Custom, Excise & Service Tax Tribunal
Super Forgings & Steel Ltd vs Kolkata North Commissionerate on 9 January, 2024
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.2
Excise Appeal No. 380 of 2008
(Arising out of Order-in-Original No. 6/Commissioner/CE/Kol-IV/2008 dated
05.05.2008 passed by Commissioner of Central Excise, Kolkata-IV
Commissionerate.)
M/s. Super Forgings & Steel Ltd.,
(6, Lyons Range, Kolkata-700001)
Appellant
VERSUS
Commr. of Central Excise, Kolkata-IV
(M. S. Building, (7th Floor), Customs House, 15/1, Strand Road, Kolkata-700001)
Respondent
APPEARANCE :
Mr. H. K. Pandey, Advocate for the Appellant Mr. S. Mukhopadhyay, Authorized Representative for the Respondent CORAM:
HON'BLE MR. R. MURALIDHAR, MEMBER (JUDICIAL) HON'BLE MR. K. ANPAZHAKAN, MEMBER (TECHNICAL) FINAL ORDER NO.75015/2024 Date of Hearing : 06 December 2023 Date of Pronouncement: 09/01/2024 PER R. MURALIDHAR:
The Appellant's premise was searched on 1st September 2001 on the allegation that 503.750 MT of Steel Ingots were found short against the recorded stock and Excise Duty of Rs. 14,00,964/- was demanded. The Statement of Mr. A. K. Ladia, Commerical Manager of factory was recorded on 1st September 2001. Thereafter on the allegation that the Appellant has cleared the goods clandestinely without payment of duty, the demand of Rs. 3,03,54,200/- (inclusive of Rs. 14,00,964/- on account of shortages found) was issued by way of Show Cause Notice on 27/07/2004 for the period September 2001 to August 2001. After due process, the Adjudicating Authority confirmed the demand. Being aggrieved, the Appellant was before the Tribunal.2 Excise Appeal No. 380 of 2008
2. The Tribunal vide its Final Order No. S-855/A/2078/KOL/2007 dated 18/12/2007 after noting that several of the relied upon documents were not provided to the Appellant, directed the Adjudicating Authority to provide those documents and complete the adjudication process by following the principles of natural justice. The Adjudicating Authority claims to have provided all these documents to the Appellants and completed the Denovo proceedings and passed the impugned OIO on 05/05/2008 confirming the demand of Rs. 3,03,54,200/-. Being aggrieved, the Appellant is before the Tribunal.
3. The Learned Senior Counsel appearing on behalf of the Appellant submits that though the Adjudicating Authority was required to furnish all the documents, the same were not given to them. Though the Appellant has filed a letter on 13/02/2008 clearly stating that the required documents have not been made available to them, still the Commissioner has erroneously held that all the documents have been made available to the Appellant. He draws our attention to the list of relied upon documents given at Page 4 of the Show Cause Notice dated 27/07/2004. He submits that the Tendered document Nos. 1 to 11, 16, 18, 19, 21 to 24, 30(1) to 30(8), 38, 39(1) to 39(7), 40 to 42 dated 01.09.2001 have not been provided to the Appellants at the time of Denovo Adjudication. He draws our attention to the letter dated 13/02/2008 (Page No. 288-289 of the Appeal Paper Book) wherein, they have stated that the documents provided are not the ones which are sought by them. Then he takes us to Para 5 of the OIO (Page 8 of the OIO) wherein, there is no mention about the Appellant's letter dated 13/02/2008. Therefore, the Learned Counsel submits that the Denovo Proceedings have been completed without the Appellant Company being handed over the documents which were actually directed by the earlier Bench to be handed over to them.
3 Excise Appeal No. 380 of 20084. Further he submits that the Show Cause Notice heavily relied on a single statement recorded by Shri A. K. Ladia on 01/09/2001. He takes us through Statement of this person at Page No. 55 to 59 of the Appeal Paper Book. He submits that nowhere has the Appellant given any categorical answer to the effect that any clandestine removal has taken place. Further, this person had retracted the Statement on 05/09/2001 by way of Sworn Affidavit before Advocate Notary. In this Statement, the Deponent clearly stated that the earlier Statement was not his voluntary Statement and the same was extracted from him under duress, compulsion, and threat. The Learned Counsel submits that in view of such retraction, the Recorded Statement of this person has no evidentiary value.
