Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs (1) M/S Vishwa Traders Pvt.Ltd on 3 October, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
(COURT- II(
Appeal No.E/1855, 931, 156, 936, 771, 1856/2006
Arising out of: OIO No.10/CDR-II/VTPL/BRH/COMMR/2009, dt.3.8.09
Passed by: Commissioner of Central Excise & Customs, Vadodara
For approval and signature:
Mr.M.V. Ravindran, Honble Member (Judicial)
Dr. P. Babu, Honble Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
(1) M/s Vishwa Traders Pvt.Ltd.,
(2) M/s Weldecor Mosaic Tiles,
(3) M/s Amar Ceramic Industries,
(4) M/s Excel Ceramics,
(5) M/s Sun Borax,
(6) Shri Vivek B. Maheshwari
Respondent:
CCE Vadodara Represented by:
Shri Devan Parikh, Sr.Adv., Shri S.J. Vyas, Adv., Shri D.K. Trivedi, Adv.
Shri S.R. Dixit, Adv., Shri Paritosh Gupta, Adv. for Assessee.
Shri J.S. Negi, Authorised Representative for the Revenue.
CORAM:
MR.M.V. RAVINDRAN, HONBLE MEMBER (JUDICIAL) DR. P. BABU, HONBLE MEMBER (TECHNICAL) Date of Hearing:03.10.11 Date of Decision:
ORDER No. /WZB/AHD/2011, dt._____________ Per: M.V. Ravindran:
In all these appeals, the issue being common in their nature, they are being disposed off by a common order.
(1) Appeal No.E/1855/2006 M/s Vishwa Traders Pvt.Ltd., (2) Appeal No.E/931/2006 M/s Weldecor Mosaic Tiles, (3) Appeal No.E/156/2006 M/s Amar Ceramic Industries (4) Appeal No.E/936/2006 M/s Excel Ceramics, (5) Appeal No.E/1856/2006 Shri Vivek B. Maheshwari (6) Appeal No.E/771/2006 M/s Sun Borax,
2. The main appellant in this case is in Appeal No.1855/2006 i.e. M/s Vishwa Traders Pvt.Ltd. and other are in appeal on imposition of penalties imposed by adjudicating authority on them.
3. The relevant facts that arise for consideration are that:
(i) The factory premises of M/s Vishwa Traders Pvt.Ltd. (hereinafter referred to as M/s VTPL), was visited by the officers of DGCEI on an information that VTPL had indulged in clandestine removal of the goods under fake invoices prepared by the authorized signatories. Simultaneous visits were carried out in the factory, office, residential premises of the Director, Factory Manager, Employees, Production Manager, premises of dealers and also the suppliers of raw materials and purchasers of final product from M/S VTPL. Statements were recorded of various persons. On culmination of such detailed investigations and scrutiny of the records, it was noticed by the officers that the appellant herein M/s VTPL has indulged themselves in clandestine removal of final products. In view of this, Show Cause Notices were issued to M/s VTPL, Shri Vivek Maheshwari, Director of M/s VTPL, M/s Sun Borax Industries, M/s Excel Ceramics, M/s Weldecor Mosaic Tiles and M/s Amar Ceramics Industries. The said Show Cause Notices were adjudicated by the adjudicating authority and Order-in-Original was passed. This Order-in-Original was challenged by M/S VTPL and Shri Vivek Maheshwari before Hon'ble High Court in Special Civil Application No.228/2009, wherein Hon'ble High Court directed the adjudicating authority to do the de-novo adjudication of the case in respect of these two appellants. The main allegation in the Show Cause Notice is regarding the clandestine removal of the goods by M/s VTPL during the period 1998-1999 to January 2002. The Show Cause Notice was contested before adjudicating authority on various grounds. The adjudicating authority also granted an opportunity of hearing to M/S VTPL and its Director Shri Vivek Maheshwari. Both these appellants as well as other appellants contested the Show Cause Notice on merit as well as on legal issues before adjudicating authority. The adjudicating authority, after considering the submissions made by all concerned, did not accept the contentions raised and recorded the following orders:
(i) I confirm the demand of duty amounting to Rs.89,63,253/- (Rupees Eighty Nine Lakhs, Sixty Three Thousands, Two Hundred and Fifty Three only) from M/s VTPL under the first proviso to Section 11A of Central Excise Act, 1944. Since an amount of Rs.31,11,020/- has already been paid by M/s VTPL, this amount is appropriated towards their duty liability. I also direct M/s VTPL to pay interest at the applicable rate on the above mentioned short paid duty as per the provisions of Section 11AB from the 1st day of the month succeeding the month in which the duty ought to have been paid till the date of payment of duty.
