CEC 159 of 2002 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CEC.No. 159 of 2002 Date of decision 15.1.2009 Commissioner of Central Excise, Chandigarh ...Petitioner Versus M/s Gopal Mills and another ... Respondents. CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE H.S. BHALLA Present: Mr. Gurpreet Singh ,Sr. Standing counsel for the revenue Mr. Jagmohan Bansal , Advocate for the respondents 1. Whether Reporters of local papers may be allowed to see the judgement ? 2. To be referred to the Reporter or not ? 3. Whether the judgement should be reported in the Digest ? M.M.KUMAR, J. The revenue has approached this Court by seeking a reference under Section 35 H(1) of the Central Excise Act, 1944 (for brevity the Act') for directing the Excise and Gold (Control) Appellate Tribunal (for brevity 'CEGAT') to state the facts of the case and refer the following question of law that would arise for adjudication of this Court from its final order dated 5.2.2002: “ Whether CEGAT has erred by relying upon the statement of the partner of the factory that the factor 'd' was changed w.e.f. first week of Nov., 1997 whereas there is a substantial proof that the factor 'd' was changed w.e.f. 1.10.97 as there was a sudden increase in the production w.e.f. 10/97 which was attributable due to change in factor 'd' and reducing the penalty from Rs. 24 lacs to Rs. 10 lacs.” CEC 159 of 2002 2 The assessee had two Rolling Mills 'A' and 'B' run by a single electric motor and single fly wheel with following 'd'. 'n' and 'I' parameters: Rolling Mill Rolling Mills 'A' 'B' 'd' parameter 275 mm 350 mm 'n' parameter 735 rpm 735 rpm 'I' parameter 0.19 0.122 The aforesaid declaration was made on 26.9.1997 by the petitioner firm as per the requirement of Rule 3(1) of the Hot Rolling Steel Mills Annual Capacity Determination Rules, 1997 (for brevity 'the Determination Rules, 1997'). On 24.1.1998 the preventive staff of the Central Excise Division, Patiala paid a surprise visit to the factory premises of the assessee in pursuance of a complaint in which allegation was made for mis-declaration of factor 'd' in respect of rolling mill 'B'. One Shri Sushil Mittal, who was present at the time of visiting officer produced their central excise register. After perusal of the declaration made on 26.9.1997 the officers found that rolling mill 'B' was found working while rolling mill 'A' was found closed and idle. The factor 'd' of both the rolling mills were verified in the presence of Shri Sushil Mittal which was measured by Sh. Gurdeep Singh, Foreman of the assessee. The factor 'd' of pinion stand of rolling mill 'B' which was found working was of 405 mm as against 350 mm declared by the assessee in their declaration dated 26.9.1997. The verification report was submitted which was duly signed by Shri Mittal, their Foreman and the visiting Central Excise Officer as a token of correctness of the measurement and verification of 'd' factors of two pinion stands of the rolling mills was taken. The Revenue has claimed that partner of the assessee admitted the facts and further stated that the assessee had CEC 159 of 2002 3 changed factor 'd' of their rolling mill 'B' from 350 mm to 450 mm in the first week of November, 1997 and did not give any intimation to the revenue about this change because they were not aware of any such requirement. On 11.3.1998 the partner had further stated that the assessee did not have purchase bill regarding the purchase of pinion stand of 405 mm 'd' parameter. He also stated that pinions of the stand were manufactured by their employees in their factory itself from their old rough rolls and no separate expenditure was incurred by them. He produced copies of their RT 12 returns for the year 1996-97 and 1997-98, declaration dated 26.9.1997 filed under Rule 96 ZP(3) of the 1944 Rules. The total quantum of rolled steel products manufactured by them during the period April, 1996 to February, 1997 and corresponding period of the year 1997-98 were noticed and the assessing authority proceeded to infer the increase on that basis and re-determined the same. Accordingly a show cause notice was issued to the assessee on 1.5.1998 where the assessee was called upon to show cause as to why the following actions be not taken: “ i) the annual capacity of their Re-rolling Mills should not be determined under Rule 3(3) of the Determination Rules, 1997 by taking into consideration the factor 'd' as 405 mm of their rolling mills. ii) The duty amounting to Rs. 35,85,742/- for the period 10/97 to 3/98 (less duty already paid, if any) due from them to the department as discussed above should not be recovered from them under Rule 9(2) read with rule 96 ZP(3) of the Rules and question 11A of the Act. Iii) Penal action under rule 209 of the Rules, should not be CEC 159 of 2002 4 taken against them for above said contraventions of the provisions of Central Excise Law.” The assessee filed reply and was also called for personal hearing on 5.2.1999. He produced a copy of the certificate of chart showing the amount of duty paid during the period September, 1997 to March 1998. The Assessing Authority disapproved the conduct of the assessee for changing 'd' factor of their rolling mill 'B' as it was of 275 mm in respect of mill 'A' and 350 mm in respect of mill 'B' as per declaration made on 26.9.1997. Their annual capacity production was determined as 10736 Mts in terms of Rule 5 of the Determination rules, 1997. It was further found that any change in factor 'd' was required to be intimated to the jurisdictional