Custom, Excise & Service Tax Tribunal
Shri Kartik R Shah vs Ahmedabad-Iii on 18 January, 2019
In The Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
Impugned
Appeal No. Arising out of Passed by Appellant Respondent
order dated Commissioner ( Appeals ) OIA-CCESA-
E/10151/2018- Commissioner of Central Shah Foils C.C.E. & S.T.-
SRT-APPEAL- 29/09/2017
DB Excise, Customs and Service Limited Surat-ii
PS-36-2017-18
Tax-SURAT-I
OIA-RAJ- Commissioner ( Appeals )
E/10152/2018- EXCUS-000- Commissioner of Central Shah Foils C.C.E. & S.T.-
02/11/2017
DB APP-115-2017- Excise, Customs and Service Limited Rajkot
18 Tax-RAJKOT
Commissioner ( Appeals )
OIA-CCESA-
E/10153/2018- Commissioner of Central Shah Foils C.C.E. & S.T.-
SRT-APPEAL- 29/09/2017
DB Excise, Customs and Service Limited Surat-i
PS-35-2017-18
Tax-SURAT-I
OIO-AHM- Commissioner of Central
E/11433/2018- Shri Kartik R C.C.E. & S.T.-
EXCUS-003- 27/02/2018 Excise, Customs and Service
DB Shah Ahmedabad-iii
COM-12-17-18 Tax-AHMEDABAD-III
OIO-AHM- Commissioner of Central
E/11436/2018- Shri Ramesh C.C.E. & S.T.-
EXCUS-003- 27/02/2018 Excise, Customs and Service
DB M Shah Ahmedabad-iii
COM-12-17-18 Tax-AHMEDABAD-III
OIO-AHM- Commissioner of Central
E/12274/2018- Shah Foils C.C.E. & S.T.-
EXCUS-003- 27/02/2018 Excise, Customs and Service
DB Limited Ahmedabad-iii
COM-12-17-18 Tax-AHMEDABAD-III
Represented by:
For Appellant: Mr. Anand Nainawati (Advocate)
For Respondent: Mr. T.G. Rathod (AR)
CORAM:
HON'BLE MR. RAMESH NAIR, Member (JUDICIAL)
HON'BLE MR. RAJU, Member (TECHNICAL)
Date of Hearing:29.11.2018
Date of decision:18.01.2019
Final Order No. A/ 10120-10125 /2019
Per: Ramesh Nair
The present appeals have been filed by M/s Shah Foils Ltd (SFL), its directors Shri Ramesh Manilal Shah and Shri Kartik Ramesh Shah, against the Order-in-original No. AHM-EXCUS-003-COM-12-17-18 dt. 27.02.2018, Order-in-appeal NO. RAJ-EXCUS-000-APP-AA5-2017-18 dt. 07.11.2017, Order-in-appeal No. CCESA-SRT (Appeal) PS-35/2017-18 dt. 29.09.2017 and Order-in-appeal No. CCESA-SRT (Appeal) PS-36/2017-18 dt. 29.09.2017. The impugned Order-in-Original dt. 27.02.2018 has been
2|Page E/10151-10153,11433,11436,12276/2018 passed by the Commissioner, Central Excise, Ahmedabad wherein the demand of duty against Appellant M/s Shah Foils was confirmed alongwith interest and penalty. Also penalties were imposed against other Appellants namely Shri Ramesh Manilal Shah and Kartik Ramesh Shah. In case of Order-in-appeal dt. 07.11.2017 a penalty of Rs. 4,62,986/-, in case of Order-in-appeal both dt. 29.09.2017 a penalty of Rs. 10,000/- and Rs. 1,00,000/- has been imposed upon M/s SFL in terms of Rule 26 (2) of the Central Excise Rules, 2002. The facts of the case are that the main Appellant M/s Shah Foils are engaged in manufacture of Stainless Steel Cold Rolled (SSCR) Coils falling under chapter 72 of the Central Excise Tariff Act, 1985. Based upon investigation they were issued show cause notice dt. 06.05.2014 alleging clandestine removal of goods. The demands were raised on the ground that investigation and searches were conducted at the factory and office premises of the Appellant concern and one trading firm M/s Sankalp Foils Pvt. Ltd (SFLP). Search proceedings was also conducted at premises of Lottery/ Icecream stall of one Shri Manoj Tanna situated opposite the office premises building of M/s Sankalp Foils Pvt. Ltd. (SFPL), a firm engaged in trading goods of M/s SFL at Mumbai. The search of said stall resulted into recovery of incriminating documents indicating clearances effected by SFL and one key of locker of Shri Ramesh M Shah and the same were kept under seizure. Search proceedings of locker resulted into recovery of 11 bundles of loose papers and three pen drives. One more key of locker was found from the said locker. Both the lockers were found to be operated by Shri Ramesh Shah under fictitious name. The data found in pendrives were compared with the handwritten sheets in Gujarati which were found from seized bundles. The figures shown in papers and pen drives were complied and it was alleged that the same pertains to clandestine clearances by Appellant.
3|Page E/10151-10153,11433,11436,12276/2018 The ledgers showed the cash sales of the Appellant under "Bombay sales"
ledger and "Smi (cash)"ledger. The ledger was also of "only bills"
meaning thereby the issue of invoices without actual receipt of goods. It also contained cash sales folder and ledger of sales made on invoices and also issue of invoices without actual clearance of goods. The data retrieved was for the period April' 2009 to 10.07.2012. Based on the statements of director of M/s SFL and the brokers/ buyers of finished goods who stated that the ledger contains details of transaction of M/s SFL and the sheets written in gujarati language also have same data. The Show Cause Notice alleged that M/s SFL has acted in contravention of provisions of Central Excise Act as they had received unaccounted raw-materials, suppressed production and clandestinely removed goods against cash sales, issued invoices without actual clearance of goods, availed cenvat credit without actual receipt of goods. That the cash received from proceedings was also paid as rate difference in cash to one Shri Rameshji - Jindal Steels. The demands were proposed against M/s SFL as under :
(i) A demand of Rs. 13,22,68,484/- was made on the ground that M/s SFL has cleared their final product without payment of duty as found from the ledger accounts "Bombay Sales" and "Smi (Cash)"
maintained in pen drive. The goods were cleared to various parties in and around Mumbai. Particulars of such cash sales were also shown in the ledger of brokers like Atul Bhai, Narendra Bhai etc.
(ii) A demand of Rs. 86,71,119/- was made on the ground that M/s SFL has suppressed the production of finished goods and cleared the same without payment of duty to buyers other than "Bombay Sales" as detailed in ledger "Smi (Cash)".
4|Page E/10151-10153,11433,11436,12276/2018
(iii) a demand of Rs. 6,35,42,173/- was made on the ground that they have suppressed production of finished goods as detailed in ledger "Smi (Cash)" and cleared the same without payment of duty.
(iv) A demand of Rs. 1,07,76,233/- was made on the ground that M/s SFL has undervalued their goods at the time of clearance as found from the ledger account "Direct Purchase (Value Diff.)" and "Direct Sales (Value Diff.)".
(v) A demand of Rs. 31,40,087/- was made on the ground that M/s SFL has availed credit on the basis of invoice without actual receipt of goods.
2. It was also proposed to impose penalty on M/s SFL and other appellants. The adjudicating authority vide impugned order dt. 27.02.2018 confirmed the demand as proposed in the show cause notices and also imposed penalties against the Appellants. Resultantly Appeal No. E/12274/2018 by M/s SFL, Appeal No. E/11436/2018 by Shri Ramesh M Shah and Appeal No. E/114433/2018 have been filed.
3. Based on aforesaid investigation a Show Cause Notice dt. 30.04.2015 alleging that M/s Clayris Ceramics Pvt. Ltd., Morbi has availed credit on the basis of invoices without receipt of goods from M/s SFL through M/s Swastik Metals Distributors Pvt. Ltd. A Show Cause Notice dt. 12.02.2015 was issued alleging that M/s Rajdeep Boiler Pvt. Ltd. has availed credit on the basis of invoice issued by M/s SFL through M/s Honest Enterprise Ltd. and M/s Abhishek Ispat Pvt. Ltd both registered dealer. In another Show Cause Notice dt. 27.12.2015 it was alleged that M/s SFL has issued only invoice to M/s Lucy Engineering Works without actual delivery of goods. Accordingly it was proposed to demand the ineligible cenvat credit availed by M/s Lucy engineering Works Pvt. Ltd. It
5|Page E/10151-10153,11433,11436,12276/2018 was also proposed to impose penalty upon M/s SFL under Rule 26. The proposals of the show cause notices were confirmed by the adjudicating authority and upheld by the Commissioner (Appeals) vide Order-in-appeal NO. RAJ-EXCUS-000-APP-AA5-2017-18 dt. 07.11.2017, Order-in-appeal No. CCESA-SRT (Appeal) PS-35/2017-18 dt. 29.09.2017 and Order-in- appeal No. CCESA-SRT (Appeals) PS-36/2017-18 dt. 29.9.2017. Aggrieved, M/s SFL has filed Appeal Nos. E/10152/2018 - SM, E/10153/2018 and E/10151/2018 respectively which being emanating from same investigation are also being taken up for disposal by common order.
4. In case of impugned order dt. 27.02.2018, the adjudicating authority has confirmed the demand of Rs. 13,22,68,484/- on the ground that the ledgers found in the seized pen drives from lockers pertained to account of M/s SFL. The sheets found in bundles were hand written by director of M/s SFL in gujarati language having details of clearance of goods and the same are matching with the data in pen drive. The ledger account "Bombay Sales" printed from pen drives seized from the locker at Venilal Safety Vaults on 10.07.2012 reflects details of sales of goods by the Appellants in cash to parties without invoice and without payment of duty as the same have not been reflected in the recorded sales ledger account of "Direct Sales". It appears that such cash sales are affected through various brokers and sale amount from one or more buyers through the broker at one time is shown in ledger. Total of such sales through the broker are consolidated in the category of "Bombay Sales"
and particulars of such sale are also shown in the ledger accounts of individual brokers. The particulars of "Bombay Sales" do not match with any invoice and is not reflected in the ledger category "direct sale" which refers to sale on invoices. Thus such a cash sale is treated as clandestine
6|Page E/10151-10153,11433,11436,12276/2018 sale without any invoice. The ledgers obtained from 3 Pen drives and 11 bundles of paper at Venilal Safety Vaults reflect the transactions of SFL and of M/s SFPL as it was admitted by Shri Ramesh Shah in statement dt. 10.07.2012 that the data contained in the pen drive, the hand written papers and hard copy of ledgers belong to SFL showing the sale and purchase transactions party wise. SFLP is a different and independent trading unit and has a godown at Vasai. Therefore it is not logically correct that both the units have a common ledger. Even Shri Ramesh Shah could not explain as to how the data of SFPL got integrated in the SFL ledger. As per simple accountancy principles, any single account reflecting opening balance, incoming, outgoing and closing balance can never reflect the transactions of two different firms at a time. Since some part of the details reflected are recorded transactions of SFL, the cash transactions referred to in "Bombay Sales" are also to be of SFL. Shri Ramesh Shah on one side has stated that due to his wife illness, he was unable to look after the affairs of the company and on the other side he has contended that he was maintaining the details of business transactions of the Shri Snehil R Shah, director of SFPL. Shri Ramesh Shah is a director of company having turnover of more than 200 Crores and inspite of his wife illness, he was maintaining records in his own handwriting for SFPL a small trading concern.. The office of the SFL and SFPL are in the same building and SFPL has been created as trading firm with the intention of camouflaging the clandestine transactions of SFL and after booking of the case, M/s SFPL has been closed down and registration surrendered. The pen drive also contains recorded transactions of SFL cleared with invoice. Further the capital account does not show any investment of Snehil R shah who is director of SFPL. Therefore the account of Bombay Sales and other data belong to SFL. If goods of any
7|Page E/10151-10153,11433,11436,12276/2018 consignee are diverted by SFPL then the parties should object to it and would have taken action since they have purchased the goods or should have stopped storing with SFPL. Shri Kartik Shah, the director of SFL could not reconcile the claimed invoice quantity with the Bombay Sales transaction. That as stated by Brokers, they arranged prospective buyers and collected cash and advised the Appellants to send the goods to the Vasai godown as the buyers were advised to lift the goods from Vasai Godown. The sale to individual buyers in cash was referred in "Bombay Sales" ledger account maintained by the Appellants. There was no connection between the invoice and its quantity destined for cash sale and the issue of invoice was done primarily with two objectives (i) to give invoice without goods to parties who did not want goods but only invoices to take credit, and (ii) certain quantity of goods were to be sold to buyers on cash basis as arranged by the brokers and those goods sent to SFPL. If the goods of any consignee are diverted by the storage provider i.e SFPL, then the parties should object to it and would have complained to the Appellants since they have purchased the goods and not received the goods.
