Custom, Excise & Service Tax Tribunal
M/S Davinder Sandhu Impex Ltd vs Cce, Ludhiana on 14 September, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. II DATE OF HEARING/DECISION : 14/09/2015. Excise Appeal No. 195 of 2007 with Misc. Application No. 51821 of 2014 and Appeal No. 196 of 2007 [Arising out of the Order-in-Original No. 21/Ldh/2006 dated 27/10/2006 passed by The Commissioner of Central Excise, Ludhiana.] For Approval and signature : Honble Shri Ashok Jindal, Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) 1. Whether Press Reporters may be allowed to see : the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair : copy of the order? 4. Whether order is to be circulated to the : Department Authorities? M/s Davinder Sandhu Impex Ltd. ] Appellant Shri Baldev Singh, Director ] Versus CCE, Ludhiana Respondent
Appearance Shri B.L. Narasimhan, Advocate for the appellant.
Shri R.K. Grover, Authorized Representative (DR) for the Respondent.
CORAM: Honble Shri Ashok Jindal, Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) Final Order No. 52894-52895/2015 Dated : 14/09/2015 Per. Ashok Jindal :-
The appellants are in appeal against the impugned order confirming the demand of duty alongwith interest and imposition of penalty on both the appellants on the charge and clandestine removal for the period 1st April 2003 to 21st May, 2004. The Revenue has filed an application for early hearing of appeals. As the appeals are already listed today for disposal, therefore, the application for early hearing of appeals has become infructuous. Accordingly, the same are dismissed as infructuous.
2. The facts of the case are that a team of Central Excise officers visited to the factory premises of the appellant on 25th May, 2004 and had a search operation. They did not find any discrepancy in any stock physically present and in records. On 21st May, 2004, the statement of Shri Baldev Singh, Managing Director of the appellant was recorded, wherein shortages has been worked out on the basis of the statement i.e. 15 to 20% wastage took place in manufacturing of their final product and the same was admitted by Shri Baldev Singh. Therefore, it was alleged that appellants have cleared the goods without issue of invoice and without accountal and without payment of duty. The said statement was retracted by Shri Baldev Singh on 31st May, 2004. Thereafter on 3rd May, 2005, another statement was recorded by the Department which was also retracted on the same day by Shri Baldev Singh. Thereafter, a show cause notice was issued to the appellants on 5th October, 2005 by invoking extended period of limitation on the ground that appellants have clandestinely manufactured Mufflers and T-Shirts from different type of yarns found short and removed the same clandestinely without payment of duty, invoices and without accounting the same. The matter was adjudicated and the impugned order has been passed. Aggrieved from the said order, appellant is before us.
3. The learned Counsel for the appellant submits that in this case there was no shortage of finished goods were found at the time of search and the raw material found short was assumed by the authorities below that same has been used in manufacturing of final product which have been removed clandestinely without payment of duty. The said charge is only on the basis of assumption and presumption without any supportive evidence. He further submits that the case has been made by the Department on the basis of the statement of Shri Baldev Singh, wherein he has stated that the wastage works out 10 to 15%. In fact before issuance of the show cause notice, the learned Commissioner sought an information from Knitwear Club, Ludhiana to ascertain the fact how much is the waste occurs during the activity undertaken by the appellant which was replied by the Knitwear Club, Ludhiana on very next day stating that wastage is of around 40%. If the said wastages of 40% is taken up for consideration, there will be no shortage of yarn and consequently, the charge of clandestine removal will not sustain. He further submits that to allege that appellant has cleared goods clandestinely apart from statement of Shri Baldev Singh, no other corroborative evidence has been brought on record by the authorities below, therefore, impugned order is to be set aside. In support of his contentions, he relied on the decisions of CCE vs. Saakeen Alloys Pvt. Ltd. reported in 2014 (308) E.L.T. 655 (Guj.) which has been affirmed by the Honble Apex Court reported in 2015 (319) E.L.T. A117 (S.C.). He also relied on the decision of Mahavir Metals Industries vs. CCE & CUS, Daman, Vapi reported in 2014 (313) E.L.T. 581 (Tri. Ahmd.), Klene Paks Ltd. vs. CCE, Bangalore I reported in 2009 (247) E.L.T. 271 (Tri. Bang.) and CCE & CUS. & SER. TAX, DAMAN vs. Nissan Thermoware P. Ltd. reported in 2011 (266) E.L.T. 45 (Guj.). He, therefore, prayed that the impugned order is to be set aside.
