Dismissed

Maheshwari Dyechem v. Ahmedabad-ii

CESTAT23 Apr 2018E/215/2009

Case brief

AI extract

What is this about?

The Tribunal upheld the Commissioner's demand for excise duty and penalty, rejecting the appellant's claim of mere trading. It held mixing water and emulsifiers with amino silicon constituted manufacture under section 2(f), finding the appellant possessed necessary machinery before the alleged takeover.

What did the court decide?

Excise duty and penalty were upheld; refund sanction was vitiated. Appeals dismissed.

Maheshwari Dyechem vs Ahmedabad-ii — Customs and Excise | CESTAT (2018)

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In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad

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Appeal No.E/215,834,1824/2009-DB

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[Arising out of OIO-20/Commr./RKS/AHD-II/2008 dated 14.11.2008 passed by the Commr. Ahmedabad-II]

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[Arising out of OIA-20/2009-AHD-II-CE/ID/COMMR-A-/AHD dated 20.01.2008 passed by the Commr. Amd-II] [Arising out of OIA-388/2009-AHD-II-CE/CMC/COMMR-A-/AHD/S/74-A-II-/09 dtd 09.11.2009 passed by the Commr. Amd-II]

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M/s Maheshwari Dyechem Appellant

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C.C.E. Ahmedabad-ii Respondent

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Represented by :

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For Appellant: Mr. P.M. Dave (Advocate) For Respondent: Mr. L. Patra (AR)

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CORAM:

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HON’BLE PRESIDENT MR. JUSTICE DR. SATISH CHANDRA HON’BLE Mr. C.J. MATHEW, MEMBER (TECHNICAL)

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Date of Hearing/Decision:23.04.2018

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Final Order No. A / 10767-10769 /2018

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Per: C J Mathew

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The first of these appeals are filed against order-in-original no. 20/COMMISSIONER/RKS/AHD-II/2008 dated 14^th November 2008 of Commissioner of Central Excise, Ahmedabad-II. The dispute has a protracted history of litigation and involves clearances from 1993-94 to 1996-97 which is now before the Tribunal for the third time.

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Owing to this peculiarity, and considering the turn of events, brief narration of the facts may not be out of place. Following searches carried out in 1997 at the premises of M/s Durant Chemicals Industries and subsequent investigations, show cause notice dated 2^nd March 1998 was issued to M/s Maheshwari Dye Chem, M/s Durant Chemicals Industries, and Shri Rajesh Kedarmal

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Baheti, proprietor of M/s Baheti Dyechem, for recovery of duty Rs 48,29,075 from the first, Rs 2,16,895 from the second and for imposition consequential penalties in relation to alleged clearance of ‘textile auxiliary chemicals’ between 1993 to 1998 without payment of duties of central excise. The facility of M/s Maheshwari Dye Chem had been taken over by M/s Durrant Chemical Industries, a proprietary enterprise of Shri Kedarmal Baheti, in December 1996.

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It was alleged that M/s Maheshwari Dyechem and the successor unit had manufactured and cleared ‘textile auxiliary chemicals’, viz. , ‘micro plus’, ‘micro-x’, and ‘micro-conc’ classified under heading 38.09 of the First Schedule to the Central Excise Tariff Act, 1985. The adjudicating authority, vide order dated 23^rd December 1998, confirmed duty liability of Rs. 22,16,106 on appellant and Rs. 2,14,895 on M/s Durrant Chemical Industries, along with interest thereon, and imposed appropriate penalties. The said liabilities, on being assailed before the Tribunal, was disposed off vide order dated 20^th May 2005, by remand after modifying penalties for re-computing the duty liability.

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The case was re-adjudicated by the Commissioner vide orderin-original dated 17^th November 2005. In the meanwhile, an appeal of M/s Maheshwari Dye Chem against order of the Tribunal (Tax Appeal No. 269/2006) before the Hon’ble High Court of Gujarat was allowed to be withdrawn in order dated 19^th September 2006 with the liberty to approach the Tribunal for rectification of its order.

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The application of M/s Maheshwari Dyechem for rectification of order dated 20^th May 2005 was allowed by the Tribunal vide its order dated 12^th February 2007, directing the adjudicating authority

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to also decide on the contention of the appellant that they had not undertaken any manufacture identical to that found at the time of search when the unit was in their control. The order-in-original dated 17^th November 2005 of Commissioner of Central Excise was thus rendered infructuous to be subsumed in the fresh adjudication.

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In compliance with the direction of the Tribunal, the adjudicating authority issued impugned order-in-original no. 20/2008 dated 14^th November 2008 leading to the third round of consideration by the Tribunal. It is noted that the demand of the duty was successively reduced on each occasion and the present appeal is confined to duty liability of Rs. 15,52,586/- with equal penalty imposed on M/s Maheshwari Dye Chem. Liability of duty on the part of M/s Durrant Chemical Industries and the individual have since been set aside.