5. The adjudicating authority confirmed demand of Rs. 7,22,13,292/- on account of ledger account "Smi (Cash) holding that the said ledger covers several transactions including particulars of receipt of large amount of cash by SFL from various persons. The transactions are shown as "cash" in the ledger and which appears to be receipt of huge cash amounts by SFL relating to their cash sale of goods. Similarly some transactions show the name of the party in which the entries of cash receipts also indicate quantity of the goods sold in kgs and rate per kg. Scrutiny of ledger account "Smi (Cash) reveals cash purchases of inputs by SFL from various parties. The Particulars shown under entries like
8|Page E/10151-10153,11433,11436,12276/2018 "cash" or sale against certain names do not match with the recorded sales. The receipt of regular huge amount of cash can only be on two accounts i.e. Sale proceeds of goods by SFL or receipt of cash loans from parties whose names are mentioned in the Smi (Cash) ledger account. The said ledger account nowhere reflects return of the amounts to said parties, the receipt of said cash amounts can only be against cash sale of goods. The sale shown in "Smi (Cash)" does not match with the recorded cash sales. Shri Kartik Shah admitted the fact of cash sale of goods and issuance of only sale invoice to the parties without sale of goods in his statement dt. 28.01.2014. His contention that SFPL was responsible for cash sales of the goods after clearance from SFL on payment of duty is afterthought. Shri Kartik Shah admitted in his statement dt. 29.01.2014 making cash payments to M/s Jindal Stainless Steel/ Ramesh Agarwal of Rs. 5/- per Kg towards purchase of SSHR Coils. Scrutiny of ledger account "Smi (cash)"reveals cash purchase of SS Coils from Goa Metal. Shri Ramesh Jain, Proprietor of Goa metals admitted having sold the mentioned goods to SFL. As regard undervaluation of goods as detailed in ledger account "Direct Purchase (Value Diff.) and ""Direct Sales" (Value Diff) the adjudication authority confirmed demand of Rs. 1,07,76,322/- on the ground that both the ledger accounts are related to some invoice of SFL. It is seen that though the quantity of goods shown in both these ledger accounts are same, the value is different in both ledgers. Investigation reveals that the ledger account "Direct Purchases (Value. Diff)" were reflecting details of the goods as per invoices of SFL and the ledger account "Direct Sales (Value Diff)" were reflecting details of goods sold in actual. SFL was recovering additional amounts in cash over and above the actual invoice value from the customers and thus undervalued
9|Page E/10151-10153,11433,11436,12276/2018 the final goods for purpose of payment of central excise duty. Shri Kartik Shah has admitted the above.
6. The demand of Rs. 31,40,087/- was confirmed on the ground that M/s SFL has availed ineligible credit without actual receipt of inputs. The ledger account "Smi (Cash)" reflects receipts of only invoice by SFL without actual receipt of goods. The entry with respect to such receipts are shown as "Only bills". That cenvat credit has been availed by SFL on these bills. Since these goods were not received alongwith the invoices, the credit availed appears inadmissible. Shri Kartik Shah in his statement dt. 28.01.2014 has stated that on some occasions SFL used to purchase their raw material through SFPL under the cover of proper documents. That on perusal of ledger it is seen that M/s SFPL procured the goods in cash from some parties and also procured invoices from some other parties and sent the cash purchased to SFL alongwith the invoices. Thus Shri Kartik agreed to the receipt of invoices from some suppliers without receiving goods from those suppliers instead as claimed by him, the goods were procured from a different person. Although Shri Kartik tried to prove that the entire job of procurement was done by M/s SFPL, the claim does not appear to be correct since the involvement of SFPL does not come on record and no evidence was supplied by SFL that the invoice accompanied the goods when they themselves stated in the ledger entry as "only bills".
7. In case of impugned Order-in-Appeals, the Appellate authorities has upheld the penalties imposed upon M/s SFL under rule 26 (2) holding that the invoices were issued without actual delivery of goods by relying upon the same investigation.
8. Being aggrieved by the impugned orders the Appellants have filed the instant appeals.
10 | P a g e E/10151- 10153,11433,11436,12276/2018
9. Shri Anand Nainawati, Ld. Counsel appearing for the Appellants submits that in case of impugned order dt. 27.02.2018, the allegation have been made on the basis of statements of persons where all of them were shown the seized ledgers and data and all have accepted the clandestine clearance and other allegations. He submits that during the search at Appellant's premises no incriminatory document or evidence was found. They are selling goods through their dealer M/s Sankalp Foils Pvt. Ltd. (SFPL) or sales to buyers through brokers and direct sales. In case of sale made to buyers in and around Mumbai, the orders are placed through SFPL or through brokers, they clear the goods to Vasai Godown of M/s SFPL on payment of excise duty from where the goods are cleared to end buyers as and when requested. During search of office premises of M/s SFPL the documents pertaining to M/s SFPL was found and not a single document pertaining to M/s SFL was found which shows that the office is not of M/s SFL and the same was also clarified by Shri Ramesh, director of M/s SFL. During search at lockers at Venilal Safety Vaults, the key of which was recovered from icecream stall of Shri Manoj Tanna, 11 bundles of loose papers were found out of which 4 bundles were papers written in gujarati, 3 bundles contained computer generated printouts and 4 bundles contained handwritten yellow coloured delivery challans and summaries thereof. 3 pendrives were also seized. Statements of director Shri Ramesh Shah and Shri kartik Shah was recorded on different dates. Statements of brokers Shri Atul Parekh, Shri Chhailsingh Deora, Shri Narendra Shah and buyers Shri Ashok Shah of Suraj ltd., Shri Ketan Jain of M/s Goa Metals, Shri Pravin Mehta of Jigar Plast, Shri Devang Bhayani (Trinity Plast), Shri Rameshchandra Gada of Axis Impex, Shri Mukesh Jain of M/s Magma Industries has been recorded. Except the said persons no statement of 11 | P a g e E/10151- 10153,11433,11436,12276/2018 any other person has been recorded. The show cause notice has relied upon only the handwritten sheets and data from pen drives. At the time of adjudication proceedings they had sought cross examination of the persons whose statements has been relied upon in the show cause notice. However the same was denied on the incorrect ground that the Appellant have fully availed the opportunity of examining the veracity of the entire set of documentary and oral evidences gathered from the witnesses, namely brokers, buyers etc. The Ld. Counsel submits that the contention of the adjudicating authority that director Shri Ramesh of M/s SFL has been shown various documentary evidences and he has confirmed the correctness of statements on the basis of evidences and no objection was raised by him is incorrect. It is only after issuance of show cause notice that it is known as to which statement and evidence has been relied upon in the show cause notice and hence the requirement of compliance with the provisions of section 9D and cross examination cannot be dispensed on above assertion made by the adjudicating authority. Therefore the reliance placed upon by the Commissioner on the statements of various persons to deny cross examination is wrong. That they had also prayed for following the procedure under Section 9D of the Central Excise Act, but the same was also not followed. He submits that in absence of following the procedure under Section 9D and refusal of cross examination, the statements relied upon by the adjudicating authority has no evidentiary value. The Commissioner has relied upon only those portions of the statements which are in favour of the department and either ignored or summarily rejected the portions of the statements supporting the contention of the Appellants. The cross examination was sought as there was contradictions in the statements. Further many of the statements were recorded after the last statement of Shri Ramesh, Director of M/s 12 | P a g e E/10151- 10153,11433,11436,12276/2018 SFL. Therefore there is no question of presenting all the statements at the time of recording of statement of director. The directors have categorically denied any clearance of finished goods by the Appellants without payment of duty and have stated that the diversion of goods, if any has taken place at the end of M/s Sankalp (SFLP). Inspite of such statements of director the adjudicating authority has relied upon the statement of brokers which is incorrect. The reliance placed upon by the adjudicating authority on judgments to deny cross examination is wrong as there are contradictory statements of the brokers and buyers in question. No unaccounted goods or private records were found from the Appellant's factory. The Commissioner has relied upon the judgments in case of Customs where it is the liability of the persons from whom offending goods are found to show that he legally acquired those goods whereas in case of central excise it is the department who has made the allegation and has to prove the same and not the assessee. He submits that cross examination is to be given before placing reliance upon the statement in view of Section 9D of the Central Excise Act, 1944. He relies upon the Apex Court judgment in case of Andaman Timber Industries Vs. CCE, Kolkatta 2015 (324) ELT 641 (SC) and orders in case of Skyrise Overseas Pvt. Ltd. Vs. Commissioner of Customs (Port) 2017 (353) ELT 421 (Cal.), Nirmal Seeds Pvt. Ltd. Vs. UOI 2017 (350) ELT 486 (BOM), Mukesh Appliances Pvt. Ltd 2016 (343) ELT 246 (TRI). He also relies upon the Gujarat High Court judgment in case of Manek Chemicals Pvt. Ltd. Vs. UOI 2016 (334) ELT 302 (GUJ). He submits that when procedure under section 9D is not followed the statements cannot be relied upon as held in case of CCE, Delhi Vs. Kuber Tobacco India Ltd. 2016 (338) ELT 113 (TRI), Jindal Drugs Pvt. Ltd. Vs. UOI 2016 (340) ELT 67 (P & H), Dhakad Metal Corp. Vs. CCE, Daman 2015 (330) ELT 561 (TRI - AHD) and J & K Cigarettes Ltd. Vs. 13 | P a g e E/10151- 10153,11433,11436,12276/2018 CCE 2009 (242) ELT 189 (DEL - HC). The data contained in pen drive as well as loose papers also pertains to M/s SFPL, which is a registered dealer of excisable goods and is engaged in buying and selling of stainless steel Cold Rolled Coils manufactured by M/s SFL. The demands are also based upon the statements of brokers and buyers which are contradictory. Statement of broker Shri Chhail Singh Deora has been relied upon who with reference to "Bombay Sales" wherein he stated that SFL has sold SSCR Coils without any invoice on cash basis of which some coils were used by him for circle cutting and some quantities were sold to some other parties in which case he acted as broker only for which payment was collected in cash from the customer and handed over to Shri Ramesh Shah. But on the other hand he has stated that he does not know the names and address of the parties who have purchased the goods through him as a broker in cash and from whom he stated to have collected payment. Statement of Shri Gajendra Purohit, broker was recorded on 13.09.2012 wherein he stated that the ledger "Bombay Sales" contains the goods purchased by him from M/s SFL and the payments were made by him in cash. Even though he stated that the goods were used by him for cutting circle and were also sold to parties in cash, yet he stated that he does not know the name and address of any person to whom the goods were allegedly sold. Similarly in case of alleged issue of invoice without delivery of goods, the statement of Shri Pravin Vasant Mehta of M/s Jigar Plast was recorded on 13.12.2013 wherein he has stated that sale invoices of the Appellant without delivery of goods has been reversed. However Shri Pravin Mehta has nowhere stated that they have purchased goods from M/s SFL and all the goods were procured by M/s Jigar Plast through broker Shri Atul Parekh. Shri Pravin Mehta also stated that Shri Atul Parekh has received goods and invoices from the SFL in the name of 14 | P a g e E/10151- 10153,11433,11436,12276/2018 various parties including M/s Jigar Plast and whenever they received intimation from Shri Atul Parekh regarding receipt of goods from Appellant, M/s Jigar Plast prepared job work challan in the name of their job worker M/s Shree Ram Steels where the goods were unloaded directly. The show cause notice has failed to consider this aspect in so far as it supports the submission of the Appellants that they have always cleared goods on payment of duty and under the cover of invoices to the brokers like Shri Atul Parekh. He submits that statement of broker Shri Atul Parekh was recorded on 22.08.2012 and 02.08.2013 wherein he was shown ledger "Atul bhai" for the period April' 2009 to March' 2012 wherein the "Bombay Sales" was reflected against the sale of quantities of SSCR Coils and he admitted the fact that the said ledger was maintained by Shri Ramesh Shah. He also indicated details of sale of coils/ transactions carried out under Bombay sales were made in cash to various parties through him. However in case of 'bill condition' he stated that he has nothing to do with the sales invoice issued by the Appellants and the invoices were handed over directly by M/s SFL to the parties which directly deal with each other. His statement is contrary to statement of Shri Vasant Mehta who is one of the parties listed in "Bill condition" account meaning that the invoices were issued, and who has stated that all the orders were placed on broker Shri Atul Parekh and they have never dealt directly with M/s SFL. That in case of Shri Ramesh Chandra Gada who alleged to have received only invoices without delivery of goods, his statement was recorded on 18.03.2014 who admitted receiving only sale invoice without delivery of goods. However he has nowhere stated that he has purchased goods from M/s SFL and that the goods were procured through M/s Chhail Singh Deora. Further he also stated that whenever they received intimation for Shri Deora about receipt of goods, they 15 | P a g e E/10151- 10153,11433,11436,12276/2018 prepared job work challans in the name of their jobworker M/s Vikram industries whose proprietor is Shri Deora. He submits that this clearly shows that whatever goods were cleared by M/s SFL was on payment of duty by issuing invoice. He also pointed out from the statement of Shri Kartik shah that the purchases made by them were on invoices. He submits that the adjudicating authority has wrongly proceeded with assumption that the data and documents seized from the lockers belong to the Appellant alone and reflects only the Appellants transactions. The impugned ledger pertains to the transaction of M/s SFPL. The adjudicating authority reached to such conclusion on the ground that the details contained in hand written sheets in Gujarati were compared with the details in pen drive and the date of transaction, name of party, quantity of goods, invoice no, of the Appellant, cheque no etc were matching and the same was admitted by Shri Rakesh Shah. He submits that such matching is of no consequence as both of them were seized from third party premises and were not maintained by the Appellants. Further Shri Rakesh Shah in his statement dt. 10.07.2012 has stated that the documents are of both i.e M/s SFL and M/s SFPL and was further clarified in his statement dt. 25.07.2013 wherein he stated that the ledger "Bombay sales" belongs to M/s SFPL and he was maintaining the same on behalf of Ms SFPL.
