Custom, Excise & Service Tax Tribunal
Dd Iron & Steel Pvt Ltd vs Rourkela on 14 July, 2025
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.2
Excise Appeal Nos. 76871-76872 of 2016
(Arising out of Order-in-Original No. 08/CCE/CEX/RKL/2016-17 dated 28.07.2016
passed by Commissioner of CGST & Central Excise, Rourkela.)
M/s DD Iron & Steel Pvt. Ltd.,
Shri Musafir Jaiswal, Director
(At: Pada Jampali, Rajgangpur,
Dist.- Sundargarh (Odisha) 770017).
...Appellant
VERSUS
Commissioner of CGST & Central Excise, Rourkela,
(KK-42, Civil Township, Rourkela-769004.)
.. ...Respondent
APPERANCE :
Shri K. Kurmy, Advocate for the Appellant Shri S. Dey, Authorized Representative for the Respondent CORAM:
HON‟BLE MR. R. MURALIDHAR, MEMBER (JUDICIAL) HON‟BLE MR. RAJEEV TANODN, MEMBER (TECHNICAL) FINAL ORDER No...76899-76900/2025 DATE OF HEARING : 12.06.2025 DATE OF PRONOUNCEMENT:14.07.2025 Per R. Muralidhar :
The Appellant is manufacturer of Mild Steel Ingots falling under Sub Heading 7206.10.90. They use Sponge Iron, Pig Iron, Cast Iron etc. as raw materials.
2. On 01-09-2012 the Officers of DGCEI conducted simultaneous search operations at their Factory-cum-Office premises and Residential premises of one Shri Surendra Prasad Gupta, Brother-in-law of Shri Musafir Jaiswal, and also at other premises. One Spiral Binding Pocket Diary (Navneet) (Doc.01/DGCEI/RRU/DDIS/P/F/12) was seized purportedly from [Directors Chamber (Panchanamas Page 204, Vol.- II)]. Delible Pencil Handwritten loose sheets, (Trial Balance as per the Revenue) (Doc.02/DGCEI/RRU/SPG-Resi/F/12) were seized from the residence of Sri Surendra Prasad Gupta, Brother-in-Law of Sri Musafir 2 Excise Appeal Nos. 76871-76872 of 2016 Jaiswal, Director (Panchanamas Page 181, Vol.-II). In the course of said search operation, the physical stocks of raw materials and finished goods were taken and no excess/only shortages of stocks were detected. Statements were recorded from various persons and a Show Cause Notice was issued on 27.01.2016 alleging that the appellant has cleared 5816.660 MT of M.S. Ingots of the value of Rs.19,13,71,626/- involving Central Excise duty of Rs.2,16,46,337.After due process, the Adjudicating authority confirmed the demand along with interest and penalty. He also imposed penalty on the Director of the company. Being, the appellants are before the Tribunal.
3. The Ld Counsel appearing on behalf of the appellants, makes the following submissions :
3.1 The break-up of the demand is as per the following Table :
BREAK-UP OF DEMAND Sl. Doc. Nos. Description Maker Seized from Period Qty. (MT) Demand No. of RUD (Rs.)
1. (Doc.No.02 Pencil hand Written by Residence of April, 2011, 4074.870 1,52,20,517/-
/DGCEI/R written loose two unknown Surendra September, 2011, RU/SPG- sheets (So persons Prasad October, Resi/ Called Trial (Page 119, Gupta, 2011/November, F/2012) Balance) 4th line from Brother-in- 2011, December, (Please see top of OIO, Law of Sri 2011/January, Panchanama Vol.-I & Para Musafir 2012, February, at Page 204 4.3 at Page Jaiswal, 2012/March, of SCN, Vol.- 155 of SCN, Director 2012, April, 2012 II) Vol.-I) to July, 2012
2. 01/DGC Spiral Director's Drawer of July 2012 and 1741.790 64,25,819/-
EI/ Binding Chamber Musafir August 2012
RRU/ Pocket Jaiswal or
DDISP/F Diary office of
/12 (Dumb Director's
Document) Chamber
("Navneet") (Page 119)
Souda/deals
recorded
(Para 13.4 at
Page 117 of
OIO)
(Please see
Panchanama
on Page 181,
Vol.-II)
2,16,46,337/-
3
Excise Appeal Nos. 76871-76872 of 2016
3.2 Demand is based on private records (Doc. No. 02/DGCEI/RRU/SPG- RESI/2012 & Doc. No. 01/DGCEI/RRU/DDIS/F/2012) and there is no corroborative evidence in support of the charge.