(ii) I impose penalty of Rs.89,63,253/- (Rupees Eighty Nine Lakhs, Sixty Three Thousands, Two Hundred and Fifty Three only) on M/s VTPL under the provisions of Section 11AC of Central Excise Act, 1944, read with Rule 173Q of Central Excise Rules, 1944, and Rule 25 of Central Excise Rules, 2002. However, in terms of first proviso to Section 11AC of Central Excise Rules, 1944, where such duty as determined under sub-section (2) of Section 11A, and the interest payable thereon under Section 11AB, is paid within 30 days from the date of communication of this order, the amount of penalty liable to be paid by such person under this section shall be 25% of the duty so determined. Further, in terms of 2nd proviso to Section 11AC of Central Excise Act, 1944, the benefit of reduced penalty under the 1st proviso shall be available if the amount of penalty so determined has also been paid within the period of 30 days referred to in that proviso.
(iii) I impose personal penalty on Shri Vivek Maheshwari, Director of M/s VTPL, Shri B.M. Patel, and Shri M.J. Devasia, Employee of M/s VTPL under Rule 209A of Central Excise Rules, 1944 read with Rule 26 of Central Excise Rules,2002, as under:
a) Shri Vivesk B. Maheshwari, Rs.50,00,000/- (Rs.Fifty Lakhs)
b) Shri B.M. Patel, Rs.10,000/- (Rs.Ten Thousands)
c) Shri M.J. Devasia, Rs.25,000/- (Rs.Twenty Five Thousand)
4. From the above reproduced order, we are concerned with M/s VTPL and Shri Vivek Maheshwari. The other 2 persons have not preferred any appeal. As regards other appeals as mentioned in 1st Para, their appeals are against penalty imposed by adjudicating authority in the first round of litigation.
5. Shri Devan Parikh, ld.Sr.Advocate, along with other advocates appeared for the appellants. Ld.Counsel would submit that the evidences relied upon by the Department are not sufficient to uphold the charge of clandestine removal. It is his submission that the evidences relied upon by the Department, under no circumstances, come to the standard required, to prove charges, as laid down by various decisions of the Apex Court and Tribunal. It is his submission that the evidences which have been relied by the Department are not sufficient to sustain the charge of clandestine removal and secondly the charge of clandestine removal needs to be balanced between evidence in and against the assessee. It is his submission that the adjudicating authority has passed an order on conjectures and surmises. It is his submission that there can be positive evidence, which go to show clandestine removal but there cannot be any positive evidence to show clandestine removal has not taken place. It is his submission that it is settled, in law of evidence, that negative cannot be proved and there cannot be any evidence that there is no clandestine removal. After making these opening submissions, ld.Sr.Advocate would take us through the evidences relied upon by the Department by referring to the Show Cause Notice and the Order-in-Original. He would try to point out commissions and omissions in Commissioners order as regards charge of clandestine removal. He points out the following:-
i) Basic documents relied upon are laid down in Para 9.4.1 of Order-in-Original and all these documents were recovered from the premises of Shri Anil Jadav, who was Accountant.
ii) Further, reliance is placed on the documents for the year 2000-2001 and 2001-2002, again recovered from the premises of Shri Anil Jadav.
iii) There is a reference of extract of certain alleged zipped floppies stated to have been recovered from the factory premises showing cash receipts during the period April to June 2002.
iv) Few sheets and slips alleged to be recovered from the factory premises, which indicate removal of finished goods worth Rs.4.57 lakhs.
v) Reliance is also placed on 179 parallel invoices recovered from residential premises of Shri B.M. Patel, who is a Factory Manager.
vi) Some documents are evidence of actual production and clearance recovered from the residential premises of Shri A.K. Ranjan, Production Manager.
vii) Apart from above, the Department has relied upon the statements of Shri Anil Jadav, Shri B.M. Patel, Shri Ashokbhai and Managing Director Shri Vivek Maheshwari.
