Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Missing seized records must be considered while testing ITC claim; duplicate GST demands ordered corrected: Delhi High Court. *  GST appeal can’t be rejected without addressing taxpayer’s grounds: Allahabad High Court. *  Surplus IGST credit can offset CGST, SGST shortfall: GSTAT. *  GST refund can’t be denied when cancelled airfares are returned with tax: GSTAT. *  3 Hearing notices issued within 2 minutes: Gujarat High Court flags portal flaw, seeks report. *  GSTR-9, GSTR-9C filing for FY 2025-26 enabled; pending GSTR-1 and GSTR-3B must be filed first. *  Dupattas are exempt fabrics, can’t be taxed as fibres at 4%: Madras High Court. *  Full transitional credit allowed on capital goods received after GST rollout: GSTAT denies Rs. 6.99 lakh export duty credit. *  GST return mismatch alone can’t justify fraud proceedings: GSTAT orders fresh adjudication under section 73. *  Supplier found non-existent later can’t alone justify input tax credit denial: GSTAT. *  GST interest stops once tax reaches government account, can’t run until return filing: GSTAT. *  Cancelled flat booking- GST refund can’t be denied without excluding COVID period from limitation: GSTAT. *  India notifies rules of origin for India–New Zealand FTA. *  Incomplete E-bike kits classifiable as complete vehicles, but not eligible for CKD duty concession: CESTAT. *  Same GST rate on main input and output can’t by itself bar inverted duty refund: GSTAT. *  Unjust enrichment doesn’t apply to customs refunds from assessments finalised before July 13, 2006: Gujarat High Court. *  CENVAT credit can’t be denied solely because plant And machinery are embedded in earth: Karnataka High Court. *  DFIA exports ineligible for RoDTEP benefits; customs directs repayment with applicable interest. *  Second E-Way bill alone doesn’t prove another supply: GSTAT. *  Bail denied in Rs. 1.19 crore fake GST refund case over risk of accused absconding again: Punjab and Haryana High Court. *  GST registration can be restored after revocation deadline if outstanding dues are paid: Gauhati High Court. *  Multiple GST proceedings over same suppliers: Calcutta High Court directs dept. to share findings for adjudication. *  E-Governance portal services not OIDAR, fixed deposit interest not taxable: CESTAT. *  Rs. 500 Stamp duty required on authority letters for CAs, CMA and GST practitioners in Pune GST division.  *  Rs. 1.10 crore GST refund must be paid in cash after business closure: Allahabad High Court. *  Godown rent attracts 18% GST even when used exclusively for exempt agricultural warehousing: AAR. *  GST portal launches "Multi-State Registration" facility: one master TRN for registration applications across multiple States/UTs. *  RoDTEP scheme extended till 31st December, 2026.  *  Mere disagreement with order can’t override Rs. 20 lakh appeal limit: GSTAT. *  Customs interest can’t be backdated before confiscation liability is determined; nearly 8 year period excluded: Delhi High Court.
Subject News *  GST summons: anticipatory bail maintainable without arrest order, but relief denied in evasion case: Allahabad High Court. *  GST Appeal can’t be decided without hearing taxpayer’s objections to fresh evidence: Allahabad High Court. *  GST ITC can’t be reversed merely because supplier grants discount without reducing tax liability: GSTAT. *  Mere quoting of GST provision is not a valid charge: GSTAT quashes ITC denial. *  Personal hearing mandatory before adverse GST order, even without taxpayer’s request: Rajasthan High Court. *  Parallel bail pleas without full disclosure amount to abuse of process Rs. 43.08 crore GST case sent for fresh hearing: Supreme Court. *  GST refund based on unchallenged advance ruling can’t be recovered using later circular: GSTAT. *  Payment of GST alone doesn’t end interest and penalty liability when tax and interest remain unpaid beyond 30 days of notice: GSTAT. *  GST demand over builders’ 80% procurement rule requires reasoned adjudication: GSTAT. *  Eligible ITC doesn’t automatically entitle taxpayers to compensation cess refund on domestic sales: GSTAT. *  GST confiscation order passed before reply deadline invalid: GSTAT. *  GST interest can’t be retained after tax refund on delayed export receipts: Punjab & Haryana High Court. *  GST appeal can’t be dismissed over pre-deposit shortfall without opportunity To respond: Bombay High Court. *  DGGI SCN can’t be challenged before reply and adjudication:Chhattisgarh High Court. *  GST input tax credit can’t be denied solely due to supplier’s retrospective registration cancellation: GSTAT. *  GST notice must explain fraud allegations; merely repeating section 74 Is not enough:  Himachal Pradesh High Court. *  Audit detection alone can’t justify GST fraud penalty; specific suppression must be proved: GSTAT. *  GST order uploaded only under ‘Additional Notices’ tab without separate intimation set aside: Calcutta High Court. *  Service Tax appeal can’t be rejected for missing pre-deposit proof when payment is already recorded: CESTAT. *  SGST dept. can’t hear appeal against CGST order: Calcutta High Court. *  Mere dispatch of tax order can’t prove service or make appeal time-barred: CESTAT. *  Dealer incentives can’t be taxed merely on ledger entries: CESTAT. *  DGFT orders quashed for failure to supply DRI letter relied upon in SCN: Bombay High Court. *  GST penalty u/s 122(1A) can’t apply to Pre-2021 transactions; unregistered beneficiaries also covered: Delhi High Court. *  Expired E-way bill caused by wrong PIN code can’t justify GST penalty without intent to evade tax: GSTAT. *  Used railway rails can’t be taxed as track material without proof they are fit for reuse: CESTAT. *  Earlier DGGI notice doesn’t bar separate GST demand on different issue: Delhi High Court. *  ITC dispute involves no question of law: GSTAT directs appeal to Vice-President. *  Earlier DGGI notice doesn’t bar separate GST demand On different issue: Delhi High Court. *  No E-way bill required for interstate goods movement in november 2017: GSTAT quashes detention and penalty.  

