Custom, Excise & Service Tax Tribunal
Cce, Ludhiana vs M/S.Adinath Dyeing And Finishing Mills ... on 17 May, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH-160017 DIVISION BENCH COURT NO.1 Appeal No.E/622-626 and 2250/2007-EX(DB) [Arising out of the Order-in-Appeal No.119-123/CE/Appl/Ldh/06 dt.30.11.06 and 62-65/CE/Appl/LDH/07 dt.8.3.07 passed by the CCE(Appeals), Chandigarh) Date of Hearing/Decision: 17.05.2016 For Approval & signature: Honble Mr.Ashok Jindal, Member (Judicial) Honble Mr.Raju, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3. Whether their Lordships wish to see the fair copy of the order? seen 4. Whether order is to be circulated to the Department Authorities? Yes CCE, Ludhiana Appellant Vs. M/s.Adinath Dyeing and Finishing Mills Ltd. Respondent
Lalit Jain, Director Satish Kumar Jain, Proprietor Rishi Kumar, Proprietor Jagdish Kumar, Proprietor M/s.Adinath Dyeing & Finishing Mills Ltd.
Appearance Shri Sanjay Jain, AR- for the appellant Shri Jagmohan Bansal & Naveen Bindal,Advocate.- for the respondent CORAM: Honble Mr.Ashok Jindal, Member (Judicial) Honble Mr.Raju, Member (Technical) FINAL ORDER NO: 60152-60156 / 2016 Per Ashok Jindal:
The Revenue is in appeal against the impugned order. As all these appeals are arising out of a common order, therefore all the appeals are disposed of by this common order.
2. The facts of the case are that the respondent No.1 is engaged in dyeing of fabrics. It is alleged that the respondent has availed the exemption from Central Excise duty under Notifications Nos.07/2000-CE dated 1.3.2000, 03/2001-CE and 14/2002-CE dated 1.3.2002 during the period from 1.4.2000 to 31.3.2003. As they have cleared the knitted fabric made of man made fibres of chapter sub-heading 6002.43 and 6002.93 by misdeclaring the same as knitted fabric of cotton as the same was exempt from the central excise duty under the above notifications. On the basis of investigation and statement of suppliers of knitted fabric, it is alleged that the main respondent has cleared knitted fabrics of polyester not of cotton. In these set of facts, the show cause notices were issued to the respondents to deny the exemption as claimed by them consequently to demand of duty alongwith the interest and for imposition of penalty. The matter was adjudicating and exemption was denied consequently, the demand of duty was confirmed alongwith interest and penalty and various penalties were imposed. Aggrieved with the said order, the respondents have challenged before the Commissioner (Appeals) who dropped the charge against the respondents on the basis of available records. Aggrieved with the said order, the Revenue is in appeal before us.
3. Learned AR appeared on behalf of the Revenue and submitted that the Commissioner (Appeals) fell in error who has not given any credence to the confessional statement made by the suppliers. In fact, the department investigated on a specific information that the main respondent is misdeclaring the goods as cotton dominated fabrics whereas the goods cleared as polyester dominated fabrics. The statement of suppliers were recorded who submitted that the respondents have manufactured the polyester dominated fabrics and received back the same for further processing of dyeing and the same has been mentioned in the job worker challan. Therefore, on this sole ground, the impugned order is to be set aside. It is further submitted that retraction of statement dated 28.3.2005, Shri Darshan Kumar, partner of the appellant during the course of cross examination conducted is not acceptable as retraction has been made after more than a year of recording the statement and no evidence was produced to the effect that the departmental officers obtained the statement under threat/duress. Therefore, it was submitted that in the case of Paulraj-2001 (137) 03 (Madras), the Honble Madras High Court has held that retraction made after 45 days of recoding of statement does not in any way affect the credibility of the confessional statement made by the accused and the statement is voluntary in nature. No explanation given by the accused except bare denial. No proof of any torture or coercion is available. Learned AR relied on the decision of Apex Court in the case of Kalema Tumba vs. State of Maharashtra-2001 (115) ELT 8 (SC).
4. On the other hand, leaned Counsel, Shri Jagmohan Bansal appeared on behalf of the respondents submitted that the suppliers or witness made the statement during the course of investigation and later in cross examination, the truth was revealed and the initial statement were not recorded before the respondents. He further submitted that the respondents have never admitted that they were dyeing polyester dominated fabrics. The respondents have cross examined the persons whose statement have been relied on by the authorities while issuing the show cause notices and cross examination was granted. In the cross examination, it was disclosed by the persons who made the statements that they were forced to make the statements on the pretext that they will be exonerated from the proceedings. Further, it was stated by the witness that even in the cross examination, the original copies of invoices does not disclose the description of the goods i.e. polyester fabrics but in the photocopies of the invoices, the witness was compelled to write the description of the goods as polyester dominated fabrics and that statement of witness has not been controverted by the Revenue with cogent evidence. Moreover, during the course of investigation, no samples were drawn and in the absence of test report, it cannot be said that the goods cleared by the respondents were polyester dominated fabrics. The Commissioner (Appeals) has rightly appreciated the facts and cross examination done by the respondents. The Commissioner (Appeals) has also examined the records placed before him i.e. challan/invoices, ledger which clearly show the activity of respondents and after examining the said documents, he has rightly arrived at a decision that the goods cleared by the respondent were cotton dominated fabrics and not polyester dominated fabrics. Therefore, the impugned order is to be upheld.
