IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 34 of 2012 With TAX APPEAL No. 35 of 2012 For Approval and Signature:
HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
========================================================= SUNTREK ALUMINUM PVT LTD - Appellant(s) Versus COMMISSIONER OF CUSTOMS CENTRAL EXCISE & SERVICE TAX-RAJKOT - Opponent(s) ========================================================= Appearance :
MR DK TRIVEDI for Appellant(s) : 1, MR DARSHAN M PARIKH for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : 07/11/2012 CAV JUDGMENT (Per : HONOURABLE MR.JUSTICE N. V. ANJARIA)
1) As both the Appeals involved similar facts, they are being taken up and decided together by this judgment. Appeal No.34 of 2012 is preferred by M/s.Suntrek Private Limited and Appeal No.35 is by one Sandeep R. Patel, Director of the Company. The Appeals arise from the common order dated 07th December, 2011 passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench, Ahmedabad in Appeal No.E/506/2010 and Appeal No.E/507/2010.
1.1) The Appeals were admitted by this Court for consideration of the following questions of law:
“Whether the Tribunal below committed substantial error of law in passing the order impugned by totally overlooking the effect of Notification No.8 of 2003-CE dated 1st March 2003 exempting clearance to the case of the petitioner.
Whether the Tribunal below committed substantial error of law in overlooking the fact that Rule 25 of Central Excise Rules speaks of excisable goods which is not applicable to the case of the petitioner in view of the Notification dated 1st March 2003.”
2) We heard learned Advocate Mr.D.K. Trivedi for the appellants in both the Appeals and learned Advocate Mr. Darshan M. Parikh for the respondent-Department, at length.
3) The relevant facts involved in the Appeals may be set out first. M/s. Suntrek Private Limited was engaged in the manufacture of Aluminum Sections, which are excisable items falling under the relevant Heading in the First Schedule of the Central Excise Tariff Act, 1985. The appellant Company carried on its business as a Small Scale Industry.
3.1) The Officers of the Central Excise Department, acting on intelligence report, visited the factory premises of the appellant on 01st July, 2008. In course of the investigation, on verification of the stock of finished goods lying the factory premises, it was noticed that the appellant had not maintained any books of accounts and the records regarding the stock of the goods lying in the factory as well as of the goods cleared. The stock of goods so detected, weighed 28,785.710 kgs. Valued at Rs.46,05,714/- at Rs.160/- per kg. The panchnama dated 01st July, 2008 was recorded. Amongst the two Directors of the company present at that time, the Investigating Officer recorded statement of Sandeep Ratibhai Patel, the appellant of Appeal No.35 of 2012, under Section 14 of the Central Excise Act, 1944 (hereinafter referred to as “the Act” for sake of brevity). The stock of goods were seized.
3.2) The investigation resulted into issuance of a show cause notice dated 23rd December, 2008 by the competent Authority, the Assistant Commissioner, Central Excise Bhavan II, Rajkot. The said notice was addressed to both the appellants herein in their respective capacities, and they were called upon to show cause as to why the seized goods of the value of Rs.46,05,714/- should not be confiscated under Rule 25 of the Central Excise Rules, 2002 (hereinafter referred to as “the Rules” for sake of brevity), and as to why penalty should not be imposed upon the Company, as also on the Director under the relevant Rules. The noticees filed their reply dated 12th February, 2009 to the show cause notice. In the reply, the main defence of the appellant–assesse was that it was a Small Scale Industry and covered by the exemption limit under the Notification No.08 of 2003 dated 01st March, 2003.
3.3) The show cause notice culminated into Order-In- Original dated 17th June, 2009. The Adjudicating Authority ordered (i) confiscation of seized Aluminum Sections valued at Rs.46,05,714/-, allowing redemption on payment of fine of Rs.01,82,550/- within 30 days; (ii) imposition of penalty of Rs.01,84,250/- on M/s.Suntrek and (iii) imposition of penalty of Rs.2,000/- on the said named Director.
3.4) M/s. Suntrek Private Limited as well as its Director challenged the afore-mentioned Order-In- Original by preferring two Appeals being Appeal No.25 of 2010 and Appeal No.26 of 2010 before the Commissioner of Central Excise (Appeals), Rajkot, who by order dated 11th January, 2010 upheld the order including imposition of penalty, by dismissing the Appeals. Thereafter, the appellant company and its Director preferred two different Appeals before the Tribunal, which culminated into common order impugned in these Appeals.
