RAVI STEEL INDUSTRIES Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) This appeal filed by the assessee is against a demand of differential duty of Rs. 13,44,341/ - in respect of processed fabrics found to have been cleared by them on payment of duty on a value below the correct value during the period of dispute (April, 1995 to April 1998). The appellant has also challenged equal amount of a penalty imposed on them under Section 11AC of the Central Excise Act.

(2.) After examining the records and hearing both sides, we note that the appellant had been authorised by a large number of merchant -manufacturers to process grey fabrics on their behalf during the material period inasmuch as they (merchant -manufacturers) sought to be exempted from the licensing provisions of Rule 174 of the Central Excise Rules, 1944 under Notification No. 27/92 -C.E. -NT dated 09/10/1992. After investigations, the department found that the processed fabrics manufactured and cleared by the appellant to the merchant -manufacturers were grossly undervalued vis   -vis the actual procurement prices. Two of the 18 merchant -manufacturers, from whom evidence was gathered by the investigating officers of the department, stated under Section 14 of the Central Excise Act that they were asked by the appellant to lower the prices of the grey fabrics to enable the appellant to under -value the finished goods (processed fabrics). Other merchant -manufacturers did not implicate the appellant in this manner, though they also confessed to under -pricing of the raw material (grey fabric). On the basis of the statement given by the two merchant -manufacturers against the appellant, the department issued a show -cause notice beyond the normal period of limitation, to the appellant for recovery of the 'short -paid' duty by invoking the extended period of limitation under Section 11A(1) of the Act on the ground of suppression of facts. In their reply to the show -cause notice, the appellant denied the allegations and also requested for cross -examination of the two merchant -manufacturers who had given incriminating statements. In adjudication of the dispute, the original authority confirmed the demand of duly against the appellant and imposed on them equal amount of penalty. Penalties were also imposed on the merchant -manufacturers. Aggrieved, the appellant preferred an appeal to the Commissioner (Appeals), but without any success. Hence the present appeal of the assessee.

(3.) On the other hand, it is submitted by the learned SDR that, by not ensuring the correctness of value of the excisable goods manufactured by them and cleared to the merchant -manufacturers during the period of dispute, the appellant was committing fraud on the Revenue. In this connection, the learned SDR has referred to the scheme of Notification of 27/92 ibid. In answer to a query from the bench, it is submitted that the conduct of the appellant as detailed in the show -cause notice constitutes fraud, even though this was not specifically attributed to them. In the context of referring to the consequences of fraud, the learned SDR has also referred to Commissioner v. AAfloat Textiles (I) Pvt. Ltd. : 2009 (235) ELT 587 (SC) wherein their Lordships considered certain instances of 'fraud' in the context of dealing with a licence which was used by the party for duty -free import of gold and silver.