MOON CHEMICALS Vs. CCE

JUDGEMENT

(1.) THE appellants are engaged in the manufacture of Sodium Silicate (SH 2839.10 of the First Schedule to the Central Excise Act). An officer of Central Excise, authorized for investigations, visited their factory and conducted verification of records, whereupon it was found that the appellants had cleared 353.735 MTs of Sodium Silicate valued at Rs. 15,91,808/ - to M/s. Vijay Detergent Products (P) Ltd., Palakkad without payment of duty under 36 invoices during the period 5.7.2002 to 7.9.2002. The officer collected the said invoices and another set of invoices from the appellants and also recorded their statements. A register showing the particulars of clearances effected under the said 36 invoices was also recovered from the appellants. Invoice books containing invoices for the period from 1.4.2001 to 12.9.2002 were also collected by the investigating officer. From the results of these investigations, it appeared to the department that the appellants had clandestinely cleared the above quantity of Sodium Silicate (Neutral Grade) during the aforesaid period by suppressing the production and removal of the goods, with intent to evade payment of duty attracting the proviso to Section 11A (1) of the Central Excise Act. Therefore, a show -cause notice dated 7.7.2003 was issued to the party demanding duty of Rs. 1,52,814/ - on the above quantity of goods, with interest thereon, and proposing penalties under Section 11AC of the Act and Rule 26 of the Central Excise Rules, 2002. The notice was contested by the party in their reply and subsequent written submissions. The adjudicating authority, after considering the submissions of the party, confirmed the demand of duty against them under the proviso to Section 11A (1) of the Act and imposed on them equal amount of penalty under Section 11AC of the Act. Separate penalties of Rs. 5000/ - each were imposed on the Factory Manager, Shri K. Ravi and the Managing Partner of the firm, Shri v. Babu under Rule 26 ibid. The order of adjudication was upheld by the Commissioner (Appeals). The present appeal is directed against the appellate Commissioner's order.

(2.) HEARD both sides. Ld.counsel for the appellants submitted that the so -called 'second set' of invoices were only invoices raised by the appellants, under a job work contract for collecting labour charges from M/s. Vijay Detergent Products (P) Ltd., Palakkad for conversion of Sodium Silicate (solid) to Sodium Silicate Solution. Counsel also produced copies of all these 36 invoices covering the period from 5.7.2002 to 6.9.2002. He submitted that the above fact had not been considered in the impugned order. It was pointed out that the price of Sodium Silicate at the relevant time was about Rs. 4,000 per MT and that the labour charge collected by the appellants was at the rate of Rs. 350/ - per MT as evidenced by the above commercial invoices. Was it department's case that the appellants were collecting Rs. 350/ - instead of Rs. 4000/ - from their customer to evade duty of excise @ 16%?, counsel posed. In this connection, he further submitted that it had not been alleged by the department that the appellants had received from their customer any amount over and above what was mentioned in the above invoices. The lower authorities had demanded duty from the appellants on the ground that they had not followed the procedure set out in Notification No. 214/86 -CE dt. 23.5.1986. Counsel submitted that, under the scheme envisaged under the above Notification, it was the liability of the raw material -supplier to pay duty of excise on the product of job work when removed from his factory for home consumption. Whether the raw material -supplier viz. M/s. Vijay Detergent Products (P) Ltd. discharged this liability was not ascertained by the department. In fact, no enquiry was conducted at their end. Ld. Counsel, further, submitted that it was for the raw material -supplier to comply with the condition laid down in para -2 (i) of the above Notification. If that condition was not complied with, the department was at liberty to demand duty from them rather than from the appellants. In this connection, he relied on the Tribunals decision in Aggarwal Rolling Mills v. CCE, New Delhi , wherein it was held that the duty liability, if any, which might arise in case of non -fulfillment of the condition prescribed in para -2 (i) of Notification No. 214/86 -ibid would lie on the raw material -supplier. Counsel also contended that the private register maintained by the Factory Manager was not to be given evidentiary value for the purpose of finding clandestine removal of goods. The statements of the Managing Partner and Factory Manager would not by themselves constitute conclusive evidence of clandestine removal of goods. In support of this argument, ld. counsel relied on Premium Packaging Pvt. Ltd. v. CCE Kanpur . On the other hand, ld.JDR relied on the decision in K. Manickam v. CCE Coimbatore in support of his argument that the finding of clandestine removal of goods was sustainable against the appellants on the strength of the above register coupled with the statements of the Managing Partner and the Factory Manager.

(3.) AFTER giving careful consideration to the submissions, we find that the lower appellate authority sustained the demand of duty on the ground that the condition laid down in para (2) of Notification No. 214/86 was not complied with by the appellants. The goods specified under the Notification were exempted from payment of duty of excise, where such goods were manufactured in a factory as a job work and utilized in relation to the manufacture of final products on which the duty of excise was leviable. The exempted goods and the final products were specified respectively in Col.1 and Col.2 of the Table annexed to the Notification. It is not in dispute that the raw material received by the appellants from M/s. Vijay Detergent Products (P) Ltd. and the goods returned to the latter after job work were specified in the Table annexed to the Notification. Again, it is not in dispute that the goods after job work were supplied to M/s. Vijay Detergent Products (P) Ltd. under cover of commercial invoices and that only the labour charges mentioned in such invoices were collected from them by the appellants. The Revenue has no case that the work undertaken by the appellants did not fall within the scope of the expression "job work" under Explanation -I to the Notification. Their only case is that the condition laid down in para (2) of the Notification was not complied with by the appellants. The appellants have claimed that the Sodium Silicate Solution returned after job work to their customer was removed by the latter on payment of duty for home consumption from their factory. This claim has not been contested by the Revenue. In the circumstances, the appellants were eligible for the benefit of the Notification subject to the surviving condition that the raw material -supplier gave an undertaking to the Asst. Commissioner or Deputy Commissioner of Central Excise having jurisdiction over the appellants' factory to the effect that the goods would be removed (by the raw material -supplier) on payment of duty for home consumption. The demand of duty is consequential to non -fulfillment of this condition. The appellants have resisted the demand of duty on the ground that it was for the raw material -supplier to comply with the said condition. It is their further case that the department could have recovered duty on the subject goods from M/s. Vijay Detergent Products (P) Ltd. on the ground of nonfulfillment of the said condition. We find that the Tribunal's decision in Aggarwal Rolling Mills (supra) supports this case of the appellants. No binding decision to the contrary was cited by the DR.