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The second and third appeals now before us arise from orders of Commissioner of Central Excise (Appeals), Ahmedabad (order-inappeal no. 20/(Ahd-II)/CE/ID/Commr (A)(Ahd)/2009 dated 20^th January 2009 and order-in-appeal no. 388/(Ahd-II) CE/CMC/Commr (A)/Ahd/2009 dated 9^th November 2009) both of which pertain to the sanction of refund of amount of Rs 10,00,000 deposited during investigation and Rs 1,00,000 deposited as condition for stay of operation of recovery during pendency of main appeal before the Tribunal. The claim for refund was sanctioned by the original authority after the Tribunal had remanded the matter back to the original authority which, having been set aside on appeal of Revenue by the first appellate authority, is before us on appeal of M/s Maheshwari Dyechem. The protective demand for recovery of

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erroneously sanctioned refund, on deciding to challenge the sanction before first appellate authority, was confirmed by original authority and upheld by first appellate authority, is also before us on appeal of M/s Maheshwari Dyechem. These two appeals are only of consequence in the light of outcome of the main appeal and, hence, are disposed off together with the first.

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From the record, it appears that, on 5^th September 1997, a search was conducted at the business premises of M/s Durrant Chemical Industries with follow-up searches at the Bhilwara unit of the appellant as documents pertaining to the appellant were said to have been stored there. The details of facility and the seizure of documents were recorded in panchnama and statements of key persons were also recorded. Though it was claimed that it was the Bhilwara unit which was engaged in the manufacture ‘micro emulsion concentrate (MECT)’ that was sent to the appellant at Ahmedabad for dilution by adding water before supply in market, it was alleged by central excise authorities that it was the appellant who had engaged in manufacture of goods that were liable to duty.

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We have heard Shri Paresh M. Dave, Learned Counsel for the appellant, and Learned Authorized Representative.

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After hearing both the sides at length it is evident that the present dispute pertains to the period between 1993 and 1996 on the issue of manufacture having been undertaken. The submission of Learned Counsel is that dutiability does not arise on dilution of chemicals with water during the disputed period as deeming activities such as labelling or re-labelling and repacking from bulk packs to retail packs as manufacture was incorporated as note 5 in

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chapter 38 of the First Schedule to Central Excise Tariff Act, 1985 only in March 1997. The appellant claims that they were mere traders and it was only after December 1996 that manufacture commenced under the name and style of M/s Durrant Chemicals Industries. It is also the claim of Learned Counsel that the case of Revenue has been built on presumption and inference without considering that the machines inventorized in the panchnama were not in the facility operated by the appellant; that it was the new unit that had procured the equipment and that, sans the equipment, the old unit, i.e. the appellant, could not have manufactured any goods as alleged. He contends that the clearances detailed in the paper slips relating to earlier period had been merely totaled without ascertaining whether manufacture was undertaken by the appellant. According to him, this was sufficient to set aside the duty liability and penalty.

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Learned Authorized Representative states that the findings of the adjudicating authority are very clear: that the unit had merely changed its name in January 1997 while continuing the existing business which was evidenced by statements narrated above and in the panchnama. He also drew attention to the specific findings of the original authority, based on receipt dated 20^th September 1991 and delivery challan, that the stirrers with lifting device was with appellant before 1997 and for which depreciation was being claimed every year in their books of accounts; that addition of machinery as claimed by Learned Counsel would have reflected a higher value of assets in 1997 itself which is not apparent. It is also urged that the adjudicating authority has given clear findings to corroborate the

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reliance on paper slips.

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On scrutiny of the panchnama dated 5^th September 1997, it is taken note that stirrer machines with one homogenizer machine and one testing machine was found at the premises in Ahmedabad at the time of the search. From the statement of Shri Shankarlal Thakkar, Supervisor, it appears that water and emulsifiers were being mixed with amino silicon in stirrer machines and the resultant ‘textile auxiliary chemicals’ were marketed by them under the name of ‘micro film’ and ‘micro-X’ and ‘elastomer’, that the principal raw material was ‘amino silicon’ in which water and emulsifier were mixed in the machine to obtain the final product.

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The process of manufacture of ‘textile auxiliary chemical’ requires addition of emulsifier which serves as an active agent with the base material and the resultant products are distinguishable from the input in name, quality, character and use. Consequently, the process carried out by the appellant is undoubtedly ‘manufacture’ within the meaning of section 2(f) of Central Excise Act, 1944.

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The submission made on behalf of appellant does not suffice to controvert the specific findings, based on statements and panchnama, that appellant was in possession of the machinery at Ahmedabad before December 1997 and their claim of mere trading, on the basis of lack of machinery, is not tenable. The closure of the unit, or change in name, coupled with absence of evidence of overt manufacture and casting of aspersions on the reliability of paper slips cannot alter the finding that the machines were received by the appellant who had claimed depreciation thereon. From this, there

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can be no doubt that the lack of wherewithal for manufacture is not an acceptable defence. In the light of this, the significance of computation of clearances based on the paper slips cannot be wished away. Mere assertion of non-dutiability is not a substitute for evidence. No submission was made during the course of hearing except inadequacy of evidence and absence of facility to carry out any activity other than blending with water. The appellant is, accordingly, liable to duties of excise on the product cleared by them which was admittedly not discharged. In view of above, we are of the view that the lower authorities have appropriately demanded excise duty and imposed the penalty for the reasons mentioned in the impugned order.

