not been issued to the other units, their clearances cannot be clubbed with the clearances of the appellants without putting the other parties to notice. For the above proposition, they relied upon various decisions of the higher authorities. Ld.Advocate further clarified that if the clearances of M/s.Thermoking are taken out of consideration. The cumulative clearances of all the remaining units would meet the eligibility crieteria.
7. Otherwise also, the appellants submitted that all the units are separate legal entities, registered separately under various statutory laws like sales tax, income-tax, etc. The same are having complete machinery to manufacture the goods and are registered separately with the Central Excise department. In fact all the units are located at different places, two being at Noida and one at Delhi. Similarly M/s Thermoking is a separate entity owned by husband of Ms. Neera Khanna and the clearances of the same cannot be held to be the clearances of the other three firms. They also contended that there is no financial flow back between the three units and as such no mutuality of interest was there. Reference in this regard is made to para 38.3 of the Commissioner’s order. The contention of the ld. Advocate appearing for the appellants is that merely because Shri Pradeep Khanna was visiting the units owned by his wife, by itself cannot be taken as a factor to arrive at a finding of mutuality of interest between the three units. As regards, the use of brand name of Thermoking, it is submitted that even if the Revenue’s contentions are accepted to be correct, such use of brand name of Thermoking will not disentitle them from the benefit of SSI Notification No.175/86 in as much as during the relevant period, Thermoking was itself entitled to the benefit of Notification. He further submits that the cross examination of the deponent of the various statements has revealed that Thermotech was not having sufficient installation of power required for manufacture of air conditioners as such the Revenue’s contention that the appellants were also manufacturing air conditioners, cannot be accepted. As regards the manufacturing and clearances of washing machines (609 in no.), confirming demand of Rs.3,18,946/-, ld. Advocate draws our attention to the cross examination of Shri Rajesh Kumar laying down that the all the goods were cleared on proper invoices. As regards the allegation of manufacture of air conditioners, he submits that Revenue has proceeded on the ground that the description given by them in their invoices relates to the air conditioners. He clarifies that they have cleared room air coolers and the description RAC in their invoices relates to room air coolers whereas Commissioner has held that the same are room air conditioners. By referring to the value as reflected in the invoices, he submits that it is not possible to clear air conditioners at such a low value as reflected in the invoices. Further, there is no evidence of any customer who has received air conditioners from the appellants.
8. As against the above argument, ld. AR Shri R.K.Varma appearing for the Revenue submits that admittedly M/s Thermoking which is a proprietorship concern of Ms. Neera Khanna was using the brand name of Thermoking which admittedly belongs to M/s Thermotech, a proprietor unit of Shri Pradeep Khanna husband of Ms. Neera Khanna. The above fact is not disputed by the appellants and the various evidences discussed by the adjudicating authority reveal that though M/s Thermotech is proprietorship concern of Ms. Neera Khanna, Shri Pradeep Khanna was actively involved right from the time of allotment of plot in the name of Ms. Neera Khanna and in the management, production, sale and procurement of raw material. The activities regarding procurement of compressors for all the units were centralized in the hands of Shri Pradeep Khanna. He submits that various statements refer to only one fact that Shri Pradeep Khanna was found to be controlling the sales of these firms. He submits that as discussed by the Commissioner, it is not the single factor of registration of units under various tax laws or mutuality of interest which can be taken as sole criteria to decide the clubbing issue, but the overall facts have to be examined in each and every case.9. In a clubbing dispute of two units, one is owned by husband and another by wife, the Tribunal upheld department’s proposition of clubbing of clearance despite units having independent registration under the Sales Tax and Income Tax law (Refer Quality Steel Industries vs. CCE 1989(43)ELT775 which was upheld by the Supreme Court vide 1999(107)ELTA61. In United Chemicals vs. CCE ‘ 1998(103)ELT551(CEGAT), the clubbing of the clearance was upheld when the control of management, production and sales of the 3 units was fond in the hands of one person only, though there were no evidences of financial flow back. In this respect the observation of Hon’ble Tribunal in CCE vs. Element Industries 2000(120)ELT1989CEGAT) would be most appropriate. In this case, the Hon’ble Tribunal observed that facts in totality have to be seen. While financial flow back could be one important consideration, it could not be made sole basis for arriving at the decision this way or that way. With reference to isolated facts, the units may appear to be distinct and separate, but when the facts and circumstances are seen in totality, seemingly distinct and separate units may turn out to be one common manufacturing entity. Thus the guiding factor has to be a careful consideration of all the facts and circumstances of the individual case.