4. On the other hand, learned AR opposed the contention of the learned Counsel and submits that the learned Commissioner (Appeals) has considered all the aspects raised by the appellant and it is the statement of the Managing Director Shri Baldev Singh who himself admitted that there is wastage of 10 to 15% and retraction was done later on, therefore, same is admissible evidence. Moreover, the appellant is an exporter under DEEC Scheme and while filing their shipping bills, the appellant has declared the composition and quality of raw material used for manufacture of goods exported and on the basis of composition declared on shipping bills which corroborates with the statement of Shri Baldev Singh, the learned Commissioner has come to a conclusion that the statement given by Shri Baldev Singh is correct, therefore, the charge of clandestine removal has been proved. He further submits that the wastage claimed by the appellant on the basis of the letter issued by Knitwear Club is not relevant when the wastage is ascertainable from the export documents and which has been admitted by the Managing Director of the appellant. Therefore, the impugned order is to be upheld.
5. Heard the parties considered the submissions.
6. In this case during the course of investigation, the statement was recorded and the statement given by Shri Baldev Singh, Managing Director admits that there is a shortage of 10 to 15% for manufacturing the final product and it is also admitted by Shri Baldev Singh that they have cleared certain goods without payment of duty, but the said statement was retracted by Shri Baldev Singh who claims to be that same has been recorded under influence and duress, thereafter, another statement was recorded on 3rd May, 2005 which was also retracted on the same day, where also same statement recorded which is a typed one and it is the claim of the Revenue that same has been typed by Shri Dinesh Kumar (who is an employee of the appellant) in the office of the Department. To that effect, Shri Dinesh Kumar filed an affidavit on 1st August, 2006 that the statement has been typed by the officers of the Department themselves not by him and that said affidavit has not been controverted. Further, the cross examination of Shri Ashwani Kapoor, Inspector on 3rd August, 2006 explaining that wastage on each stage of production have not been considered by the Adjudicating Authority. Moreover, the Knitwear Club, Ludhiana which is an independent body have also stated in their letter dated 19 May, 2005 that in normal course, there is a wastage of around 40% same has also not been considered by the Adjudicating Authority but without bringing any corroborative evidence apart from statement of Shri Baldev Singh demand has been confirmed. Such a situation has been dealt by this Tribunal in the case of Klene Paks Ltd. vs. CCE, Bangalore I (supra), wherein the facts of the case are as under :-
2.?The relevant facts that arise for consideration are appellant-company herein are manufacturers of HDPE/PP, woven fabrics, sacks. The appellant-company availed Cenvat credit of the duty paid on HDPE/PP granules purchased from various manufacturers like M/s. GAIL; M/s. Reliance Industries Ltd; M/s. HPCL etc. The officers of the DGCEI visited their factory and carried out various investigations. First show cause notice dated 4-7-2003 was issued directing one of the appellant-company herein to show cause as to why the 323 bags of plastic granules seized in the godown of M/s. Mahalakshmi Plastics be not confiscated. Further, investigations were carried out by the authorities and statements of various persons like the officers, directors of the company and also the suppliers of raw materials were recorded. Investigations culminated in issuance of show cause notices which summarises the contraventions, main allegation being, that the appellants had contravened the provisions of Rule 57A/57AB of the Central Excise Rules, 1944 and Rule 3(4) of the Cenvat Credit Rules, 2001-2002 inasmuch as they had not used Cenvat credit availed plastic granules in the manufacture of woven fabrics/sacks, but appear to have clandestinely removed them without payment of duty. The said show cause notices while quantifying the demand, worked out the demands based upon the wastage that could be permitted to the appellants which was pegged at 7.5% (based upon percentage of wastes in other factories) and input-output ratio in the Handbook of Procedures of the EXIM Policy and concluded that the reasonable wastage that could be allowed to the appellants is in the range of 7.5%, while the actual percentage of waste is more than that. Coming to such a conclusion, a demand was raised on all the appellants..
