Customs, Excise and Gold Tribunal - Delhi
Paras Laminates P. Ltd. vs Cce on 12 August, 2004
Equivalent citations: 2004(97)ECC785, 2005(180)ELT73(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. M/s. Paras Laminates Pvt. Ltd. and Shri Ravi Bansal, Director, have filed these two appeals arising out of a common Order-in-Original, by which the Commissioner, Central Excise, has confirmed demand of Central Excise duty against the Appellant Company and imposed penalties on both the Appellants.
2.1 Shri A.R. Madhav Rao, learned advocate, mentioned that the Appellants manufacture laminated sheets in their factory at Bhiwadi (Rajasthan) and have their godown at Delhi; that they have mainly sold under DGS&D Rate Contract the laminated sheets under the brand name "Paras" to the Indian Railways; that they were supplying the laminates after manufacture at Bhiwadi factory or from the Delhi godown; that the purchased laminated sheets were stocked at Delhi, branded as "Paras" and offered for visual inspection at Delhi and samples were drawn, taken to Bhiwadi factory and tested there; that in view of such trading activity, they obtained necessary sales tax registration; that the laminated sheets have been procured against S.T.I form and the sales tax returns have all been assessed; that S.T.I is for re-sale under the Delhi Sales Tax Act, 1975 and there is no tax on the dealers if S.T.I is given to them; that "D" Form is given by Railways on sale of traded goods to them for concessional rate of Central Sales Tax @ 4% instead of 10%, normal rate; that in Delhi the sales tax is levied on first point sale and "D" forms are only for Government suppliers; that "D" forms of Delhi supplies to Railways show Delhi address. He also mentioned that on acceptance of the lots offered from Delhi procured from the market, the goods were despatched directly from the Delhi godown to the respective railway destinations; that the procurement of laminated sheets are paid by cheque and transactions are duly recorded; that sometimes where the supply from Delhi slightly fell short of the lot requirement sheets, then such shortage was made good by sending the material to Delhi from factory at Bhiwadi on payment of duty; that the goods were sent to Delhi to avoid double transportation; that at other times, the goods have gone directly from Bhiwadi and Delhi to the respective destinations.
2.2 He, further, mentioned that searches were conducted of their factory and head office on 12.6.96 and various statements were recorded; that Shri Ravi Bansal, Director, in his statement dated 30.8.96, deposed clearly that samples were taken from the godown at Delhi after visual inspection to the Bhiwadi factory and tested for compliance; that there was no search, verification or recording of statements in the godown of the Appellants at Delhi; that a show cause notice dated 6.12.96 was issued to them to demand, inter alia, duty on the deocrative laminated sheets procured from the dealers and supplied to Railways during 1991-92 to 1995-96 alleging that the laminated sheets supplied from Delhi godown under DGS&D rate contract could not be the traded sheets since (i) the rate contract provided for supply of laminated sheets of 3 mm thickness manufactured and tested in Appellants' factory under the brand name "Paras" and (ii) as per the statements given by the dealers and the sale invoices of the dealers, there could not have been supply of decorative laminated sheets of 3 mm thickness with "Paras" brand from the dealers to them; that in other words the laminated sheets supplied from Delhi godown under DGS&D rate contract were manufactured and removed clandestinely from Bhiwadi factory; that consequently, the benefit of S.S.I. exemption under Notification No. 1/93-CE, dated 28.2.93 has been denied to the goods cleared during 1993-94; that duty has also been demanded on 2109 Nos. and 198.8 kgs. of laminated sheets found short on verification of physical stock with the recorded balance in R.G.I on 12.6.96; demand has also been confirmed on 2871.4 kgs. of base paper, on which Modvat Credit had been taken, found short on verification, and duty has also been confirmed on the ground that 10,414 numbers of laminated sheets shown in private record of Shri Gairola, General Manager.
3.1 The learned Advocate submitted that the impugned order is based on erroneous inferences drawn from the terms of the DGS&D rate contract and the statement of the dealers that the laminated sheets supplied under DGS&D rate contract were all goods manufactured in the factory and clandestinely removed to Delhi; that it has been the consistent view of the Tribunal that to allege and establish clandestine removals, it has to be supported by evidence with regard to purchase of inputs, production, source of founds, sale and receipt of consideration [Ambica Chemicals v. CCE, 2002 (148) ELT 191 (T)]; that they had requested the cross-examination of all the dealers and Shri Gairola, Ex-General Manager of their company; that only Shri I.C. Khanna, Deputy Director, Quality Assurance, DGS&D, New Delhi turned up for cross-examination; that thus reliance on the statements of all the persons who did not turn up for cross-examination is totally uncalled for since the same have not been tested by cross-examination and hence the Order is liable to be set aside. Reliance has been placed on the following decisions:
(i) Takshila Spinners v. CCE, 2001 (131) ELT 568.