3.3 The case of the department is based on two private records, the Ld. Commissioner accepts that both the documents are "Private Records" (Para 13.4 at Page 117 & Para 13.5 at Page 118).
3.4 Law is well settled through a series of judgments that no demand can confirmed on the basis of private records unless it corroborated by bringing in tangible, cogent corroborative evidence based on independent enquiries.
3.5 The maker of loose sheets Doc. No. 02/DGCEI/RRU/SPG- Resi/2012 is not known on the basis of which clandestine removal of 4074.870 MT of M.S. Ingot involving duty of Rs.1,52,20,517/- is alleged. In the impugned Order/SCN, it is accepted that the said document is written by two unknown persons (Please see Page 119, 4 th line from top of OIO & Page 115, last 4 lines of SCN).
3.6 When maker of the said document is not known, not identified and/or examined, nothing can be speculated in the vacuum as to why it was prepared, at whose instruction and for whose consumptions it was prepared.
3.7 Sri Musafir Jaiswal, Director in his statement dated 15-01-2013 (Q.No.15) (Page 341 of Vol.-II) stated that it is neither written in his own hand writing nor any of his staff.
3.8 Sri Musafir Jaiswal, Director in his said statement in reply to Q.No.14 (Page 341 of Vol.-II) did not recognize the said document.
4Excise Appeal Nos. 76871-76872 of 2016 3.9 In the case of Hitech Abrasives P. Ltd. Vs. CCE (2018) 362 ELT 96 (CHH.) (Para 12, Para 12.1) it is held that when maker of the document is not examined, such document can not be entered into evidence and can not be relied upon.
4.0 Further, the Doc. No. 02/DGCEI/RRU/SPG-RESI/2012 is loose sheets written in delible pencil which is Xeroxed to avoid erasing (Please see Panchanama dated 01-09-2012, Page 204 of Vol.-II & Statement of Sri Surendra Prasad Gupta, Brother-in-Law dated 01-09-2012 Q.No.10 Page 298 of Vol.-II) hence it appears to be some "rough work" prepared by some unknown person.
4.1 In the impugned Order, the entries in Doc. No. 02/DGCEI/RRU/SPG-Resi/2012, is matched with Electricity Bills, Bank Statements and it is held that it is "approximately matching" (Para 13.9 at Page 126 of OIO, Vol.-II) and it is written in delible pencil also (Please see Page 204, i.e. Panchanama, Vol.-II). The above approximate matching written in delible pencil/proves that it may be some "rough work" prepared by some unknown persons.
4.2 Mere approximately matching of Electricity Charge, Bank transactions etc. with the books of the Appellant may create doubts but no tax can demanded on the basis of doubts and suspicion. Charge of clandestine removal is a serious charge and hence, no reliance can be placed on such incredible materials without independent corroboration.
4.3 In the case of Sharma Chemicals Vs. CCE reported in 2001 (130) ELT 271 (Tri-Kol.), after analyzing a series of judgments this Hon‟ble Tribunal has held that mere material (approximate matching in this case) may give rise to doubts but no tax can be demanded on the basis of doubts or suspicion. (Para 14 last 4 lines) 5 Excise Appeal Nos. 76871-76872 of 2016 4.4 The maker of "loose sheets/private records", is not identified and/or examined. The clandestine removal of 1741.790 M.T involving duty of Rs.64,25,819/- is alleged on the basis of one Hand Written "Pocket Diary" [Doc. No. 01/DGCEI/RRU/DDIS/F/2012] purportedly seized from Director‟s Chamber containing entries of purchase sauda/sale sauda. (Please see Page 13.4, Page 117 & 118, Vol.-I of OIO) 4.5 The statements Sri Sanatan Bahera and Sri Musafir Jaiswal are not tested under Section 9D hence, both the statements are irrelevant piece of materials and the Pocket Dairy [Doc. No. 01/DGCEI/RRU/DDIS/F12] in itself is dumb document does not speak anything about clandestine removal or purchase. Sri Sanatan Bahera, Accounts Assistant in his statement dated 01-09-2012 in reply to Q.No.5 (Page 197 of Vol.-II) stated that it is "SOUDA NOTE BOOK" and after of SOUDA. It was struck out.