5.1 It is his submission that Revenue officers visited various premises of customers. Statements of only 2 customers M/s Amar Ceramics Industries and M/s Excel Ceramics were recorded and relied upon to show that they were receiving the goods without invoices.
5.2 Statement of raw material supplier viz. M/s Sun Borax was also taken and relied upon by, to indicate purchases of raw materials without accounting for in the records.
5.3 Statement of dealer i.e. M/s Weldecor Ceramics Industries reads to indicate that they were collecting the cash and demand draft on behalf of M/s VTPL and depositing the same in their bank account. It is his submission that as regards documents recovered from the premises of employees and 3rd party, they are not official records and they are not kept on day to day basis. It is also his submission that despite request for cross examination of these very persons, it was denied by adjudicating authority on the frivolous ground and the documents recovered from the employees residence and statements made by them and 3rd party are to be discarded as not proved, in the absence of any cross examination. It is further his submission that evidences recovered from the premises of employees are themselves not consistent and are contradictory. It is his submission that serious charge of clandestine removal cannot be sustained on the basis of documents recovered outside premises of the assessee, which are themselves are internally inconsistent. It is his submission that the appellants sell their final product at least to 70-80 customers. It is his submission that the Revenue authorities visited the premises of almost all such customers, but were able to obtain statement only from 2 of the customers who recorded statements that they were receiving the goods without invoice. Consequently, a case was made out on said M/s Amar Ceramics Industries for manufacture and clearance of final product clandestinely, out of the goods supplied by M/s VTPL. It is his submission that this Tribunal had held in favour of the said M/s Amar Ceramics Industries on the ground that Shri Dharmendra Patel, has retracted the statement. Hence, it is his submission that there is no statement of M/s Amar Ceramics Industries, which inculpates M/s VTPL. It is his submission that there is no evidence brought on record by Revenue for the purchases of other raw materials which are required for manufacturing their final product. It is his submission that for manufacture of their final product i.e. Frit, inputs required are Quartz, Feldspar, Zinc, Borax Powder, Calcium and Dolomite. It is his submission that Borax Powder which is used as one of the ingredients, constitutes 12-15% of the material in final product as against Quartz which is approximately 45% of the finished good. It is his submission that despite such large scale investigation including the visit to the premises of raw material suppliers, there was absolutely nothing brought on record to show that the appellant had purchased all the raw materials without recording the same in their book of accounts. It is his submission that the lower authorities have found that there are 3-4 entries of unaccounted purchases of Borax Powder, which are very negligible, considering the demand which has been raised for clandestinely manufactured and cleared goods. It is his submission that unless the goods are manufactured, the question of clandestine removal would not arise. He would submit that there is no cogent and sufficient evidence with the Department to pin down the assessee M/s VTPL and Shri Vivek Maheshwari with the charge of clandestine removal. For this purpose, he would rely upon the following decisions:
i) 2003 (153) ELT 437 CCE Chennai Vs Dhanvilas (Madras) Snuff Co.
ii) 2006 (200) ELT 234 S.T. Texturisers Vs. CCE Surat
iii) 2002 (140) ELT 187 T.G.L. Poshak Corporation Vs. CCE Hyderabad
iv) 2005 (183) ELT 101 Rajasthan Foils Pvt.Ltd. Vs CCE Jaipur
v) 1989 (39) ELT 655 Kashmir Vanaspati Pvt.Ltd. Vs CCE
vi) 2001 (130) ELT 271 Sharma Chemicals Vs CCE Calcutta
vii) 2011 (266) ELT 45 (Guj) CCE Daman Vs Nissan Thermoware Pvt.Ltd.