5. He further submits that the stock taking was done on visual counting basis without actual weighment and hence the same cannot be relied upon to come to any conclusion about shortage. So far as the alleged manufacture and clearance of clandestine quantity is concerned, the same is based on the assumptions and presumptions based on the likely production per-machine per-day without any corroborative evidence. The Department has not brought an iota of evidence in the form of any purchase of raw material on cash basis, sale of finished goods on cash basis, excess electricity consumption and movement of vehicles/Trucks, while the allegation is for clandestine manufacture and clearance of more than 5,000 tonns of finished goods. The Department has not seized any private diaries or chits during the search operations. Therefore, the Department has proceeded on presumptions without any proper documentary evidence or back up to corroborate their allegation. He relies on the following case laws:-
4 Excise Appeal No. 380 of 2008(i) Ambica Iron & Steel Pvt. Ltd. Vs. Comm. Of C. Ex., Cus. & S.T., Rourkela, 2022 (380) ELT 351 (Tri.-Kolkata)
(ii) Commr. of Central Excise Vs. Saakeen Alloys Pvt. Ltd., 2014 (308) ELT 655
(iii) Rattan Industries Pvt. Ltd. Vs. Commr. of C. Ex., Kanpur-
2013 (290) ELT 442 (Tri-Del.)
(iv) Hi Tech Abrasives Ltd. Vs. Commr. of C. Ex., & Cus., Raipur-
2018 (362) ELT 961 (Chhattisgarh)
(v) Commr. of C. Ex., Kolkata-III Vs. Sai Sulphonate Pvt. Ltd., 2022 (380) ELT 441 (Cal)
(vi) CCE & ST, Udaipur Vs. Mittal Pigment Pvt. Ltd., 2018 (16) GSTL 41 (Raj.)
6. In view of the foregoing, he submits that the confirmed demand is required to be set aside on merits.
7. He further submits that though the officials visited the Appellant's factory on 1st September 2001 and recorded the statement of A. K. Ladia on the same day, and also gathered various documents subsequently within the next few months, still the Department has issued the Show Cause Notice only on 27/07/2004. From the list of documents relied upon at Page No. 4 of SCN, he draws our attention to the fact that all the recordings of statements were completed by 29/4/2002 itself. Therefore, when the Department had all the relevant documents with them, there is no justification in waiting for more than two years to issue the Show Cause Notice on 27/07/2004. Therefore, he submits that entire demand is barred by limitation.
5 Excise Appeal No. 380 of 20088. The Learned AR reiterates the findings of the lower authority. He submits that the Commissioner has clearly recorded the fact that the documents were properly handed over to the Appellant and only after that the adjudication proceedings were taken up for Denovo proceedings. He justifies the detailed findings of the Adjudicating Authority for confirming the demand.
9. Heard both sides and perused the Appeal Papers, Written Submissions and the relied upon documents.
10. This Bench vide their earlier Final Order dated 18/12/2007, has directed the Department to provide all the documents which were relied upon in the Show Cause Notice and then take up the Denovo Proceedings. From the letter dated 13/02/2008 filed by the Appellant, it is clear that the Department has not provided all the relevant documents to them. The Adjudicating Authority in his Order only notes the dates and the details of the letters by which documents have been given to the Appellant, without making any reference to the points raised by the Appellant on 13/03/2008. He has completed the proceedings on 05/05/2008, ignoring the pleadings of the Appellant towards non-receipt of the documents. This shows that the directions of the Tribunal were not properly followed by the Adjudicating Authority during the Denovo Proceedings.