4.6 Sri Musafir Jaiswal, Director in his statement dated 05-09-2012 (Page 318 of Vol.-II) in reply to (Q.No.19) stated that it is maintained by him for sale order and purchase order and the they are struck up after receipt of raw material or sale of M.S. Ingot.
4.7 In the impugned Order under Para 13.2, the Ld. Commissioner has categorically accepted that the said Pocket Diary contains recording sale order and purchase order i.e. sauda.
4.8 The "Pocket Diary" [Doc. No. 01/DGCEI/RRU/DDIS/F/2012] is "Dumb Document" in as much as it does not speak for itself. The clandestine removal is deciphered from the oral statement of Sri Sanatan Bahera, Accounts Assistant and Sri Musafir Jaiswal, Director.
6Excise Appeal Nos. 76871-76872 of 2016 4.9 In the quantification chart under Annexture-31 (Page 504 of Vol.- II) only those entries are treated as clandestine purchase or sale where name of the buyers/seller stated by Sri Musafir Jaiswal, Director in his statement dated 22-01-2015 (Page 419 & 417 of Vol.-II) which match with names of buyers/seller in said "Pocket Dairy".
4.10 In the impugned Order the Ld. Commissioner under Para 13.4 and Para 13.5 has accepted that the demand in the instant case rests on "Private document/private handwritten document".
4.11 The Appellant most humbly submits that in the instant case, there is corroborative evidence to prove that -
The maker of loose sheets Doc. No. 02/DGCEI/RRU/SPG-
Resi/2012 is not known;
Written by two unknown persons;
Written in delible pencil;
The Pocket Dairy [Doc. No. 01/DGCEI/RRU/DDIS/F12] in
itself is dumb document does not speak anything about clandestine removal or purchase;
There was no excess shortage of raw material/finished goods detected on the day of search;
No invoice, challan, transport bilty for clandestine removal was found on the day of search;
There is no acceptance of buyers M/s Scan Steel Ltd., and M/s Shreeram Sponge & Steel P. Ltd. The said buyer by their Account statement confirmed that they have purchased excisable goods on payment of duty only;
There is no evidence of removal of 5816.660 MT of finished goods. For transportation of 5816.660 MT of impugned 7 Excise Appeal Nos. 76871-76872 of 2016 goods, at least 650 nos. of lorries (9 MT each) would be required but there is not a single evidence for the same;
There is no evidence of production of 5816.660 MT of the impugned goods;
There is no evidence of extra use of labour, electricity etc.;
There is no evidence of purchase of raw material. For manufacture of 5816.660 MT finished goods, at least 6900.000 M.T of raw materials would be required and but in the instant case there is not a single evidence of out of account purchase of single tone of the said raw materials;
There is no evidence of transportation of raw material. For transportation of the said quantity of raw materials at least 766 nos. of lorries (of 9 M.T each) would be required but in the instant case there is no evidence of even a single lorry;
There is no acceptance of transporters for transporting the said quantity of raw materials;
There is no acceptance of sellers of raw materials;
There is no evidence of flow of back of funds;
4.12 The Appellant relies on the following judgments :-
(i) Arya Fibres Pvt. Ltd Vs. CCE 2014 (311) E.L.T 529 (Tri.
Ahmd) [Para 40];
(ii) Prinik Steels (P.) Ltd. Vs. CCE (2023) 12 TMI 1299-
CESTAT-KOLKATA [Para 14];
(iii) Continental Cement Co. V. UOI (2014) 309 ELT 411 (All.) [Para 12];
(iv) Hitech Abrasives P. Ltd. Vs. CCE (2018) 362 ELT 96 (CHH.) [Para 2 (last 4 lines), Para 12.2];
(v) Sharda Re-Rollers Pvt. Ltd. Vs. CCE [2025 (5) TMI 1281 -
CESTAT - Kolkata];
8Excise Appeal Nos. 76871-76872 of 2016 4.13 In the impugned Order under Para 13.5 and Para 13.14 the Ld. Commissioner has held that the burden of proof is on the Appellant which the Appellant has purportedly failed to discharge. The conclusion of Ld. Commissioner on this count under Para 13.5 at Page 65 is erroneous.
