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2020 Supreme(Guj) 426
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
J.B. Pardiwala, Bhargav D. Karia, JJ.
Trinetra Texturisers Pvt Ltd. - Appellant
Versus
Commissioner of Central Excise And Service Tax Surat Ii - Opponent
R/Tax Appeal No. 405 of 2018 With Civil Application (For Stay) No. 1 of 2018, In R/Tax Appeal No. 406 of 2018
Decided On : 13-03-2020
For the Appellant : Mr. Nirav P. Shah
For the Opponent : Mr. Nirzar S. Desai
Point of Law:
It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue.
Headnote:
Central Excise Act, 1944 - Section 35G - Appeal substantial questions of law involved in both captioned Tax are same those were heard analogously and are being disposed of by this common judgment and order - Appellant is directed against order passed by Customs and Service Tax Appellate Tribunal Counsel for appellant submitted that before Central Excise Customs & Service Tax Appellate Tribunal appellant had raised several grounds of facts and law - Tribunal however dealt with only one of issues namely of ascertaining production capacity of machinery - Though several other legal issues arose out of order in original passed by Commissioner after remand made by Tribunal did not examine these issues though argued before it - Factory premises of appellant was visited by officers of Department on search was carried out of factory premises - Statements of Directors were recorded in course of search factory premises officers of Department took into possession documentary evidence in form of Registers - Held, principle of law discernible from aforesaid decisions is that case of Department of clandestine manufacture and removal of goods should be looked into having regard to production capacity of machine installed in factory premises - If Department was unable to arrive at any final conclusion with regard to production capacity of machine on account of same not in a working condition then Department owed a duty to examine machine of similar type which might have been installed in any other factory premises - This is what Rule provides for principle of law in this regard is that burden will be upon Department to show that entries in Registers match with production capacity of machine - Court may remind Revenue of observations made by Supreme Court in case - Appeal Allowed (Paras 45 to 49)
Facts of the Case:
Appellant of the Tax Appeal No.405 of 2018 is a Company, incorporated under the Companies Act, whereas, the appellant of the connected Tax Appeal is a Director of the Company. The appellants are in the business of manufacturing Texturized Yarn. The appellants are assessees under the Act, 1944. The appellants have a factory situated at Village : Karanj, District : Surat. They installed one Himson Rieter Scragg Draw Texturising Machine in their factory on February, 1994 Model SDS-3 with 144 spindles purchased from M/s.Himson Engg. vide invoice dated 21.04.1994
Finding of the Court:
Principle of law discernible from aforesaid decisions is that case of Department of clandestine manufacture and removal of goods should be looked into having regard to production capacity of machine installed in factory premises - If Department was unable to arrive at any final conclusion with regard to production capacity of machine on account of same not in a working condition then Department owed a duty to examine machine of similar type which might have been installed in any other factory premises - This is what Rule provides for principle of law in this regard is that burden will be upon Department to show that entries in Registers match with production capacity of machine - Court may remind Revenue of observations made by Supreme Court in case.
Result: Appeal Allowed
JUDGMENT :
J.B. Pardiwala, J.
1. Since the substantial questions of law involved in both the captioned Tax Appeals are the same, those were heard analogously and are being disposed of by this common judgment and order.
2. The Tax Appeal No.405 of 2018 is treated as the lead matter.
3. This appeal under Section 35G of the Central Excise Act, 1944 (for short the ‘Act, 1944’) is directed against the order passed by the Customs and Service Tax Appellate Tribunal (for short ‘the CESTAT Tribunal’), Ahmedabad, dated 21st September, 2017 in the Appeal No.E/607,608/2008.
4. On 19th April, 2018, a Co-ordinate Bench of this Court passed the following order:
“Counsel for the appellant submitted that before the Central Excise, Customs & Service Tax Appellate Tribunal, the appellant had raised several grounds of facts and law. The Tribunal, however, dealt with only one of the issues; namely, of ascertaining the production capacity of the machinery. Though several other legal issues arose out of the order in original passed by the Commissioner after the remand made by the Tribunal, the Tribunal did not examine these issues though argued before it.
Notice for final disposal, returnable on 20th June 2018.”
5. Both the tax appeals are admitted for the consideration of the following substantial questions of law :
“(i) Whether or not the Hon’ble Tribunal erred in law in not considering remand order of the Tribunal and confirming the demand beyond the scope of remand proceedings?
(ii) Whether or not the Hon’ble Tribunal erred in law in not considering production capacity on the basis of certificate of various authority and confirming demand beyond the production capacity on assumption basis?
(iii) Whether or not the Hon’ble Tribunal erred in law in not permitting determination of production capacity on identical machine at any other factory?
(iv) Whether or not the Hon’ble Tribunal erred in law in not considering other legal submissions of production capacity under rule 173E?”
6. Both the Tax Appeals are taken up for final hearing forthwith, as the notice was issued for final disposal.
7. The appellant of the Tax Appeal No.405 of 2018 is a Company, incorporated under the Companies Act, whereas, the appellant of the connected Tax Appeal is a Director of the Company. The appellants are in the business of manufacturing Texturized Yarn. The appellants are assessees under the Act, 1944. The appellants have a factory situated at Village : Karanj, District : Surat. They installed one Himson Rieter Scragg Draw Texturising Machine in their factory on February, 1994 Model SDS-3 with 144 spindles purchased from M/s.Himson Engg. vide invoice dated 21.04.1994.
8. The factory premises of the appellant was visited by the officers of the Department on 05.04.1995 and a search was carried out of the factory premises. The statements of the Directors were recorded in the course of the search. In the course of the search of the factory premises, the officers of the Department took into possession documentary evidence in the form of Registers, etc. At the end of the inquiry, the Department came to the conclusion that the appellant was guilty of clandestine removal of the goods manufactured in the factory premises. In other words, the Department noticed that the goods were cleared without accounting in the central excise records and without payment of duty thereon.
9. In such circumstances referred to above, a show cause notice came to be issued dated 27th September, 1995, calling upon the appellant to show cause why a particular amount should not be recovered with penalty towards the unaccounted texturized yarn.
10. The appellants appeared before the concerned authority with necessary documentary evidence to make good their case that the allegation of clandestine removal of the goods from the factory premises without payment of duty was baseless. The principal argument of the appel
