M/S. MAAN ALUMINIUM LTD.versusCOMMISSIONER OF CENTRAL EXCISE, INDORE

                   [2015] 10 S.C.R. 27


              MIS. MAAN ALUMINIUM LTD.                      A
                            v.
    COMMISSIONER OF CENTRAL EXCISE, INDORE
             (Civil Appeal No. 2830 of 2005)
                                                            B
                      MAYOS, 2015
        [A. K. SIKRI AND R. F. NARIMAN, JJ.]
      Central Excise Act, 1944 - Schedule, Chapter 76 -
Show-cause notice alleging the appel/ant-assessee for       c
clandestinely removing some of the quantities of the finished
goods manufactured by it - Demand of differential duty by
adjudicating authority- The order of the authority confirmed
by the Tribunal and the High Court - On appeal, held: The
order was passed by courts below on the basis of admissions D
of two employees of the assessee-company without adverting
to the specific plea of the assessee explaining that there was
no clandestine removal of the goods from the premises -
The statements of the employees cannot be read as
admissions - Thus entire basis of impugned order gets E
knocked off - Demand order is quashed.
     Allowing the appeal, the Court
     HELD: 1. In view of the reply to the show cause
notice and the statements of the two employees of the F
assessee-company, the findings arrived at by the
CESTAT which are accepted by the Hi.gh Court are ~otally
perverse and there is no such admission made by these
two persons which has become the basis of the orders
passed by the authorities below. Since there was no G
such admission on the part of these two persons which
is erroneously read out to be so, entire basis of the
impugned orders passed by the Commissioner as well
as the CESTAT gets knocked off. [Paras 7 and 12][34-F;
36-E-F]                                                  H
                           27
28        SUPREME COURT REPORTS                [2015] 10 S.C.R.


A       2. In spite of the factthat the plea was specifically
  raised by the appellant in explaining that there was no
  difference in the quantities and thus, no question of
  any clandestine removal of the goods from the
  premises, the said plea has not been adverted to, c.nd
B there is no reference made to the material produced by
  the appellant. Only on the baais of so called admissions,
  the authorities jumped to the conclusion without
  undertaking any further exercise. Such an order of the
  CESTAT which is confirmed by the High Court, does not
C stand legal scrutiny and therefore, these orders are liable
  to be set aside. [Para 15] [38-E-G]

         CIVIL APPELLATE JURISDICTION: Civil Appeal No.
     2830 of2005
D
          From the Judgment and Order dated 21.06.2004 of the
     High Court of Madhya Pradesh Bench at Indore in M.A. No.
     1184of2004

E        S. Ganesh, Narendra Kamar, Vinod Mehta, Rakesh
     Kumar for the Appellant.

          K. Radhakrishnan, Shirin Khajuria, Rajiv Sharma, 8.
     Krishna Prasad for the Respondents.

F         The Judgment of the Court was delivered by

       A. K. SIKRI, J ..1. The appellant herein is engaged in
  the business of manufacturing of Aluminium Profils, bars
  and roads, tubes and papers. These items which are finished
G goods are subjected to excise duty and classified under
  chapter 76 of the Schedule to the Central Excise Act.
  Substantial quantity of the aforesaid goods manufactured by
  the appellant is exported. Some officials of the Central Excise
  Department visited the factory of the appellant on 16.08.1996
H and checked the physical stock of the finished goods viz-
   M/S. MAANALUMINIUM LTD. v. COMMISSIONER OF                        29
       CENTRAL EXCISE, IN DORE [A. K. SIKRI, J.]

a-viz, the stock recorded in its books. On verification, A
these officials found that several quantities of goods are
unaccounted. These goods were, accordingly, seized. The
raiding party also visited the office premises of the appellant.
It went to the dealers of the appellant and recorded their
statements as well. Statements of some of the employees of B
the appellant company who were dealing with the affairs of
the appellant were also recorded.

     2. On the basis of the aforesaid material and the
statements recorded, the Department took the view that C
the appellant had been clandestinely removing some of the
quantities of the finished goods. On this basis, a show
cause notice dated 03.03.1999 was issued to the appellant
company as well as its managing director. Making out the
case of evasion of excise duty and suppression of facts on D
the part of the appellant, extended period of limitation was
invoked, as per proviso to Section 11A(1) of the Central
Excise Act.