4.14 In the case of Hitech Abrasives P. Ltd. Vs. CCE (2018) 362 ELT 96 (CHH.) (Para 12, Para 12.1) it is held that when maker of the document is not examined, such document cannot be entered into evidence and can not be relied upon.
4.15 Without complying with Section 9D, Statements of witnesses cannot be relied upon. The Ld. Commissioner contrary to the mandates of Section 9D of the Act arbitrarily rejected the prayer for cross examination of the persons whose statements are relied upon in the instant case. (Please see Page 129, Vol.-I) 4.16 The Appellant relies on the following judgments-
(i) G.Tech Industries Vs. UOI [2016 (339) ELT 209 (P&H)] [Para 16, 17, 18, 19];
(ii) M/s J.J. Extrusion Pvt. Ltd., Vs. CCE reported in 2025-VIL-
320-CESTAT-KOL-CE (Para 9, Para 10, Para 11);
(iii) Hitech Abrasives P. Ltd., Vs. CCE (2018) 362 ELT 96 (CHH.) [Para 2 (last 4 lines), Para 9.1, 9.4, 9.5];
(iv) Prinik Steels (P.) Ltd. Vs. CCE (2023) 12 TMI 1299-CESTAT-
KOLKATA (Para 13);
4.17 In the instant case no investigation is carried out to ascertain for what purposes which entries were striked out and whether it relates to 9 Excise Appeal Nos. 76871-76872 of 2016 clearance of excisable goods or cancellation of Orders. It is presumed that those entries must be related to actual clearances.
4.18 Demand is barred by Limitation and imposition of penalty is arbitrary for the following reasons :
The dispute in the instant case is relates to April, 2011 to August, 2012 whereas the Show Cause Notice is issued on dated 22-07- 2015 under Section 11A(1) i.e. beyond the normal period of limitation of one year, hence the entire demand is barred by normal period of one year.
The Appellant further submits that in the instant case none of the ingredients necessary for invoking extended period of limitation does exist.
Under Para 13.4 and Para 13.5 the Ld. Commissioner has accepted that the demand in the instant case is based on "Private Records/Private documents".
The allegations/findings in the instant case are entirely based assumption and presumption and not based on any tangible and cogent evidence. Extended period of limitation cannot be invoked unless a clear case of suppression etc. is made-out.
5. In respect of the confirmed demand on the Director, the Ld Counsel submits that in the first place, the allegation of the clandestine removal itself is not proved by the Revenue. Secondly, there is nothing to gather from the investigation that the Director has agreed with the Revenue‟s allegation about the clandestine manufacture / clearance of the goods. Hence, it is prayed that the penalty imposed on the appellant Director may be set aside.
10Excise Appeal Nos. 76871-76872 of 2016
6. In view of the above submissions, the Ld Counsel prays that the impugned Order may be set aside both on merits as well as on account of limitation and the appeals may be allowed.
7. The Ld A R, appearing for the Revenue submits that in the course of the visit, the Dept has recovered the Loose Sheets, which is nothing but the Trial Balance of the company, showing the correct details of the cleared goods. The quantity and value shown in the Trial Balance, is significantly higher than the quantity and value recorded in their statutory records. The very fact that several entries from this Trial Balance tally with their actual expenditure like electricity charges and bank charges shows that the clearance also would be the one shown in these loose sheets mentioned as Trial Balance. The Adjudicating authority has clearly dealt this issue in detail in the order. Therefore, the confirmed demand is based on proper evidence gathered by the Revenue.
8. In respect of the Pocket Note book, the Ld A R Submits that this shows that the appellant‟s record of having removed the goods without any proper legal Invoices. Wherever any entry in this pocket book is found to be tallying with the proper invoices, the same has been excluded while computing the demand. Therefore, he relies on the detailed findings of the adjudicating authority.