10. Ld. AR further submits that the fact that three units were owned by Ms. Neera Khanna and the forth was owned by Shri Pradeep Khanna husband of Ms. Neera Khanna and the fact that all were manufacturing more or less same type of goods, would be a relevant criteria to club the clearances of all the four units. The special relationship cannot be ignored for the purpose of Notification No.175/86. In as much as the total clearances from all the four units have exceeded the eligibility criteria of Rs.1.50 crores or Rs. 2 crores, the benefit of Notification is required to be denied.
11. As regards the allegation of clearance of air conditioners, he submits that the appellants contention that the same were manufactured on job work basis, cannot be accepted. The job work bills of some of job workers produced by the appellants, in support of their contention reveal that all of them have been prepared by one person in one sitting and there is no variation in the style and tenure of writing. Even at the time of investigation, neither Shri Pradeep Khanna nor Ms. Neera Khanna had ever mentioned about these documents. Further in the sale bills issued by M/s Thermoking to M/s Thermotech, there is a mention of words ‘against firm C whereas no such form stands produced by the appellants. He further submits that M/s Thermotech got itself registration with the sales tax department of Noida. In the list of finished goods attached to the registration certificate, they have provided 13 items which include room air conditioners, split air conditioners and air conditioning appliances. They also got themselves registered with the U.P. Directorate of Industries for manufacturing/processing of water coolers, heat convectors and washing machines as such he submits that the appellants plea that they were not fully equipped to manufacture air conditioners cannot be accepted. He further submits that the appellants stand that RAC stands for room air coolers and not air conditioners, cannot be accepted in as much as the term desert type coolers has been used for coolers whereas the invoices which were raised for air conditioners described the goods as RAC 1.5 tonne grill fil. The price range of the goods also reveal that the goods were air conditioners and not room air coolers. Similarly, the appellants contention that during the material period, they were trading in goods similar to one being manufactured by them cannot be accepted in as much as for trading in the same type of goods, permission in terms of Rule 51A is required to be taken.
12. As regards, the extended period plea, he submits that since the issue involved is illegal availment of Notification No.175/86, the same amounts to malafide on the part of the appellants, thus justifying invocation of longer period.
13. We have considered the submissions made by both the sides.
14. The demand stands confirmed against M/s Thermotech by clubbing the clearances of all the units. In as much as the total clearances from all the four units exceeded the eligibility criteria of Rs.1.5 crores or Rs.2 crores, the benefit of Notification No.175/86 stands denied to them during the next financial year. We find that admittedly M/s Jass Kann International stopped its manufacturing activities w.e.f. December, 1989 and M/s Thermotech came into existence in the year 1990. Further M/s Thermoking which is a unit of Shri Pradeep Khanna was working continuously w.e.f. 1977 onwards. The Revenue proposing to club the clearances of M/s Thermoking which is a unit of husband of proprietor Ms. Neera Khanna of M/s Thermotech. The said clubbing has been done on the ground that Shri Pradeep Khanna was involved in the functioning of two units of Ms. Neera Khanna. The Commissioner in his impugned order has observed that Shri Pradeep Khanna was assisting other unit in procuring raw materials as also sale of the final products of these units. The profit sharing from all the units remained confined to husband and wife and nobody else. As such, he has observed that there remain no room for doubt that the entire operation of the four units has to be seen as a special relationship which cannot be ignored for the purpose of benefit of Notification No.175/86.