5. Heard the parties and considered the submissions and examined the records placed before us.
6. The contention of the learned AR that retraction made by the respondents is not acceptable. In fact, there was no retraction and it was during the cross examination, the facts came to knowledge of the adjudicating authority. The Revenue fell in error to conclude that the statement made in the cross examination is retraction. Therefore, the case law relied upon by the learned AR are not relevant to the facts of this case.
7. While adjudicating the case, the adjudicating authority has not given any credence to the cross examination done by the learned for the respondents wherein the witness itself has categorically stated that he was pressurized by the department to make inculpatory statement against the respondents on the pretext that the witness shall not be dragged, if the witness writes the statement as per wishes of the department. It was also revealed that in the cross examination, there is evidence on records that the invoices of the descriptions/contents of blended yarn are not written but the witness was compelled by the officers to write in his handwriting the contents of yarn on photocopies of the invoices. Even at the time of cross examination, in the original copies of the invoices, there was no mention the contents of yarn.
8. We further find that the Commissioner (Appeals) has appreciated this fact and observed as under:
As per facts on record, the departmental officers visited the office-cum-factory premises of the appellants no.1 and resumed their records. After scrutiny of the records, the department conducted enquiries against various suppliers of the appellants no. 1 and as result of such enquiries it was concluded that during the material period the appellants no. 3 & 4 had sent polyester dominated fabrics to the appellants no. 1 for dyeing and not cotton dominated fabrics as mentioned by the appellants no. 1 on the invoices while returning the same after dyeing. The purchase records of the appellants no.3 & 4 were scrutinised and their statements were recorded incorporating therein the details of types of yarns purchased by the appellants no. 3 & 4, and types of fabric manufactured and supplied to the appellants no. 1 for dyeing during the material period. It has been alleged that during the material period the appellants no. 3 & 4 has supplied 55351.112 Kgs. of polyester dominated fabrics valued at Rs. 86,40,865/- to the appellants no. 1 for dyeing on which duty of excise not paid by the appellants no. 1 while returning the same after dyeing by declaring the said fabrics as cotton dominated. In the course of adjudicating proceedings, the appellants no. 4 was cross-examined, during which he denied his statement recorded by the investigating officers. The adjudicating authority vide the impugned order dated 10.11.2006 confirmed the demand of duty and imposed penalties on the basis of the said statements on record with the reason that the retraction from the statements after as sufficient time has no value and such denial cannot be accepted.
It has been pleaded by the appellants no. 1 that no question was asked by the adjudicating authority to the appellants no. 4 when he denied his statement during cross examination and thus, the said statement has not been rightly relied upon for confirmation of the demand in the instant case. They have also contended in the instant proceedings that they have paid dying charges of cotton which are always very high as compared to charges of polyester and that it is evident from their ledgers and ledgers of the suppliers that higher charges were paid. It is observed that during cross examinations, the appellants no. 4 has stated that they sent fabric for dyeing against the challans which are prepared by themselves; that they were never instructed by dyers and that in case of cotton dominated fabrics cotton dyeing was mentioned and in case of poly dominated poly dyeing was mentioned. There are no findings in the impugned order to challenge these claims of the appellants no. 4 in reference to their records. However, it is observed that the demand has been confirmed by the adjudicating authority on the basis of the statements recorded during the investigation without taking the cognizance of the records & details produced by the appellants no. 4 during cross examination to deny the contents of the statements relied upon by the department.
Further, it is observed that the purchase records of the appellants no. 1 was resumed by the department and the same been made basis for initiating the investigations in the instant case against their suppliers including appellants no. 3 & 4. If has also been mentioned that the records of the appellants 3 & 4 was scrutinized by the investigators. In such cases, it is imperative that documents such as invoices/challans, transport records & receipt records should have been brought on record as documentary evidence in support of the allegations to show that the goods supplied to the appellants no. 1 were in fact polyester dominated fabrics, whereas the department has not given any details regarding the contents of the resumed records and what was observed on scrutiny of such records. The findings of the adjudicating authority that polyester dominated yarn was got dyed from the appellants no. 1 during the material period, is based only on the statements brought on record by the department. It is evident that the said appellants no. 4 disowned their original statements on which reliance has been placed by the department. Further, the appellants no. 3 also contented during the instant proceedings that they purchased cotton dominated yarn and that they have paid charges of cotton dyeing to the appellants no. 2. As per facts on record, there is no documentary or corroborative evidence to support the contents of the statements which have been made basis of the allegations and as such there is no evidence against the appellants no. 1 beyond the statements relied upon by the department in the instant case. Thus, there is strength in this contention of the appellants no. 1 as in event of categorical denial of the statement by the supplier and without any other corroborative evidence, the departments case becomes a case of practically no evidence.