4) Learned advocate for the appellant submitted that the appellant company was having status of small scale industry and its total clearances in a financial year was below the limit of Rs.01,50,000/- described in the Notification No.08 of 2003 dated 01st March, 2003 and therefore, the appellant was enjoying the exemption. It was further submitted that in that view, it was not necessary to maintain the accounts for the purpose of central excise. He, however, submitted that under other applicable laws, the accounts were being maintained and they were even audited. It was further submitted that the show cause notice and the consequential order of confiscation and penalty passed only on the basis of statement dated 01st July, 2008 of the Director Sandeep R. Patel got recorded by the officers on the date of inspection.It was submitted that there was no other evidence and that the statement relied upon was validly retracted.
4.1) It was further submitted that the value of goods lying in the factory premises could not have been the basis for coming to the conclusion that the goods were clandestinely cleared, as there was neither any evidence nor were the details of any goods having been actually cleared in illicit manner. The learned advocate for the appellant submitted that even if for the sake of arguments the case of the Department was to be accepted, the total value of seized goods was of value of Rs.96,65,000/-, which in any case, below the limit of Rs.1.5 crores under the Notification, there was no case for taking any action against the appellant.
4.2) On the other hand, the learned advocate for the respondent-Department submitted that admittedly the appellant Company had not been maintaining accounts and there was no record available as regard volume of actual quantum of goods and the finished products. He submitted that the Director in his statement dated 01st July, 2008 clearly admitted clandestine clearance of Rs.15 lakhs to Rs.20 lakhs He further admitted that the goods were supplied to the connected firms and for that, payments were received through Angadias and such transactions were unsupported by any invoices or any challan, as stated by him. He, therefore, submitted that the Order-In-Original and the confirming order passed by the Appellate Commissioner and finally by the Tribunal were proper. It was submitted that in the facts of the case, assessee could neither claim advantage of being a Small Scale Industry,(SSI) nor could seek the umbrella of protection under the exemption Notification No.08 of 2003 dated 01st March, 2003.
5) We carefully considered the facts and material on record, and went through the order of the Tribunal as well as the orders of the lower authorities leading to the impugned order of the Tribunal. Considered the submissions on behalf of the parties.
5.1) Section 6 of the Act says that any person, who is engaged in the production or manufacture of any specified goods included in the Schedules to the Central Excise Tariff Act, 1985, shall get himself registered. Rule 25 of the Central Excise Rules about confiscation and penalty, inter alia provides that if any manufacture removes any excisable goods in contravention of the provisions of the Rules, or does not account for excisable goods manufactured or engages in manufacture, etc. of excisable goods without applying for registration or contravenes any of the provisions of the Rules, all such goods should be liable to be confiscated and a penalty shall be imposed in accordance with law. As per the Notification No.08 of 2003 such exemption limit was Rs.1.5 crores. It is not the case of the respondent that said Notification does not apply. The decision of the lower authorities confirmed by the Tribunal rested on the reasoning that the appellant having not maintained the accounts under the excise law and that there was clandestine removal of goods, it was liable to the action of confiscation and penalty.
5.2) Notification No.08 of 2003 provide for SSI Exemption to the manufactures not availing CENVAT. Relevant part of the said Notification is extracted hereunder:
“In exercise of the powers conferred by sub- section (1) of section 5A of the Central Excise Act,1944 (1 of 1994) (herein after referred to as the Central Excise Act) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 8/2002-Central Excise, dated the 1st March,2002, published in the Gazette of India vide number G.S.R.129(E), dated the 1st March,2002, the Central Government, being satisfied that it is necessary in the public intrerst so to do, hereby exempts clearances, specified in column (2) of the Table below (hereinafter referred to as the said Table) for home consumption of excisable goods of the description specified in the Annexure appended to this notification (hereinafter referred to as the specified goods), from so much of the aggregate of” –
(i) the duty of excise specified thereon in the first Schedule to the Central Excise Tariff Act,1985 (5 of 1996) (hereinafter referred to as the First Schedule); and
(ii) the special duty of excise specified thereon in the Second Schedule to the said Central Excise Tariff Act,1985 (hereinafter referred to as the Second Schedule), as is in excess of the amount calculated at the rate specified in the corresponding entry in column (3) of the said Table:
Provided that nothing contained in this notification shall apply to a manufacturer who has availed the exemption under notification No. 39/2001 Central Excise, dated the 31st July,2001, published in the Gazette of India vide number G.S.R. 565 (E), dated the 31st July,2001, in the same financial year.