(ii) Laxmi Engg. Works v. CCE, 2001 (47) RLT 302,
(iii) Swadeshi Polytex Ltd. v. CCE, 2000 (72) ECC 2 (SC) : 2000 (122) ELT 641 (SC).
3.2 He mentioned that Shri I.C. Khanna had earlier mentioned in his letter dated 9.9.96 that the inspection staff carried out the inspection at the firm's work at Bhiwadi only and an inference was drawn that there was no traded sheets; that during cross-examination, Shri Khanna had stated that he had not personally conducted any inspection of the laminated sheets and such inspections were being carried out by the Assistant Director, Quality Assurance and the Examiners of Stores and that he was not aware whether any samples of laminated sheets were taken from Delhi.
3,3 He further mentioned that the dealer, namely, Shri Kapil Dev Pandit, Office Assistant of Bakelite Home and M/s. Gupta Industries, a sister concern of Bakelite Home, had clearly deposed in his affidavit that laminated sheets of 3 mm were supplied to the Appellants.
4.1 The learned Advocate mentioned that the procedure followed was that visual inspection was done in the Delhi godown and affixed with marks to identify the lot offered for inspection and testing; that from such lots, sample cut pieces of required size were drawn and taken to Bhiwadi factory and after passing for quality test, the lot offered from Delhi godown was accepted; that on such acceptance, the laminated sheets were despatched to the respective consignee under the cover of G.Rs. directly from Delhi godown. The learned Advocate also showed such G.R. at the time of hearing and contended that thus the term of the DGS&D contract cannot be the basis to infer adversely that there was manufacture and clandestine removal of laminated sheets over and above the actual production recorded in the R.G. I for supply from Delhi godown under the guise of traded goods. He also mentioned that there were instances where the testing was not at all carried out in Bhiwadi factory but in independent testing institutions.
4.2 He said that the Commissioner has also relied on letter dated 29.12.95 of RITES that the inspection was carried out at factory premises; that RITES was not involved in respect of orders of DGS&D on rate contract on which demand of duty has been confirmed; that the Adjudicating Authority has not dealt with this factual aspect of the matter.
4.3 He further mentioned that according to the case of the Department, laminated sheets under the DGS&D contract are to be of "Paras" brand and therefore, the laminated sheets procured from the market having brand name other than "Paras" could not have been supplied from Delhi godown and contended that the contract did not stipulate where and how the brand name is to be affixed; that "Paras" brand is affixed in the factory on the laminated sheets manufactured as also in the Delhi godown on the laminated sheets procured from the market through screen printing (Pages 1052 and 1053 of the Paper Book); that thus the traded goods bore the brand name of "Paras" and the term specifying "Paras" brand cannot be the basis to infer that there was manufacture and clandestine removal of laminated sheets from factory over and above the actual products in R.G.I. 4.4 He said that the Commissioner has contended that the DGS&D contracts were not awarded for supply of goods manufactured by others from the market and submitted that there is no such restriction in the Rate Contracts; that thus it cannot bring home the charge that there was clandestine removal; that in the case of two dealers, namely, M/s. Kumar Industries and M/s. Vardhana Industries, the department had alleged that their sale invoices were fake; that they had shown that they had paid the money by cheque and the dealers had themselves not disputed the supply and invoices raised by them on the Appellants; that all sales were assessed under Sales Tax and the amount thus paid has not been refunded to them showing that the transactions with these two dealers went through.