15. We find no merits in the above reasoning of the adjudicating authority. Admittedly he has nowhere referred to any mutuality of interest between the units of husband and units owned by wife. He has observed that lack of mutuality of interest or financial flow back can be only one of the important consideration but cannot be made sole basis for arriving at the decision. Merely because the two owners of the units were husband and wife and the profits earned by them came into same household, does not mean that clearances of all the units is required to be clubbed. We really fail to understand the above reasoning of the adjudicating authority. If the husband is helping his wife in running of any business activity and rendered assistance, the same cannot be made the basis for clubbing the clearances of all the units. For doing so, Revenue is expected to produce evidence to show that all the units were facad and were not complete units independently manufacturing the goods in question. If the reasoning adopted by Commissioner is accepted, the same would result in legal chaos in as much as the clearance of units being run by wifes, independent of their husband’s units would lead to clubbing issues, irrespective of the fact that finances of wife and husband are being separately managed by them.
16. Apart from above, we note that all the units were separately registered with income tax as also sales tax authorities. Their locations of business were at separate places. In fact one of the unit was located in Delhi itself. There was no financial inter-twining and all the units were working with their own independent financial resources. There is no evidence on record to show that there was any mutuality of interest between the units except for the fact that Shri Pradeep Khanna was sometimes looking after the affairs of the units belonging to his wife which, as already discussed by us, cannot be made the basis for clubbing the clearances of the units owned by husband and wife.
17. We further note that identical case was made out against M/s Jass Kann International proposing the clubbing of clearances of M/s Thermoking with their clearances. Such charges were dropped by Commissioner vide his order dtd. 30.09.02, who held that clearances of M/s Thermoking under the proprietorship of Shri Pradeep Khanna cannot be clubbed with the clearances of M/s Jass Kann, a unit owned by his wife. In such a scenario to restart the identical proceedings in respect of another unit of Ms. Neera Khanna, i.e., M/s Thermotech, proposing clubbing the clearance of M/s Thermoking cannot be appreciated.
18. We further note that the appellants have taken a strong objection to the fact that while show cause notice (SCN) proposed clubbing of clearances of M/s Thermoking, M/s Flevel International and M/s Jass Kann International with the clearances of M/s Thermotech, no SCN stands issued to the other units. The said objection of the appellants stands not accepted by the Commissioner by observing that as all the units are owned either by wife of Shri Pradeep Khanna or by Ms. Neera Khanna, issuancecof separate notice to the other units was not required.
We find no merits in the above arguments. Admittedly all the units were working separately and the Revenue is proposing the clubbing of clearances with the clearances of M/s Thermotech. The minimum legal requirement is to put the other units on notice. Mere fact that the said other units were under the proprietorship of Ms. Neera Khanna or under the ownership of husband of Ms. Neera Khanna cannot absolve the Revenue from putting the other units to notice. It is well settled law that in case of clubbing of clearances of various units, the notices are required to be issued to all, in as much as the clearances of other units is sought to be clubbed with clearances of a particular unit. To club the clearances of other units with M/s. Thermotech without even putting the other units on notice and without even letting them know about the same is against the settled principle of law.
19. In view of our foregoing discussion, we hold that the findings arrived at by the Commissioner holding that the clearance figures of all the units is required to be clubbed and in as much as the same exceeds eligibility limit stipulated in Notification No.175/86, M/s Thermotech is not eligible to exemption in terms of the said units, are unsustainable. We accordingly set aside the confirmation of demand of duty of Rs.83,60,821/- confirmed against M/s Thermotech along with penalty of identical amount imposed upon them.
20. As regards the confiscation of five air conditioners (out of which three seized from the vehicle and two seized from premises), we find that the appellants has taken a categorical stand that they were not engaged in the manufacture of air conditioners but were either doing the trading in the same or were getting the same manufactured from the job worker out of the compressors purchased by them. It has come on record that the appellants power installation was not sufficient to manufacture the air conditioners. This has come on record during the cross examination of the employees of M/s Thermotech. As regards the description of the goods in the invoices, the appellants have taken a stand that the same were in respect of room air coolers and not air conditioners. The confirmation of demand of Rs.3,18,946/- on the said ground is not sustainable in as much as Shri Rajesh Kumar during the course of his cross examination has very clearly deposed that all the goods manufactured by the appellants were being cleared on proper invoices and they do not have sufficient installation of power required for manufacture of air conditioners. The Revenue has not placed any evidence on record to reflect upon the fact that RAC referred to room air conditioners and not room air coolers. We note that even the value reflected in the invoices is not corresponding to the value of the air conditioners. We note that the Revenue has not approached any of the buyers to substantiate the allegation that RAC referred to room air conditioners. In the absence of any evidence to reflect upon the said issue, the demand cannot be confirmed on the basis of doubts. Similarly the job work challans produced by the appellants cannot be dismissed lightly on the basis of mere visual examination that all of them stands made by one person. Help of no writing expert has been taken by the Revenue to establish the above fact. As such, we note that confiscation of air conditioners is not called for. We accordingly set aside the same.