Table
6) The case of the appellant-assessee in nutshell was that since its aggregate clearance was below the limit prescribed in the afore-mentioned Notification it was SSI and was exempted from seeking registration under the Central Excise Act. It was not required to maintain the accounts for the excise purpose. From the facts narrated above, the Department initiated action against the assessee mainly by relying on the statement of one of the Directors, who was present at the time of inspection. The Director stated that its company used to purchase raw-material from different firms without invoices and payment was made through Angadias and no receipts were given. It was also stated by him that in the financial year concerned, the company had received payment of Rs.10 lakhs Rs.12 lakhs. He mentioned different names of the firms from which as per his statement, the materials were procured.
6.1) For coming to the conclusion that there was a clandestine removal of goods, the only material on which heavy reliance was placed by the Department was the statement of the Director Shri Sandeep R. Paetl recorded on 01st July, 2008 under section 14 of Act. The same came to be retracted by affidavit dated 26th July, 2008, the relevant portions from the retracting affidavit are reproduced hereinbelow:
At the entire of the investigation and after made punchnama as per them version, they called two persons from out side and taken signature of these two persons on punchnama along with me.
After completion as above, in my utter sur- prise they to record my statement at weedy hours without issuing me “SUMMONS” – as re- quired under law – till this date. I po- litely refused for the same. But they have taken me under coercion and duress for statement proceeding. For buy peace from the officers, I have surrendered myself for strenuous exercise held by officers at weedy ours as to myself was exhausted during the material time.
“During the course of statement proceeding, they started to interrogate me in context to our involvement in suppression of production as well as cleared our product without issu- ing invoices or Bills and thereby our firm has suppressed aggregate clearance value and not followed the C. Ex. Law & procedure and accordingly they have recorded my statement as per them palatable version,” is contrary to the correct facts. The statement record- ing from me on dtd. 01.07.2008, was under coercion, threat and duress. The same is not accepted to me and I retract the same by this affidavit.
Further, “the allegation of Central Excise Officers, regarding to our involvement in suppression of production and made clearance without issuing Bills/Invoices to our cus- tomers and recovered some over and above amount, by way of incriminate nature through “Angaliyas” is contrary to correct facts. They have forcibly extracted my statement as per them palatable version, as according to above, is taken under the threat, coercion, duress and undue hardship of the department. The same is retracted and discarded by me through this affidavit.
Further more, in proceeding my statement, the inquiry officer, forcibly extracted my statement in the matter of M/s. Sundhal alu- minum, Ahmedabad, M/s. Shreeji traders, Ahmedabad, M/s.Swami aluminum, Surat, in context to supply of our product and for that we have received extra consideration from the said parties through Angaliyas, is totally unworthy and outlandish to the cor- rect facts. The correct fact is that, we have received consideration from these parties, in normal practice, which known un- der commercial parlance. Hence, the inquiry officers have extracted my statement as per them version in nexus to above is retracted by this affidavit.
Further, I make it clear by this affidavit that, the copy of statement is not given to me at the material time, so I exactly do not remember that what has been mentioned in the said statement recorded from me, because I was under the undue hardship and covered by beleaguered position of the Central Excise officers, I was in embracement situation at the material time. And hence, they have taken my signature on the statement or like wise on the other documents, was not exactly under my knowledge and belief. So I solemnly affirm and clarify that the contents whatsoever written and taken my signature thereon may not be considered true, sound minded and under normal circumstance as they had often given reference of arrest to me.”
(para 4 to 10)
6.2) The confession or self-incriminatory statement made would come within the purview of Section 24 of the Evidence Act, 1972, the same being relevant, is produced hereunder:
“24. Confession caused by inducement, threat or promise, when irrelevant in criminal proceeding. – A confession made by an accused person is irrelevant in a criminal proceeding, If the making of the confession appears to the court to have been caused by any inducement, threat or promise, having reference to the charge against the accused person, proceeding from a person in authority and sufficient in the opinion of the court, to give the accused person grounds, which would appear to him reasonable, for supposing that by making it he would gain any advantage or avoid any evil of a temporal nature in reference to the proceedings against him.”
6.3) Section 14 of the Central Excise Act, 1944 which is similarly worded as section 108 of the Customs Act, 1962, deals with the powers of the empowered central excise officers to summon persons to give evidence and produce documents in any inquiry which such officer is making for any purposes of the Act. The principles regarding evidentiary value of confessional statements got recorded under such provision are laid down by the Courts. In CCE vs. Duncan Agro Industries Ltd. [(2000) 7 SCC 53], with reference to section 108 of the Customs Act, the Apex Court opined as under :
“12. … The inculpatory statement made by any person under Section 108 is to non-police personnel and hence it has no tinge of inadmissibility in evidence if it was made when the person concerned was not then in police custody. Nonetheless the caution contained in law is that such a statement should be scrutinized by the court in the same manner as confession made by an accused person to any non-police personnel. The court has to be satisfied in such cases, that any inculpatory statement made by an accused person to a gazetted officer must also pass the tests prescribed in Section 24 of the Evidence Act. If such a statement in impaired by any of the vitiating premises enumerated in Section 24 that statement becomes useless in any criminal proceedings.”