4.5 He further contended that there is no basis for the Department to say that all traded goods had been disposed of in market and the supplies had actually come from the factory to the godown and sent to the Railways; that during the five years in question, they had purchased and sold to the Railways goods worth Rs. 6.62 crores and the sales in the market was only Rs. 1.25 crores relating to industrial laminates, electrical switch boards and decorative sheets of 0.6 mm.; that all these clearances were from Bhiwadi factory on payment of duty; that there is no evidence with the Department to show that the laminated sheets purchased from the dealers were disposed of in the market. He also mentioned that the purchases had been clearly reflected in their balance sheet; that the transporters have certified carrying the material from Delhi (Page 1221 to 1257 of the Paper Book); that from the document, complete correlation of the bought out materials and its despatch to the Railways is reflected. He also mentioned that the inference that laminated sheets of 3 mm thickness were not procured from the dealers and hence such sheets could have only been manufactured and clandestinely removed from Bhiwadi factory is factually incorrect; that such a premises is based on the statements recorded from the dealers wherein they have stated that they did not deal with laminated sheets of 3 mm thickness and as a trade practice, the thickness of the sheets was not shown in the invoices; that the fact that such statements are false is evident from the very fact that the sales were for laminated sheets of 1.5 thickness and laminated sheets of unspecified thickness; that the practice of issuing of invoices for sale of sheets of unspecified thickness cannot be the basis to allege that such invoices were fake or such invoices were not for sheets of 3 mm thickness; that since the DGS&D rate contract was for sheets of 1.5 thickness and 3 mm thickness and since the invoices for purchase of laminated- sheets of 1.5 mm thickness were available, consequently, the invoices with thickness not specified were for sale of laminated sheets of 3 mm thickness; that laminated sheets supplied by the dealers under the invoices showing unspecified thickness were received under proper challans and sold under the Appellants' Commercial invoices; that such quantity of traded sheets was duly assessed under Sales Tax which conclusively prove that the sheets were of 3 mm thickness; that further they have been paying for the purchases by cheques. He contended that if the Department's version is to be believed, they would require to purchase raw-materials of such a magniture (sic) to manufacture the so-called clandestine removal of 3 mm sheets; that not a single transport document of procurement of such a huge quantity of raw-material, source of procurement, sellers, payment in cash has been led in. He emphasised that the statements of dealers are not reliable and cross-examination should have been offered. He also contended that the Appellants do not have the capacity to produce the quantity of laminated sheets alleged to have been manufactured by them; that in this regard they have submitted a certificate from Shri A.K. Khanna, Chartered Engineer.
5.1 The learned Counsel mentioned, about demand based on entries in spiral pad maintained by Shri R.K. Gairola, Ex. General Manager; that the Commissioner has inferred from the odd figure mentioned therein that these were figures of actual production and not production planning; that such an inference is incorrect since Shri Gairola himself has clarified in his statement dated 12.6.96 that the figures were based on orders in hand irrespective of execution or not; that the Revenue has not led any evidence to show that such actual production as per the spiral pad had taken place and was cleared without payment of duty; that it has been consistently held that charge of clandestine removal based merely on note books maintained by workers and other private accounts is not sustainable. Reliance has been placed on the following decisions: (i) Bearing Manufacturing Co. v. CCE, Vadodara, 2000 (123) ELT 1148 (T) (ii) T.G.L. Poshak Corporation v. CCE, Hyderabad, 2002 (140) ELT 187 (T) 5.2 He also contended that the demand of duty by denying benefit of small scale exemption for the financial year 1993-94, is erroneous as they did not exceed the limit of Rs. 2 crores in 1992-93; that value of goods traded by them from Delhi godown is not includible for determining the aggregate value of clearances of the goods during the preceding financial year.
5.3 Regarding shortage of finished goods, he mentioned that the shortage was on account of mixing in the grade/categories while physically verifying the stock; that while the stock in a particular category was higher, the equal quantity in another grade or category was short. Regarding 1180 sheets found in packed condition, he stated that the same was lying in the finishing room for 3 or 4 days and it was not meant for clandestine removal.
5.4 He also stated that demand on alleged shortage of base paper 2871.4 kg. is not sustainable; that at the most the Revenue can disallow the credit, if any credit of duty had been availed of by them; that duty cannot be demanded on the premises that they had availed Modvat Credit on the alleged shortage; that once an input is entered in R.G. 23A Part-I, it is obvious that the same has been issued for manufacture; that the use of base paper in manufacture of laminated sheets was work-in-progress and its issue was yet to be accounted for in the Register.