21. Similarly confiscation of the excisable goods, semi finished goods and the raw material seized from the factory premises of the appellants M/s Thermotech with an option to them to redeem the same on payment redemption fine of Rs.1 lakh, is not called for in as much as the goods were still in the factory premises and were admittedly either in the semi finished stage or still raw material. Even where the goods were finally packed, i.e., room air conditioners, we have already accepted the appellants contention that the same were not manufactured by them and were either being traded or got manufactured from other workers. We accordingly set aside the confiscation of the same.22. Further the imposition of penalty on Shri Pradeep Khanna under Rule 209A of Central Excise Rules is required to be set aside as we have already set aside the duty demand and imposition of penalty in respect of M/s Thermotech. His appeal is accordingly allowed. Appeal No.4903 of 2004
Vide Order-in-Original No.ADJ/1/3/2004, dtd. 14.01.04 in appeal No.4903 of 2004, Commissioner has held as under:-
(i) Confirmed central excise duty of Rs.61,98,465/- against M/s Flevel International under Rule 9(2) of Central Excise Rules read with Section 11 of the Act on the findings of clandestine removal;
(ii) Confirmed duty of Rs.12,80,542.50 by denying the benefit of Notification No.75/87-CE, dtd. 01.03.87;
(iii) Confirmed central excise duty of Rs.3,16,800/- on 24 air conditioners alleged cleared by the appellants on 27.02.92 without payment duty under Rule 9(2) of Central Excise Rules read with section 11A of the Act;
(iv) Imposed penalty of Rs.77,95,808/- on M/s Flevel International under Rule 173Q of Central Excise Rules; and
(v) Confiscated seized 60 air conditioners, 4 fans and 4 deep freezers with an redemption fine of Rs.1 lakh and on payment of central excise duty.
23. The said appellant M/s Flevel International is engaged in the manufacture of air conditioners, washing machine, geysers, heat convectors. Their factory was visited by the officers on 28.2.92 who found 36 numbers of air conditioners totally valued at Rs.7,92,000/- lying in the factory. In addition 281 compressors valued at Rs.47,77,000/- and four fan motors and four deep freezers were found in the factory. Inasmuch as the officers entertained a view that such 36 numbers of air conditioners have not been entered by the appellant in their RG-1 register, they were seized alongwith seizure of other goods found in the factory premises. Subsequently the residential premises of Shri Pradeep Khanna, Proprietor, M/s Thermoking and husband of of Ms. Neera Khanna, proprietor of M/s Flevel International were put to search and 24 numbers of air conditioners were seized from the said premises on the reasonable belief that the same were manufactured by the appellant and cleared clandestinely. However, it is seen that on subsequent production of records, 281 compressors detained on 28.2.92 were released by the department unconditionally.
24. The statement of Shri Pradeep Khanna was recorded on 28.2.92 wherein he deposed that 24 air conditioners recovered from the residential premises were manufactured by the appellant and cleared by them without payment of duty. However, the said statement was subsequently retracted and it was deposed that 24 air conditioners recovered from the residential premises were in fact cleared from the factory of Shri Pradeep Khanna who was also engaged in the manufacture of air conditioners. It was disclosed that the said manufacturing were got done through a contractor, Shri Devender Oberoi, proprietor of M/s.Nikhil Refregeration. A copy of the contract entered into by M/s.Nikhil Refregeration was also put on record.