Comments

Print   |    |  Comment

PJ/Case Laws/2011-12/1149

Clandestine Removal of Goods - Establishment of

Case: British Biologicals (Unit-II) v/s Commissioner of C. Ex., Bangalore
 
Citation: 2011 (266) ELT 217 (Tri-Bang)
 
Issue:- Allegation of clandestine removal on the basis of security register is not sustainable. It has to be corroborated with evidences. The removal of inputs from Unit-I and Unit-II without reversal is not sustainable as the credit is available to other unit.
 
Brief Facts:- Appellant-Unit-II is a proprietary concern engaged in the manufacture of dietary supplements and protein beverages falling under heading 19 & 21. Appellant has two more units, Unit-I situated in another area and Unit-III situated adjacent to Appellant-unit. Appellant is manufacturing bulk mix of protein beverages and also retail packages of the very same product. Retail packages of the very same product. The retail packages were cleared from Unit No. II. They were discharging duty liability. Appellant is clearing bulk protein mix to their unit No. 1 only. Unit No. I is re-packing this bulk protein mix into sample pouches and clear the same on payment of duty upon pre-rata of the MRP of the retail packages cleared by the appellant from his factory premises to the customers.
 
Further, appellant were clearing the duty paid packing materials and inputs to Unit-III were the said items were being stored. Appellant-Unit-II was taking credit of the items stored in Unit-III premises and a intimation in this regard was also given to the Department.
 
Officers of the Preventive Section visited all the 3 units of the appellant simultaneously and had recorded various statements and scrutinized the records maintained by all the 3 units. Department reached the conclusion that the appellant were clandestinely removing the goods in contravention of the provisions of Rule 4, 6, 8, 10, 11 and 12 of the CER, 2002 and Rule 3 (4) (b) of CCR, 2004 and issued show cause notice alleging non-payment/short payment of duty on Bulk mix of protein beverages cleared to Unit-I, Cenvat taken on packing material cleared to Unit-III; duty of Sample pouches cleared to Unit-I and duty on Xtra-Mass. Further imposition of penalty under Section 11AC of the CEA, 1944 was also proposed.
 
The Adjudicating Authority confirmed the demand and imposed penalty. Against the said order, appellant-assessee is in appeal before the Tribunal.
 
Appellant’s Contentions:- Appellant had raised the contentions as under:
 
- Demand of duty on clearance of bulk from Unit-II to Unit-I not sustainable: - It was submitted that demand has been confirmed on the basis of certain entries made by security personnel without any corroborative evidence. No evidence or show cause notice was issued against Unit-I where simultaneous investigations was conducted. There is no corroborative evidence in the form of any illicit purchase of raw materials or excess consumption of electricity by Unit-II. The demand is based on assumptions and presumptions. Reliance placed on judgment given in Chemco Steels Pvt Ltd v/s CCE, Hyderabad [2005 (191) ELT 856 (Tri-Bang)], Dalmia Vinyls (P) Ltd v/s CCE, Hyderabad [2005 (192) ELT 606 (Tri-Bang)], Mohan Steels Ltd v/s CCE, Kanpur [2004 (177) ELT 668 (Tri-Del)], Vigirom Chem Pvt Ltd v/s CCE, Bangalore [2010 (251) ELT 544 (Tri-Bang)], CCE, Madurai v/s N. Manikandan [2009 (246) ELT 349 (Tri-Chennai)], CCE v/s Arsh Casting Pvt Ltd [2010 (252) ELT 349 (Tri-Chennai)].
 