9. Heard both the sides. Perused the Appeal papers, written and oral submissions.
10. Admittedly, the demands emanate from the documents seized during the search operations on 01.09.2012. The documents seized and demand made based on these documents are summarized as under :
11Excise Appeal Nos. 76871-76872 of 2016
(a) Handwritten (in pencil) loose sheets seized from the residence of Sri Surendra Prasad Gupta Brother-in-Law of the Director -
(Doc.02/DGCEI/RRU/SPG-Resi/F/12) : Rs.1,52,20,517
(b) One Spiral Binding Pocket Diary (Navneet) seized from the Director‟s Chamber (Doc.01/DGCEI/RRU/DDIS/P/F/12) : Rs. 65,25,819
11. We have gone through the Loose Sheets, which is referred to as the Trial Balance in the present proceedings. A few pages from this document are reproduced below :
12Excise Appeal Nos. 76871-76872 of 2016 13 Excise Appeal Nos. 76871-76872 of 2016 14 Excise Appeal Nos. 76871-76872 of 2016
12. On going through the above extracts and the evidence produced by the Ld Counsel, it gets clarified that this is written by Pencil which is capable of being modified. If any document is written by pen, then modification of the same without cutting out, is not possible. It is 15 Excise Appeal Nos. 76871-76872 of 2016 also seen from the entries therein that the handwriting differs. The description in the Debit and Credit side is in one handwriting and the value entries therein is in another handwriting. This makes it clear that this document is prepared by two persons giving their individual inputs in writing in these loose sheets. The loose sheets do not contain any words specifying that it pertains to "Trial Balance". There is no signature of any of the person who can be held to be the author of this document. We find from the Page 213 extracted above, that one side shows the total figure as "5,97,02,101". The second side shows the total figure as "7,01,66,912". As per the Accounting principles, when the Trial Balance is drawn, the totals of both the sides should match. From this Trial Balance, the entered figures get figured either in the P&L Account or in the Balance Sheet. If these figures do not match, the drawn-up P & L account / Balance Sheet would not be correct. The very fact that these are written in pencil, shows that the figures may not be final, are tentative and have been made with pencil so as to modify the same. The presence of two different handwriting, makes it difficult to know the author and the intention for adopting this system. This has not been probed in details by the Revenue.
13. We have gone through the recorded statement of Sri Surendra Prasad Gupta, the Brother in Law of the Director, from whose premises the „Trial Balance‟, was recovered.. The relevant extract is given below:
16Excise Appeal Nos. 76871-76872 of 2016 17 Excise Appeal Nos. 76871-76872 of 2016
14. Answering the Q No.3, he has stated that he does not have any business interest in the business of his brother-in-law. Hence, he cannot be presumed to be the part author of the „Trial Balance‟.
15. Mere tallying of certain entries, does not make out these loose sheets to be a complete evidence of the purchases and sales and other details pertaining to the appellant.
16. Considering the factual details discussed above like non-finding of the author of these loose sheets, non-tallying of the Debit and Credit figures, figures being written in pencil that too by two different persons, we take the view that the Loose Sheets cannot be presumed to be the „Trial Balance‟ as has been assumed by the Revenue to enforce the demand. Their assumption does not have any proper legal footing and hence the same is required to be rejected. We do so.
17. Coming to the Pocket Diary [Navneet] seized by the Revenue, the relevant portions of the recorded statements are reproduced below :
18Excise Appeal Nos. 76871-76872 of 2016 19 Excise Appeal Nos. 76871-76872 of 2016
18. The Asst Accountant, Santosh Behara, answering the Q No.2.5 states that the pocket diary is a „Sauda‟ note book showing the sale and 20 Excise Appeal Nos. 76871-76872 of 2016 purchase of the raw materials. There is nothing to indicate from that the entries therein are not pertaining to legally purchased and sold items.
19. The extract of the recorded statement of Sri Musafir Jaiswal, Director, Appellant herein is reproduced below :
21Excise Appeal Nos. 76871-76872 of 2016 22 Excise Appeal Nos. 76871-76872 of 2016 23 Excise Appeal Nos. 76871-76872 of 2016
20. From the above statement, it is seen that Answering the Q No.5 he has given the list of 6 parties to whom the finished goods were being 24 Excise Appeal Nos. 76871-76872 of 2016 supplied. Answering the Q No.6, he has submitted that they are purchasing ingot moulds from two parties. He has also explained as to how the entries are made for purchases and sales and are cut once the deal is completed. He has also submitted that in some cases the entries get cancelled if the transaction is not completed.