       3. The appellant submitted its reply to the said show cause   E
notice contesting the position which was taken by the
Department in the said notice. The appellant submitted that
there was no clandestine removal of any quantity of finished
goods and the raw material was in fact used in manufacturing
the finished goods.                                                  F

      4. After hearing the appellant, the adjudicating authority
passed the Order-in-Original dated 28.08.2002, raising the
demand of Rs.64,82,565/- as differential duty payable by the
appellant. The appellant went in appeal, which appeal was G
dismissed by the Customs, Excise and Services Tax
Appellate Tribunal (hereinafter referred to as 'CESTAT') as
well vide its orders dated 22.12.2003. Relevant portion of
this order which contains the discussion on the essential
aspects is reproduced below:-                                    H
30   SUPREME COURT REPORTS                  [2015] 10 S.C.R.


A    "3.1 The company had cleared goods for export also.
     The export documents showed the "catalogue weight"
     of the goods, which was more than the actual (physical)
     weight recorded in RG-1 register. Consequently, the
     weight of goods actually exported was less than what
B    was shown I the export documents viz. AR4s. Invoices
     etc. The SCN alleged that the differential quantity of
     goods had not been accounted and the same had been
     clandestinely cleared without payment of duty during the
     period February 1994 to January 1999. this allegation
c    was also based on the finding that the "gate register"
     and other records seized from the factory premises had
     shown that goods had been cleared without invoice
     and without payment of duty. The demand of
     Rs.1,05,67,090/- was raised on a total quantity of
D
     641.145 Mts of goods which was allegedly cleared in
     the above manner during the above period,
     corresponding to which the total quantity of exports as
     noted by the Commissioner was 6507.073 Mts. The
E    adjudicating authority has found that out of this quantity
     of total exports, the exports made to M/s Man lntertrade
     Co. (UAE) are not to be taken into account for
     demanding duty and accordingly it has requantified the
     demand as Rs. 64,82,565/-. Thatauthorityhasworked
F    out this demand on the basis of the appellants own
     records and statements. For instance a letter issued by
     Sh. U. D. Selvan, Senior Engineer of the company, to
     their Indore office showed the catalogue weight of certain
     Aluminium Sections as 21986 Kgs. and its physical
G    weight as 21404.2 Kgs. Shri Selvan, in his statement,
     confirmed this fact. Some official correspondence
     between functionaries of the company also indicated that
     the catalogue weight of export goods was 5-10% more
     than the actual weight. Shri Deepak Das, Senior
H    Manager (Tool Room) who was confronted with the
M/S. MAANALUMINIUM LTD. v. COMMISSIONER OF                     31
    CENTRAL EXCISE, IN DORE [A. K. SIKRI, J.]

 letters, admitted that the catalogue weight (despatch         A
 weight) was always more than the physical weight. Shri
 Prahalad Das Sarda, Excise (Officer & Authorised
 Signatory, stated that it was his function to make entries
 in RG-1 Register on the basis of the Packing
 departments reports which were prepared on the basis          B
 of actual weight. But he could not explain as to how
 the differential quantity of goods was disposed of. He
 further stated that he had only acted as per the directions
 of the Managing Director and the latter alone could
 offer any explanation. Shri J.C. Mansukhani, in his           C
 statement, admitted that in some cases of exports, the
 catalogue weight was higher than the physical weight
 and the differential quantity of goods remained in the
 factory. However, he could not say as to how this quantity    D
 was disposed of. In the aforesaid example, the quantity
 of Sections exported under GP2 No. 58 dated 29.12.93
 was shown as 21e0s Kgs. (catalogue weight) whereas
 the actual weight was only 21404.2 Kgs. The differential
 quantity (581.8 Kgs.) was not actually cleared and            E
 exported, though, in RG-1, it was shown as debited
 for clearance for export. Shri Mansukhani in his
 statement conceded this factual position but could not
 say as to how the 581.8 Kgs. of Sections remaining in
 the factory were disposed of. The Consultant for the          F
 appellants submitted before us that J.C. Mansukhani
 and Deepak Das had been wrongly quoted in the SCN
 and the Commissioner's order. He added that the
 allegation of clandestine removal of goods had not been
 proved by the department. Yet another submission              G
 made by the Consultant was that the difference in weight
 of the goods was less than 5 which according to him,
 was too negligible to be taken into account. The DR
 submitted that he demand of duty was based only on
 the differential quantity admitted by the appellants and      H
32     SUPREME COURT REPORTS                   [2015] 10 S.C.R.