25. On the above basis, show cause notice dt.26.8.92 was issued proposing confiscation of the 36 air conditioners valued at Rs.7,92,000/-, 4 fan motors valued at Rs.1600/- and 4 deep freezers valued at Rs.41,500/- on the ground that the same were not entered in the RG-1 register. 24 air conditioners recovered from the residential premises were also proposed to be confiscated alongwith confirmation of duty of Rs.3,16,800/-. The notice also proposed confirmation of duty of Rs.12,80,542.50 by denying the benefit of Notification No.75/87 on the ground that on clubbing the clearances of all the three units under the proprietorship of Smt.Neera Khanna, the same exceeded the eligibility criteria of the said notification, the demand of Rs.58,44,825/- was proposed to be confirmed for the period 1988-99 to 1989-90 on the allegation of clandestine removal of 606 air conditioners. The said notice culminated into an order passed by the Commissioner, confirming the demands, imposing penalties and confiscated seized goods as detained above.
26. Dealing with confiscation of 36 air conditioners, 4 deep freezers and 4 fan motors, we find that the same stand confiscated on the ground of their non entry in the RG-1 register. The appellant had taken a stand that the visit of the officers was on 28.2.92, and it was a budget day. All the records were taken by their employees to Range office for filing budget declaration. The said budget day declaration included 36 numbers of air conditioners lying inside the factory. The show cause notice in fact does not dispute that such air conditioners were duly included in the budget day declaration. The RG-1 registers were produced subsequently, which revealed that the entry of 36 numbers of air conditioners was available in the same.
27. The above stand does not stand accepted by the adjudicating authority on the ground that the appellant could not produce RG-1 registers at the time of visit of the officers. The fact that such registers were sent to their Range office for filing budget day declaration was not revealed by the appellant in their various statements recoded on the spot. The report of Shri Ram Singh, sector in charge of the appellant unit informed that pre budget day declaration of Flevel was filed by Shri Dhram Veer, a part time employee and had no excise register was produced by him alongwith the said declaration.
28. We find that admittedly 28.2.92 was a budget day and Central Excise assessee were required to file budge day declaration. The said declaration was indeed filed by the appellants. The appellant’s stand that the RG-1 registers were taken to Range office cannot be doubted on the sole ground that the report of Ram Singh, range in charge is to the effect that the said registers were not produced before him. It may be possible that the registers were taken alongwith a budget declaration on the belief that the same are also required to be produced before the Range office. The same might not have been produced before him. However, the appellants have produced subsequently such RG-1 registers wherein the entry of 36 numbers of air conditioners was there. As such, by extending the benefit of doubt to the appellants, we set aside confiscation of the said 36 air conditioners. However, the duty on the same if not been paid the appellants at the time of clearance, they are directed to enter the said air conditioners in RG-1 registers on the release and clear the same on payment of duty, if not already paid.
29. As regards, 4 fan motors and 4 deep freezers, the appellants have taken a stand that the basement of the appellants factory was temporarily taken by M/s.Thermoking on rent and the said goods were manufactured on behalf of M/s.Thermoking, by a contractor. It is a fact that at the time of visit by the officers, a contractor, Devender Oberoi was found engaged in fabrication of deep freezers and the statement recorded on the spot revealed that he was working for M/s.Thermoking. The Commissioner has observed that no permission to shift factory premises temporarily to the basement of the factory of M/s.Flevel International was taken by M/s.Thermoking. We are of the view that the same may be reason for imposition of penalty for non obtaining permission but cannot lead to conclusion that said the deep freezers and fan motors were manufactured by the appellants. As such, we set aside the confiscation of the same.
30. As regards confiscation of the 24 air conditioners seized from the residential premises of Shri Pradeep Khanna husband of Ms. Neera Khanna it is seen that initially Shri Pradeep Khanna in his statement recorded on 28.2.92 deposed that the said air conditioners were cleared from the factory of M/s.Flevel International without cover of proper gate pass. However, the said statement was subsequently retracted by him on 8.3.92 and he claimed that the said air conditioners found from his residential premises were in fact manufactured by his factory Thermoking who got it manufactured from Nikhil Refrigeration. In his subsequent reply dt.4.2.02, it was submitted that the compressors used in the air conditioners were purchased by Sriram Refrigeration and M/s.Kirloskar Brothers and the same were used in air conditioners manufactured by Nikhil Refrigeration.
31. The Commissioner has observed that from where the said air conditioners had been recovered were not manufacturing place but the same were recovered from the basement of residential premises of husband and wife. He has chosen to rely on initial statement of Shri Pradeep Khanna on the ground that usually normal person tells the facts truthfully in his first statement. As such, he has observed that the statement of Shri Pradeep Khanna has a higher evidentiary value than the subsequent statement made by him and the appellants stand that incorrect/false statement was made under the pressure and mental tension does not stand accepted by the Commissioner.