5.5 He finally submitted that the demand of duty under Sub-heading 4823.90 of the Schedule to the Central Excise Tariff Act is totally unsustainable; that as per the judgment of the Supreme Court in the case of C.C.E., Hyderabad v. Bakelite Hylam Ltd., 2002 (82) ECC 3 (SC) : 1997 (91) ELT 13 (SC), the laminated sheet is classifiable under Heading 39.20 of the Tariff; that, therefore, the demand is liable to be set aside for this reason alone, that penalty is not imposable on any of the Appellants as the demands have been confirmed on inferences which are factually incorrect; that further as ingredients of Rule 209A of the Central Excise Rules, 1944, have not been satisfied being there no material to suggest that Ravi Bansal knew or had the reason to believe that the goods were liable for confiscation.
6.1 Countering the arguments, Shri O.P. Arora, learned S.D.R, submitted that the Rate Contract awarded by DGS&D to the Appellants for supply of laminated sheets of 1.5 mm thickness and 3.0 mm thickness of "Paras" brand contained the conditions that the goods would be supplied Ex-factory Bhiwadi (Distt. Alwar, Rajasthan) and source of manufacturing would be indigenous and that "for all supply against the R/C inspection will be carried out at your works at Plot No. B-492, RIICO Industrial Area P.O., Bhiwadi, Distt. Alwar (Rajasthan);" that the scrutiny of the Misc. file recovered from factory premises of the Appellants has revealed that the joint inspection was carried out by the representatives of Rail Coach Factory, DGS&D and the Appellants and a report was drawn on inspection of the manufacturing process, quality control arrangement, process control and procedure of testing, etc; that such inspection report clearly shows that the contract with Rail Coach Factory was for the Appellants' own manufacture only; that the Appellants have to comply with the conditions specified in the Rate Contract which goes to show that the goods were manufactured by them for being supplied to the Railways; that the rate contract awarded to them by the DGS&D cannot be ignored. He relied upon the decision in the case of Cambridge Woollen Mills v. CCE, Chandigarh, 2000 (120) ELT 687 (T), wherein it has been held by the Tribunal that when the assessee entered into a contract for supply of yarn to DGS&D of its "own manufacture" and of composition, 70% wool and 30% nylon and the composition declared in the gate pass was nylon content less than 1/6 of total fibre content, the assessee cannot claim that they could procure fibre or yarn from outside and supply it to the DGS&D in terms of the contract and that they were to supply the stores of their own make. Reliance has also been placed on the decision in Abrol Engineering Co. P. Ltd. v. CCE, Chandigarh, 1996 (83) ELT 534 (T) and A.K. Industries v. CCE, Calcutta-II, 2001 (138) ELT 351 (T) wherein the Tribunal has upheld the Adjudication Order of confiscation of goods which were in the process of being removed at the time of visit of the officers without reflecting them in the R.G.I and the explanation that the same were being sent out for inspection was not accepted by the Authorities by observing that as per the contract of the Appellants with their customers; inspection had to take place in the Appellants' own factory.
6.2 The learned SDR, also contended that the scrutiny of the invoices issued by the dealers revealed that size and thickness of the sheets was not mentioned in the column for description of goods in most of the cases; that enquiries from the dealers also revealed that they had not supplied the laminated sheets of 3.0 mm thickness; that Shri Basant Kumar Bansal, Director of M/s. Om Prakash Fatesh Chand Ltd., has deposed in his statements dated 12.6.1996 and 22.11,96 that they sold decorative laminated sheets of thickness varying from 0.8 mm to 1.5 and also some quantity of 2.00 mm thickness and they had not sold laminated sheets of thickness more than 2.00 mm to the Appellants and that they had never sold 'Paras' brand laminated sheets and sheets of 3 mm thickness to the Appellants; that similarly other dealers had also deposed that they had not sold 3.0 mm thickness laminated sheets to the Appellants as they mainly traded in laminated sheets of thickness 0.8 mm, 1.0 mm and 1.5 mm.
6.3 He, further, mentioned that M/s. Kumar Industries, whom the Appellants had shown purchase of laminated sheets from, were not found in existence on the given address; that enquiry from Sales Tax Department revealed that the Registration Certificate had been surrendered and cancelled with effect from 10.3.89; that scrutiny of the application of M/s. Kumar Industries for registration with Sales Tax Department showed that they had applied for registration as dealer to deal in commodities, namely, 'Plastic Dana', Plastic Powder and Tractor Parts; that the invoices recovered had been issued in 1992-93 which is after more than 3 years of closure of the firm; that thus the invoices are fake; that similarly M/s. Vardhana Industries (India) was not found in existence at the given address and Shri Sachin Sawaria whom the said premises belonged to, stated in his statement dated 18.7.96 that he was having his residence as well as grocery shop since 1992-93 and earlier one retail cloth trader lived therein; that Sales Tax Officer had also informed that no firm in the name of Vardhana Industries (India) had been registered in his jurisdiction.