10. The demand of Rs. 13,22,68,484/- has been made on the ground that the "Bombay Sales" ledger in seized pen drive belong to the sales made by M/s SFL without payment of duty and which has not been reflected in direct sales and that particulars of such cash sales was shown in individual ledger of the brokers and sale amount on account of one or more buyers through the broker are consolidated in the category of 16 | P a g e E/10151- 10153,11433,11436,12276/2018 "Bombay Sales". The Ld. Counsel for the Appellant submits that the "Bombay Sales" indicates the clearance by SFPL from Vasai Godown to the end buyer. M/s SFL has cleared goods by issuing invoice and paying duty. The diversion if any was done by M/s SFPL at their Vasai godown. The clearance shown in "Bombay Sales" ledger belongs to M/s SFPL is supported by "Purchase - godown" ledger account which shows receipts of goods from Appellant at godown of M/s SFPL. The said "Purchase- godown" ledger was in seized pen drives and was printed in the presence of Shri Ramesh Shah and Kartik Shah on different dates. The said ledger was specifically requested by the Appellants from the DGCEI officers and the copy of the same was given to them. He takes us through the correspondence with the DGCEI and illustrative copy of the ledger in this regard. He submits that the "purchase- godown" ledger is purchase account of M/s SFPL from the Appellants and it also indicates the relevant invoice of the Appellant. He shows the clearance dt. 12.04.2009 made by the Appellant to M/s Manibhadra of 16489.800 Kgs of finished goods recorded as purchase by M/s SFPL in said ledger. He also shows the sales register of the Appellants showing such clearance. He submits that since both the entries tally, it clearly shows that "Purchase-godown" ledger account is not of M/s SFL but of M/s SFPL. Thus it is clear that the "Bombay Sales" ledger account is clearance record of M/s SFPL from their Vasai Godown which were originally purchased by M/s SFPL from M/s SFL on payment of duty and recorded in Purchase godown ledger of M/s SFPL. The total value of the goods in Purchase godown ledger" and "Bombay Sales" ledger accounts for the financial years 2009 -10, 2010-11, and 2011-12 is as under :
Financial year Purchase- godown Bombay sales
17 | P a g e E/10151-
10153,11433,11436,12276/2018
account Account
2009 - 10 Rs. 46,09,35,085/- Rs. 44,15,69,740/-
2010 - 11 Rs. 39,34,36,449/- Rs. 45,69,60,392/-
2011 - 12 Rs. 40,77,80,267/- Rs. 41,40,71,084/-
Total 126,21,51,801/- Rs. 131,26,01,216/-
11. He submits that if the contention of the revenue is accepted and "Bombay sales" ledger is treated as ledger account of M/s SFL for sale of goods in cash then the existence of "Purchase-godown" ledger indicating purchase of a similar quantity of goods and containing invoice number of invoices issued by the Appellants cannot be explained. Therefore it leads to conclusion that the demand of duty on "Bombay sales" is not sustainable. He also highlights entries which shows the receipt of goods from the Appellant issued under invoice in "Purchase-godown" during the impugned period corresponding with the subsequent entries in Bombay Sales ledger accounting during the said period and submits that the demand of duty on "Bombay sales" would lead to demand of duty twice on same goods. He also takes us through the list of invoices alongwith corresponding lorry receipts and Form No. 402 issued by the VAT department Gujarat showing transaction to Maharashtra. He submits that even though details of purchase godown register taken out from the seized pen drive were presented before the adjudicating authority, yet he did not give any findings on the same and held that the Appellant has failed to reconcile the "Bombay - sales" account with any invoice on payment of duty covered in the direct-sale account. The goods referred in the "Bombay sales" ledger account and correlating with the Purchase Godown ledger account of SFPL are also co-relating with "Bill Condition"
ledger account. He also shows the similarity of such details from the 18 | P a g e E/10151- 10153,11433,11436,12276/2018 annexures attached to the appeal. The adjudicating authority has wrongly held that Shri Ramesh in his statement has stated that the "Bombay- sales" account and the "Bill - condition" account reflect the transactions of the Appellant. He takes us through the statement dt. 08.8.2013 wherein Shri Ramesh has stated that the said accounts pertain to SFPL transactions with various parties. He submits that inspite of categorical statement of Shri Rakesh Shah that the ledger "Bombay - Sales" belong to M/s SFPL, the statement of Snehil R Shah, the owner of trading firm M/s SFL was not even recorded as the same would have clearly shown that the ledgers pertained to M/s SFPL. Shri Kartik Shah also in his statement dt. 28.01.2014 has stated the fact that the legder "Bombay Sales" is sales account of M/s SFPL which was recorded in presence of Mr. Snehil Shah, the director of M/s SFPL. He submits that the Appellant had requested cross examination of the broker Shri Atul Bhai, Shri Chhail Singh and others which was denied and therefore in absence of same, their statements cannot be relied upon. None of their statements is corroborated by their own records and independent evidence other than the print outs of the ledger accounts and loose bundles of papers seized from third party premises. He submits that the findings of the adjudicating authority that Shri Ramesh Shah wrote the sheets in gujarati for such transactions and the papers were found in lockers held under fictitious names by Shri Ramesh Shah cannot lead to inference that the Appellant has cleared goods without payment of duty. The Appellant Unit is at Kalol, Gujarat and Shri Ramesh Shah was residing in Mumbai only due to illness of his wife. Since he was living in Mumbai and the registered office, godown and operations of SFPL all are located at Mumbai and Shri Snehil R Shah is his relative, he was looking after the records of M/s SFPL. The records does not pertain to any clandestine clearance. Merely because the 19 | P a g e E/10151- 10153,11433,11436,12276/2018 records were stored in locker owned by Shri Ramesh, it cannot imply that the same pertain to clandestine clearance when the said records also contained ledger accounts like "Direct Sales" which admittedly is a ledger account of Appellants for sales made directly to the buyers and where payment of duty has not been challenged. The office premises held to be of M/s SFL is wrong as it is registered premises of M/s SFPL and no document pertaining to Appellants was found. Both M/s SFL and SFPL are separate legal entities. The contention of the adjudicating authority that there is no investment of Snehil R Shah in trial balance which shows account of Bombay Sales which means that trial balance belongs only to Appellant, is wrong as it is not mandatory that for a director to invest in the company in which he is a director. It is not mandatory for director to have investment. The absence of same does not render the trial balance as of M/s SFL. If the contention of Ld. Adjudicating authority that there was no connection between the invoice and its quantity destined for cash sale as the issue of invoice was done to give credit to certain parties without actual delivery of goods and to make cash sale to other party is accepted, it itself means that no goods were cleared by the Appellants without issue of invoice and without payment of duty. This clearly shows that both set of buyers were arranged by the brokers at the Vasai Godown without any involvement of Appellant and the respective ledger accounts are of M/s SFPL only which shows the sale of goods separately and sale of invoice separately. Irregularity, if any that is alleged against the Appellants is that the goods were not delivered to intended buyer but to third party. The said irregularity has not been committed by the Appellant but by the broker. However this clearly shows that the goods were cleared by Appellant legally. The contention of the adjudicating authority that in case of diversion of goods the buyers might have acted against M/s SFPL, 20 | P a g e E/10151- 10153,11433,11436,12276/2018 the Ld. Counsel submits that the same is not relevant as they never received any such complaint. Shri Kartik Shah was never asked to reconcile the sales invoice of the Appellants with Bombay sales ledger account. The Bombay sales ledger account is of M/s SFPL and not the Appellants, it is not possible to have one to one correlation between them. However the Purchase-godown ledger which was also seized from the same locker indicates the purchases of SFPL from the Appellant and could have co-related with the invoices of Appellant as the said purchase ledger account of SFPL also specifies invoice numbers of the invoice issued by the Appellant. There is no question of Appellant selling goods in cash as the goods were picked up from the godown belonging to M/s SFPL. None of the buyers stated that they paid cash to the Appellants. Further their cross examination was not granted. He submits that it is thus clear that none of the findings of the Adjudicating authority is tenable.