32. We find apart from the retracted statement of Shri Pradeep Khanna, there is no other evidence on records to support the Revenues charge that the air conditioners recovered from the residential premises were manufactured by the appellant and cleared clandestinely by them. Admittedly Shri Pradeep Khanna has got nothing to do with the factory of Flevel International and is not related to said manufacturing unit except for the fact that he is the husband of proprietor of M/s.Flevel International.
33. There is no statement of Smt. Neera Khana, proprietor of the unit, and other employees of the units indicating that the said air conditioners were manufactured by their unit. Subsequently, Shri Pradeep Khanna has claimed that the said air conditioners were manufactured by Theremoking through one Shri Devender Oberoi, a contracator. He has produced a copy of the contract entered into with Shri Devender Oberoi, proprietor of Nikhil Refrigeration. The above evidence of the appellant stands rejected by the adjudicating authority on the ground that the address given in the agreement does not belong to Shri Devender Oberoi as reported by the enquiry conducted by the department. The appellants contention is that they are not concerned with the correctness of the address given by Shri Devender Oberoi and the agreement executed between Thermoking and Nikhil Refrigeration is sufficient to reveal the fact that the air conditioners were got manufactured by ThermoKing through Nikhil Refrigeration.
34. We find that the allegation in respect of 24 air conditioners is clandestine removal of the same by the appellants. Apart from the statement of Shri Pradeep Khanna, there is no other evidence reflected upon such activity. The said statement of Shri Pradeep Khanna stands retracted subsequently and alternative stand taken by them is supported by the agreement between Thermoking and Nikhil Referigeration. His subsequent statement also stands corroborated by the fact that Shri Devender Oberoi was found in the factory on the date of visit of the officers. The Revenues stand that Devender Oberoi, proprietor of M/s.Nikhil Referigeration is non existent party cannot be accepted inasmuch as his statement was recorded by the Revenue wherein he admitted that he was fabricating goods for M/s.Thermoking on contract basis. There being no other evidence or record except the statement of Shri Pradeep Khanna, reflecting upon the procurement of raw material, manufacture of the ACs and their removal from the appellants factory, the finding arrived at by Commissioner cannot be sustained. As such, we are of the view there is no sufficient tenable and positive evidence reflected upon the clandestine manufacture and clearance of 24 air conditioners from the appellants factory. Accordingly, confiscation of the same and demand of duty in respect of the same is set aside.
35. The demand of Rs.12,80,542.50 stands confirmed against the appellant on the ground that when clearances of all the 3 units belonging to Mrs.Neera Khanna are clubbed, they exceed the eligibility criteria of Notification No.75/87-CE dt.1.3.87.
36. The appellants contention is that the value of the geysers, compressors and washing machines seized is not to be included in the total clearance value while examining the benefit of Notification No.75/87. On the other hand, it is the contention of the ld. SDR that while computing the aggregate value of clearances in terms of the said Notification, clearances of all excisable goods have to be taken into consideration.
37. We find that para 2 of the Notification No.75/87 reads as follows :-
“The aggregate value of the clearances of all excisable goods for home consumption by a manufacturer from one or more factories or from a factory by one or more manufacture, does not exceed Rs. 50 lakhs in the preceding year.
38. As is clear from the above, it is the aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories have to be taken into consideration. In as much as all the three units were owned by one proprietor Ms. Neera Khanna, the aggregate value of all the units which admittedly exceeds Rs.50 lakhs in the preceding financial year are required to be taken into consideration. We also note that it is the availability of Notification to M/s Flavel International which is being examined for the purpose of Notification No.75/87 and as such the fact that no notices were given to the other two units cannot act as a deterrent for examining the availability of exemption Notification to the present appellants.Accordingly, we note that the appellants have taken a stand that the clearances of the seized goods have also been taken into consideration while computing the clearances of Rs.50 lakhs. Otherwise also, we find that some of the demands stands confirmed against the appellants in the findings of the clandestine manufacture stands dropped by us. It is not clear whether such clearances have been taken into consideration or not? Accordingly we direct the Commissioner to examine the said aspect and arrive at a total figure of clearances of Ms. Neera Khanna for the purposes of extending the benefit of Notification. Needless to say that the appellants would be given an opportunity to putforth their case.