During the instant proceedings, photocopies of the records such as challans issued by the appellants no. 1 and ledgers of the appellants were produced by the appellants to support their contention the charges of cotton dyeing were higher as compared to the chares of polyester dyeing and that they charged higher charges pertaining to cotton dyeing in respect of fabrics removed to the appellants no. 3 & 4 after dyeing. It was also shown by the appellants no. 1 that they issued separate invoices for dutiable and non-dutiable goods and correlated the non-dutiable invoices issued by them for cotton dyeing to the suppliers with the respective challans of the suppliers and the entries in the ledgers showing that they have charged for cotton dyeing from the suppliers. As recorded in the impugned order, the original copies of purchase invoices of the appellants no. 4 were also produced during the adjudicating proceedings in addition other documents but the same has not been disputed and there also no adverse findings on the same. Further, no evidence has been produced by the investigators that the records resumed from the appellants had any incriminating documents to prove that the appellants no. 3 & 4 supplied polyester dominated fabrics to the appellants no. 1 for processing which further strengths the case of the appellants.
It is also observed that the department has brought on record the statements of the appellants no. 2 recorded during investigations, wherein he, inter-alia, stated that appellants no. 1 were engaged in the dyeing of all knitted fabrics, including cotton fabrics, polyester cotton fabrics, polyester fabrics and other blends of Nylon which were received from the supplier on challans, and that in cases where challans mentioned that goods were polyester or polyester dominated they issued Central Excise Invoices and paid duty accordingly. However, it is observed that there is nothing in the statements of the appellant no. 2 to corroborate the allegations of the department. The Adjudicating has discussed the contents of the statement of the appellants no. 2 to draw conclusion that duty was paid on the said goods as per the description given on the challans and not by the composition of actual goods received by the appellants no. 1. This conclusions is not sustainable when the appellants no. 3 & 4 have categorically denied to have sent fabrics other than cotton dominated fabrics for dyeing as alleged by the department and the appellants no. 4 have also produced the documents in support of their claim during the course of cross examination in the adjudication proceedings. When the facts on records do not prove that the fabrics sent for dyeing by the appellants no. 3 & 4 was polyester dominated, the allegation of the department that the appeals no. 1 has mis-declared the said fabric as cotton dominated is not maintainable.
From the above, it is evident that adjudicating authority overlooked the fact that the contents of the statements on which the whole case is based, lacks corroboration by any documentary evidence. Further, it is conspicuous that the said statements 3 & 4 which has been denied by the statement makers themselves and that there is also no confessional statement of the main accused i.e. appellants no. 1 on record, in respect of the allegations madE by the department. In this regard, it worth mentioning the statement of co-accused can be used only to lead an assurance to the conclusion to be drawn on the strength of the rest of evidence. In the instant case, it is seen that apart from statements of the co-accused there is no other evidence to support the departments case. Also, the documents produced by the appellants no. 4 in the course of investigation and adjudicating proceedings were not taken into consideration and, the same were not also disputed. Therefore, it has been rightly contended by the appellants the same cannot be ignored and that preference cannot be attached to alleged confessional statements which have disowned by the statement makers themselves. It is well settled the mere statements which have later on disowned could not be mad basis of confirming the demand without seeking corroboration from any other reliable evidence. In view of this, I find that the instant departmental case is not sustainable for want of corroborative evidence. As the departments case does not survive, there is no case of contravention of statutory provisions and accordingly penal action is not warranted and also demand of interest does not sustain.
9. On perusal of the observations made by the Commissioner (Appeals) in the impugned order and the evidence placed before us, we find that in this case the original invoice is the main evidence to reveal the truth but the statement made by the witness during the cross examination that the original invoices does not have mention of the description of the goods which has not been considered by the adjudicating authority, therefore, the evidence in form of photocopy of invoice is not acceptable. Moreover on photocopies of the invoices, the witness was forced to write in his handwriting as per the wishes of the departmental officers. This issue has neither been denied by the Revenue nor raised in the appeal before us which is a crucial evidence to decide the case. Further, no samples were drawn by the Revenue during the course of investigation, in the absence of any evidence in support of the allegation made against the respondent, the bald allegation i.e. the respondent has cleared the polyester dominated fabrics instead of cotton fabrics is not sustainable. Therefore, we hold that the respondent has rightly availed the exemption as per the notifications cited hereinabove on clearance of cotton knitted fabrics.
10. In these circumstances, the impugned order is upheld and the appeals filed by the Revenue are dismissed.
(Dictated & pronounced in the open court)
(Raju) (Ashok Jindal)
Member (Technical) Member (Judicial)
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