viii) 2002 (141) ELT 676 Shree Jay Jyoti Vs CCE Madurai 5.4 To sum up, it is his submission that the case of clandestine removal cannot be upheld merely on the basis of documents, etc been found along with statement unless there is tangible, independent, corroborating proof like financial flow back, actual manufacture and clearance, excess purchase of raw material, electricity consumption, statements of workers, actual transportation of the goods, statement of purchasers. Alternately, it is his submission that assuming that the submissions made by and has met the approval of the Tribunal, the value of clearance has to be considered as cum-duty value and duty liability needs to be re-worked out, as has been consistently held by various judicial forums including the Tribunal. It is also submission that wholesale price of the goods needs to be worked out in this case. As regards penalty, it is his submission that if the demand itself cannot sustain, the question of penalty does not arise. He would also rely upon the decision of Hon'ble Supreme Court in the case of Collr. of Customs, Madras & Others Vs D. Bhoormull 1983 (13) ELT 1546 (SC), for the submission that the burden of proof is on the Department to prove that there is clandestine removal.
6. Ld.Advocate Shri Paritosh Gupta, appearing on behalf of M/s Amar Ceramics Industries would make only 2 submissions; based upon the statement that they have received the raw material i.e. Frit from M/s VTPL, Revenue had proceeded against M/s Amar Ceramics Industries, alleging them of clandestine manufacture and clearance of their final product from their factory premises. This demand was upheld in Order-in-Appeal No.231-232, by the appellate authority and M/s Amar Ceramics Industries preferred an appeal before Tribunal in Appeal No.2562/2004, which was decided by Final Order No.A/698/WZB/AHD/2007, dt.29.3.07. It is his submission that this Bench, after going through the merits of the case and also considering the fact that statement has been retracted and there being no tangible evidence for the manufacturing of final product, has allowed the appeal and set aside the demand raised on M/s Amar Ceramics Industries. He would submit that there cannot be any penalty on M/s Amar Ceramics Industries. Other advocates for appellant companies M/s Weldecor, M/s Excel Ceramics, M/s Sun Borax Industries submitted that the penalty imposed by adjudicating authority under Rule 26 of Central Excise Rules, 2002 is incorrect as such penalty cannot be imposed upon them.
7. Ld.AR on behalf of the Revenue, on the other hand, would draw our attention to the merits of the case. It is his submission that the adjudicating authority has concisely recorded that entire case is based on number of parallel invoices recovered from the residential premises of Shri B.M. Patel, Factory Manager, Shri Anil Jadav, Accountant. He would also submit the lorry receipts issued by M/s Express Roadlines and M/s National Transport indicate that there was no movement or even if there was any movement, there were clandestine clearances. It is his submission that the documents recovered from the residential premises of the employees when cross checked with the statutory records, indicate clandestine removal of the goods. It is his submission that bulk of the clandestine sales or clearance were made by M/s VTPL without payment of duty to M/s Weldecor and it has been admitted by the partner of M/s Weldecor in their statement, even though there was no official agreement. It is his submission that the amount which was received by cash/DD/Pay Order by M/s Weldecor Mosaic Tiles, deposited in Canara Bank/Central Bank. He would submit that above all the statement of the Managing Director of the Company, which indicate that they were making clandestine clearance of final product from their factory premises without recording the same in their books of account. He would submit that the efforts of the ld.Sr.Advocate to show the commissions and omissions in the evidences relied upon by the Revenue is totally incorrect. It is his submission that the statements or the evidences clearly point out that there was a well-calculated operation to remove the goods clandestinely without payment of duty. He would submit that if the entire records which were seized from the employees of the assessee, has to be discarded, the first and foremost thing which comes to mind that how details in these documents tallies with the recorded transactions of the assesssee in statutory book, there cannot be any doubt in the mind that these documents recovered were kept in the premises of employees in order to hoodwink the Revenue. He would rely upon the decision of this Tribunal in the case of Montex Dyg. & Ptg. Works Vs CCE Surat 2007 (208) ELT 536 (Tri-Ahmd), for the proposition that when Kachcha/Pakka challans containing plethora of information corroborated by the statement of the partner and further corroborated by the statement of the merchant manufacturers, referring to any other requirement for proving clandestine removal not always necessary. It is his submission that the very same case-law laid down that sufficiency of evidence on record is to be considered and Revenue cannot be expected to prove its case by producing direct evidences.