11. We observe from the list of documents relied upon at Page 4 of SCN that the tendered documents and joint stock verification Report, etc. are very crucial to show as to how the total quantity of shortages and alleged clearances were arrived at by the Department. Even after 20 years of issue of Show Cause Notice, these documents which should have actually formed part of the 6 Excise Appeal No. 380 of 2008 Show Cause Notice in the first place, are not available. This shows that no proper care was taken to compile all the documents while issuing the Show Cause Notice. Even after specific directions of the Tribunal, these documents were neither made available to the Appellant nor are they available before us today, to come to a conclusion as to how the shortages and alleged production and removal of clandestine manufactured goods took place. From the Show Cause Notice, it is also seen that except for some Recorded Statements, which all pertain to the officials of the Appellant, no statements have been recorded from any third parties like the alleged sellers of raw materials, purchasers of raw materials, transporters of the goods etc. No corroborative evidence whatsoever has been brought in respect of cash purchases, cash sales, movement of vehicles carrying clandestine purchase of raw materials and clandestine removal of finished goods. There is no evidence of the Department having gathered any private records, sheets, etc. towards such transactions. When the alleged value of the clandestinely removed finished goods is more than Rs. 50 crores, it is surprising that no effort whatsoever has been made by the Department to gather any corroborative evidence on the above issues.
12. The Tribunal in the case of Ambica Iron & Steel Pvt. Ltd. Vs. Commr. of C. Ex., Cus. & St, Rourkela cited supra has held as under:-
14. The clandestine manufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to
(i) Receipt of raw material inside the factory premises, and non-accounted thereof in the statutory records; (ii) Utilization of such raw material for clandestine manufacture of finished goods; (iii) Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, 7 Excise Appeal No. 380 of 2008 discrepancy in the stock of raw materials and final products; (iv) Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporters' documents, such as L.Rs., statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignees; (v) Amount received from the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal. Whereas, in the instant case, no such clinching or corroborative evidences to the above effect have been brought on record.
15. In the instant case, the entire case of the Revenue is based on the Kaccha Chithas seized from the residence of the Director. The manner in which the said Kaccha Chithas is seized has been strongly agitated by the Appellant. We find that the said Kaccha Chithas/documents should have been seized in the presence of the Director. There is considerable force in the contention of the Appellant that the Kacha Chithas relied upon by the Revenue cannot be a basis to uphold the serious charge of clandestine clearance. It is settled legal position that charge of clandestine clearance is a serious charge and the onus to prove the same is on the Revenue by adducing concrete and cogent evidence. In the absence of corroborative evidence, the issue of fact i.e. in the present case "the charge of clandestine clearance" cannot be levelled against the assessee.
16. We find that in the entire proceedings, no evidence, much less corroborative evidence, has been adduced to show that input goods has been procured to manufacture goods for clandestine clearance. No efforts have been made by the investigating agencies to establish the existence of any unaccounted manufacturing activity in the form of unaccounted raw material, shortage of stock, shortage of raw material/finished goods, excess consumption of electricity, unaccounted labour payments, interrogation of buyers/transporters or any incriminating record/document to suggest any flow back of cash etc. The Revenue authorities in this case have failed to discharge the burden of proving the serious charge of clandestine clearance or undervaluation with cogent and clinching evidence. It has been consistently held that no demand of clandestine manufacture and clearance can be confirmed purely on assumptions and presumptions and the same is required to be proved by the Revenue by direct, affirmative and incontrovertible evidence, as has been held in the following cases :-8 Excise Appeal No. 380 of 2008
• Bihar Foundary & Castings Ltd. v. CCE, Ranchi [2019 (8) TMI 527- CESTAT, Kolkata] - Para 18 • Continental Cement Company v. Union of India [2014 (309) E.L.T. 411 (All.)] - Para 12 • Balashree Metals Pvt. Ltd. v. UOI [2017 (345) E.L.T. 187 (Jhar.)] - Para 5(vi) • CCE, Meerut-I v. R.A. Castings Pvt. Ltd. [2012 (26) S.T.R. 262 (All.) = 2011 (269) E.L.T. 337 (All.)] • Popular Paints and Chemicals v. CCE & Customs, Raipur [2018 (8) TMI 473 (Tri. - Delhi)] - Para 17
18. The Learned Commissioner has asserted in the impugned order that the demand based on the Kacha Chithas and the statement of Director is sustainable and that no further corroboration was required in view of the clinching nature of the oral and documentary evidence establishing clandestine production and removal of finished goods at para 17.2 of the Order-in-Original is clearly contrary to the judicial precedents cited supra.