6.4 The learned SDR also mentioned that Shri Satish Gupta, Partner of M/s. Bakelite Home, in his statement dated 24.9.96, has stated that they had sold laminated sheets under two bills only to the Appellants and they were dealing in sheets of thickness from 5 mm to 50 mm. He thus contended that the laminated sheets supplied to the D.G.S.&D were not of the same gradation/size, and in some of the cases even the firms were found non-existence and fictitious; that Dy. Director, Quality Assurance, DGS&D had also confirmed vide letter dated 9.9.96 that the "Inspection Staff carried out the inspection at the firm's works at Bhiwadi only" and they "never carried out inspection at firm's godown at New Delhi"; that it is thus clear that all goods were supplied by the Appellants to Government Departments from the factory premises and not from their godown at Delhi as being claimed by them.
6.5 He also mentioned that there is no substance in the Appellants' plea that they did not have sufficient capacity of manufacture the alleged quantity of laminated sheets; that even the Joint Inspection Committee, in its Inspection Report, had assessed their manufacturing capacity as 1.80 lakh sheets per annum; that the total sheets cleared by them were much below the said manufacturing capacity; that thus their plea that on account of less capacity of production, they resorted to procure the goods from market is not acceptable.
7.1 The learned SDR, further, submitted that 3290 laminated sheets found in packed condition at the time of visit of the officers were not entered in R.G.-I Register; that Shri M.L. Sharma, Supervisor had admitted in his statement dated 12.6.96 that these goods were in finished condition and were Completely in packed condition; that thus these goods are liable for confiscation.
7.2 Regarding excess stock of raw-materials worth Rs. 44,769, he mentioned that the stock taking of raw-material was done by Shri Abdul Rashid Khan, Production Manager, who in his statement dated 12.6.96, has confirmed the fact besides stating that he was fully satisfied with the manner of stock taking; that the Appellants had kept the raw-material unaccounted for using the same in the manufacture and clandestine removal of the finished goods and accordingly the same is liable for confiscation.
7.3 He mentioned that 2109 numbers and 1988 kgs. of laminated sheets were found short vis-a-vis the balance recorded in R.G.-I at the time of physical verification on 12.6.96; that their defence that shortage had occurred on account of the fact that in some category there was excess stock which had happened on account of mix-up is an afterthought since the stock verification report was prepared by showing not only the size of the sheets but also the gradation/marks/quality and the stock verification report was prepared by Applicant's own employee in the presence of Panchas; that Shri M.L. Sharma, Supervisor of the Appellant Co. was fully satisfied with the manner of stock taking; that, therefore, duty is demandable from the Appellants.
7.4 Regarding Mini Spiral Pad recovered from the room of Shri R.K. Gairola the learned SDR reiterated the findings as contained in the impugned Order and emphasised the fact that as the sheets were mentioned in odd numbers, these figures cannot be regarded as figures of Planning the Production and these were figures of actual production in respect of which duty is payable by the Appellants.
7.5 Regarding shortage of base paper, he mentioned that no proper explanation has been offered by the Appellants; that thus it had been removed from the factory on which duty equal to the amount of Modvat Credit taken by them is payable.
7.6 Finally, he mentioned that the Appellants would not be eligible for benefit of S.S.I. exemption Notifications No. 175/86-CE and 1/93-C.E. after including that value of clearances of laminated sheets shown to have been cleared from Delhi godowns that penalty is imposable on both the Appellants as the excisable goods had been manufactured and removed clandestinely without payment of duty by suppressing the facts with an intent to evade payment of duty; that penalty is imposable on Ravi Bansal as he was incharge of the affairs of the Appellant Company being Director and was conducting the business of the Company.
8. In reply, the learned Advocate submitted that one Shri Kapil Dev Pandit, an employee of M/s. Bakelite Home, has sworn an Affidavit wherein he has mentioned that he was working as an assistant and his duties were to take care of incoming material as well as despatches; that they were supplying decorative laminated sheets of standard size (8'x4') having 3 mm thickness to the Appellants. He also mentioned that Vardhana Industries (India) had given to them S.T.-I declaration which shows that they were registered with the Sales Tax Department; that there were few instances of purchase of laminated sheets from M/s. Kumar Industries and except in two cases, the laminated sheets were rejected and returned; that Shri Vipin Talwar of M/s. Sheetal Electricals, had clearly deposed in his statement that they were generally dealing in laminated sheets of 0.5 mm to 25 mm; that, therefore, no adverse inference whatsoever can be drawn to allege that the laminated sheets sold from Delhi Office were not goods procured from the market.
