EPC INTERNATIONAL PVT. LTD. Vs. UNION OF INDIA

JUDGEMENT

(1.) This intra-Court appeal filed by writ petitioner is directed against the order dtd. 9/3/2017 in WP No. 5757 (W) of 2017. The said writ petition was filed challenging an order-in-original dtd. 29/11/2016 passed by the Commissioner, Central Excise and Service Tax, Siliguri Commissionerate, the second respondent in this appeal. The facts leading to the filing of the writ petition could be summarized as follows.

(2.) The second respondent issued show cause-cum-demand notice dtd. 11/3/2016 alleging that the appellant has contravened the provisions of Ss. 2(f) and 3 of the Central Excise Act, 1944 (the Act) read with Rules 4, 6, 8, 10 and 12 of the Central Excise Rules, 2002 (the Rules) inasmuch as they have clandestinely manufactured and cleared "Special Boiling Point Spirit" classifiable under Central Excise Tariff Sub-heading 2710.1213 commercially known as 'EPC solvent' during the period from 2011-12 to 2015-16 (up to October, 2015) without payment of Central Excise Duty as leviable thereon amounting to Rs.24,87,18,605.00 including cess. Further, it was stated that the aforementioned goods have been cleared without payment of Central Excise Duty hence liable for confiscation under the provisions of Rule 25 of the Rules. It was further stated that the appellants have suppressed the fact of clandestine manufacture and clearance by way of suppression and willful mis-statement in their ER Returns submitted by them to the Central Excise Department every month and by way of manipulation in the sale invoices, the amount of Central Excise Duty so evaded is recoverable in terms of Sec. 11A(4) of the Act by invoking the extended period of 5 years. Therefore, the appellants are liable to pay interest in terms of Sec. 11AA read with Sec. 11AC of the Act. It was alleged in the notice that intelligence was received with the effect that the appellants were procuring "condensate" and were manufacturing "industrial solvent" from such product but they failed to pay Excise Duty against clearances of such manufactured "Industrial Solvent". Acting on such intelligence, the officers of Head Quarter Anti-Evasion Unit, Siliguri Central Excise Commissionerate visited the factory premises on 12/6/2015. After briefly stating about the manufacturing process as culled out during the inspection, during which the officers appear to have examined the documents available in the factory premises and stated that the appellants were submitting their returns showing no production and clearance of finished goods therein. After mentioning about the various registrations, permissions and licenses obtained by the appellants it was stated that the appellants themselves declared their premises as a factory and the activities therein was a manufacturing process but they failed to pay Central Excise Duty by suppressing the fact of production in their monthly returns and thereby, violated Rule 4 of the Rules and also violated Rule 6 as they had mis-classified their finished goods and had not assessed liability of duty on the finished goods correctly, violated Rule 8 as they had not paid duty, violated Rule 10 as they had not shown it in their daily stock account the amount payable and particulars regarding the amount of duty actually paid in respect of the goods cleared from the factory premises and violated Rule 12 inasmuch as they had not disclosed removal of those goods in their monthly returns. Statement of the authorized signatory of the appellants and their managers and employees were recorded. There was a reference to a chemical test report dtd. 13/1/2016 stating that though in the reports no classification of the product has been made but there were certain observations made in the report which ultimately led to a prima facie conclusion that the appellant had violated the various provisions of the Act of the Rules and were called upon to show cause (a) as to why the goods which were manufactured and cleared clandestinely without payment of Central Excise Duty should not be confiscated under Rule 25 of the Rules, (b) as to why the goods which were held under seizure vide seizure memo dtd. 12/6/2015 should not be confiscated under Rule 25, (c) why Central Excise Duty along with cess should not be demanded and recovered under Sec. 11A (4) of the Act; (d) why applicable rate of interest should not be charged and recovered as per Sec. 11AA of the Act; (e) why penalty under Rule 25 of the Rules read with Sec. AC of the Act should not be imposed; (f) why extended period of 5 years as per provisions of Sec. 11A(4) should not be applicable in respect of the instant case as duty has been evaded by way of suppression and willful mis-statement in the returns and manipulation in the sale invoices; (g) why penalty should not be imposed on the Director, who was the second notice, as per provisions of Rule 26 of the Rules.

(3.) The appellants submitted their reply dtd. 8/7/2016 to the show cause notice stating that they had purchased the goods namely, "condensate" from M/s. Oil India Limited, Assam under proper Central Excise invoices without payment of duty by virtue of the classification of products under Tariff Sub-heading 2709 0000 at Nil rate. The said product was subjected to distillation process in their factory for refining the condensates by removing impurities without ad-mixture with any other materials and sold the distilled condensates to various customers under the cover of Central Excise invoices appropriately classified the distilled condensate under tariff sub-heading 2709 0000 at Nil rate of duty considering that "condensates" and "distilled condensates" are one and the same and having same composition. Further, it was stated that "distilled condensates" were sold in the name of "condensates (distilled)" or industrial solvent or EPC SOL-100, EPC SOL-200, EPC SOL-500 as per the requirement of the customers. It is further stated that the said "condensates" (distilled) etc. are used as industrial solvent in the paint industry, thinner, adhesives and dry cleaning purpose but it has no use as fuel or as motor spirit. Further, that the "condensates" are supplied by M/s. Oil India Limited under stringent conditions one of which is to furnish end use certificate though the District Magistrate, Jalpaiguri every month. The process of distillation was explained in the following terms :