It was submitted that in the absence of any evidence that Unit No. I had cleared samples without payment of duty, the entire duty liability on the bulk mix is discharged by Unit-I when they cleared the samples.
 
- Duty demand on the sample pouches alleged to have been cleared from the appellant’s unit:- It was submitted that appellant do not have the facility to convert bulk into sample pouches and the said facility is only available in Unit-I. This plea was taken at the investigation stage, which is not disputed and no contrary findings have been recorded. It was submitted that the invoices on which reliance was placed were in fact only for sending of empty pouches of samples for filling the same with bulk mix in the premises of Unit-I. It was submitted that the Authorities have not further investigated this matter to arrive at a conclusion of clandestine removal. The clearance of said pouches to Unit-I was subsequently done to payment of duty.
 
Alternatively it was submitted that the entire duty paid by Unit No. II is available as credit to Unit-I and hence the exercise, which has been done by the Revenue would be a revenue neutral exercise. Reliance was placed on CCE v/s Jamshedpur Beverages [2007 (214) ELT 321 (SC)], CCE v/s Coca Cola India [2007 (213) ELT 490 (SC)], RAD_MRO Manufacturing Pvt Ltd v/s CCE, Bangalore [Final Order No. 730/2010 dated 08.04.2010 {2010 (258) ELT 235 (T)}, CCE v/s BPL Sanyo Utilities & Appliances [2004 (177) ELT 722] and Gopal Zarda Udyog v/s Commissioner [2001 (128) ELT 409].
 
Alternatively, it was further submitted that the appellant have paid duty on bulk cleared from the Unit-II to Unit-I by applying pro-rata MRP of the unit container, instead of adopting cost construction method in terms of Board’s Circular No. 643/34/2002-CX, dated 01.07.2002. It is submitted that the bulk mix cleared from the appellant’s Unit-II to Unit-I cannot be assessed either on MRP or on pro-rata MRP basis, as it is not a pre-packaged commodity and hence the valuation or the assessable value has to be ascertained as per the provisions of Section 4 readwith Valuation Rules, 2000. Reliance is placed on Jayanti Food Processing Pvt Ltd [2007 (215) ELT 327 (SC)] and in Malhotra Shaving Products (P) Ltd [2010 (250) ELT 118]. It is submitted that if Rule 8 of Valuation Rules is applied in this case, then appellant needs to discharge the duty liability based on cost of production which is far less than the amount of duty liability discharged by the appellant. It is submitted that the demand is barred by limitation, as the entire duty paid on the bulk mix would be available as credit to the appellant’s Unit-I and there is no reason for evading duty as it is undisputed that the appellant’s Unit-I has discharged duty liability on the pouches cleared from their factory premises.
 
It is submitted that with regard to demand of duty on the inputs and packing materials found in Unit-III but availed credit in Unit-II, that they had informed the Revenue authorities on 14.12.2005 of their intention to store such duty paid inputs there. There was no mis-use of Cenvat credit availed, as the said inputs were received back and consumed in Unit-II within 180 days of their clearance from the Unit-III.
 
As regard demand of duty on product (Xtra-Mass) it was submitted that they are not contesting the matter seriously.
 
Respondent’s Contentions:- Revenue contended that bulk mix cleared by appellant under ‘R’ series delivery challans and combining them at the month end under BB series delivery challans is totally an unacceptable proposition in Central Excise law. Appellant is liable to discharge duty liability on the goods cleared from the factory premises. Even if appellant’s argument is accepted that BB series of the delivery challans are nothing but a consolidation of removals under R series of delivery challans, the arithmetic therein is not matching. There is duplication of clearances, then the quantity on which demands raised should have been, more or less, equal or double the quantity of goods shown to have cleared on payment of duty. The sums or the quantity cleared do not match. Appellant has been unable to explain entries in the outward register maintained by the security at the factory gate. The defence of the assessee that security is purely a private register maintained by security personnel is unacceptable. It is submitted that any clandestine manufacture and removal there is difficulty to attain mathematic precision in investigation. Reliance placed on Collector of Customs v/s D. Bhoormull [1983 (13) ELT 1546 (SC)]. 
 
For valuation of goods of removal, it was submitted that provisions of Section 4 readwith Valuation Rules, 2000 will be attracted in this case and as per the law settled, every Rule has to be exhausted clearly before arriving at the Rule, which needs to be applied. It is submitted that Rule 4 of the Valuation Rules will be applicable as there is a value i.e. pro-rate MRP value of the goods cleared by the assessee from the factory premises.
 