9. We have considered the submissions of both the sides. The major demand of duty has been confirmed against the Appellants on the ground that the laminated sheets could not have been supplied by the Appellants by purchasing the same from dealers as rate Contract awarded to them contained the conditions that goods should be of their own make - PARAS brand and these were to be inspected at factory and the dealers, besides some of them being non-existent, were not dealing in laminated sheets of 3 mm thickness. The Revenue has thus presumed that the goods sold under DGS&D Rate Contract under the cover of Delhi Godown bills were clandestinely manufactured in their factory at Bhiwadi and removed without payment of duty. On the other hand, the Appellants have contended that the laminated sheets were purchased at Delhi from various dealers, Paras Brand name was printed on these purchased goods through the process of screen printing, samples were taken to Bhiwadi factory for quality test and afterwards goods were despatched directly from Delhi godown to various destinations. The appellants have brought on record the transport documents in support of their contention that the goods against Rate Contract were despatched from Delhi godown. The Revenue has not brought out any material on record to contradict the said documents evidencing transport of the goods from Delhi godown. They have also brought on record the certificate given by the Transport Company regarding transporting of goods from New Delhi godown. Nothing has also been adduced to show that the laminated sheets, after being manufactured in their factory at Bhiwadi, were first brought to Delhi and then from Delhi, these were transported to various destinations. The Revenue has also not rebutted the submissions of the Appellants that the laminated sheets were procured against ST-I form which is for re-sale under the Delhi Sales Tax Act, 1975. Their contention that "D" form was given by Railways on sale of traded goods to them has also not been controverted by the Revenue. The learned Advocate has also shown that in the Rate Contract for 1995-96 in column for Place of Inspection, Delhi Godown has been mentioned specifically. The Revenue has relied upon the letter dated 9.9.96 of DGS&D wherein the Deputy Director, Quality Assurance, has mentioned that the inspection at the firm's works at Bhiwadi where testing facilities were available and inspection was never carried out at firm's godown at New Delhi. But the said Dy. Director never carried out any inspection himself. This has been brought out by the Appellants clearly and specifically in the Cross-examination of the Deputy Director (Shri I.C. Khanna), wherein he answered in negative when a question was put to him whether did he personally conduct any inspection and whether was he aware that samples were taken from Delhi godown to the Appellants' factory at Bhiwadi. We observe that no statement of any of the members of the Inspection Team has been recorded by the Revenue, though Shri Balraj Chugh, Marketing Manager, has deposed in his statement on 12.6.96, on the day of search itself that "materials are inspected at our works & Delhi Godown." We, therefore, agree with the submissions of the learned Advocate that the terms of the DGS&D Rate Contract cannot be the basis to infer that there was manufacture and clandestine removal of laminated sheets from the factory of the Appellants.
10. The Revenue has relied upon the statements of the dealers to show that they had not supplied laminated sheets of 3 mm thickness. First of all these dealers were not produced for being cross-examined by the Appellants. It has been held by the Tribunal in Takshila Spinners v. CCE, Chandigarh, 2001 (131) ELT 568 (T) that "Whatever those witnesses stated during the investigation before the Preventive Staff could not be accepted as gospel truth by the Commissioner". The Tribunal has also held that "legally the statements of those witnesses could not be accepted or taken into evidence, for having failed to submit themselves for cross-examination, by the Appellants." We also observe that the thickness of the laminated sheets sold by the dealers was not mentioned in the Sale Bills issued by them. In view of this fact, the only evidence against the Appellants is the statements of dealers who have not been subjected to cross-examination by the Appellants. Accordingly these statements which have not been tested in cross-examination cannot be relied upon against the Appellants. Moreover, the Appellants had produced an Affidavit of Shri Kapil Dev Pandit of Bakelite Home wherein he has averred that decorative laminated sheets of 3 mm thickness had been supplied by them to the Appellants. Thus, the Revenue has not succeeded in proving that the dealers had not supplied the laminated sheets of 3 mm thickness.