21. We have also gone through some of the entries made in the Diary [Navneet], which are extracted below :
25Excise Appeal Nos. 76871-76872 of 2016 26 Excise Appeal Nos. 76871-76872 of 2016
22. From the above extracts, we find that on a date-wise basis, the details of the quantity sold, party‟s name, rate at which the transaction 27 Excise Appeal Nos. 76871-76872 of 2016 has been done with marking "+ +" in some case and with no such markings in some cases. It is the allegation of the Revenue that when „+ +‟ is marked, these pertain to clandestine clearance. As per the appellant this book pertains to their daily transaction. Once the same is completed the same is cut to show that it is completed. This method is followed for both their sales and purchase transactoins. If the transaction does not go through, the same is cancelled and hence cut. This is because, the rate may vary when the consignment is despatched a later date. They take the plea that the entries in the pocket diary,with cut explains their transactions including that of the cancelled transactions. These entries, on their own cannot be relied on to allege clandestine removal.
23. After this we have taken up the appellant‟s submission that on the date of stock taking, no shortage of finished goods / raw materials was found. Therefore, we have taken a look at the Pachanama recording for this. The relevant portion is extracted below :
28Excise Appeal Nos. 76871-76872 of 2016 29 Excise Appeal Nos. 76871-76872 of 2016
24. The Panchanama does not indicate about any shortage being found either for the raw materials or the finished goods. Since no demand has 30 Excise Appeal Nos. 76871-76872 of 2016 been made in the Show Cause Notice on account of any shortage, we find the submission of the appellant to be correct.
25. After this we go to the relevant Pages of the Show Cause Notice, wherein the demand has been quantified. The relevant extracts are given below :
31Excise Appeal Nos. 76871-76872 of 2016 32 Excise Appeal Nos. 76871-76872 of 2016
26. From the above paragraphs, it gets clarified that the demand quantification is as per the figures given in the Loose Sheets [Trial 33 Excise Appeal Nos. 76871-76872 of 2016 Balance] and the Diary [Navneet], from which the actual clearances recorded in the RG 1 details have been deducted to arrive at the residual excess clearance, which is termed as the clandestine clearance.
Based on the clandestine removal quantity the amount of demand has been worked out. We do not find any error in following this procedure to work out the differential duty. This shows that the Revenue has taken care not to demand the Duty on the already accounted for clearances under RG 1 / ER 1. But the important point to be proved by the Revenue would be as to how on their own, with the defects discussed above, these two documents would be able to prove the charges of clandestine manufacture and removal thereof.
27. We have already discussed in detail as to how even on their own these two documents do not prove to be the relevant documents towards the clandestine removal. Even if it is hypothetically taken as to be the correct figures, still the same has to withstand the scrutiny of corroborative evidence.
28. The appellant‟s director has given the names of the following Five Parties, who have been buying the finished goods from the appellant :
(1) Scan Steels Ltd -Rambhai (2) Sri Ram Rerollers (3) Ambica Iron & Steel (P) Ltd (4) Sri Ram Sponge & Steel (P) Ltd 34 Excise Appeal Nos. 76871-76872 of 2016 (5) K L Rathi (Ghaziabad)
29. Out of the 5 parties, the enquiries have been made from (1) and (2) alone and even they have not conclusively stated that they have purchased goods on cash basis without Invoices from the appellant. No follow-up enquiries have been made from the rest of the three parties.
No follow-up enquiries have been made from the suppliers of the mould
- Maa Alloys (P) Ltd and Ginni Metal Industries (P) Ltd., mentioned by the Director. Thus, we find that no proper follow-up verification / enquiry process was undertaken to ascertain as to whether any or all of the alleged clandestinely removed goods have reached any of the buyer.
30. The allegation is towards removal of 5816.660 of MTs of finished goods. This would require purchase of approximately 6900 MTs of raw materials. The Purchase and sales would require movement of over 600 to 700 vehicles on each side. No statement of any Vehicle owner about movement of goods without invoices has been obtained. In order to manufacture the finished goods, the appellant should have consumed more Electricity. On the other the hand, for the purported entry in the Trial Balance on account of electricity, the charges have been paid by the appellant, which shows that the electricity consumption has been accounted for by the appellant. The Revenue has not come out with any evidence towards excess consumption of electricity. No documents towards cash receipt, cash payment etc. have been seized. Neither any 35 Excise Appeal Nos. 76871-76872 of 2016 vendor has given any statement towards cash sale of the raw materials, nor any buyer has confirmed receipt of finished goods on cash basis.