6.4) It was held that a statement recorded by the Customs Officer under section 108 of the Customs Act, though admissible in evidence, the Court has to test whether the inculpating portions were made voluntarily or whether it is vitiated on account of any of the premises envisaged in section 24 of the Evidence Act.
6.5) The law with regard to confession regarding the confession retracted afterwards was discussed by the Apex Court in Vinod Solanki Vs Union of India and others reported in 2008 (16) SCC 537 by observing that it is trite law that evidence brought on record by way of confession, which stood retracted, must be substantially corroborated by other independent and cogent evidence. The Apex Court further observed as under:
“A person accused of commission of an offence is not expected to prove to the hilt that confession had been obtained from him by any inducement, threat or promise by a person in authority. The burden is on the prosecution to show that the confession is voluntary in nature and not obtained as an outcome of threat, etc. if the same is to be relied upon solely for the purpose of securing a conviction.
(para 36) With a view to arrive at a finding as regards the voluntary nature of statement or otherwise of a confession which has since been retracted, the court must bear in mind the attending circumstances which would include the time of retraction, the nature thereof, the manner in which such retraction has been made and other relevant factors. Law does not say that the accused has to prove that retraction of confession made by him was because of threat, coercion, etc. but the requirement is that it may appear to the court as such.”
(para 37) “Whereas mere retraction of a confession may not be sufficient to make the confessional statement irrelevant for the purpose of a proceeding in a criminal case or a quasi-criminal case but there cannot be any doubt whatsoever that the court is obligated to take into consideration the pros and cons of both the confession and retraction made by the accused. It is one thing to say that a retracted confession is used as a corroborative piece of evidence to record a finding of guilt but it is another thing to say that such a finding is arrived at only on the basis of such confession although retracted at a later stage.”
(para 38)
6.6) The statement in question dated 1.7.2008, if examined closely in light of the above test, as seen from the copy thereof which is on record of the appeal at page 11, it was admittedly written by the Inspector, Central Excise, Morbi and the appellant stated to have put his signature below the same. When the said statement was read, it contained repeatedly made self-incriminatory statements and confessions about receiving of amount in cash through Angadia without receipts in the last financial year. A direct confession was also recorded in that statement to the effect that non-maintaining of accounts was with an intention to evade the duty. Having regard to the kind and nature of confessions mentioned in the statement, a bare reading thereof would give an impression that various statements were extracted by force and not voluntarily made. Apart that statement was retracted by the said Director by affidavit dated 26th July, 2008, it is also on record of the Appeal.
6.7) More importantly the statement in question was too weak to be relied on as evidence on law, in absence of any corroboration thereof by cogent evidence. The show cause notice mentioned the details of different firms such as Paresh Metals, Rajkot, M/s Mangalm Metals, Ahmeddabad, M/s Krishna Metals, Ahmedabad, M/s Sunil Metals, Ahmedabad, M/s Harish Metals etc., to allege that the raw materials were received by the appellant from those firms. However, statement of none of the above parties was recorded which could have corroborated the statement relied on, except that the statement of the proprietor of M/s Harish Metals, Morbi was recorded who stated that the scrape was sold to the appellant as per the credit practice and competition without bills. The solitary statement could not be said to be a cogent and convincing piece of evidence which validly corroborate the confessional statement in the statement of the Director, more particularly when the said statement of M/s Harish Metals was not referred to and discussed in the show cause. Therefore, it was the sole statement of the Director Sandipbhai which was uncorroborated, and which was taken as base for the action against the appellant, when no evidentiary value could have been attached in light of what is stated above. Moreover, the confessional statement was retracted within reasonable time. Therefore also, the said confession could not have been used as a piece of evidence and there was no basis for inference and conclusion about clandestine removal of goods thereof.
6.8) It was further noticed that the failure on part of the appellant to produce accounts was in course of the process of investigation. The assessee’s case was that it was maintaining the register and the entries were being made therein about receipt and clearances of goods and the same was produced at the time of personal hearing but the authority rejected if viewing the same as an afterthought. The regular accounts under the excise law were not maintained by the assessee considering that since the exemption limit in the said Notification applied to it, maintaining of accounts for the excise purpose was not required. It is not disputed that the assessee was otherwise maintaining the accounts for the purpose of other laws like Sales Tax Act, Sales Tax Registration and its accounts were audited in accordance with the provisions of the Companies Act, 1956. In the Order- in-Original dated 17.06.2009, the adjudicating authority itself observed that there were no statutory records or excise records as they were dispensed with by the department since 2000 as a measure of simplification and the every manufacturer was required to maintain his own records and to device to his own record keeping method depending upon the accounting requirements. In this view and given the facts and circumstanceses of the case, the conclusioln that the assessee had deliberately not maintained the accounts under the excise law could not stand and such a finding could be said to be baseless.