8. We have considered the submissions made at length by both sides and perused the records.
9. The entire case of the Revenue in these cases is starting from the visit of various premises on 8.7.02. On that date, simultaneous visits were organized to the raw material suppliers and customers and residential premises of employees employed with M/s VTPL. It is also undisputed that evidences which the department relies upon for confirmation of demand in the appellant M/s VTPLs case is based upon the docucmentary evidences recovered from the premises of Accountant, Factory Manager and Plant Manager of the appellant. It is also undisputed that only statements of 2 customers were recorded indicating receipt of finished goods by them without payment of duty and only one raw material suppliers statement was recorded for supply of raw material without accounting for the same and statement of the Managing Director. It is also undisputed that the Managing Director, in his statement, has given inculpatory statement, as regards clandestine removal of the goods. To sum up, the Departments case is based upon:-
i) Documents recovered from the premises of some of the employees, but not the premises of assessee, wherein he does the business of manufacturing and clearance.
ii) Statements of these employees and that of Managing Director, which are inculpatory in nature.
iii) Out of the visit to most of the customers who purchased the material from M/s VTPL, statements of only 2 customers were recorded and that of one dealer was recorded.
iv) Statement of supplier of one of the raw material.
10. First and foremost evidences which are on record whether they indicate clandestine removal of the goods vis-`-vis statement of the Managing Director and other persons.
10.1 As regards documents recovered from the premises of the employees and 3rd party, it is definitely pertinent to note that these are not official records maintained in the place of business and it is also noticed that they are not kept on day to day basis and were not recovered from regular business premises.
10.2 Few documents which were recovered from the factory premises of the appellant were not tallying with any of the official documents, but were sought to be tallied with the evidences on record recovered from the residence of three employees. We find that the ld.advocate for the M/s VTPL had specifically requested for cross examination of the following persons, as recorded by the adjudicating authority in Order-in-Original.
i) Shri Anil Jadav, Employee
ii) Shri Vipul P. Mehta, Buyer
iii) Shri Bipin H. Mehta, Buyer
iv) Shri Ashok Kumar Ranjan, Employee
v) Shri Manhar J. Patel, Buyer
vi) Shri Dharmendra V. Patel, Transporter
vii) Shri Ashok J. Patel, Buyer
viii) Shri Mundakathil Joseph Devasia,
ix) Shri Chetanbhai Shah,
x) Shri B.M. Patel, Factory Manager 10.3 The adjudicating authority, in his findings in Para 9.2.5, had not granted cross examination of the above said people only on the ground that they are co-accused and they have in one way or other has helped M/s VTPL to evade payment of duty. It is also seen that the adjudicating authority had dismissed the request for cross examination only on the ground that M/s VTPL has not given any reason and justification for cross examination of these persons. We find that this approach of the adjudicating authority is inconsistent with the settled law of evidence. It is undisputed that the persons who had given inculpatory statements (as indicated herein above) were 3rd party and were only employees of the assessee. There could be an element of doubt that these persons jointly or severally were working against appellant M/s VTPL or otherwise. This could be ascertained only during the cross examination, by confronting the persons with the documents recovered from their possession. Be that it may be, documentary evidences recovered from the residential premises of the employees, the veracity of the same needs to be always checked and cross checked before relying upon such evidences. M/s VTPL were well within their rights to ask for cross examination of these employees to bring on record that documents which were recovered and on which reliance has been placed by adjudicating authority for confirmation of demand of duty, could have been maintained by other persons or 3rd party for their own personal reasons or for the reasons best known to them. In our considered opinion, due to non-granting of the cross examination of above said persons, no reliance can be placed upon the evidences collected from residential or other premises and inculpatory statement of these persons cannot stand test of the law and said evidences needs to be discarded. We are fortified in our view by the judgment of Honble Apex Court in the case of Shalimar Rubber Industries Vs Collr.of C.E. Cochin 2002 (246) ELT 248 (SC), wherein their Lordship held no reliance can be placed on the oral statement of the raw material suppliers as he is not subjected to any examination and cross examination during adjudication. On discarding of the evidences from the above persons, we find that there is paucity of tangible evidence which would indicate that there was clandestine manufacture and clearance of the goods.