With regard to clearance of cenvat availed packing materials and inputs without reversing credit it was submitted that appellant has not followed the procedure of storing goods outside the factory premises wherein the credit so availed. It is submitted that the letter relied upon by the assessee does not indicate that the appellant intends to remove the Cenvat credit availed packing material for storage or for jobwork.
 
As regards the value of samples of various flavours collected from the Unit-II, it is submitted that the invoice No. 718/28-2-2006 of the Unit-II very clearly indicated that they have cleared substantial quantity of sachets (samples) on payment of duty. This evidence would belie the submission that sample packs are cleared only from Unit-I and there is no sufficient evidence found that the appellants were manufacturing samples only in Unit-I and not Unit-II. It was submitted that since there is a clandestine removal of bulk the extended period is correctly invoked. The principle of Revenue neutrality cannot be cited to defeat the principle of correct assessment of duty and collection of the same.
 
Reasoning of Judgment:- The Tribunal held as under:
 
1. Clearance of bulk mix of protein beverages without payment of duty: It was held that the allegation of clearance of clandestine manufacturing and clearance of bulk mix is based only on a register maintained at the security. It was admitted fact that appellant used to clear bulk mix of protein beverages to their unit-I only and there has been practice of raising the invoice once in a month for the entire clearance made to Unit-I. The Tribunal found from records, that the Revenue had not investigated this matter further, inasmuch as there is no investigation done as to consumption of further raw materials, packing materials, consumption of electricity, which were unaccounted by the appellant. Appellant’s contention regarding absence of corroborative evidence is right. The demand of duty based only on assumption and presumption is not sustainable for simple reason that if it is an admitted fact that the entire bulk mix of protein beverages are cleared to their Unit-I and the consumption thereto is for packing the sample pouches are cleared. It is seen from the record that Revenue have not come to a tentative conclusion that Unit-I had cleared sample pouches clandestinely, or without payment of duty. Thus, the Tribunal held that charge of clandestine removal is not proved against the appellant. It is an undisputed fact that Unit-I only has the facility for re-packing of bulk into sample pouches. The Authorities were required to investigate further to conclude that clearances of sample packs from Unit-I manufactured out of entire bulk mix received from Unit-II.
 
It was held that the cases cited by appellant also support their contention that clandestine removal allegation cannot be made on assumptions and presumptions.
 
It was further held that there is no admission by the Proprietor or its employees about clandestine clearances. The aspect of Revenue neutrality definitely arises as the entire duty paid by one unit was available as credit to another unit.
 
It was further held that Provisions of Section 4 and Valuation Rules made thereunder were applicable as the clearances of bulk mix of protein beverages were made to their own unit for further packing of sample pouches which would amount to consumption by themselves or on their behalf. In such a case Rule 4 will not be attracted but Rule 8 will apply wherein valuation based upon the cost of production needs to be arrived at, will get attracted. Thus, it was held that demand of duty was not sustainable and therefore set it aside.
 
2. Clearance of Cenvat availed packing materials & inputs: The Tribunal found that Unit-III where the duty paid packing materials and inputs were found is rented by the assessee and is in his possession as one of the premises. Provisions of CCR, 2004 clearly indicate that the duty paid materials can be removed to further processing or job working and can be brought back within 180 days and if it cannot be done so, proportionate credit needs to be reversed and the said credit can be re-taken once the assessee is able to correlate the receipt of duty paid inputs and raw materials back to the factory premises. It was held that the issue in hand may not strictly fall under the said category of removal of cenvat availed packing materials and inputs to jobworkers but, at the same time, it is seen from the records that the assessee had been always taking a stand that these goods were stored in the premises which they had rented, as there was shortage of space.
 
It was held that there is no allegation that there is shortage of such packing materials and inputs removed from the factory premises of the appellant to Unit-II to Unit-III. The only allegation is that they have not followed proper procedure. Thus the findings recorded by the Adjudicating Authority were set aside.
 
3.         Clearance of samples of various flavours: On this issue the Tribunal found that the appellant had taken a categorical stand that Unit-II does not have machinery to manufacture sample pouches. Unit-II has not machinery to manufacture final products in sale packs only. As to clearance of sachets, it was found that the invoice did not indicate that the appellant cleared sample pouches filled with protein mix beverages. The invoices only indicates clearance of sachets of sample. It is clearance of empty sachets. This is supported by fact that the facility of filling empty sachets with bulk mix is not available at Unit-II but at Unit-I. Demand confirmed in this regard is set aside.
 
4. Duty liability on Xtra-Mass: As this is not seriously contended, duty liability as confirmed by the Adjudicating Authority is upheld.
 
The Tribunal set aside the penalty imposed except on clearance of Xtra-Mass.  
 
Decision:- Appeal disposed of accordingly.
 

**************

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com