6.9) Even if the case of the department is taken at its best value, admittedly the total clandestine clearance was below the limit of 1.5 crores specified in the notification dated 1.3.2003. The clearance value of the goods alleged to have been clandestinely removed upto 1st July, 2008 was lakhs 76.65 lakhs and even if the maximum goods of the value Rs. 20 lakhs is accepted as stated by the Director in his said statement dated 1.7.2008, the total value comes to Rs.
96.65 lakhs, which is well under the exemption limit. There is also force in the submission of the appellant that the finding regarding clandestine removal was on the basis of goods which were lying in the factory premises at the time of inspection, and that there was no material or evidence establishing the actual clearance of goods, muchless clandestine clearance.
6.10) Curiously, the adjudicating authority in the Order-In-Original accepted the position recording in paragraph No.18 of the order as under, yet ultimately passed the order of confiscation and penalty holding that the exemption notification benefit was not to be given to the appellant and that there was clandestine removal:
“It is correctly contended by the notice that their clearance value was to the tune of Rs.76.65 lakhs up to 01.07.2008 as per records and as admitted by the Director, they had clandestinely cleared goods to the tune of Rs.20 lakhs upto that period. Therefore, their total clearance value up to 01.07.2008 should be considered as Rs.96.65 lakhs. Thus, their total clearance value was well below the exemption limit. However, for confiscation of unaccounted goods and imposition of penalty there is no need to show leniency looking at the gravity of the case in light of the admission made by the Director of the notice under Section 14 of the Central Excise Act, 1944.
6.11) In the impugned order, the Tribunal mechanically concluded that on investigation, it was found that the assessee was not maintaining proper accounts and the Director also admitted that there was no accounted stock in the factory, which would to the tune of Rs.76,65,000/- upto 01st July, 2008 and the admitted aggregated value of the clearance of the goods worth Rs.96,65,000/-. It was stated by the learned Tribunal that since the appellant was not maintaining the accounts, they cannot take shelter under the fact that they were small scale industry and fell below the clearance limit of Rs.01,50,000/- and that progressive total clearance of the goods is not known and is ambiguous.
7) In light of the foregoing discussion, approach of the Central Excise Authority was erroneous and the findings arrived at by the learned Tribunal were not tenable at law. Once the sole basis of confessional statement adopted by the Authority in basing the case against the assessee was found to be an unreliable piece of evidence, inferences and conclusions about clandestine removal of goods fail to sustain. They were rendered in the realm of propositions and suppositions. It could not be said that the assessee deliberately not maintained the accounts with an intention to evade the duty.
8) Referring to the questions of law formulated, it is held that the Tribunal committed substantial error of law in passing the order impugned in the present Appeals by totally overlooking the effect of Notification No.08/2003-CE dated 01.03.2003 exempting the clearance upto aggregate of Rs.01,50,000/-, which is applicable to the facts of the appellant. It is further held that the Tribunal committed a substantial error of law by overlooking that in view of Notification No.08/2003-CE dated 01s March, 2003, Rule 25 of the Central Excise Rules, 2002 would not be applicable in case of the appellant.
9) The substantial questions of law are accordingly answered in affirmative and against the Department as above.
10) Both the appeals are allowed in aforesaid terms. As a result the Order-in-Original dated 17.06.2009 passed by the Assistant Commissioner Central Excise, Division-II, Rajkot and the order in appeal dated 20.11.2009 by the Commissioner (Appeals) stands set aside.
(V.M. Sahai, J) Anup (N.V. Anjaria, J) CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI and HONOURABLE MR.JUSTICE N.V. ANJARIA Date:07/11/2012 FURTHER ORDER (Per : HONOURABLE MR.JUSTICE N. V. ANJARIA) After the pronouncement of the order, Mr.Darshan Parikh, learned counsel appearing for the respondent prayed to stay the operation of the judgment, which has been delivered today.
Having heard learned counsel for the respondent Mr.Darshan Parikh, we do not find any reason to stay the order, which has been delivered today. Hence, oral request of the learned counsel for the respondent is rejected.
(V.M. Sahai, J) (N.V. Anjaria, J) Anup