11. The basic charge of the Revenue on M/s VTPL is that they have removed finished goods clandestinely from the factory. For this purpose, they have relied upon the inculpatory statement of M/s Amar Ceramics Industries and M/s Excel Ceramics. We find from the records that authorized signatory of M/s Amar Ceramics Industries, during his recording of the statement, has admitted that they had received the Frit without bill from M/s VTPL and also deposed that the same was used in the manufacture of glazed tiles, which were cleared without payment of duty. This is to indicate that the authorized person of M/s Amar Ceramics Industries had stated that they had cleared their final product i.e. glazed tiles manufactured by using unaccounted purchases of Frit from M/s VTPL. This Bench vide Final Order No. A/698/WZB/AHD/2007, dt.29.3.07 had clearly held that there is no tangible evidence to lead to a inevitable conclusion of clandestine manufacture of the glazed tiles in the factory of M/s Amar Ceramics Industries and coming to such a conclusion the impugned order was set aside in that case, indicating therein that confessional statements of the partner/authorized person was retracted. If that be so, statement of Shri Patel, Partner of M/s Amar Ceramics Industries cannot be relied upon as it is a retracted statement and such retraction is considered for setting aside the demand raised on them, which would mean that there is no inculpatory statement from M/s Amar Ceramics Industries against the appellant. In the absence of any other statement of M/s Amar Ceramics Industries which inculpates the current appellant M/s VTPL, the statements relied upon by Department is to be discarded. As regards other statement of M/s Excel, we have already recorded our finding that, having not produced the person who made the statements for cross examination, such statement cannot be relied upon by the Department for coming to the conclusion, that there was clandestine removal from the premises of M/s VTPL.
12. Be that as it may be, it is to be noted that there is no dispute that to manufacture of said final product Frit requires the use of Quartz, Feldspar, Zinc, Borax Powder, Calcium and Dolomite as inputs/raw material. On the date of visit of the officers to the factory premises of the appellant, it is undisputed that the stock of raw materials as well as finished goods was tallying with recorded balances. This conclusion can be reached from perusal of records, as there is nothing on record to indicate otherwise.
13. On careful perusal of the entire records of the case, we find that there is nothing on record as to unrecorded purchases or consumption of various other raw material in the manufacture of Frit, there is also nothing on record to indicate that the appellant had purchased the Quartz, Feldspar, Zinc, Borax Powder, Calcium and Dolomite and without accounting them used for the manufacture of Frit for clandestine removal. There is also nothing on record nor there is any statement of the suppliers of other raw materials, which would indicate that the appellant had received unaccounted raw material from the suppliers of these raw materials. There is a solitary evidence in the form of statement of supplier of one of the raw material i.e. Borax Powder, who indicated that the appellant had procured Borax Powder and not accounted the same in his record; and the said entries and information were deduced from the documents of the premises of Shri Anil Jadav and whose evidence has been discarded for having not been produced for cross examination; in the absence of any other tangible evidence to show that the appellant had been procuring the other major raw materials required for manufacture of Frit without recording in books of accounts, we are unable to accept the contentions of the ld.AR appearing for the Revenue and the findings of the adjudicating authority, that there was clandestine manufacture and clearance of the finished goods. The investigation has not proceeded further to bring on record unaccounted purchases of all the raw materials required for manufacturing of Frit.