Commissioner of Central Excise as per Rule 5 of the Determination Rules, 1997 but the assessee has changed factor 'd' without intimating the same to the jurisdictional Commissioner. In that regard reliance was placed on the statement of Shri Sushil Mittal, partner and Gurdeep Singh, Foreman. The Assessing Authority also rejected the argument that the change in factor 'd' to mill 'B' has to be made from the September, 1997 and not from November, 1997 because the computed levy was levied w.e.f. 1.10.1997 and even the production of mill 'B' has gone up from September, 1997. On the basis of the afore-mentioned finding the assessee was held liable to pay duty of Rs. 5,97,623.67 p.m. w.e.f. 1.10.1997 and demand for differential duty of Rs. 24,53,742/- under Rule 96 ZP(3) of the 1944 Rules was raised alongwith interest @ 18 percent p.a. and penalty of Rs. 24,00,000/- was also imposed under Rule 209 of the 1944 Rules. On appeal filed by the asseesee before the CEGAT the same CEC 159 of 2002 5 was partly allowed. The Tribunal concluded that there was no evidence with the revenue to come to the conclusion that factor 'd' was changed w.e.f. 1.10.1997. In his statement Sh. Sushil Mittal, partner recorded on 24.1.1998 has in unequivocal terms stated that the change was effected in the first week of November, 1997. In the absence of any evidence to the contrary the statement has to be accepted that it is from November 1997 and not from October, 1997. Accordingly the Tribunal directed the adjudicating authority to re-compute the duty liability of the assessee. The penalty was also found to be on the higher side which was reduced to rupees ten lacs. Feeling aggrieved, the revenue has approached this Court with an application for referring the aforesaid question of law for determination of this Court. Mr. Gurpreet Singh, learned counsel for the revenue has vehemently argued that the findings recorded by the adjudicating authority should not have been upset once there is a confessional statement. According to the learned counsel the production table from September, 1997 to February, 1997 would show that there was sudden increase in production which is explainable to the increase in 'd' factor without intimating the same to the department. According to the learned counsel the adjudicating authority has rightly drawn an inference from the aforesaid table and the findings must have been restored. Mr. Jagmohan Bansal, learned counsel for the assessee has argued that there is no question of increase in production on account of variation of 'd' factor. He has drawn our attention to the table to submit that it is incorrect to say that the production has started increasing only from September, 1997 onwards and pointed out that there was big jump in CEC 159 of 2002 6 production in the month of June which was far less in the month of May. Likewise, he has pointed out that production in the month of November has come down considerably. He has further submitted that there is no question of evading the payment of duty because the assessee is entitled to MODVAT credit in any case and therefore no malafide could be alleged. Having heard learned counsel for the parties and perusing the record we are of the view that the prayer made by revenue to refer question of law would not on facts arise. It would be profitable to study the table to which reference has been made by the learned counsel for the parties which reads thus: (Figures in M.Ts.) Month Year 1996-97 Year 1997-98 April, 940.905 724.406 May 770.755 395.340 June 752.192 800.678 July 761.978 651.565 August 782.535 356.750 Total A 2928.739 Sept. 965.785 935.075 Oct. 766.933 1059.470 Nov. 1027.335 416.990 Dec. 861.126 840.310 Jan. 1031.385 582.990 Feb. 982.924 740.975 Total A 4575.630 ....................................................................................... G. Total 7504.369 ........................................................................................ A perusal of the above table would show that in the year 1997- 98 the production in the month of May, 1997 was far less than in the month of June when it reached 800.678 Mts. In the month of August it has come down to 356.750 Mts. which in September increased to 935.075. It went up again in October, 1997 to 1059.470 Mts but considerably reduced in the next month of November to 416.990 Mts. Taking into consideration the CEC 159 of 2002 7 aforesaid fluctuation in production it is not possible to conclude that changed factor 'd' had played any pivotal role in bringing up production and therefore no inference on that basis could have been raised against the assessee by raising additional demand from 1.10.1997. If the table does not furnish any inference to re-determine the production then the only evidence left is the report based on the statement of Sushil Mittal and the foreman of the assessee who have stated that factor 'd' was increased from the month of November, 1997. Therefore, we find that the findings recorded by the Tribunal are unexceptional and do not call for interference of this Court. Moreover, we further find that the exercise of referring the question to this Court would be futile as only a question of facts is raised for which direction under Section 35 H(1) of the Act could not be sought. We are further of the view that the assessee in any case is entitled to avail Modvat credit on the duty paid and therefore no loss to revenue would occur. Accordingly the prayer of the revenue is declined and the petition is dismissed. (M.M.Kumar) Judge (H.S. Bhalla ) 15.1.2009 Judge okg