7. In these set of facts, this Tribunal has observed as under :-
5.1?As regards the merits of the case, we find that the impugned orders have proceeded on the ground that the appellants had shown excess percentage of waste and by showing such excess percentage of waste, they had cleared the HDPE/PP granules clandestinely without reversal of Cenvat credit or without paying any duty. It is undisputed that there is no evidence of any sought whatsoever in all these appeals, as to who is the purchaser of so-called clandestinely removed HDPE/PP granules. The entire Orders-in-Original only proceeds on the ground that the appellants could not have manufactured HDPE/PP sacks or fabrics by using non-standard grades of HDPE granules. We cannot accept the proposition as mere assumptions and presumptions, cannot be the basis for coming to a conclusion that there was clandestine removal. It is now a well settled law that mere presumptions and assumptions cannot be the basis for fastening the charge of allegation of clandestine removal.
8. We further find that in the case of CCE, CUS. & SER. TAX, Daman vs. Nissan Thermoware P. Ltd. (supra), the Honble Gujarat High Court has observed as under :-
7.?Thus, on the basis of findings of fact recorded by the Tribunal upon appreciation of the evidence on record, it is apparent that except for the shortage in raw material viz., HD which was disputed by the assessee and the statement of the Director, there was no other evidence on record to indicate clandestine manufacture and removal of final products. On behalf of the revenue, except for placing reliance upon the statement of the Director recorded during the course of the search proceedings, no evidence has been pointed out which corroborates the fact of clandestine manufacture and removal of final products. In the circumstances, on the basis of the material available on record, it is not possible to state that the Tribunal has committed any legal error in giving benefit of doubt to the assessee.
and thereafter the Honble Gujarat High Court has held that the confessional statement of an accused in criminal offence which cannot be par with the statement recorded during preventive checks, therefore, the Honble High Court has set aside the charge of clandestine removal.
9. We also find that in the case of Mahavir Metals Industries vs. CCE & CUS, Daman, Vapi (supra), this Tribunal further held as under :-
7.?I further note that my learned brother has also recorded that in absence of any specific evidence to support the clandestine removal of the quantity, it is necessary that the details given by the appellant subsequently are considered and commented upon. While agreeing with my learned brother that there is no specific evidence to uphold the finding of clandestine removal, the remand of the matter for re-calculation of shortages would be only a theoretical exercise. It is settled law that such calculation of shortages arrived at on the basis of input-output calculation, cannot be made the basis of clandestine removal. The appellants have also challenged that the statement of the authorized signatory as also by the partner do not stand corroborated with sufficient evidence as they are against the record and cannot be made the sole basis for holding against them. I agree that the veracity of the statements has to be gauged from the accompanying circumstances and has to be corroborated by way of same independent evidences, which is fully absent in the present case. As such, I am of the view that in the light of various decisions relied upon by the appellant in their memo appeal, such statements which are inconsistent with the documentary evidences, only raises a doubt, but cannot take the place of an evidence. As such, I am of the view that the impugned order is required to be set aside in totality and the appeal is required to be allowed.