12. As regard demand of Rs. 7,22,13,292/- he submits that the demand has been confirmed on the ground that receipts in ledger account "Smi (Cash)" reflects the transaction of the Appellants and since it does not match with any recorded sale of Appellant, it thus reflects the cash sales of the Appellant. He submits that all ledgers seized from locker were not belonging to the Appellant and the impugned order wrongly proceeds with the assumption that the ledger account "Smi (Cash)" contain details of cash receipts/ transactions. During entire investigation not a single rupee of cash was found to have been received by the Appellant. If such huge cash of Rs. 75 Cr, approx would have received by the Appellant, the revenue should have proved the same with sufficient corroborative evidence. The allegation is in the nature of assumption as the show cause notice in Para 11.3 has alleged that calculation shows that the Appellant has effected cash sales. Only for the reason that the "Smi (Cash)" ledger 21 | P a g e E/10151- 10153,11433,11436,12276/2018 account do not match or tally with the recorded transactions of the Appellant cannot be a reason to assume that the "Smi (Cash)' ledger accounts reflects the transactions of the Appellants and that too clandestine. Shri Kartik Shah in his statement has clearly stated that M/s SFPL has diverted the goods and the goods were cleared by them on payment of duty. Though the details of sales were made by Shri Ramesh Shah but the same was maintained on behalf of Shri Snehil Shah, director of M/s SFPL. The Ld. Commissioner has contended that the ledger cannot be of two firms jointly and is of single firm. He submits that it is not a case of maintaining single ledger of two firms but the ledger accounts is of SFPL only of goods which were sold by them in cash. He submits that none of the brokers/ buyers has taken delivery from them, but from Vasai Godown of M/s SFPL which clearly shows that the sales at Vasai Godown was of SFPL. The Ld. Commissioner based on "Smi (Cash) has held that the Appellants have raised invoice no. SF-0482 to M/s Suraj Ltd. who admitted to have received invoice only without actual receipt of goods. He submits that M/s Suraj has been issued show cause notice proposing to deny credit availed by them and the same is pending for adjudication. To conclude that M/s Suraj has availed inadmissible credit before adjudication is incorrect. Shri Kartik Shah in his statement has clearly stated that the sales to M/s Suraj was made through M/s SFPL. It is thus clear that entries in ledger account containing invoice number of Appellants are pertaining to the goods sold by Appellants through SFPL and it is M/s SFPL which has provided invoices to the parties without actual supply of goods. He therefore submits that the demand against them is not sustainable. He submits that findings regarding payments made to Shri Ramesh Agarwal is incorrect. The amount was given to Shri Ramesh Agarwal as brokerage of goods procured from M/s Jindal Stainless. Shri Kartik never 22 | P a g e E/10151- 10153,11433,11436,12276/2018 admitted making cash payments to Shri Ramesh Agarwal. He only admitted making payments. The admission of Shri Kartik Shah is limited only to ledger account "Sundry Creditors" and "Jindal -Rameshji Agarwal"
and there is no admission of Shri Kartik regarding the ledger "Smi (cash)".
In any case the amount pertains to payment of brokerage and not the consideration towards purchase of raw material themselves. Therefore there is no question of admitting any clandestine transaction. The findings of the adjudicating authority is not supported by any corroborative evidence. Apart from ledger account there is no other evidence to show that the amounts were paid in cash to Shri Ramesh Agarwal. The department has not recorded any statement of Shri Ramesh Agarwal to determine the correct position or to show that any amount was paid. Thus the findings in this respect are not sustainable. As regard allegation of cash purchase by the Appellant, he submits that the said ledger "Smi (Cash)" does not reflect the transactions of the Appellant but reflects the transactions of M/s SFPL. Secondly the statement shown to Shri Ketan Jain, son of proprietor of M/s Goa Metals was recorded after showing him the "Goa Metal - Crs" account and not the "Smi (Cash)" legder account. In any case without grant of cross examination, the statement cannot be relied upon. He also submits that the reliance placed on the statement dt. 28.01.2014 of Shri Kartik Shah is erroneous as it is evident from the relevant paragraph of the statement that the Appellants have purchased some of their raw material through M/s SFPL under the cover of proper invoices. However from a perusal of the ledger account "Smi (Cash)" it appears that cash purchases have been made by M/s SFPL from some parties and only invoices are procured by M/s SFPL from other parties and the cash purchased goods alongwith the invoice were sent by M/s SFPL to the Appellants and when the goods were received by the Appellants, they 23 | P a g e E/10151- 10153,11433,11436,12276/2018 were received alongwith invoices. Nowhere Shri Kartik Shah has admitted cash purchase of any goods.
13. As regard demand of Rs. 1,07,76,323/- on the ground of undervaluation of finished goods, the Ld. Counsel submits that the pen drives seized on 10.07.2012 from the lockers also contained multiple ledger accounts belonging to the Appellants as well as belonging to SFPL. The ledger accounts "Direct Purchases (Value Diff.)" and "Direct Sales (Value Diff)" pertain to transactions of the Appellants. The Ld. Commissioner observed that the ledger accounts "Direct Purchases (Value Diff.)" and "Direct Sales (Value Diff)" are relating to some particular invoices of the Appellants where quantity of goods shown in both these ledger accounts are same but the total value of the invoices shown in both the ledgers are different. He therefore held that "Direct Purchases (Value Diff.)" was reflecting the value of goods as per invoices and the ledger account "Direct Sales (Value Diff)" was reflecting actual value of the goods and the additional amount was recovered in cash by the Appellants over and above the invoice value from the customer. He submits that the findings are incorrect as department has not provided any proof of receipt of any additional consideration by the Appellants over and above the value indicated in the invoices. He submits that the statement dt. 28.01.2014 affirming the conclusion drawn by the department was based on preliminary stage of glance of the ledger accounts as shown during recording of statement and cannot be relied upon to allege undervaluation until and unless Shri Kartik Shah states that the goods were undervalued by the Appellant and the value indicated in the "Direct Sales (Value Diff)"
is the actual price received from the customers. Infact in statement dt. 08.10.2013 of Shri Kartik Shah he has stated that he is unable to offer any explanation as the ledger account extracted from the pen drive does 24 | P a g e E/10151- 10153,11433,11436,12276/2018 not belong to Appellants and they have never received any differential value over and above the value shown in invoices. He takes us through the statement and submit that the department cannot pick and choose certain statements of the Appellants and ignore the other statements. He also submits that none of the buyers whose invoice are listed in the "Direct Sales (Value Diff)" ledger account have stated that they have paid any amount over and above the invoice value. Further they had sought cross examination of some of the buyers whose statements have been relied upon in the show cause and in absence of same the demand is not sustainable. In any case there is no evidence of any additional consideration received by the Appellant. In case of denial of cenvat credit of Rs. 31,40,087/- on the grounds of non receipt of inputs, the Ld. Counsel submits that the ledger account "Smi (Cash)" contains certain entries with the suffix "Only bills" and on that basis the Commissioner has confirmed the demand holding them to be only receipt of invoices. He held that Shri Kartik Shah in his statement dt. 28.01.2014 has stated that on some occasions SFL used to purchase their raw material through SFPL under the cover of proper documents and on perusal of ledger it is seen that M/s SFPL procured the goods in cash from some parties and also procured invoices from some other parties and sent the cash purchased to SFL alongwith the invoices. Thus Shri Kartik agreed to the receipt of invoices from some suppliers without receiving goods from those suppliers instead as claimed by him, the goods were procured from a different person. Although Shri Kartik tried to prove that the entire job of procurement was done by M/s SFPL, the claim does not appear to be correct since the ledger accounts "Smi (Cash)" and "Golden (Only Bill)"
categorically states the entry as "Only bills", no record evidencing the involvement of SFPL has been produced by the Appellants during the 25 | P a g e E/10151- 10153,11433,11436,12276/2018 investigation or the adjudication and no evidence by the Appellants that the invoice accompanied the goods. It was their responsibility when they themselves stated in their ledger the entry as "Only bills". The onus is not on the department to prove that the goods are not received with invoice. When goods were purchased as inputs, strictly in the ledger "Purchase" word was used and particulars of goods like rate, freight amount, number of coils etc were recorded. However in the case of "Only Bill" entry, only the name of the supplier and bill date is given which proves that "Bill Only" entries refer to receipt of only bills/ invoice. He submits that the findings of the Ld. Commissioner are not sustainable. The adjudicating authority has wrongly held that Appellants have failed to produce any evidence to prove involvement of SFPL is not tenable. It is the onus of the department to establish the offence alleged by it. Further the ledger account "Smi (Cash)" does not reflect the transactions of the Appellant but reflecting transactions of the SFPL and the goods were actually received by the Appellants. Therefore there is no question of the Appellants making any "Only bills" ledger entries. The Commissioner has held that the journal entries dt. 02.04.2011 passed in ledger account "Smi (Cash)" indicated that the Appellant have received Invoice no. 279 dt. 26.02.2011 and invoice no. 285 dt. 26.01.2011 from M/s Golden Metal without actual receipt of goods which is incorrect. The factory of Appellant is located in Gujarat and the goods were purchased from Maharashtra. Being interstate trade the goods also accompanied corresponding form No. 403 duly stamped by the Commercial tax officer at the state border check post as proof of transit of goods. Such form is issued on inter state purchase in terms of Section 68 of the Gujarat VAT Act, 2003 the goods are required to be accompanied with a declaration in Form 403 issued under Rule 51 of the Gujarat Vat Rules. He draws our attention to copy of 26 | P a g e E/10151- 10153,11433,11436,12276/2018 such forms attached with the appeal evidencing transport of both the consignments. He thus submits that there is no evidence that the goods were not received by the Appellants and the demand is not sustainable.
14. As regard the contention of the adjudicating authority that the Appellant issued only invoices without supplying goods, the Ld. Counsel submits that at the one hand the adjudicating authority held that the Appellants have cleared goods clandestinely and not paid duty on such goods and on the other hand also held that Appellants have issued only invoices without clearance of goods. Both the findings are incorrect. The adjudicating authority has relied upon ledgers in pen drive namely "Bill Condition", "Bill Sales" and "Sankalp Vat Collection". That the Appellants have charged only the CST amount payable with respect to invoices listed in these ledgers accounts. He submits that the findings in respect of ledger account "Sankalp Vat collection" are not sustainable against the Appellants in as much as said ledger account contains details of invoices of SFPL and not the Appellants. It is not disputed in the impugned order that the account "Sankalp Vat Collection" ledger accounts are invoices of M/s Sankalp Foils Pvt. Ltd. (SFPL) and not of the Appellants. Even though the said ledger account belong to M/s SFPL, the statement of Shri Kartik Shah was recorded instead of Shri Snehil R Shah, director of M/s SFPL. The statement of director of Appellant company for verifying the invoices of M/s SFPL is devoid of any reasoning and cannot be relied upon to make findings against the Appellant to allege that the Appellants have issued invoice without delivery of goods. He submits that Shri Kartik Shah in his statement dt. 28.01.2014 has clearly stated that the Appellants have always cleared under the cover of proper invoice and received payment directly from the parties through the cheques. Shri Kartik Shah further submitted that it appears from the perusal of the ledger accounts "Bill 27 | P a g e E/10151- 10153,11433,11436,12276/2018 Condition" and "Bill sales" that M/s SFPL from whom the orders were secured have diverted the said goods to some other parties after receipt of same from Appellants and such goods are reflected in "Bombay Sales"
account and only invoices have been issued to the buyer in whose name the invoice was issued by the Appellants. The Appellants submit that even after providing such specific clarification, the department has held that the Appellants have indulged in supplying invoices without accompanying goods. He takes us through the statements of the buyers viz. Chhail Singh Deora statement dt. 26.11.2013, Broker Narendra Shah's Statement dt. 21.11.2013 that the goods were sold under cover of invoice by M/s SFPL. He further submitted that printout of pen drives cannot be relied upon to demand duty in absence of other corroborative evidence. The pendrive were seized from locker at Mumbai whereas the factory is located at Gujarat and on checking/ investigation at factory no incriminating documents was found. The date of the pen drive was showed to the individual and their statements were obtained and were relied upon. The cross examination was not allowed. The impugned order has erred in relying upon the data printed from such pen drives as the same cannot be considered as reliable or cogent evidence. He relies upon the judgments in case of Century Metals Recycling Pvt, Ltd. vs. CCE Delhi 2016 (333) ELT 483 (TRI), CCE Vs. Belgium Glass & Ceramics Pvt. Ltd. 2016 (337) ELT A204 (SC) and Sakeen Alloys Pvt. Ltd. Vs. CCE, Ahmedabad 2013 (296) ELT 392 (TRI) as upheld in 2014 (308) EL6 655 (Guj) and maintained by Apex Court reported in 2015 (319) ELT A117 (SC). He submits that the allegation of clandestine clearance cannot be sustained based on statements alone without corroborative evidence. That all the statements were recorded in similar manner. There is no documentary evidence other than the statements. He relies upon judgments to show that onus of
28 | P a g e E/10151- 10153,11433,11436,12276/2018 establishing clandestine clearance is on revenue. He relies upon judgments in case of CCE Vs. ABS Metals (P)Ltd CCE Vs ABS Metals P.Ltd. 2016 (341)ELT 425(T), Capital Ispat Ltd. Vs. CCE (340) ELT 697(T), Commr. Vs Dhruv Dyestuff P.Ltd. 2016(339) ELT A-131 (Guj), CCE Vs Gopi Synthetics P.Ltd. 2014 (310)ELT (Guj), Rukhmani Concrete P.Ltd. Vs CCE 2013(296)ELT 526(T), Shirly Dyers Vs. CCE 2013 (293) ELT 234 (T), Maruthi Tex Print & Processors P.Ltd. Vs CCE 2012 (281) ELT 509 (Mad), In On Creation Vs CCE 2012 (278) ELT 512 (T), Saravana Alloys Steels P.Ltd. Vs. CCE 2011(274)ELT 248(T), CCE Vs Saakeen Alloys P.Ltd.2014 (308) ELT 655 (Guj) Affirmed by Supreme Court in 2015 (319) ELT A117(SC), CCE Raipur Vs P.D. Industries P.Ltd. 2016 (340) ELT 249 (T- Del), CCE, Raipur Vs Heliwal Polypackers P.Ltd. 2016 (340) ELT 204 (Tri- Del), Davinder Snadhu Impex Ltd Vs CCE Ludhiana 2016 (337) ELT 99 (Tri-Del), CCE, Daman Vs Nissan Thermoware P.Ltd. 2011 (266) ELT 45 (Guj. HC), Hingora Industries P.Ltd. Vs CCE, Daman 2015 (325) ELT 116 (Tri.Ahd) to state that onus to prove clandestine removal is on the department which they have to prove by producing evidence as to clandestine manufacturing, unaccounted raw material receipt, transportation, electricity consumption an unaccounted cash receipts.