19. We further find that the contention of the Learned Commissioner in the impugned Order-in-Original that it is neither feasible nor desirable to cause enquiry at all possible points concerning the clearances at Para 17.5 of the impugned order itself clarifies that the demand has been raised solely on the basis of assumptions and presumption and no corroborative evidence was brought out by the Revenue except the so called Kacha Chithas and statement of Director.
20. We are of the view that the Learned Commissioner made a fundamental error by making assumptions only just to confirm the demand on the allegation of clandestine clearance. It is a well settled position of law that serious allegation cannot be made merely on assumptions and presumptions and in the absence of detailed supporting evidence, the charge of clandestine removal cannot be upheld.9 Excise Appeal No. 380 of 2008
21. In view of the above discussions, the impugned order cannot be sustained and accordingly the same is set aside. The appeal is allowed with consequential relief as per law. [Emphasis supplied]
13. The Tribunal in the case of Rattan industries Pvt. Ltd. Vs. Commr. of C. E., Kanpur, cited supra has held as under:-
9. As it is clear from the above findings of the Commissioner (Appeals) the shortages were arrived at by assuming the average weight of ingots. Admittedly, there was no actual weighment of the stock. As such, I agree with the learned Advocate that the shortages cannot be held to be real.
10. Further the Revenue has relied upon the statement of Sh. Subhash Goyal, accepting such shortages and deposing that the goods might have been cleared without the cover of invoice. The fact is that the said statement was withdrawn by Sh. Subhash Goyal subsequently and there is a letter of the Director of the Company on record, I find that there is no other evidence available indicating the clandestine clearance of the ingots. There are umpteen number of decisions holding that there is no other evidence available on record indicating the clandestine clearance of the final product, charges of clandestine removal can not be upheld on the basis of sole retracted statement. The same are required to be proved by producing sufficient & positive evidence of clandestine removal.
Apart from that as already observed the weighment of the stock was not actually done and as such shortage arrived at on the basis of arithmetical and calculative methods cannot be accepted.
11. In view of the foregoing discussions, I set aside the impugned order and allow the appeal with the consequential relief to the appellant. [Emphasis supplied]
14. The High Court of Chhattisgarh in the case of Hi Tech Abrasives Ltd. Vs. Commr. of C. Ex. & Cux., Raipur, cited supra has held as under:-
9.4 The legislative scheme, therefore, is to ensure that the statement of any person which has been recorded during search and seizure operations would become relevant only when such person is examined by the adjudicating authority followed by the opinion of the adjudicating authority then the statement should be admitted. The said provision in the statute book seems to have been made to serve the statutory purpose of ensuring that the assessee are not subjected to demand, penalty interest on the basis of certain admissions recorded during investigation which may have been obtained under the police power of the Investigating authorities by coercion or undue influence. [Emphasis supplied] 10 Excise Appeal No. 380 of 2008
15. The High Court of Calcutta in the case of Commr. of Central Excise, Kolkata-II, Vs. Sai Sulphonate Pvt. Ltd., cited supra, has held as under:-
5. The assessee has filed appeal before the Tribunal challenging the said order and explained that their manufacturing activities as to how they were engaged in manufacture for themselves as well as they have been carrying on conversion job for another third party. After noting the facts the Tribunal held that LABSA and Spent Sulphuric Acid are of the same quality and the processing tank is also common in the factory as it is not possible to manufacture goods separately. Further, the Tribunal analysed the total consumption of LAB and Sulphuric Acid during the material period and took note of the ratio adopted and on facts held that there is hardly any difference between the ratio adopted for their own manufacture and conversion job.