A      hence was irresistible. We are unable to accept the
        Consultant's arguments as we have noted that the
       demand of duty of Rs. 64,82,565/- is based on the
        unrebutted documentary evidence gathered from the
       appellants premises as well as the unretracted
8      statements of the Managing Director and other
        responsible functionaries of the company. We have
       perused these statements and find that the
       adjudicating authority has correctly quoted and
       appreciated the same. The statements were never
c      retracted, nor, was any of the documents disowned. The
        result was that the differential quantity of goods i.e. the
     · difference between the actual (physical) weight and
       the weight shown to have been cleared for export was
       proved to have been removed from the factory without
D
       invoices and without payment of duty. The differential
       quantity was admitted but its accountal and clearance in
       terms of the legal provisions we.re not shown. (In view of
       the admission of the differential quantity by the company
E      authorities, it was not necessary for the adjudicating
       authority to allow them to cross-examine any officer of
       the department). The department's allegation of
       clandestine removal of the said quantity stood proved.
       The appellants have stated that the total exports
F      quantity noted by the Commissioner (6507.073 Mts) is
       not correct and that the correct figure must be less by
       95.614 Mts and, on this basis, the demand of duty should
       be reduced. We are unable to accept this claim as we
       find that the Commissioner has noted the above quantity
G      from a report of the Deputy Commissioner of Central
       Excise Division II, Indore, which has not been called in
       question in these appeals. Yet another ground of
       challenge to the demand of duty is that many of the
       exports taken into account by the Commissioner had
H      taken place prior to the period of demand. This, again,
   M/S. MAANALUMINIUM LTD. v. COMMISSIONEROF                   33
       CENTRAL EXCISE, INDORE [A. K. SIKRI, J.]

     cannot be accepted as J.C. Mansukhani admitted A
     that the differential quantities remain.ed in the factory.
     Such quantities which accumulated from past exports
     could well be removed during the period of demand.
     We uphold the above demand of duty for the reasons
     recorded."                                                 B

       5. The appellant preferred further appeal to the High
Court under Section 35G of the Central Excise Act. This
appeal has also been dismissed by the High Court primarily
on the ground that the two authorities below have looked c
into the facts and law in confirming the demand arid a finding
of fact has been arrived that it was a case of evasion of duty
by resorting to clandestine manner in removing the finished
goods and therefore, these findings do not call for any
interference. Since the High Court has dismissed the· appeal D
with the aforesaid observation, that was a reason for
reproducing in detail, the discussion carried out by the
CESTAT in its order.

     6. This is how the present appeal comes up for hearing    E
which challenges the orders of the authorities below.

      .In the first blush, the impression that would be gathered
is that a finding of fact is arrived at by the authorities below
holding that there was clandestine removal of the goods from F
the factory premises of the appellant without the payment of .
excise duty and therefore, no question of law is involved in the
present case. However, the submission of Mr. S. Ganesh,
learned senior counsel appearing for the appellant, is that
from the reading of the order of the CESTAT, it becomes G
apparent that the CESTAT has primarily been influenced by
the statements of two employees of the appellant company
viz., Mr. Deepak Das and Mr. J. C. Mansukhani and the
entire order is rested on the so called admissions contained
in the statement of these two employees. He submitted that H
34         SUPREME COURT REPORTS                [2015] 10 S.C.R. ·


