CX -When assessment order of Commercial Taxes Dept. has been set aside by Rajasthan Tax Board, CE case has no legs to stand: CESTAT
By TIOL News Service
NEW DELHI, MAR 21, 2017: THE facts of the case are that the Commercial Tax Department of the Government of Rajasthan conducted certain survey and investigation, in March 2003, with reference to non-payment of sales tax for the year 2001-2002 on the goods (MS Bars, mis-rolls, MS Scrap) sold by the main appellant.
During the course of investigation, the Commercial Taxes Department recovered certain documents from the residence of two former employees of the appellant.
On completion of the enquiry, the AC, Anti Evasion (Rajasthan), Circle III of Commercial Taxes Department, Jaipur, finalized the assessment for the year 2001-2002. He held that the main appellant is liable to pay Rs.303.13 lakhs of sales tax and imposed a penalty of Rs.606.26lakhs along with interest of Rs.168.24 lakhs. The said assessment order was forwarded by Additional Director of Income Tax (Investigation), Jaipur, (Nodal Officer of Regional Economic Intelligence Committee) to the Jurisdictional Central Excise officer.
The Central Excise Department followed up with further enquiry, by recording statements and examining the documents.
On conclusion of such enquiry, proceedings were initiated against the main appellant and others, by issue of show cause notice dated 01/05/2006.
The gist of the allegation in the notice is that the appellant evaded Central Excise duty of Rs.9.85croresduring the year 2001-2002 by clearing unaccounted MS Bars of 46333.947 MT, mis-rolls of 932.312 MT and MS Scrap of 658.795 MT.
SCN was also served to 12 units manufacturing MS Ingots alleging unaccounted clearance of MS Ingots to appellant and demanding Central Excise duty from them on that basis.
The case was adjudicated by the CCE, Alwar who confirmed the CE duty demanded; imposed equivalent penalty on appellant and also penalty on company MD/Director.Duty demands were also confirmed against the manufacturers and suppliers of MS Ingots, alongwith imposition of penalties.
Aggrieved, all of them are before the CESTAT.
After considering the submissions made by both sides, the Bench observed -
+ Admittedly, the main basis of the proceedings resulting in the impugned order is the assessment order dated 10/08/2004 of Commercial Taxes Department, Jaipur. The said assessment order has been set aside by Rajasthan Tax Board, Ajmer by order dated 10/09/2007. The main appellant has, in fact, been sanctioned with the refund alongwith interest consequent to the said appellate order of the Tax Board, Ajmer. As such, the substantial and main ground of Central Excise demand becomes unsustainable.
+ Certain documents recovered from two ex-employees formed basis of enquiry and assessment order by Commercial Taxes Department. Even the author of these records and their authenticity has not been established by cross-verification and corroboration.
+ It is relevant to note that the Original Authority declined the requests of the appellants for cross-examining various persons who conducted the investigation or whose statements were relied upon on the ground that the appellant should establish that the allegations in the show cause notice are factually wrong and the persons had malice towards them; that the show cause notice was issued in 2006 and after 10 years request for cross-examination is not reasonable and justified.
+ Such finding, apart from factually incorrect, is also fallacious. There is, admittedly, unexplained delay of more than 9 years in adjudicating this case. The appellants did not ask for cross-examination after 10 years. It is the Original Authority who delayed the adjudication for more than 9 years and no reasons were ever recorded in the impugned order for such delay.
+ The impugned order is liable to be set aside only on this reason of unexplained delay of 9 years after completion of personal hearing, to issue orders and such course of action is well within the legal principles followed by the Tribunal and higher courts.
+ Even the findings with reference to electricity consumption lacks supporting evidence and cannot be taken as a evidence in support of allegation of huge quantity of unaccounted manufacture of excisable goods.
+ The main appellant was alleged to have cleared more than 64,000 MT of MS Bars, almost three times of their accounted production. The transaction will involve a cash receipt of more than Rs.60crores in a single financial year. It will also involve thousands of movements of lorries in the said year. There is no single piece of evidence of any movement of unaccounted raw material, finished goods, receipt of sale proceeds and above all, any identified buyer of such unaccounted finished goods.
+ When the case against the main appellant itself cannot be sustained, the demands against the manufacturers of MS Ingots are in much more than weaker ground. They were roped in only in view of records recovered by the Commercial Taxes Department indicating their names as suppliers of MS Ingots. No further investigation was carried out by the Central Excise Department to examine the authenticity of the records and to get the facts corroborated with independent supporting evidence.
In fine, the impugned order was set aside and the appeals were allowed.
(See 2017-TIOL-929-CESTAT-DEL)