Thus, in the area of corroborative evidence, the investigation has woefully fallen short, by merely clinging on to only the two main seized documents, viz., the Loose Sheets [Trial Balance] and the Pocket Diary [Navneet], which even by themselves do not carry the required clarity to assume that the figures given therein are towards clandestine sales / purchases only.
31. On the issue of importance of corroborative evidence, Hon‟ble Allahabad High Court in the case of Continental Cement Co. Vs. UOI [2014 (309) E.L.T. 411 (All.), has held as under :-
"12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects :
(i) To find out the excess production details.
(ii) To find out whether the excess raw materials have been purchased.
(iii) To find out the dispatch particulars from the regular transporters.
(iv) To find out the realization of sale proceeds.
(v) To find out finished product receipt details from regular dealers/buyers.
(vi) To find out the excess power consumptions.
13. Thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department.
14. In the instant case, no investigation was made by the Department, even the consumption of electricity was not examined by the Department who adopted the 36 Excise Appeal Nos. 76871-76872 of 2016 short cut method by raising the demand and levied the penalties. The statement of so called buyers, namely M/s. Singhal Cement Agency, M/s. Praveen Cement Agency; and M/s. Taj Traders are based on memory alone and their statements were not supported by any documentary evidence/proof. The mischievous role of Shri Anil Kumar erstwhile Director with the assistance of Accountant Sri Vasts cannot be ruled out.
15. In view of the above, we are of the opinion that when there is no extra consumption of electricity, purchase of raw materials and transportation payment, then manufacturing of extra goods is not possible. No purchase of raw material out side the books have been proved.
16. In the light of the above discussions and considering the totality of the case, we are satisfied that no case is made out for extra so called clandestine sale of the Portland Cement to the said parties. We are satisfied that the first appellate authority has rightly deleted the addition and cancel the penalties. Hence we hereby set aside the impugned order passed by the Tribunal and restore the order passed by the first appellate authority, along with the reasons mentioned herein.
17. In the result, all the appeals filed by the appellants are hereby allowed ."
32. In the case of Arya Fibres Pvt. Ltd. & Others Vs. CCE Ahmedabad-II [2014 (311) E.L.T. 529 (Tri. - Ahmd.), it has been held :
"9. It is well settled that the charge of clandestine manufacture of the dutiable goods and removal thereof without discharging the duty liable by an assessee, cannot be established on assumptions and presumptions. Such a charge has to be based on concrete and tangible evidence. In this context, reference may be made to Oudh Sugar Mills Ltd. v. Union of India - 1978 (2) E.L.T. (J 172) (S.C.), wherein the Apex Court has observed that demand of duty cannot be raised on the strength of assumptions and presumptions. There should be sufficient evidence of the removal of the goods alleged to have been manufactured and cleared without payment of duty. The charge of clandestine removal must be based on tangible evidence and not on inferences involving unwarranted assumptions. This very principle of law had been applied by the Tribunal in a number of cases and out of those, few are, Amba Cement and Chemicals v. CCE - 2000 (115) E.L.T. 502 (Tribunal) = 2000 (90) ECR 265, Gurpreet Rubber Industries v. CCE - 1996 (82) E.L.T. 347 and Madhu Foods Products v.
CCE - 1995 (76) E.L.T. 197."
