ANNAPURNA INDUSTRIES PVT. LTD. Vs. COMMR. OF C. EX., ALLAHABAD
LAWS(CE)-2015-1-170
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on January 28,2015

Annapurna Industries Pvt. Ltd. Appellant
VERSUS
Commr. Of C. Ex., Allahabad Respondents

JUDGEMENT

RAKESH KUMAR - (1.)BOTH the appellant units are engaged in manufacture of plastic containers and were availing SSI exemption with Cenvat credit facility, i.e., they were paying duty at the concessional rate prescribed in the SSI notification and were availing the Cenvat credit. Both the units were visited by the Jurisdictional Central Excise Officers on 9 -9 -2002.
(2.)Both the units were found to be adjacent to each other and separated by a passage. At the time of officer's visit to the units, while M/s. Shivam Udyog was found closed since 3 -9 -2002 due to break down of the DG set, M/s. Annapurna Industries was functioning. Stock taking of the finished goods and raw materials was done in both the units. The RG -1 register in both the cases showed nil balance. However, certain quantity of the goods manufactured by M/s. Annapurna Industries was found in the factory premises of M/s. Shivam Udyog as well as in the passage and the duty involved on those goods was Rs. 9,398/ -. The officers were of the view that these finished goods had been cleared by M/s. Annapurna Industries to M/s. Shivam Udyog without payment of duty and without issue of invoices and the same were placed under seizure. In the factory premises of M/s. Annapurna Industries, 780 kg of unaccounted scrap was found which was also placed under seizure. On stock taking of the Cenvat credit availed raw material - Plastic Granules in both the units, while there was shortage of 4125 kg. of Cenvat credit availed plastic granules in the factory of M/s. Annapurna Industries, in the factory of M/s. Shivam Udyog there were shortage of 15,375 kg. According to the officers, the quantity of plastic granules found short in the factory premises of M/s. Annapurna Industries and M/s. Shivam Udyog had been cleared clandestinely and without payment of amount in terms of Rule 4(5) of the Cenvat Credit Rules and that the amount payable in the case of M/s. Annapurna Industries was Rs. 2,90,613/ - and the amount payable by M/s. Shivam Udyog of Rs. 4,46,426/ -. At the time of stock taking of plastic granules, Shri D.P. Singh, the Authorized Representative of both the units was present and on being asked, he could not give any explanation whatsoever, and as such accepted the shortage.
1.1 After issue of a show cause notice, the matter was adjudicated by the Joint Commissioner vide Order -in -Original dated 31 -3 -2004 by which he confirmed the demand of Rs. 2,90,613/ - against M/s. Annapurna Industries and demand of Rs. 4,46,426/ - against M/s. Shivam Udyog under Rule 12 of the Cenvat Credit Rules, 2002 along with interest thereon under Section 11AB and beside this, penalties of equal amount on them under Rule 13(2) of Cenvat Credit Rules, 2002, read with Section 11AC of Central Excise Act, 1944. By the same order, the Joint Commissioner also confirmed duty demand of Rs. 9,398/ - against M/s. Annapurna Industries along with interest thereon under Section 11AB in respect of the finished products held to have been removed by them and which have been found partly in the passage and partly in the factory premises of M/s. Shivam Udyog. Beside this, another penalty of Rs. 10,000/ - was imposed on M/s. Annapurna Industries under Section 11AC. The unaccounted seized goods valued Rs. 1,98,006/ - were also ordered to be confiscated with option to be redeemed on redemption fine of Rs. One Lakh and penalty of Rs. 20,000/ - was also imposed on this account on M/s. Annapurna Industries. In course of hearing before the Joint Commissioner, the appellants with regard to the shortage of Cenvat credit availed on plastic granules pleaded that there was no shortage, as the granules alleged to have been found short had actually being sent to job workers under job work challans for manufacture of Plastic Caps and Plastic Handles for which the appellants do not have the capacity and in this regard they also produced the job work register and the job work challans. According to the appellant, 4125 kg. of Plastic Granules found short in the premises of M/s. Annapurna Industries had been sent by them under job work challan No. 9, dated 8 -9 -2002 at 5:00 P.M. to M/s. Bansal Polypect, Varanasi, for job work for manufacture of Plastic Caps and Plastic Handles and similarly the plastic granules weighing 15,375/ - found short in the factory premises of M/s. Shivam Udyog had been sent to M/s. J.J. Packagers Pvt. Ltd. and M/s. Swastik Industries for job work under 3 job work challan Nos. 17, 18, 19, each dated 8 -9 -2002. However, the Joint Commissioner did not accept this plea holding that these job work challans have been fabricated and are not genuine and as such this plea is an afterthought.