A from the . reading of the statement of the two employees it
  would be crystal clear that there was no such admission made
  by them at all and what is sought to be read into those
  statements is not there at all and is conspicuously missing in
  these statements. It was thus, argued that the present case is
B a case of perverse findings. It is additionally a,rgued that when
  the Commissioner or for that matter, the CESTAT relied upon
  the so-called admissions of the aforesaid two employees, it
  failed to look into any explanation furnished by' the appellant
  in reply to the show cause notice and also in the form of other
C materials produced before the adjudicating authority. It was
  also argued that even in the statements of the said two
  employees, these employees had amply demonstrated and
  clarified the doubts pertaining to the differential in quantity
  but the authorities have blissfully ignored those parts of the
0
  statements of these employees, which has resulted in
  miscarriage of justice.

          7. In order to substantiate the aforesaid statement, Mr.
     Ganesh took us through the reply to the show cause notice,
E    other documents filed as well as the statements of Mr.J. C.
     Mansukhani and Mr. Deepak Das. On going through this
     record, we are inclined to accept the argument of Mr.
     Ganesh that the findings arrived at by the CESTATwhich are
F    accepted by the High Court are totally perverse and there is
     no such admission made by these two persons which has
     become the basis of the orders passed by the authorities
     below.

        8. Before we advert to these statements, it would be
G pertinent to mention here that the appellant had explained that
  there is a variation in the die hole between 5% to 7.5%, i.e.,
  in the manufacture of dye.· It was a specific case put by the
  appellant that the hole of the die, after its continuous use at
H Press machine for extruding the required section/ finish goods,
  the internal diameter always expanded to some· extent and
   M/S. MAANALUMINIUM LTD. v. COMMISSIONER OF                     35
       CENiRAL EXCISE, INDORE [A. K. SIKRI, J.]

therefore the dies are being manufactured accordingly so that A
the produced output should match the specifications. It
had also taken support of the technical literature that is
available in the market, to prove the aforesaid assertion.
On this basis, it was stated that in the export catalogue
which was prepared and issued by the appellant in order to B
take care of the final production with varying specifications
because of the aforesaid reason, 10 per cent actual weight
would be 5% more or less than the weight as mentioned in
the catalogue. It was further explained that even as per the
show cause notice, the difference in quantity was hardly 2 C
percent.

      9. We find from the reading of the statements of Mr.
Deepak Das and Mr. J. C. Mansukhani that this aspect is
explained in abundance by them in their statements. After D
reading the statement of these two persons, we find that no
such admission was made by them, as recorded in the order
of the CESTAT which is extracted above. Mr.Deepak Das
had only stated that "In export dies, catalogue weight should
be always equal or 10% than the physical weight". This is in E
reply to Question No. 4 which was put to Mr. Deepak Das.
For the sake of clarity and better understanding, we reproduce
the exact question and answer given thereto:
     "Question-4 Please see page No. 359 of file 28, F
     seized from factory premises on 16.8.96 please explain
     the meaning of "we may follow the wt. Range in export
     dies from - 10% to 0%" as mentioned in the above
     said letter written by you to Mr. D. K. Chandwani Indore
     office on 8.8.94.                                        G
     Ans In export dies, catalogue weight should be always
     equal or 10% than the physical weight."
      10. We fail to understand how it amounts to admission
on the part of Mr. Das that the quantity disclosed was less. To   H
36         SUPREME COURT REPORTS                 [2015] 1OS.C.R.


A    the similar effect is the statement of Mr. Mansukhani which is
     treated as his admission. In this behalf, we reproduce question
     No. 5 and answer thereof which is taken as admission of Mr.
     Mansukhani: -

B         "Question 5: Please see page No. 137 of File 498 where
          catalogue weight for different Section shown as 21986
          kg., and same goods were cleared under BP-258, dated
          29.12.1993 this BP 2 shows that in case of Export of
          goods the same are cleared on catalogue weight.
c         Ans. 5. As per my knowledge in certain exports goods
          we will have to charge them as per catalogue weight
          and there is possibility of (+-) litter difference in the
          weight this is because of international rules."

D          11. Apart from the aforequoted positions of the two
     statements, learned counsel for the Revenue could not point
     out any other part of the statements on which he could rely to
     demonstrate any admissions by any of these witnesses.