16.?On perusal of the Order-in-Original and Order-in-Appeal, I find that the appellant has taken a consistent stand before both the lower authorities that the burden of proof as regards allegation of clandestine removal is on the Department. It is seen from the records that the entire charge of clandestine removal of the finished goods is based upon the theoretical working of calculating the consumption of inputs and presumptive clearance of the finished goods from the factory premises of the appellant. The assumptions which have been considered by the Revenue authorities are totally faulty inasmuch as that the charge of clandestine removal is first to be established based upon the clandestine manufacture and removal of the goods. In the instant case, except for the statements of the partners that there was clandestine removal of the finished goods, there is nothing on record to indicate that the appellant assessee had, in fact, manufactured the final products out of the inputs detected short on the calculation of input-output ratio. I find that as correctly pointed out by the ld. Counsel that this Bench in the case of Suzlon Fibres Pvt. Ltd. (supra), in Para 3 has categorically stated as under :
3.?We agree with the above contention of the ld. Advocate, apart from the input-output ratio, there is no evidence on record to show clandestine manufacture and clearance of the goods. Such cases are required to be established beyond doubt on the basis of concrete and positive evidences. We accordingly set aside the impugned order and appeals are allowed with consequential relief.
17.?My view as regards there cannot be allegation of clandestine removal unless there is an evidence to indicate that there was clandestine manufacturing, is fortified by the judgment of Honble High Court of Gujarat in the case of Nissan Thermoware Pvt. Ltd., wherein their Lordship have held as under :
7.?Thus, on the basis of findings of fact recorded by the Tribunal upon appreciation of the evidence on record, it is apparent that except for the shortage in raw material viz., HD which was disputed by the assessee and the statement of the Director, there was no other evidence on record to indicate clandestine manufacture and removal of final products. On behalf of the revenue, except for placing reliance upon the statement of the Director recorded during the course of the search proceedings, no evidence has been pointed out which corroborates the fact of clandestine manufacture and removal of final products. In the circumstances, on the basis of the material available on record, it is not possible to state that the Tribunal has committed any legal error in giving benefit of doubt to the assessee.
18.?In view of the foregoing and there being no concrete evidence (as agreed by both the Members) of clandestine removal of the goods, the appeals are required to be allowed as held by Honble Member (Judicial). I have concurred with her views.
10. Further, we find that the Honble Gujarat High Court in the case of CCE vs. Saakeen Alloys Pvt. Ltd. (supra), the Honble Gujarat High Court has observed as under :-
7. As can be noted from the decision of the Tribunal,? it has extensively dealt with the entire factual matrix presented before it. The Tribunal rightly concluded that in the case of clandestine removal of excisable goods, there needs to be positive evidences for establishing the evasion, though contended by the Revenue. In absence of any material reflecting the purchase of excessive raw material, shortage of finished goods, excess consumption of power like electricity, seizure of cash, etc., the Tribunal noted and held that there was nothing to bank upon except the bare confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time of their recording. The Tribunal also noted the fact that the requisite opportunity of cross-examination was also not made available so as to bring to the fore the true picture and therefore, it concluded against the Revenue observing that not permitting the cross-examination of a person in-charge of records of M/s. Sunrise Enterprises and absence of other cogent and positive evidences, would not permit it to sustain the demand of Rs. 1.85 Crores raised in the Demand notice and confirmed by both the authorities below.
which has been affirmed by the Honble Apex Court.
11. In this case also, we find that the case has been made out only on the basis of the statement of Shri Baldev Singh, Managing Director of the appellant and no other evidence in the form of to manufacture of such huge quantity, the consumption of electricity, additional packing material, payment for purchase of additional packing material, payment received for clandestine removal goods, how the goods were transported has been brought on record by the Adjudicating Authority or the inspecting team, therefore, relying on the above said decision cited hereinabove, we hold that charge of clandestine removal is not sustainable in the absence of any corroborative evidence to the statement of Shri Baldev Singh, Managing Director.
12. In these circumstances, we set aside the impugned order and allow the appeals filed by the appellants with consequential relief.
(Operative part of the order pronounced in the open court.) (Ashok Jindal) Member (Judicial) (B. Ravichandran) Member (Technical) PK ??
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