39. We further note that the demand of Rs.58,44,825/- stands confirmed against the appellant on the finding of clandestine manufacture of 606 ACs and clearance of the same without payment of duty during the period 1988-89 and 1989-90. The said finding are based upon the entries made in the ledger account maintained by the appellant. It was alleged that the payments as reflected in the ledger were on account of ACs manufactured and cleared by the appellant and the appellants claim of trading in compressors cannot be accepted. It was also alleged that M/s. Thermoking who was procuring compressors under chapter X procedure without payment of duty, was diverting the same to Flevel International, instead of utilization of the same in their factory for further manufacture of ACs. Further certain payments have been made by person and credited in the books of accounts but no bill number being mentioned against the said receipts and debit column of ledger are kept blank. It was further alleged that the appellants had raised bills for the materials sold and the amounts stands debited to various parties but there are no entries against such debit and amounts had been shown at the end of year 1988-89.
40. It is seen that the entire demand on account of allegation of clandestine removal stands made on the basis of entries in the ledger account. Inasmuch as there are no corresponding entries in the central excise records, the Revenue has held that the said difference is on account of clandestine removal of the ACs. The appellants have categorically taken a stand that they have sold compressors and not ACs as alleged by the department. We find that the price range of the goods as reflected in the ledger account is the price range of compressors. But the adjudicating authority has held that the said price as reflected in the ledger account has been intentionally kept close to the values compressors. He also relied upon the statement of one Shri Pradeep Bhargava recorded on 30.4.92 that compressors were being received by Thermomking under chapter X procedure from Shri Ram Refrigeration and Kirloskara Brothers but he had never seen manufacturing activities of water coolers in which compressors were to be used in Thermokings premises. In his subsequent statement which was recorded on 1.5.92, he has deposed that such compressors obtained by Thermoking were diverted to Flevel International who manufactured air conditioners out of the same. However, the said statements were retracted by Shri Bhargava subsequently. The appellants have contented that the Shri Bhargava had grudge against Thermoking as he was convicted for an embezzlement of Rs.50,000/-. Inasmuch as he did not turn up for cross examination. The appellants contention is that his statement has to be excluded.
41. The Commissioner has strongly relied upon the statement of Shri Bhargava. However, we find that apart from the said statement as also the statement of representative of Kirlosakar Brothers that the compressors were being sold to Thermoking, there is no direct evidence of manufacture of such huge quantity of ACs in the appellant’s factory. No doubt for trading in the identical type of goods permission under Rule 51A of Central Excise Rules is required. However, the fact of non obtaining permission cannot lead to conclusion that the goods traded in the market were not compressors but the ACs which were manufactured by the appellants and cleared clandestinely.
42. It is also seen that the appellants had given a list of their buyers to whom the compressors have been sold alongwith value. The said value relate to the value of compressors and not that of ACs. The Adjudicating authority has not given any credence to such list provided by the appellants by simply observing that these bills were in the names of Sir Names of the persons whose very existence is, ex facie, doubtful. He has accordingly observed that he is not inclined to give any credence to them or the arguments advanced on the basis of same. We do not find favour in the above contention. Admittedly, the Commissioner has rejected the buyers list and stand taken by the appellants in the absence of any direct evidence on records to indicate that such buyer’s did not exist. Merely because the details of buyers address is not given and the bills are in the names and sir names of the persons cannot held to be doubtful and lead to the inevitable conclusion of the clandestine manufacture and clearance of air conditioners.
43. We find that the allegations against the appellants are of clandestine manufacture and removal on the ground that some entries which according to the appellant belonged to the sale of compressors have been held to be clearance of ACs. We find that there is virtually no evidence on records establishing that there was clandestine manufacture and clearance. There is no evidence of procuring excess raw materials required for production of such huge number of ACs. The statement of any employee has not been recorded. There is no incriminating statement of proprietor of the units or any of the authorized representatives. No buyers of ACs stands identified by the Revenue. It is well settled law in case of clandestine removal; the department is required to produce positive evidence to establish the same. We find that the entire case in the present matter is made out on the basis of doubt and not on evidence on records. The demands cannot be made on presumption and is required to be made on the actual evidence available on record.