15. He submits that the allegation of clandestine removal is not supported by any evidence of commensurate inward of raw material or consumption of electricity, manufacture of goods alleged to have been removed clandestinely, plant capacity, flow of cash from the alleged buyers to Appellant, parallel invoices, any incriminating documents from factory showing production and removal of goods, transportation evidence, freight payment to even a single transporter. He also submits that no investigation at the end of M/s SFPL was conducted even if the goods alleged to be cleared clandestinely were removed from their 29 | P a g e E/10151- 10153,11433,11436,12276/2018 godown. Even statement of director of M/s SFPL, Shri Snehil was not obtained to know the truth inspite of the fact that he was present during recording of statement of Shri Ramesh Shah, director of SFL on 28.01.2014 and has signed as witness to said statement. This is inspite of the fact that Shri Ramesh Shah in his said statement stated that the diversion of goods take place at the end of M/s Sankalp. Not even a single employee of Appellant like production manager or staff clearing goods was questioned to ascertain the correctness of the allegation. The other bundles nos 8 to 11 of papers seized from Venilal Safety Vaults belong to M/s Sankalp and Shri Ramesh Shah clearly in his statement had stated that the papers are in writing of Shri Dheeraj jain, godown keeper of M/s Sankalp. He submits that the above facts clearly shows that no goods were removed from the factory of M/s SFL without payment of duty and thus the impugned order is not sustainble . In case of appeals filed against imposition of penalty, he submits that it is absolutely clear from the facts that the Appellant has not issued mere invoice but the goods were also cleared and hence there is no reason to impose penalty. He also relies upon Tribunal and High Court judgments in case of CCE VS Laxmi Engg. Works 2010 (254) ELT 205 ) P & H), Shingar Lamps Pvt. Ltd., Vs CCE 2002 (150) ELT 290 (T), CCE Vs Shingar Lamps Pvt. Ltd. 2010 (255) ELT 221 (P & H), Ruby Chlorates (P) Ltd., Vs CCE 2006 (204) ELT 607 (T), CCE Vs Gopi Synthetics Pvt. Ltd. 2014 (302) ELT 435 (T), CCE Vs Gopi Synthetics Pvt. Ltd., 2014 (310) ELT 299 (Guj), Aum Aluminium Pvt. Ltd. Vs CCE 2014 (311) ELT 354 (T), Sharma Chemicals Vs CCE 2001 (130) ELT 271 (T), Resha Wires Pvt. Ltd., Vs CCE 2006 (202) ELT 332 (T), Atlas Conductors Vs CCE 2008 (221) ELT 231 (T), Vishwa Traders Pvt Ltd., Vs CCE 2012 (278) ELT 362 (T), CCE Vs Vishwa Traders Pvt. Ltd. 2013 (287) ELT 243 (Guj), CCE Swati Polyester 2015 (321) ELT 423 (Guj), 30 | P a g e E/10151- 10153,11433,11436,12276/2018 Commissioner Vs Swati Polyester 2015 (321) ELT A-217 (SC), Flevel International Vs CCE 2016 (332) ELT 416 (Guj), CCE Vs Renny Steel Casting (P) Ltd. 2012(283) ELT 563 (T), CCE Vs Akshay Roll Mills Pvt. Ltd. 2016 (342) ELT 277 (T), Industrial Filter & Fabrics Pvt. Ltd. Vs CCE 2014 (307) ELT 131 (T), CCE Vs Birla NGK Insulators Pvt. Ltd. 2016 (337) ELT 119 (T), CCE Vs Ganesh Agro Steel Industries 2012 (275) ELT 470 (T), UOI Vs MSS Foods Products Ltd. 2011 (264) ELT 165 (P & H), CCE Vs Sree Rajeswari Mills Ltd. 2009 (246) ELT 750 (T), CCE Vs Sree Rajeswari Mills Ltd. 2011 (272) ELT 49 (Mad.), Shardha Forge Pvt. Ltd., Vs CCE 2005 (179) ELT 336 (T), Arya Fibres Pvt. Ltd. Vs CCE 2014 (311) ELT 529 (T), TGL Poshak Corporation Vs CCE 2002 (140) ELT 187 (T)
16. On the other hand Shri T.G.Rathod, Ld. Joint Commissioner (AR) appearing for the revenue reiterates the findings of the adjudicating authority given in the impugned order. He submits that the ledgers in pen drive and the hand written sheets in gujarati belong to the Appellant clearances and hence the demand has been rightly confirmed. He submits that from the statements of the brokers and buyers, it is clear that the Appellant has cleared goods without payment of duty and also undervalued the goods. That the Appellant has also availed credit without actual receipt of goods.
17. Heard both the sides perused the records. We find that the demand against the Appellant M/s SFL is mainly based upon the pen drives seized from the locker whose key was found from ice cream parlour of Shri Manoj Tanna and 11 bundles of loose papers out of which 4 bundles contain the sheets written in gujarati by Shri Ramesh Shah, director of M/s SFL. Alongwith them some other slips and records were found which mainly were written by Shri Dheeraj, employee of M/s SFPL. The Shop was located opposite the office building of M/s Sankalp (M/s SFPL). The 31 | P a g e E/10151- 10153,11433,11436,12276/2018 contention of the revenue is that the ledgers found in the pen drive pertains to M/s SFL and depicts the clearances made by M/s SFL. The Appellants have contended that the said ledgers do not belong to M/s SFL but are of SFPL and Shri Ramesh Shah was merely helping Shri Snehil Shah, his relative who is director of M/s SFPL. We find that apart from the ledgers pointed out by the revenue one more ledger i.e "Purchase- godown" ledger was maintained which carried details of sales made by the Appellant. The Appellant has shown from sample entries that the purchases shown in said "Purchase - godown" ledger were of M/s SFPL and is almost same to the sales shown in "Bombay Sales" ledger. It is their contention that the "Purchase-godown" legder shows the receipt of goods from M/s SFL by SFPL and the "Bombay Sales" ledger the sales of said goods by M/s SFPL which makes clear that the "Bombay sales ledger belong to M/s SFPL and not SFL. We find that it has not been disputed that the godown at Vasai was owned by M/s SFPL, hence in such case if any godown purchase is shown the same can be only of M/s SFPL. The officers alongwith such ledgers also found the godown records of M/s SFPL and those bundles numbered as 8 to 11 were in handwriting of Dheeraj Jain, godown keeper of M/s SFPL alongwith duplicate copies of chits founds were on account of dispatch of goods thru borkers. The Appellant has shown the total of value mentioned in "purchase godown" ledger and compared with "Bombay Sales" which shows that the figures of both are of around same value. Also even though brokers in their statements had stated that they have purchased goods from the Appellants but the fact remains that the goods were delivered to them from the Vasai Godown of M/s SFPL. During recording of statement though the brokers stated that the goods were purchased in cash and without any bills as per the details found in "Bombay Sales", however their statements seems to be self 32 | P a g e E/10151- 10153,11433,11436,12276/2018 contradictory. Some of the brokers viz. Shri Chhail Singh Deora and Gajendra Purohit also stated that SFL has sold SSCR Coils without any invoice on cash basis of which some coils were used by them for circle cutting and some quantities were sold to some other parties in which case they acted as broker and the payment was collected in cash, but they were not able to provide even the single buyer's name and address who has purchased such goods from them which leads to doubt about the credibility of their statement. The department apart from the papers seized from the locker has not been able to give any independent evidence which can corroborate the charges. We find that the Appellant had requested for following the provisions of section 9D and cross examination of the persons whose statements were relied upon. It was more necessary in the circumstances that not a single documents was seized from these brokers to support their statement and it was only the pen drives and loose sheets on the basis of which allegations were made. The brokers who supported the allegation of the show cause notice could not produce a single document to support the allegations of clearance of goods without payment of duty. In such case the denial of cross examination and non following the provisions of section 9D is not correct. In the case of Andman Timber Ind. Vs. CCE, 2015 (324) ELT 641 (SC), the Apex Court while dealing with the relevancy of cross examination held as under :
6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the
33 | P a g e E/10151- 10153,11433,11436,12276/2018 order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross- examine those dealers and what extraction the appellant wanted from them.
7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as 34 | P a g e E/10151- 10153,11433,11436,12276/2018 mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17-3-2005 [2005 (187) E.L.T. A33 (S.C.)] was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.
8. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show cause notice.
9. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal.
The Hon'ble Delhi High Court in case of JK Cigarettes Vs. Collector of Central Excise 2009 (242) E.L.T. 189 (Del.) held as under:
12. Bare reading of the above section manifests that under certain circumstances, as stipulated therein, statement made and signed by those persons before any Central Excise Officer of a gazetted rank during the course of inquiry or proceedings under this Act can be treated as relevant and taken into consideration if under the given circumstances such a person cannot be produced for cross-
examination. Thus, this provision makes such statements relevant for the purposes of proving the truth of the facts which it contains, in any prosecution for an offence under the Act in certain situations. Sub-section (2) extends the provision of sub-section (1) to any proceedings under the Act other than a proceeding before the Court. In this manner, Section 9-D can be utilized in adjudication proceedings before the Collector as well. In the present case, 35 | P a g e E/10151- 10153,11433,11436,12276/2018 provisions of Section 9-D of the Act were invoked by the Collector holding that it was not possible to procure the attendance of some of the witnesses without undue delay or expense. Whether such a finding was otherwise justified or not can be taken up in the appeal. The Allahabad High Court in case of Parmarth Iron (P) Ltd. Versus Union of India 2014 (303) E.L.T. 59 (All.) held as under :
4. It is submitted by Shri B.C. Rai, that earlier the petitioner had filed a Writ Petition for return of the non-relied upon document and hard copy of the relied upon document. The writ petition was allowed. A Special Appeal No.741 (D) of 2010 filed by the department against the order of learned Single Judge was partly allowed on 29th November, 2010, with directions as follows:-
"16. We, therefore, have no hesitation in holding, that there is no requirement in the Act or Rules, nor do the principles of natural justice and fair play require that the witnesses whose statements were recorded and relied upon to issue the show cause notice, are liable to be examined at that stage. If the Revenue choose not to examine any witnesses in adjudication, their statements cannot be considered as evidence. However, if the Revenue choose to rely on the statements, then in that event, the persons whose statements are relied upon have to be made available for cross examination for the evidence or statement to be considered.