37Excise Appeal Nos. 76871-76872 of 2016
33. In the case of CCE, Chennai-I vs. Indian Steel & Allied Products 2016 (344) E.L.T. 292 (Tri.-Chennai), Bench has held as under:-
"14. In this regard, the Hon'ble High Courts and the Tribunal in various decisions consistently held that clandestine manufacture and removal of excisable goods is to be proved by tangible, direct and affirmative and incontrovertible evidences. The Hon'ble Allahabad High Court in the case of CCE v. R.A. Castings Pvt. Ltd. (supra) on the identical issue upheld the Tribunal's order and dismissed the Revenue appeal. The said High Court's decision stands affirmed by Hon'ble Supreme Court as reported in Commissioner v. R.A. Castings Pvt. Ltd. - 2011 (269) E.L.T. A108 (S.C.). The Tribunal in the recent decision in the case of Mahesh Silk Mills v. CC, Mumbai - 2014 (304) E.L.T. 703 (Tri.-Ahmd.), has relied the Tribunal's decision in the case of Nova Petrochemicals v. CCE, Ahmedabad [Final Order Nos. A/11207-11219/2013, dated 26-9-2013] [2014 (311) E.L.T. 529 (Tribunal)], wherein the Tribunal laid down the fundamental criteria to be established by revenue which is reproduced as under :-
"8. Similarly, in the matter of Nova Petrochemicals v. CCE, Ahmedabad-II, this Tribunal in its Final Order Nos. A/11207-11219/2013, dated 26-9-2013 this bench has held as under in Para 40 :
"After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenues which mainly are the following :38
Excise Appeal Nos. 76871-76872 of 2016
(i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions;
(ii) Evidence in support thereof should be of :
(a) raw materials, in excess of that contained as per the statutory records;
(b) Instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty.
(c) Discovery of such finished goods outside the factory
(d) Instances of sales of such goods to identified parties.
(e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him;
(f) use of electricity for in excess of what is necessary for manufacture of goods otherwise manufactured and validity cleared on payment of duty
(g) statements of buyers with some details of illicit manufacture and clearance;
(h) proof of actual transportation of goods, cleared without payment of duty
(i) links between the document recovered during the search and activities being carried on in the factory of production; etc. Needless to say, a precise enumeration of all situations in which one could hold with activity that there have been clandestine 39 Excise Appeal Nos. 76871-76872 of 2016 manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What once could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of notebooks or diaries privately maintained or on mere statements of some persons may even be responsible official of the manufacture or even of its Directors/partners' who are not even permitted to be cross-examined, as in the present case, without one or more of the evidence referred to above being present."
The guidelines laid down by the Tribunal in the above case for establishing clandestine removal is squarely applicable to the present case. Whereas in the instant case none of the above evidences or any one evidence has been established by Revenue to prove the clandestine manufacture and removal.
34. We also find from the OIO that the Adjudicating authority has recorded in Para 9 that the appellant has sought the cross-examination of the persons who have recorded the statement. At para 10.16 of the OIO, he holds that the Statements were given voluntarily and the right to cross-examine is not an absolute right as per the case laws cited by him. He also takes the stand that the persons have not retracted the statement. But he fails to note that in subsequent judgements, wherein the issue was the very admissibility of the recorded statements as evidence, the High Courts have been consistently holding that in terms of Section 9D of the CEA 1944, the person recording the statement should reiterate before the Adjudicating authority that they have 40 Excise Appeal Nos. 76871-76872 of 2016 recorded the statement without any coercion / force. After this, the Statement should be admitted as evidence. Thereafter, if the cross-
examination is sought by the noticee, the same is to be granted. In the present case, without subjecting the recorded statements to this procedure, the Adjudicating authority could not have directly admitted them as evidence.
35. As per the detailed discussions of the factual matrix and the ratio of the cited case law, we find that the confirmed demands are not legally sustainable on merits. Hence, we set aside the same and allow the appeal on merits.
36. Taking the ground of time bar, the appellant has submitted that the Show Cause Notice has been issued on 22.07.2015 for the alleged clearances made during the period August 2011 to August 2012. As to whether the facts required to issue the Show Cause Notice were already available by August, 2012 itself, is not very clear from the factual details. Therefore, having allowed the appeal on merits, we are not going into the time-bar aspect.
37. Since we have set aside the demands on the appellant company, the penalty imposed on the Director also does not legally sustain. We set aside the penalty imposed on him and allow his appeal.
41Excise Appeal Nos. 76871-76872 of 2016
38. Thus both the appeals stand allowed. The appellants would be eligible for consequential relief, if any, as per law.
(Pronounced in the open court on...14.07.2025..) Sd/-
(R. Muralidhar) Member (Judicial) Sd/-
(Rajeev Tandon) Member (Technical) Tushar Kr.