10.2 The learned Advocate has also contended that the charge of clandestine removal of the excisable goods has to be supported by evidence with regard to purchase of inputs production, source of funds, etc. The charge of clandestine removal of goods is a serious charge which should be established by the Revenue by adducing sufficient and tangible evidence. It has been held by the Tribunal in the case of Ambika Chemicals v. CCE, Chennai, 2002 (148) ELT 101 (sic) 191 (T) that for purchase of finished goods, "the Appellants are required to purchase inputs and use electricity and labour." In the present matter it has been claimed by the learned Advocate that to manufacture the alleged quantity of laminated sheets, they would require various inputs, such as, base paper, kraft paper, phenol, melamins, methanol, Formaldehyde worth approximately more than Rs. 4.85 crores. No evidence has been produced by Revenue to show purchase of any of these inputs. It has been held by the Tribunal in the case of Ammtex Synthetics Ltd. v. CCE, New Delhi, 2003 (151) ELT 170 (T), relied upon by the learned Advocate, that surmise and conjectures cannot take place of legal proof and the Department is required to prove the charge of clandestine removal by cogent, convincing and tangible evidence. The Supreme Court in the case of Oudh Sugar Mills Ltd. v. U.O.I., 1978 (2) ELT (J172) (SC) 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. In the present matter also the duty has been demanded on the basis of terms of rate contract without corroborating and substantiating with tangible evidence that the decorative laminated sheets against rate contracts were supplied by the Appellants from their own manufacture from factory. Such a demand cannot be sustained for want of tangible evidence. We, therefore, set aside the same.
11. For the same reasons, the demand of duty based on the figures mentioned in the Spiral Pad of Shri R.K. Gairola, General Manager, cannot be sustained as the Revenue has not corroborated the assumed production with any independent material/evidence. Merely because the figures were in odd number, it could not be presumed that they represent the figures of actual production and not figures for production planning. Shri Gairola, in his statement dated 12.6.96, recorded on the date of search itself has stated that the figures were production planning. The learned Advocate has also relied upon the decision in the case of T.G.L. Poshak Corporation v. CCE, Hyderabad, 2002 (140) ELT 187 (T) wherein it has been held by the Tribunal that unless Department produces evidence, which should be clinching, in nature of purchase of inputs and sale of the final product, demand cannot be confirmed based on some notebooks. Similar views have been expressed by the Tribunal in the case of Ball Bearing Manufacturing Co. v. CCE, Vadodara, 2000 (123) ELT 1148 (T). Accordingly, we set aside the said demand of duty. As the laminated sheets procured and sold from Delhi has been held not to have been manufactured by the Appellants, the aggregate value of clearances for the financial year 1992-93 will remain within the eligible limit of value of clearance for the purpose of availing the benefit of SSI exemption Notification during the following financial year i.e. 1993-94. In view of this, duty demanded by denying exemption under Notification No. 1/93-CE, is set aside.
12. In respect of demand of duty on account of shortage of finished goods, the Appellants have not succeeded in controverting the findings recorded by the Commissioner in the Adjudication Order. The duty is, thus, payable by the Appellants. However, the matter is to be remanded for computation of duty on account of challenge of classification of the laminated sheets by the Appellants in terms of judgment of Supreme Court in the case of Bakelite Hylam Ltd., supra. The jurisdictional Adjudicating Authority will first decide the classification of the impugned product after affording a reasonable opportunity of hearing to the Appellants and then compute the amount of duty payable by them on the quantity of finished goods found short. Similarly, the Appellants are liable to reverse the Modvat Credit equivalent to the amount of credit taken by them in respect of base paper found short as they have not satisfactorily accounted for the same. As far as confiscation of the finished goods found unaccounted, we observe that Shri M.L. Sharma had admitted the same in his statement recorded on 12.6.96. The submission that the excess was on account of mix-up among the categories of the sheets is nothing but an after-thought. We, therefore, uphold the confiscation. However, we reduce the redemption fine to Rs. 50,000 as the redemption fine imposed is on the higher side. Similarly, we uphold the confiscation of goods found in excess as Abdul Rashid Khan, Production Manager, was satisfied with the manner of stock taking of raw-material. The redemption fine imposed is only Rs. 10,000 which is reasonable. As the main allegation of removal of goods clandestinely has not been upheld penalty imposed on Appellant No. 2 is set aside and penalty on Appellant No. 1 is reduced to Rs. 15,000.
Both the appeals are disposed of in the above manner.