The Tribunal in case of M/s Swiber Offshore Construction Pvt. Ltd. Versus CC Kandla 2014 (301) E.L.T. 119 (Tri. - Ahmd.) held that cross examination is imperative to be provided. It held that - We therefore have no hesitation in holding that the impugned Order passed by the Commissioner as an adjudicating authority is
36 | P a g e E/10151- 10153,11433,11436,12276/2018 appealable order in terms of section 129A of the Act, even as per the ratio laid down in the above binding precedent. Request for cross-examination has been denied and the witnesses have not been examined despite specific reliance by the appellant on section 138B without there being any objective formation of opinion based on any material on record to come to the conclusion that any specified circumstance mentioned in section 138B(1)(a) exists. These circumstances mentioned in section 138B(1)(a) are also contained in pari materia section 9D(1)(a) and were recorded as follows in J.K. Cigarettes Ltd, 2009 (242) ELT 353 (Del) Further the Tribunal in case of Kuber Tobacco India Limited Vs CCE Delhi - 2016 (338) E.L.T. 113 (Tri. - Del.) held that : 14. In view of above analysis, it is clear that during adjudication, the adjudicating Authority is required to first examine the witness in Chief and also to form an opinion that having regard to the facts and circumstances of the case, the statements of the witness are admissible in evidence. In absence of examination in chief, allowing cross examination, is a futile exercise. "
We find that the statement of the brokers/ buyers are in isolation and not a single independent evidence apart from the pen drive and loose sheets is on record. Further we find that even the pen drive ledger and the papers seized are not corroborated with actual movement of goods. Inspite of raising a big demand not a single corroborative evidence is appearing on record. In such case the demand without granting opportunity of cross examination is not sustainable.
37 | P a g e E/10151- 10153,11433,11436,12276/2018 Further in case of Century Metal Recycling Pvt. Ltd. vs. CCE, Delhi - IV, the tribunal on the issue of accepting pen drive data as evidence of clandestine removal held that -
"32. Having examined each one of the points involving demand of duty or denial of credit as above we also arrive at certain general conclusions relevant to the case :
(a) As already stated, the whole case is built up on data contained in the pen drive and certain statements of persons. Admittedly, the data contained in pen drive is not disputed by the appellant. The whole dispute evolve on the interpretation of the data contained therein. In such a situation, it is necessary for the Revenue to support their interpretation by clear corroborative evidences and not by inferences and assumptions.
(b) Even in interpreting the data in the pen drive and taking some support from the select statements of persons, we find that the data applicable to a particular period was extrapolated for the whole period of demand by presuming a standard projection. This apparently is not legally sustainable.
(c) When the allegation of unaccounted clearances and substitutions of inputs of huge quantities were made, the minimum requirement is to have independent support of such allegation by way of evidence of transport, cash transaction, third party documents or affirmations, etc. Here in this case, corroborations are lacking. We are aware that in the case of clandestine removal it is not required for the Revenue to prove precise and comprehensive details of each such clearances with 100 per cent accuracy.
38 | P a g e E/10151- 10153,11433,11436,12276/2018 However, this does not mean that even in the total absence of corroborative evidence without at least establishing a preponderance of probability the case for confirmation of demands can be made.
(d) Large number of statements were recorded and also relied upon; but these, statements were not put to test by way of cross- examination and analysis or supported by documentary evidence. The statements could be of help if they support evidences which exist and which requires re-affirmation. In the present case, the statements which deal with interpretation of data in pen drive have not thrown any substantial ground to the case built up by the Revenue.
33. Even though we agree with the argument put forward by the learned DR that the extent of proof required is not that as required in a criminal prosecution, but Revenue should be able at least to discharge the initial burden of establishing the charge which is totally absent in the present case. In appreciating the evidence placed before us we fully bear in mind that in clandestine clearance it will be humanly impossible to establish every link in the clandestine activity. Revenue in the present case has merely extrapolated and summarized figures without any evidentiary support. The list of cases which state that the findings of clandestine removal are to be required to be based upon strong evidences and not on assumptions and presumptions is un-ending.
34. In Suzuki Synthetics Pvt. Ltd. - 2015 (318) E.L.T. 487 (Tri.- Ahmd.), the Tribunal observed that if the case of clandestine 39 | P a g e E/10151- 10153,11433,11436,12276/2018 removal is to be sustained based on private records then the same is required to be supported by corroborative evidence with regard to purchase of raw material, manufacture of final goods, flow-back of money or identification of the buyers and their statement, etc. In Arya Fibers Pvt. Ltd. - 2014 (311) E.L.T. 529 (Tri.-Ahmd.) the Tribunal laid down certain principles, after detailed analysis of large number of case laws, to establish the case for clandestine manufacture/clearance. The Tribunal observed that there should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions. Similar ratio was followed in large number decisions by the High Courts and Tribunal - Siddh Industries - 2013 (293) E.L.T. 556 (Tri-Ahmd.); Bansal Wires Pvt. Ltd. - 2010 (261) E.L.T. 1165 (Tri.-Del.); Arsh Casting Pvt. Ltd.
- 2010 (252) E.L.T. 191 (HP), Pan Parag India Ltd. - 2013 (291) E.L.T. 81 (Tri.-Del.), Jasmine Paints - 2013 (287) E.L.T. 239 (Tri.- Del.); Castrol India Ltd. - 2012 (283) E.L.T. 399 (Tri.-Chennai), Jaidev Alloys Pvt. Ltd. - 2012 (279) E.L.T. 283 (Tri.-Ahmd.).
35. Having considered the contentions of both the sides, we find that the analysis and findings in the impugned order cannot be legally sustained and as such the same requires to be set aside. Accordingly, we set aside the impugned order and allow the appeals."
In case of Sakeen alloys Pvt. Ltd. 2013 (296) ELT 392 (TRI) the tribunal held that :
40 | P a g e E/10151-
10153,11433,11436,12276/2018 "8. In the cases relating to clandestine removal of excisable goods, following are the indicators of clandestine removal activities by a manufacturer :-
(i) Excess stock of raw materials found in the factory premises.
(ii) Shortage of raw materials in the records of manufacturer.
(iii) Excess/shortage of manufactured goods found in the factory premises.
(iv) Excess consumption of electricity/power used in the manufacture of finished goods.
(v) Any transit seizure of clandestinely removed goods made by the investigating authority.
(vi) Any cash amounts seized from the factory premises or dealer's premises or residential premises searched during investigation.
(vii) Confessionary statements of the persons concerned with the clandestine manufacture/removal of excisable goods.
9. It is observed from the case records that in the present proceedings, there are few confessional statements of the persons which were later retracted by the persons concerned. The confessional statements subsequently retracted can be argued to be an afterthought under a proper legal advice but to observe the principles of natural justice, it becomes necessary to provide cross- examination of such witnesses, as held by various judicial courts including the Hon'ble Supreme Court relied upon by the appellants. In the case of CCE v. Omkar Textiles - 2010 (259) E.L.T. 687 (Guj.), it was held by the Jurisdictional Gujarat High Court that onus is on 41 | P a g e E/10151- 10153,11433,11436,12276/2018 the Revenue to furnish the evidence to prove the charges of clandestine removal and it is not sufficient if some confessional statements have been given by the Director of the Company. Similarly, in the case of CCE v. Arsh Casting Pvt. Limited [2010 (252) E.L.T. 191 (H.P.)], the Hon'ble High Court of Himachal Pradesh held that the private records maintained by the staff of the company cannot be made as the sole evidence to hold that clandestine removal of the goods is established and accordingly, the following point of law was decided in favour of the assessee:-
"Whether on the basis of private records, the Central Excise duty can be demanded or not when these private records show higher production than that reflected in the statutory records resulting into removal of the excess stock clandestinely i.e. without issue of invoice and without making entries of production and clearance in the statutory records?"
10. Similarly, in the case of CCE, Chandigarh-1 v. Shingar Lamps Pvt. Limited [2010 (255) E.L.T. 221 (P&H)], the Hon'ble High Court held that the private records which have been discovered during the raid may not be sufficient for holding clandestine production and removal but there should be some positive evidence suggesting clandestine production and removal. The Hon'ble Supreme Court in the case of Shalimar Rubber Industries v. Collector of Central Excise, Cochin [2002 (146) E.L.T. 248 (S.C.)] has also held that once the statement is retracted and the assessee asked for cross-examination then if such cross-examination is denied, the department cannot make such statements as the basis 42 | P a g e E/10151- 10153,11433,11436,12276/2018 for concluding that there was clandestine removal. It is further observed that the Hon'ble CESTAT in the case of Rama Shyama Papers Limited v. CCE, Lucknow [2004 (160) E.L.T. 494 (Tri.-Del.)] came to the following conclusion in Paras 9 and 10 of the judgment which are reproduced below :-
9. We have considered the submissions of both the sides. The Revenue has charged the Appellants with clandestine manufacture and removal of paper mainly on the basis of documents seized from the premises of Chitra Traders and Transporters and the various statements recorded from the Proprietor of Chitra Traders, transporters and labourers working in the factory of the Appellants and also the driver or cleaner of the Truck which was in the process of loading on 22-6-2001 when the Central Excise Officers visited their factory premises. The Appellants, on the other hand, have contended that most of the persons whose statements have been relied upon have not been produced for cross-examination and the documents seized from third parties' premises have not been corroborated by adducing evidence of any of the customers though the enquiries were conducted at different places as deposed by Shri Anurag Sharma, Inspector, in his cross-examination on 4-3-2002.
Out of 19 consignments said to have been cleared by the Appellant No. 1 without payment of duty on the basis of five transporter, we observe that in respect of two consignments, it has been mentioned by the Revenue that the same may not pertain to the Appellants. Further, only one transporter Shri Sanjay Garg of M/s. Balaji Transporter Co. was produced for cross-examination which accounts for only two consignments out of 19 consignments in question. Shri 43 | P a g e E/10151- 10153,11433,11436,12276/2018 Garg, it is observed from the record of cross-examination, has deposed that they generally work as commission agent and provide transport to Appellant No. 1; the payment is used to be received directly by the drivers after delivery of the goods at the consignee's end and in case the driver did not report back for the next 3-4 days, it was presumed that the goods had reached the consignees end. Further, the name of the Applicant No. 1 on one GR No. 34 had been written not by Shri Sanjay Garg, but by his brother, whose statement has not been recorded and on GR 187, there is no mention of the name of the Appellant No. 1 at all. No statement of the drivers concerned has been recorded by the Revenue to establish that the finished goods manufactured by the Appellants were removed without payment of duty. The other transporters have not been produced for the purpose of cross-examination nor the statements of drivers who might have actually carried the goods, had been recorded. Moreover no statement of any of the recipients of the goods had been brought on record. Thus the statements of the transporters have remained uncorroborated and also suffers from the shortcoming of being not being cross-examined by the Appellants. It has been the settled law that the liability cannot be fastened on an assessee on the strength of documents seized from the possession of third party. There should be some corroborative evidence/material. The Tribunal has in the case of Emmtex Synthetics Ltd., supra, when the charge of clandestine removal was made against the Appellants therein out of yarn received from a third party based on the diary, loose documents and packing slips allegedly recovered from Shri B.M. Gupta, Vice President of the Supplier Company, held that "no presumption on the basis of 44 | P a g e E/10151- 10153,11433,11436,12276/2018 uncorroborated, uncross-examined evidence of B.M. Gupta and the alleged entries made by him in the private diary, loose sheets, charts, packing slips could be drawn about the receipt of polyester yarn by the Appellants from the company, M/s. HPL, in a clandestine manner during the period in question. Similarly, no inference could be legally drawn against the Appellants of having manufactured texturised yarn out of the said polyester yarn and the clearance thereof, in a clandestine manner without the payment of duty." The Tribunal had also referred to the decision in Oudh Sugar Mills Ltd. v. Union of India, 1978 (2) E.LT. (J172) wherein "the Apex Court has observed that no show cause notice or an order can be based on assumptions and presumptions. The findings based on such assumptions and presumptions without any tangible evidence will be vitiated by an error of law". The Tribunal also took note of the decision in Kamal Biri Factory and Shri Khushnuden Rehman Khan v. CCE, Meerut - 2003 (161) E.L.T. 1197 (T) = 1997 (23) RLT 609 (CEGAT) wherein view has been taken that the allegations of clandestine removal of the goods will not stand established when based on the entries made by the assessee's employee in a diary or on the basis of third party's record in the absence of any corroborative evidence. It has also been the consistent view of the Tribunal that the statements of the witnesses, without allowing the assessee to test the correctness of the same by cross-examining those witnesses; cannot be made the basis for holding the allegation against the assessee. (Takshila Spinners v. CCE, supra). Similar views have been expressed by the Tribunal in the case of Haryana Petrochemicals Ltd., supra wherein the Tribunal has held that reliance cannot be placed on the documents maintained by a third 45 | P a g e E/10151- 10153,11433,11436,12276/2018 party "who did not have the courage to come forward for cross- examination in order to test the veracity and correctness of the private record maintained by him." It has also been held by the Tribunal in the case of Kothari Synthetics Industries v. CCE, Jaipur - 2002 (141) E.L.T. 558 (T) that entries made in the transport Register of the transport company could not be accepted as a conclusive proof of clandestine receipt of goods from that transport company for want of corroboration from any tangible evidence. Following the ratio of these decision, the duty demand cannot be upheld solely on the basis of uncorroborated statements and records of transporter. The statements tendered by the labourers can also not be relied upon by the Revenue as these persons were not produced for being cross-examined. Moreover, there is no corroboration of their statements with regard to the Trucks by which the goods were allegedly removed or the persons who received the goods. The Truck driver Shri Shiv Bahadur Yadav has also not been cross-examined and cleaner Shri Rakesh Kumar had deposed that the Bills/Invoices are supposed to be with the Driver and he being cleaner had no knowledge.