1.2 On appeals being filed to Commissioner (Appeals) against this order of the Joint Commissioner, the same were dismissed by the Commissioner (Appeals) vide order -in -appeal dated 15 -10 -2004. Against this order of the Commissioner (Appeals), these appeals have been filed.

Shri Bipin Garg, Advocate, the Ld. Counsel for the appellant, pleaded that as regards the stock of plastic containers and caps found in the passage between the two units and in the premises of M/s. Shivam Udyog on 9 -9 -2002, the same had not been cleared to M/s. Shivam Udyog but the same had only been temporarily shifted, as there were shortage of space in the premises of M/s. Annapurna Industries and the second unit of M/s. Shivam Udyog was closed, that the Plastic Containers and caps found were not in fully finished condition, that as regards alleged excess quantity of 780 kg. of Plastic Scrap, the same was meant for recycling and for this reason only, the same had not entered in the RG -1 Register, that in view of this the confiscation of 780 kg. of scrap and confiscation of the plastic containers/caps is not sustainable, that as regards the alleged shortage of 4125 kg. of Plastic Granules in the factory of M/s. Annapurna Industries and alleged shortage of 15,375 kg of Plastic Granules in the factory of M/s. Shivam Udyog, as explained by the appellant in their reply to the show cause notice, there was no shortage, as this quantity of plastic granules had been sent to various other manufacturers including M/s. J.J. Packagers Unit -II for manufacture of plastic caps and handles on job work basis, that thought at time of officer's visit to the factory, the Authorized Representative present at that time, could not produce the job work challans, subsequently at the time of reply to the show cause notice, the job work challans along with job work register, had been produced, that the plastic granules sent to the job workers had been processed by the respective job workers and the appellants have received back the plastic caps and handles, that in view of this the demand of Rs. 2,90,613/ - against M/s. Annapurna Industries and demand of Rs. 4,46,426/ - against M/s. Shivam Udyog are without any basis, more so when no inquiry has been conducted with the job workers as well as transporters, that in any case, the amount of Rs. 2,90,613/ - and Rs. 4,46,426/ - demanded from M/s. Annapurna Industries and M/s. Shivam Udyog under Rule 4(5)A are on much higher side, as the Department has adopted some value of the plastic granules on arbitrary basis and has calculated the amount payable at the rate of 16% ad valorem, that both the appellants had purchased the Granules from J.J. Packagers (the Authorized Stockist of Gas Authority of India Ltd.), and on the basis of the invoices of GAIL, the value of the plastic granules alleged to have been found short would be much lower and on that basis, the amount payable would be much lower, and that in view of the above submissions, the impugned order is not sustainable.

Shri M.S. Negi, the ld. DR, defended the impugned order by reiterating the findings of the Commissioner in the impugned order. With regard to the alleged clearance of plastic containers by M/s. Annapurna Industries to M/s. Shivam Udyog without payment of duty, he pleaded that at the time of officer's visit to the factory, the RG -1 register was showing nil balance which shows that the goods found in the passage between the two units and in the factory of M/s. Shivam Udyog had been illicitly cleared and hence the duty of Rs. 9,398/ - has been correctly demanded from M/s. Annapurna Industries in respect of the same and the goods had been correctly confiscated. With regard to the alleged removal of 4125 kg. of Plastic Granules by M/s. Annapurna Industries and 15,375 kg of Plastic granules by M/s. Shivam Udyog, he pleaded that at the time of visit to the factory, Shri D.P. Singh, the Authorized Representative of both the units, could not give any explanation whatsoever and absolutely made no mention that the goods had been sent to job workers under job work challans and on the contrary had accepted the shortage. He also pleaded that while the job work challans produced along with reply to the show cause notice show the date of removal as 8 -9 -2002, it is surprising that at the time of officer's visit to the unit, the authorized representative was not aware of sending of the consignments of plastic granules to various job workers. He, therefore, pleaded that the Cenvat credit demand in respect of the quantity of plastic granules found short has been correctly upheld by the Commissioner (Appeals). He accordingly pleaded that there is no infirmity in the impugned order.

(3.)WE have considered the submissions from both the sides and perused the records. Coming first to the question of non -accountal of 780 kg. of plastic scrap found in the premises of M/s. Annapurna Industries, there is no dispute that the same was not accounted for in the RG -1 Register. However, we are of the view that the appellant's plea that the same being intermediate product was meant for recycling and was exempted from duty under Notification No. 67/95 -C.E. and for this reason, the same was not accounted for in the RG -1 Register is acceptable. Accordingly, we hold that the confiscation of 780 kg of Plastic Scrap under Rule 25(1) of Central Excise Rules, 2002 and imposition of penalty on M/s. Annapurna Industries on that account is not sustainable and has to be set aside.
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