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Hence, we decline to interfere with the impugned order. The sanction of refund claim is also vitiated in these circumstances. The three appeals are dismissed.

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On pronouncement in the open court, Mr Dave announced that the dispute would revert to the Tribunal on a fourth occasion after being set aside by the Hon’ble High Court. Reiterating that, as Secretary of the Bar Association, he would, and could, force a boycott of the bench that was not inclined to acquiesce to his demands and, upon his exhortation in the court, he, along with other counsels, staged a walk out.

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Therefore, before parting with the matter, our disquiet about the conduct and behavior in court and the manner in which the proceedings were sought to be perverted with such ill-grace must, with reluctance, find a place in the record. Generally, litigants are

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not personally present in court but are represented by counsels, both in acknowledgment of superior knowledge of legal process and as a mark of the assurance that the counsel will only act in the best interests of the absent litigant. A decision of the Tribunal is not the final word in the dispute and the road of appeal to the higher courts lies open – a reaffirmation of that trust reposed by the litigant in the judicial system and the professional recourse to these by counsel. When counsels betray that trust to sacrifice the interests of the litigant at the altar of personal aggrandizement, it is a sad day for a system that has survived odds to stand forth as a beacon of stability and faith. This is further compounded when, at that same altar, the interests of other litigants, not concerned in that particular dispute, are also sacrificed. Our angst cannot but be the anguish of all those who are called to ensure that the march of justice is unimpeded and continues to serve the greater purpose of survival of civilized society.

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It is inevitable that one of the litigants in a proceeding must fail, in part if not in entirety, despite which the litigant places itself in the jurisdiction of a court out of respect for civilized behavior that should ever distinguish all human intercourse and borne out of belief in the fairness of that institution. The outcome of a dispute, whether favourable or otherwise, is, without exception, acclaimed with a gratitude to the institution that has facilitated the peaceful articulation of the particular grievance. A threat to have the matter re-appraised by a higher court is not only an unseemly substitute but also demonstrates contempt for the entire appellate mechanism as well for the litigant. A right that is inherently available to disappointed litigants is not a weapon that needs to flashed in the

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manner that violence surrounds forcible concurrence - unless it is intended as a perception of threat with the aim of intimidation. To even conceive of such intimidation in the respectable environs of a court and in a proceeding conducted in the light of day is a symptom of hubris – self before the greater good.

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That the bench chose to be unmoved by the rants of a high officer of the bar association with extensive influence must have galled. The threat of boycott was a call to other counsels to abandon the cause of the litigants represented by them to obtain discharge for the appellant in this matter from duty liability. The resemblance to shop-floor strategy is marked – at least, shop floor tactics are governed by rules and guidelines. It was as clear a demonstration of his lack of faith in the interventionary power of the higher judiciary and constitutional courts as is humanly possible after his first threats to get the decision overturned. Obviously, the call for intercession of the Hon’ble High Court is not an article of faith for him; when that did not achieve the desired end, the mask of righteous indignation did slip. As to that which was exposed, that is best left to those who can think things through. Rudeness may be forgiven, professional discourtesy can be overlooked but contempt for the judicial system can be tolerated only at the cost of the faith of citizens in peaceful settlement of disputes.

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There is no material explanation for the exposive reaction except personal prejudice and rabble-rousing both of which are anathema in the hallowed precincts of the halls of justice. Mr. Paresh M. Dave chose to sacrifice his client and incited other counsels to abandon their clients without concurrence of and, worse, behind the back of clients who trusted their counsels for their ability,

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responsibility, diligence and dedication. Those who have reposed their fiscal future in responsible officers of the court must know of this perfidy for it is only they who can, in affirmation of their faith in the judicial process, insist on accountability for performance of their right to be heard in a dispute. The facts are simple enough: Mr. Paresh M. Dave insisted that taxability was the only ground on which he sought to represent the claim of the appellant. That approach, which the bench was disinclined to concur with, having failed did not suit Mr. Paresh M. Dave who must have assured himself of victory in this forum. And the unseemly conduct was the consequence. That justice was tainted in its own halls and by an officer of the court, whose vocation is the furtherance of justice and perpetuation of a just equitable system, prompts our regret in recording this narration. We would be lowering the dignity of the judicial process if we forbore to do so. Nevertheless, again bearing that dignity in mind, we choose not to say more save that introspection by counsel and his colleagues is a consummation that is devoutly to hoped for.

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In view of above, the conduct of Mr. Paresh M. Dave, Advocate is condoned without saying much.

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(Operative portion upto paragraph 15 pronounced and dictated in open Court)

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(C.J. MATHEW) (JUSTICE DR. SATISH CHANDRA) MEMBER (TECHNICAL) PRESIDENT

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Neha

Maheshwari Dyechem v. Ahmedabad-ii

Case brief

What is this about?

What did the court decide?

Maheshwari Dyechem v. Ahmedabad-ii

Case brief

What is this about?

What did the court decide?

What the court decided

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