Further, the Tribunal noted that the department has not made any allegation that assessee procured excess quantity of LAB to manufacture excess quantity of Acid Slurry or LABSA 90%, nor the department has produced any evidence or referred to any material to show how excess amounts of LAB has been brought into the factory and how the same were removed after being manufactured into LABSA. Thus, the Tribunal concluded that without any evidence on record the allegation of clandestine removal cannot be made.
6. In our considered view, the Tribunal rightly granted the relief to the assessee as allegation of clandestine removal is a very serious charge and the onus of establishing the same is first on the department and upon the onus being discharged in the manner common to law, then and then only the burden of proof shifts to the assessee. In the instant case, admittedly there was no material on record establishing the charge of clandestine removal and such charge was made against the assessee by way of an inference taking note of the ratio adopted in the manufacturing process.
7. Thus, we are of the considered view that the entire issue involved in this appeal is factual and no question of law as suggested by the Revenue arises for consideration in this appeal. Accordingly, the appeal fails and is dismissed. [Emphasis supplied]
16. The High Court of Rajasthan in the case of Commr. of C. Ex. & S. T., Udaipur Vs. Mittal Pigment Pvt. Ltd., cited supra has held as under:-
6.3 Consequently, we are of the considered view that the department has not discharged its burden of conclusively proving the case of suppressed production and clandestine clearance by the appellants. In this regard we seek support from Hon'ble Allahabad High Court's decision in the case of Continental Cement Company v. Union of India - 2014 (309) E.L.T. 411 (All.) and Supreme Court's decision in the case of Oudh Sugar Mills Ltd. v. Union of India - 1978 (2) E.L.T. J172 (S.C.) and CESTAT's in the case of Punalur Paper Mills Ltd. v. CCE - vide Final Order Nos. 996-997/2008, dated 26-8-2008. The Hon'ble High Court in the case of Continental Cement Company (supra) has inter alia observed as under :11 Excise Appeal No. 380 of 2008
13. ..... to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department....
14. .......
15. ...... When there is no extra consumption of electricity, purchase of raw materials and transportation payment, then manufacturing of extra goods is not possible........."
7. Considering above discussions and the case laws cited above, we conclude that the Revenue has failed to reasonably prove suppressed production and clandestine clearance on the part of the appellants. Consequently, the impugned order in respect of confirmation of duty for alleged suppressed production, and imposition of fine and penalty on the appellant No. 1 and imposition of personal penalty of Rs. 40 lakhs on Shri Agarwal who is appellant No. 2 are hereby set aside. The appellants will get the relief accordingly.
17. From the above decisions, it gets clarified that the allegation of clandestine manufacturing/clearance is a serious allegation and the Department cannot merely rely on the recorded Statements alone and the quantification cannot be done based on the assumptions and presumptions without proper corroborative evidence in the form of evidence towards purchases, sales, movement of goods, electricity consumption, recorded statements of alleged purchasers and sellers etc. In the present case, as observed above, the Department has not made any efforts whatsoever on these counts. Even the recorded statement of Mr. A. K. Ladia has been retracted by him. Thus it loses its evidentiary value as held by Hon'ble Chhattisgarh High Court in the case of Hi Tech Abrasives Ltd. cited supra. Therefore, we see no merits in the impugned order and set aside the same on merits.
18. We also find force in the arguments of the Appellant that though the officials visited the unit of 1st September 2001 and necessary Statements were recorded by September 2002, the Show Cause Notice was issued only on 27/07/2004. This shows that the Department has not issued the Show Cause Notice inspite of having all the documents with them. The Tribunals and High Courts have been consistently holding that the Show Cause Notice is to be issued 12 Excise Appeal No. 380 of 2008 within 6/12 months from the date of visit of officials since that is taken as the date of availability of knowledge to the Department. Therefore, we hold that the Show Cause Notice issued on 27/07/2004 is also barred by time.
19. Accordingly, we allow the Appeal both on merits as well as on account of limitation. The Appellant would eligible for consequential relief, if any, as per law.
(Order was pronounced in the open court on 09/01/2024) Sd/-
(R. Muralidhar) Member (Judicial) Sd/-
(K. Anpazhakan) Member (Technical) Pooja