44. At this stage, we may refer to the recent decision Hon’ble High Court of Gujarat in the case of Nissan Thermoware Pvt. 2011 (266) ELT 45 (Guj.) wherein it was held in para 16 as under:-
“In the absence of any tangible evidence which would indicate that there was clandestine manufacture and clearance of the goods from the factory premises of M/s VTPL, in the peculiar facts and circumstances of this case, we hold that the impugned order which confirms the demand on the appellant M/s VTPL and imposes penalty on them is not sustainable and is liable to be set aside and we do so.”
In a recent decision of the Tribunal in the case Kuber Gutkha, it would be relevant to reproduce some paragraphs from the order dictated by third member:-
“25. I find that the Hon’ble President has correctly relied on the judgment of Hon’ble Supreme Court in the matter Nagubai Ammal and Others vs B. Shama Rao, AIR 1956 SC 593 wherein it was held that- “an admission is not conclusive as to the truth of the matters stated therein. It is only a piece of evidence, the weight to be attached to which matters depends on the circumstances under which it is made. I am unable to find these retracted oral testimonies as credible piece of evidence to sustain the charge against the Appellant Company.26. It would be necessary to analyze whether the evidences, other than the retracted oral evidences, are credible for being used as corroborative evidence. The Hon’ble Supreme Court in case of Sitaram Sao v. State of Jharkhand - (2007) 12 SCC 630, pithily encapsulated the idea of “corroborative” evidence, in the following words :
“34. The Word ‘corroboration’ means not mere evidence tending to confirm other evidence. In DPP v. Hester - (1972) 3 All ER 10.16, Lord Morris said:
“The purpose of corroboration is not to give validity or credence to evidence which is deficient or suspect or incredible but only to confirm and support that which as evidence is sufficient and satisfactory and credible; and corroborative evidence will only fill its role if it itself is completely credible.......”
There can be, therefore, no “corroboration” of evidence, which is itself unworthy of credence.
29. In the entire records of proceedings, there is no evidence to indicate that there was clandestine manufacturing. There is no independent tangible evidence on record of any clandestine purchases or receipt of the raw materials required for the manufacturing of the alleged quantity of finished goods for its clandestine removal from the factory. In the entire notice and the order there is no satisfactory and reliable independent evidence as regards the unaccounted manufacture and or receipt of the huge quantities of raw materials. The quantities of the alleged bags dispatched from the factory would require some transportation arrangement for delivery from the factory. However, any reliable evidence about any vehicle coming to or going out of the factory without proper entries is not forthcoming. There is also no cogent evidence about any freight payment for any such movement.
30. I do not find cogent evidence of disproportionate and unaccounted receipt and consumption of the basic raw materials and packing material, required for manufacturing alleged quantity of unaccounted finished goods. I do not find tangible proof of unauthorized payment for procuring such unaccounted raw material and packing material. I do not find cogent evidence of disproportionate power consumption, capacity utilization and labour employed, or any cogent evidence of clandestine manufacture of unaccounted quantity alleged as clandestinely removed. I find that unaccounted production in the factory of the appellant company has not been established.
31. My above views are fortified by a recent case in the case of Viswa Traders Pvt.Ltd. and others Vs. CCE Vadodara being Final Order No.A/1846-1851/WZB/AHD/2011, dt.01.11.2011, a similar issue of clandestine removal was decided by co-ordinate Bench of Tribunal in Ahmedabad, wherein it is held that unless clandestine manufacturing is brought on record, there cannot be any allegation of clandestine clearances, un-corroborated with evidences.
45. From the above discussion, we find that there is virtually no evidence available on records indicating clandestine manufacture of 606 ACs. As such, we find no reason to confirm the demand against the appellants on the said ground. In the absence of confirmation of demand, no penalty is liable to be imposed.
46. In view of the foregoing discussion, the appeals of M/s Thermotech and Shri Pradeep Khanna are allowed. The appeal of M/s Flavel International is partially allowed and partially remanded as indicated in the orders.