14. In the case of Dhanavilas (Madras) Snuff Co. 2003 (153) ELT 437 (Tri-Chennai), we find that in Para 6, the Tribunal has recorded as under:
6.Revenue ought to have produced the evidence of purchase of raw material, manufacture and clearance of goods clandestinely by examining the workers and also those who have received the goods without payment of duty. In view of lack of evidence, the Commissioner has rightly dropped the proceedings with regard to the charge pertaining to clandestine removal. However, he has upheld the charge pertaining to certain other charges and has confirmed duty and penalties.. In yet another case in the case of S.T. Texturisers -2006 (200) ELT 234, this Bench, in respect of clandestine removal, very clearly held as under:
6.?Considering the above arguments of the appellant in the light of the various decisions of the Tribunal, it is seen that it has been consistently held by the Tribunal that entries in rough register cannot be made the sole basis for arriving at finding of clandestine manufacture. Reference in this regard be made to the Tribunal decision in the case of Essvee Polymers (P) Ltd. [2004 (165) E.L.T. 291 (Tri.- Chennai)], Krishna Bottlers (Vijayawada) Pvt. Ltd. v. Commissioner of Central Excise, Gantur [1999 (32) RLT 845 (CEGAT)], Ganga Rubber Industries v. Collector of Central Excise [1989 (39) E.L.T. 650 (Tribunal)]. The ratio of all the above decisions is that the allegations of clandestine manufacture and removal being quasi criminal in nature are required to established beyond doubt by producing evidence in the shape of procurement of raw materials, shortage, excess use of electricity, flow back of funds and purchase of final products by customers etc. Admittedly no such evidence has been produced on record by the Revenue, the evidentiary value of the statements relied upon by the Revenue already stands discussed by me in the proceedings paragraph. The said statements having been made under Section 108 of the Customs Act, 1962 are not comparable to the confession recorded under Section 164 of CRPC before Magistrate, and as such are required to be corroborated, by evidence of removal without payment of duty. As already discussed the said statements are devoid of probative value and cannot be considered to be supportive of charges of clandestine removal. In yet another case in the case of T.G.L. Poshak Corporation - 2002 (140) ELT 187, the co-ordinate Bench of the Tribunal held as under:
6. We have carefully considered the submission and? perused the impugned order. Insofar as the assessees appeal is concerned, we notice from the extracted portion of the Commissioners order that Revenue is solely relying on the exercise note books mainly balance steets. 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 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 assessees appeal is allowed.
All the above reproduced ratio would lead to a conclusion that the charge of clandestine manufacture and removal has to be proved beyond doubt and in the case before us, as already discussed, there is nothing on record that instils confidence in our mind that the appellant had clandestinely manufactured and cleared the final product.
Further, it is settled law that for the purpose of clandestine removal, there has to be clandestine manufacture. We find on perusal of the record, that the Revenue authority, despite having engaged themselves in massive investigation, has not brought on record a single evidence of procurement of other major raw materials required for manufacture of Frit, either in the form of entries in the books of accounts or in the form of statements of supplier of the other major raw materials. It is undisputed that for manufacturing of Frit (the final product) major raw material is Quartz which is approximately 45% of the total inputs going in the manufacturing of Frit. We find from the records that Revenue has not produced a shred of evidence, to indicate that the appellant had been procuring Quartz without accounting them in books of account nor is there any evidence to indicate that other raw materials were also procured without recording them in books of accounts. In the absence of any such evidence, we are unable to persuade ourselves that the appellant M/s VTPL had clandestinely manufactured the quantity of Frit during the period 1998-99 to January 2002. If there is no clandestine manufacture, there cannot be any clandestine clearance. Further, we also find from the records that there is no investigation which has been carried out to indicate that there has been unusual consumption of electricity or any other evidence in the form of receipt of raw material into the factory premises of the appellant M/s VTPL or that the production figures were so manipulated that the clandestine removal could take place without receipt of other raw materials. The investigating authorities, during the course of raid, had even seized the records of security at the factory gate, but from these records, Revenue was not able to show that there was illicit receipt of the raw materials in the manufacture of final product in the factory premises.
15. We find that Hon'ble High Court of Gujarat, in the case of Nissan Thermoware Pvt.Ltd 2011 (266) ELT 45 (Guj), has specifically 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. (Emphasis supplied) The above ratio, as laid down by Hon'ble High Court of Gujarat, would squarely cover the issue before us.
16. In the absence of any tangible evidence which would indicate that there was clandestine manufacture and clearance of the goods from the factory premises of M/s VTPL, in the peculiar facts and circumstances of this case, we hold that the impugned order which confirms the demand on the appellant M/s VTPL and imposes penalty on them is not sustainable and is liable to be set aside and we do so.
17. Since we have held that there is no sustainable demand, consequential penalties on various other appellants, who are in appeal before us, would also automatically be set aside.
18. As we have disposed the appeals on merits of the evidences on record, we are not recording any findings on various other submissions made by both sides.
19. Accordingly, all the appeals are allowed with consequential relief, if any.
(Pronounced in Court on ______________________)
(Dr.P. Babu) (M.V. Ravindran)
Member (Technical) Member (Judicial)
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