E          12. Once we arrive at an conclusion that there was
     no such admission on the part of these two persons which is
     erroneously read out to be so, entire basis of the impugned
     orders passed by the Commissioner as well as the CESTAT
     gets knocked off.
F
        13. We would also like to mention at this stage that in
  reply to show cause notice, a specific plea was taken by the
  appellant that the allegations made in the show cause notice
  were purely hypothetical and the difference occurred because
G of +/- 5 per cent tolerance which was admissible in invoicing
  of export dispatches. It was also specifically pleaded that
  the exporter always dispatches 10% less quantity and yet
  the importer pays foreign exchange for full invoice amount, even
  for 10% less quantity received by him. The statements made
H in the catalogue were also justified in the following manner: -
  M/S. MAANALUMINIUM LTD. v. COMMISSIONER OF                        37
      CENTRAL EXCISE, INDORE (A. K. SIKRI, J.]

     "For export of the finished products to various countries,     A
     the noticee No. 1 has made out an Export catalogue
     which contains technical details of our different section;
     weight per meter etc. and as per the international
     practice, the invoicing of export dispatches is made
     on the basis of Catalogue weight whereas the actual            B
     weightofthe section may be as percatalogueweight
     in most of the cases and in some case it may be 5%
     more or less than the weight as mentioned in the
     catalogue.      Each export consignment consist of
     minimum 15-20 different varieties of section/profiles          C
     and out of these different types, only in three four
     sections there can be variation and in rest of the sections,
     the weight is almost same. However, the aggregate
     value of the invoice is always as per the actual weight        D
     of the total consignment. To elaborate further, if the
     quantity of any particular section is 5% less than the
     catalogue weight, the quantity of other section will be
     5% more than that of catalogue weight. The average
     weight of a container is thus always equal to the              E
     actual weight."

      14. It was specifically pointed out that the Department
had taken only those samples of products with larger quantity
and missed out those with lesser quantity and in case all the F
items are taken together, there would not be any difference
in quantities. This was sought to be demonstrated by a
chart prepared asAnnexure 'AE' to the show cause notice in ·
the following manner: -
     "The chart as Annexure 'AE' prepared for differential G
     quantity 4.044 MT pertaining to the exports made during
     the period from 19.07.93 to 28.06.94 which is totally
     irrelevant as the relevant period of the proposed
     demand duty is from Feb, 94 to Jan, 99. The difference
     worked out in this chart comes to about 4.91 % of total H
38           SUPREME COURT REPORTS                  [2015] 10 S.C.R.


A           82.391 MT quantity invoiced which is also appeared
            to be well within the tolerable limit of 5%. Another aspect
            for this chart is that the investigating officers while
            preparing the chart "AE" deliberately have taken only
            those cases in which catalogue weight is more than the
B           actual weight and ignored the cases in which actual
            weight were more than the catalogue weight. On going
            through whole para 6, it appears that these were the
            only stray evidences which the investigating officer of
            the department could collect after searching the files
c           and records of Noticee No. 1 by spending almost three
            years valuable time of the Central Excise department.
            But these cases are also not relevant in the case of
            Noticee No. 1 as the relevant period of proposed demand
            of duty made in the impugned show cause notice is from
D
            Feb, 94 to Jan, 99."

            15. It is unfortunate that in spite of the fact that the
     aforesaid plea was specifically raised by the appellant Ki
     explaining that there was no difference in the quantities and
E    thus, no question of any clandestine removal of the goods
     from the premises, the said plea has not been adverted to
     and there is no reference made to the aforesaid material
     produced by the appellant. It is stated at the cost of repetition,
F    that only on the basis of so called admissions made by Mr.
     Mansukhani and Mr. Deepak Das, the authorities jumped
     to the conclusion without undertaking any further exercise.
     Such an order of the CESTATwhich is confirmed by the High
     Court does not stand legal scrutiny and therefore, these orders
G    are liable to be set aside. We, accordingly, allow this appeal
     and quash the demands raised by the authorities.

           16. No costs.

     Kalpana K. Tripathy                                 Appeal allowed.
H