10. The confirmation of duty in respect of 149 consignments is also based on the records seized from the premises of M/s. Chitra Traders and not on the basis of any record seized from the premises of the Appellant-company. The Revenue has not been able to adduce any corroborative evidence to show the movement of goods from the premises of the Appellant-company to the premises of M/s. Chitra Traders or the Customers whom the goods were sent directly to as per the direction of Chitra Traders. No inquiry has also been 46 | P a g e E/10151- 10153,11433,11436,12276/2018 made into these Customers who ultimately received the goods. There is no substance in the reasoning given by the Commissioner in the impugned order to the effect that "as the party did not challenge the fact of their business association with M/s. Chitra Traders, Delhi, the enquiry further down the line was not considered necessary." The onus of proof that the goods were removed by the Appellants without payment of duty and without entering the same in their records is upon the Revenue which cannot be discharged merely on the strength of the entries made in the records of a third party without linking the removal of goods from the premises of the Appellant-company. The mere fact that the Appellant-company had business relation with Chitra Traders, does not mean that they will be liable to each and every entry made by Chitra Traders in their books of account. It is also noted that none of the transporters and none of the labourers whose statements have been relied upon by Revenue have mentioned that the goods in question were delivered to Chitra Traders from the premises of the Appellants. The material brought on record may at the most create a doubt only. But doubt cannot take the place of evidence. The Revenue has, thus, not proved its case against the Appellants in respect of 149 consignments. We, therefore, set aside the demand of duty and penalty imposed on Appellant-company and consequently the demand of interest."
11. From the above settled law, it is clear that in a clandestine removal case, the facts of clandestine removal of excisable goods cannot be established only on the basis of certain statements which are retracted later but there has to be positive evidences like 47 | P a g e E/10151- 10153,11433,11436,12276/2018 purchase of excess raw materials, shortage/excess of raw materials/finished goods found in the stock/factory premises of the appellant, excess consumption of power like electricity, any seizure of cash during the investigation when huge transactions are made in cash. In the present case also, it is observed, from the annexures to the show cause notice dated 1-5-2009 issued to the appellants, that there were huge cash transactions to the tune of Rs. 11.23 Crores. When such large number of transactions involving huge amounts are being undertaken in clandestine removal activities, it is very likely that some cash would have been seized. There is not a single instance where either seizure of cash is made or any clandestinely removed goods are seized or raw materials/finished goods were found either short or in excess in the factory premises of the appellant or at any other place. As per the Panchnama drawn at the factory premises it is shown that there was no excess/shortage of the raw materials or finished goods found. The documentary evidences collected from the business premises of M/s. Sunrise Enterprise and the statements recorded by investigation, can at the most raise a reasonable doubt that some clandestine removal activities are undertaken by the appellant. However, such a suspicion or doubt has to be strengthened by positive evidences which seem to be lacking in this case. Any suspicion whosoever cannot take the place of evidence regarding clandestine removal of excisable goods. Moreover, after having positive evidences, quantification of duty on clandestinely removed goods also becomes essential. As already mentioned above, the stock lying in the stock yard of M/s. Sunrise Enterprise, Mehsana was found containing the goods received from M/s. Sakeen Alloys Pvt. Limited under proper 48 | P a g e E/10151- 10153,11433,11436,12276/2018 invoices. When the goods received under proper invoices are found in the stock yard of M/s. Sunrise Enterprise, then it is possible that out of such goods certain quantities were sold to various customers by accepting payment in cash. In such a situation, the quantification undertaken by the investigation becomes doubtful and incorrect. For this purpose cross-examination of the person Incharge looking after the records of M/s. Sunrise Enterprise was must, which was not allowed by the adjudicating authority. In view of the above observations, the demand of duty of Rs. 1,85,10,861/- is not sustainable and is required to be set aside."
18. The above judgment of the Tribunal stands upheld by the Hon'ble High Court of Gujarat as reported in 2014 (308) ELT 655 (Guj.) and Apex Court as reported in 2015 (3190 ELT A117 (SC). Applying the ratio of aforesaid orders, we find that the sole evidence which has been relied upon by the department is only pen drive date and statement of brokers which were even self contradictory. Though the statement of directors has also been relied upon by the department, but we found that even in some statements they have stated that the data found in pen drive do not belong to M/s SFL and it belongs to M/s Sankalp. Inspite of fact that some of the statements were recorded in presence of Snehil R shah who is director of M/s Sankalp, but even then he was not questioned about such data. Atleast the officers could have recorded his statement to ascertain the truth. Even if the statements of director are considered inculpatory the same cannot be relied upon in absence of corroboration with material evidence as held in case of Tejwal Dyestuff Ind. Vs. 2007 (216) ELT 310 (TRI) and 2009 (234) ELT 242 (GUJ.). Thus the statement of directors cannot lead to inference that the goods stated in 49 | P a g e E/10151- 10153,11433,11436,12276/2018 "Bombay Sales" ledgers are of Appellant. We also find that the brokers have even stated that they have taken the goods from Vasai Godown of M/s SFPL. In such case there is no reason to hold that the Appellant has dealt with M/s SFL. Thus in both cases i.e "Bombay Sales" and "Smi Cash Sales" apart from the statements which are even contradictory no corroborative evidence. The Appellant has placed reliance upon various judgments to canvas their point that in absence of corroborative evidence no demand can be made. We find that no corroborative evidence has been stated in show cause notice in the form of receipt of unaccounted raw material, transportation of unaccounted such raw material to SFL factory, consumption of unaccounted raw material, production of unaccounted finished goods, production record of unaccounted finished goods, use of consumables, extra labour and excess consumption of electricity, clearance of goods from the factory, receipt of cash from even a single person on account of alleged clandestine sale. We also find that the revenue did not undertake any investigation at the end of M/s SFPL from where the clearance of goods has taken place. When the brokers had stated that the delivery was taken from Vasai Godown which was under
the ownership of M/s SFPL, the officers should have made investigation. Thus in such circumstances, the demand on account of clandestine removal cannot be made. In case of Davinder Sandhu Impex Ltd. 2016 (337) E.L.T. 99 (Tri. - Del.) the tribunal has held that -
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 50 | P a g e E/10151- 10153,11433,11436,12276/2018 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. v. 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
51 | P a g e E/10151- 10153,11433,11436,12276/2018 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 52 | P a g e E/10151- 10153,11433,11436,12276/2018 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 v. Nissan Thermoware P. Ltd. (supra), the Hon'ble 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 53 | P a g e E/10151- 10153,11433,11436,12276/2018 Tribunal has committed any legal error in giving benefit of doubt to the assessee".
and thereafter the Hon'ble 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 Hon'ble High Court has set aside the charge of clandestine removal.
9. We also find that in the case of Mahavir Metals Industries v. 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 54 | P a g e E/10151- 10153,11433,11436,12276/2018 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 :
55 | P a g e E/10151-
10153,11433,11436,12276/2018 "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 Hon'ble 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."
56 | P a g e E/10151- 10153,11433,11436,12276/2018
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 Hon'ble Member (Judicial). I have concurred with her views". Further, we find that the Hon'ble Gujarat High Court in the case of CCE v. Saakeen Alloys Pvt. Ltd. (supra), the Hon'ble 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 57 | P a g e E/10151- 10153,11433,11436,12276/2018 Crores raised in the Demand notice and confirmed by both the authorities below".
which has been affirmed by the Hon'ble 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 of goods, how the goods were transported has been brought on record by the Adjudicating Authority or the inspecting team, therefore, relying on the 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. In case of TGL Poshak Corporation Vs. CCE 2002 (140) ELT 187 (TRI), the tribunal held as under :
5. Heard Ld. SDR, Shri G.S. Menon, who reiterates the departmental view. He contends that there are statements and several registers maintained by the party which clearly indicated that they had manufactured and cleared the goods. He refers to the evidence which was culled out by the investigating agencies which 58 | P a g e E/10151-
10153,11433,11436,12276/2018 clearly showed the manufacture of 'vanaspati' during the period in question. He submits that the Commissioner has not given details on the evidence and therefore matter has to be readjudicated by taking into consideration the evidence which is already noted by him in his order. He also refers to the grounds of appeal which are reproduced below :-
(A) The demand for Rs. 68,35,193/- was towards the duty on the clearance of vanaspati without payment of duty made during the period of 1990-91 & 1991-92 (upto 31-1-92). The demand was based on the excess clearances shown by a set of private records when compared with the clearances shown by RG-1 register. The set of private records are :-
(1) Confidential file which contain production & clearance particulars of vanaspati and other products during the period 1990-
91 and 1991-92 as shown to the bank and as shown in the Central Excise records.
(2) Select operational Data Returns which are the monthly production and clearance details filed with bank. These figures tallied with those found in the confidential file. (3) Consortium Meeting file which is a correspondence file with bank for working capital and contained the production and clearance figures.
(4) Balance sheet for the years 1990-91 and 1991-92 whose figures tallied with those shown in confidential file and select data returns submitted.
59 | P a g e E/10151- 10153,11433,11436,12276/2018 (B) It is evidence from the three sets of private records and balance sheets for the year 1990-91 and 1991-92 that the figures in each of the private records had tallied with each of the other records. Same production and clearance figures being present in 4 sets of records gives the strength of corroborative evidence. These records clearly show that more clearances were effected than what was shown in the statutory record i.e. RG-1 register. Hence the veracity of private records need not be doubted and the figures taken from the private records appear to be having the strength of corroborative evidence and hence the demand of Rs. 68,35,193/- made on the basis of figures shown by private records requires to be confirmed. As this demand is dropped, the order appears to be not proper to this extent.
6. We have carefully considered the submission and perused the impugned order. Insofar as the assessee's appeal is concerned, we notice from the extracted portion of the Commissioner's order that Revenue is solely relying on the exercise note books mainly balance sheets. The Tribunal in large number of cases which have already been noted above in the tabulated list of citations furnished by the Counsel has held that unless there is clinching evidence on the nature of purchase of raw materials, use of electricity, sale, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of note books maintained by some workers. The facts in the case of Aswin Vanaspati Industries would be identical to the facts herein as in that case also the allegation was with regard to removal of Vanaspati based on the 60 | P a g e E/10151- 10153,11433,11436,12276/2018 inputs maintained. The Tribunal went in great detail and have clearly laid down that unless department produces evidence, which should be clinching, in the nature of purchase of inputs and sale of the final product demands cannot be confirmed based on some note books. A similar view was expressed by the Tribunal in the other judgments noted supra. The citations placed would directly apply to the facts of this case. Hence, following the ratio of the cited judgments, the assessee's appeal is allowed.
7.Insofar as the Revenue's grievance on the Commissioner's dropping the proceedings is concerned, we notice from the extracted portion of the Commissioner's order that Commissioner has duly considered the note books relied upon by the department that they are not in the nature of purchase and removal of goods which was only certain balance sheets and certain private registers which does not prove the case of the department with regard to purchase of raw material, manufacture of final goods and clandestine removals. There is no seizure of goods or statements from the purchaser of goods who have paid money and the amounts received by them, appellants have also not recovered, nor there is any proof that amount said to have been received has flown back. Therefore, the dropping of proceedings, is proper and legal, we do not find any merit in the revenue appeal and same is rejected.
19. Same analogy has been followed by the Tribunal and Hon'ble High Courts in case of CCE Vs. ABS Metals (P)Ltd CCE Vs ABS Metals P.Ltd. 2016 (341)ELT 425(T), Capital Ispat Ltd. Vs. CCE (340) ELT 697(T), Commr. Vs Dhruv Dyestuff P.Ltd. 2016(339) ELT A-131 (Guj), CCE Vs 61 | P a g e E/10151- 10153,11433,11436,12276/2018 Gopi Synthetics P.Ltd. 2014 (310)ELT (Guj), Rukhmani Concrete P.Ltd. Vs CCE 2013(296)ELT 526(T), Shirly Dyers Vs. CCE 2013 (293) ELT 234 (T), Maruthi Tex Print & Processors P.Ltd. Vs CCE 2012 (281) ELT 509 (Mad), In On Creation Vs CCE 2012 (278) ELT 512 (T), Saravana Alloys Steels P.Ltd. Vs. CCE 2011(274)ELT 248(T), CCE Vs Saakeen Alloys P.Ltd.2014 (308) ELT 655 (Guj) Affirmed by Supreme Court in 2015 (319) ELT A117(SC), CCE Raipur Vs P.D. Industries P.Ltd. 2016 (340) ELT 249 (T- Del), CCE, Raipur Vs Heliwal Polypackers P.Ltd. 2016 (340) ELT 204 (Tri- Del), CCE, Daman Vs Nissan Thermoware P.Ltd. 2011 (266) ELT 45 (Guj. HC), Hingora Industries P.Ltd. Vs CCE, Daman 2015 (325) ELT 116 (Tri.Ahd).
20. We also find that the onus to prove clandestine clearances has to be discharged by sufficient cogent, unimpeachable evidence as held in case of CCE VS Laxmi Engg. Works 2010 (254) ELT 205 ) P & H), Shingar Lamps Pvt. Ltd., Vs CCE 2002 (150) ELT 290 (T), CCE Vs Shingar Lamps Pvt. Ltd. 2010 (255) ELT 221 (P & H), Ruby Chlorates (P) Ltd., Vs CCE 2006 (204) ELT 607 (T), CCE Vs Gopi Synthetics Pvt. Ltd. 2014 (302) ELT 435 (T), CCE Vs Gopi Synthetics Pvt. Ltd., 2014 (310) ELT 299 (Guj), Aum Aluminium Pvt. Ltd. Vs CCE 2014 (311) ELT 354 (T), Sharma Chemicals Vs CCE 2001 (130) ELT 271 (T), Resha Wires Pvt. Ltd., Vs CCE 2006 (202) ELT 332 (T), Atlas Conductors Vs CCE 2008 (221) ELT 231 (T), Vishwa Traders Pvt Ltd., Vs CCE 2012 (278) ELT 362 (T), CCE Vs Vishwa Traders Pvt. Ltd. 2013 (287) ELT 243 (Guj), CCE Swati Polyester 2015 (321) ELT 423 (Guj), Commissioner Vs Swati Polyester 2015 (321) ELT A-217 (SC), Flevel International Vs CCE 2016 (332) ELT 416 (Guj), CCE Vs Renny Steel Casting (P) Ltd. 2012(283) ELT 563 (T), CCE Vs Akshay Roll Mills Pvt. Ltd. 2016 (342) ELT 277 (T), Industrial Filter & Fabrics Pvt. Ltd. Vs 62 | P a g e E/10151- 10153,11433,11436,12276/2018 CCE 2014 (307) ELT 131 (T), CCE Vs Birla NGK Insulators Pvt. Ltd. 2016 (337) ELT 119 (T), CCE Vs Ganesh Agro Steel Industries 2012 (275) ELT 470 (T), UOI Vs MSS Foods Products Ltd. 2011 (264) ELT 165 (P & H), CCE Vs Sree Rajeswari Mills Ltd. 2009 (246) ELT 750 (T), CCE Vs Sree Rajeswari Mills Ltd. 2011 (272) ELT 49 (Mad.), Shardha Forge Pvt. Ltd., Vs CCE 2005 (179) ELT 336 (T), Arya Fibres Pvt. Ltd. Vs CCE 2014 (311) ELT 529 (T), TGL Poshak Corporation Vs CCE 2002 (140) ELT 187 (T). In view of said judgments we find that the charges of clandestine removal on the basis of pen drive data and sheets are not sustainable.
21. As regard demand on the ground of undervaluation as found from the ledger account "Direct Purchase (Value Diff.)" and "Direct Sales (Value Diff.)" we find that no evidence apart from pen drive data and loose sheets is appearing to show that the Appellant has removed goods by making undervaluation. We have already held above that the pen drive data is not a substantial evidence. We also find that no evidence of extra receipt has been produced in the form of person from whom such extra consideration was given, how it was received by the Appellant and in what manner it came to the Appellant. It is also not forthcoming as to how such huge amount was accounted by the Appellant. The revenue has relied upon the statement dt. 28.01.2014 of Shri Kartik Shah wherein he stated that the conclusion drawn by the investigating officers seems to be correct. However no evidence has been placed on record. Even the statement dt. 28.01.2014 gets negated by the subsequent statement dt. 08.10.2013 wherein he stated that he is not able to offer explanation as the pen drives do not belong to Appellant and they have never received any differential value over and above the value shown in invoice. This statement was not mentioned in show cause notice and the appellants have annexed copy of the same with the appeal papers. In such case only 63 | P a g e E/10151- 10153,11433,11436,12276/2018 on the basis of pen drive the charges of undervaluation cannot be sustained. We are therefore of the view that demand on account of undervaluation is not sustainable.
22. A demand of Rs. 31,40,087/- was made on the ground that M/s SFL has availed credit on the basis of invoice without actual receipt of goods. We find that the demand is based upon ledger account "Smi Cash"
containing entries with the suffix " Only Bills". The adjudicating authority has held that sometimes the Appellant were purchasing goods from some parties and procured sale invoice from other parties as indicated in ledger account and send the cash purchase alongwith invoices. We find that the revenue has not proved the allegation with any evidence as it has to be shown by making investigation at the supplier's end, statements of suppliers and other corroborative evidences. It has also to be shown as to how the purchase amount paid by the Appellant to the supplier came back to them. None of such evidence are on record. The Commissioner has merely relied upon the purchase shown from Golden Metal Pvt. Ltd. to show that the invoices were received without any goods. However the Appellant has annexed the declaration in Form 403 issued under Gujarat vat Rules duly stamped by the commercial officer of check post as proof of transit of goods for both the invoices. In view of said facts we find that the allegation and the findings of the adjudicating authority is not sustainable. Moreover there is no person who has received the cash from the Appellant. No person from Appellant company has been named as having receipt of cash and place where the cash was received or manner of receiving cash. Thus the allegations on this account are not sustainable.
23. The demand has also been made against Appellant on the ground that they issued invoices without delivery of goods, the statement of Shri 64 | P a g e E/10151- 10153,11433,11436,12276/2018 Pravin Vasant Mehta of M/s Jigar Plast was recorded on 13.12.2013 wherein he has stated that sale invoices of the Appellant without delivery of goods has been reversed. However we find that Shri Pravin Mehta has nowhere stated that they have purchased goods from M/s SFL. He has stated that all the goods were procured by M/s Jigar Plast through broker Shri Atul Parekh. Shri Pravin Mehta also stated that Shri Atul Parekh has received goods and invoices from the SFL in the name of various parties including M/s Jigar Plast and whenever they received intimation from Shri Atul Parekh regarding receipt of goods from Appellant, M/s Jigar Plast prepared job work challan in the name of their job worker M/s Shree Ram Steels where the goods were unloaded directly. It is also appearing from the statement of brokers viz. Shri Chhail Singh Deora dt. 26.11.2013 that for purchase of goods they had to take invoice in name of any party. Same statement has been given by Shri Narendra Bhai, broker in his statement dt. 21.11.2013. It is therefore clear that whenever the invoice was issued by the Appellant, the goods were also cleared against such invoice. In such case the Appellant cannot be found faulted with. Even it is clear that Shri Kartik Shah in his statement dt. 28.01.2014 when questioned in respect of "Sankalp Vat Collection" has stated that the Appellants have always cleared goods on payment of duty. The adjudicating authority has held that Shri Kartik Shah with reference to "Sankalp Vat Collection" has stated that the conclusion by the officer that only invoice has been issued is correct. We find that first of all the legitimacy of data found in pendrive is not free from doubt. Further in view of above findings it is clear that the Appellant has consigned the goods to their buyers through M/s SFPL. The goods were handed over to the parties/ brokers from Vasai godwn by M/s SFPL and the Appellants had no role to play in such delivery of goods. There is no evidence at the 65 | P a g e E/10151- 10153,11433,11436,12276/2018 Appellant's end that they issued any invoice without delivery of goods. We therefore found that the contention of the revenue that the Appellant issued invoice without actual clearance of goods is not sustainable.
24. In view of our above observation we thus hold that the demands and penalties imposed against Appellant M/s Shah Foils Ltd. are not sustainable. For the same reason we also hold that the penalty against other appellants is also not sustainable. We therefore set aside the impugned order dt. 27.02.2018 in as much as it relates to all the present Appellants.
25. As regard impugned Order-in-appeals passed by Commissioner (Appeals), Rajkot and Surat, we find that the impugned orders has relied upon the ledger "Bill condition" to hold that only bills were supplied without any actual delivery. Also the statements of the brokers and the intermediary dealers and buyers has been relied upon. The Appellant has pointed out that the findings are merely on basis of statements and without any support of documentary evidence. That merely on basis of records or papers of third party the allegation cannot be sustained. The Appellant has also relied upon the judgments in case of Dhruv Dyestuff Pvt. Ltd. 2016 (339) ELT A 131 and Kubber Tobaco India Ltd. 2016 (338) ELT 013 that for relying upon the statements the provisions of section 9D of the Central Excise Act has to be followed. He also relied upon the Tribunal order in case of Dhakad Metal Corporation 2015 (330) ELT 561 (TRI) that on the basis of confessional statement without corroborative evidence, the demands cannot be raised. That Shri Kartik Shah in his statement dt. 28.01.2014 and 29.01.2014 had clearly stated that the diversion of the goods, if any, may have occurred due to diversion of goods by broker of M/s SFPL and that all clearances made by them were 66 | P a g e E/10151- 10153,11433,11436,12276/2018 under invoices. He has pointed out entries out of "Bill condition" ledger were of invoices in respect of which lorry receipts and Form no. 402 submitted to Gujarat Vat Department for movement of said goods is also available. He submits that the goods were always removed on invoice and the diversion took place later. We find that there is no physical/ material evidence of Appellant having issued invoice without accompanying goods. Only on the basis of pen drive seized from place outside the factory/ premises of Appellant and which itself is highly doubtful as discussed by us in foregoing paras, we are of the view that it cannot be said that the Appellant M/s SFL issued only invoices without actual clearances. We therefore hold that the impugned Orders-in-appeals in as much as it imposed penalty upon the Appellant under rule 26 (2) are not sustainable. We therefore set aside the impugned order in as much as it imposes penalty against the Appellants.
26. In view of above observations, all the appeals are allowed with consequential reliefs, if any.
(Pronounced in the open court on 18.01.2019)
(Raju) (Ramesh Nair)
Member (Technical) Member (Judicial)
Neha