Custom, Excise & Service Tax Tribunal
Sanyo Cera Tiles Pvt Ltd vs Ahmedabad-Iii on 25 November, 2024
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad
REGIONAL BENCH-COURT NO. 3
Excise Appeal No. 11891 of 2013 - DB
(Arising out of OIO-3-COMMR-ADJ-AHD-2013 dated 28/03/2013 passed by Commissioner
of Central Excise-AHMEDABAD-III)
Sanyo Cera Tiles Pvt Ltd ........Appellant
1st Floor, It Tower-4, Infocity,
Near Indroda Circle,
Gandhinagar, Gujarat
VERSUS
Commissioner of C.E. & S.T.-Ahmedabad-iii ......Respondent
Custom House... 2nd Floor,
Opp. Old Gujarat High Court, Navrangpura,
Ahmedabad, Gujarat-380009
With
Excise Appeal No. 11892 of 2013 - DB
(Arising out of OIO-3-COMMR-ADJ-AHD-2013 dated 28/03/2013 passed by Commissioner
of Central Excise-AHMEDABAD-III)
Mittalbhai Bhikhabhai Patel ........Appellant
Director Of M/s, Sanyo Cera Tiles Pvt Ltd, Opp : Sahkari Jin,
N.h.no. 8, Himatnagar,
Sabarkantha, Gujarat
VERSUS
Commissioner of C.E. & S.T.-Ahmedabad-iii ......Respondent
Custom House... 2nd Floor,
Opp. Old Gujarat High Court, Navrangpura,
Ahmedabad, Gujarat-380009
APPEARANCE:
Shri Devashish K Trivedi, Advocate for the Appellant
Shri Rajesh Nathan, Assistant Commissioner (AR) for the Respondent
CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR
HON'BLE MEMBER (TECHNICAL), MR. C L MAHAR
Final Order No. 12803-12804/2024
DATE OF HEARING: 23.09.2024
DATE OF DECISION: 25.11.2024
RAMESH NAIR
The present appeals has been filed by appellants against OIO No.
3/Commr (Adj)/Ahd/2013 dated 31.01.2013 passed by the Commissioner
(Adj.) Central Excise, Ahmedabad.
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1.1 The brief facts of the case are that based on the intelligence that
Appellant was engaged in the evasion of duty by way of illicit clearance
without invoices and mis-declaration of the grade and MRP of the tiles,
search was conducted at the factory premises and other premises of the
appellant and during the search several incriminating records/ documents
were found and the same were withdrawn under panchanama. Also
searches were conducted at the major dealers/ depot of Appellant located
at various places and incriminating documents were withdrawn from there.
By scrutiny of the documents withdrawn and after detailed investigation
and recording statements of various persons, a detail show cause notice
dtd. 30.05.2009 was issued to the Appellants asking them to pay the
central excise duty of Rs. 3,22,11,229/- under proviso to Section 11A of
the Central Excise Act, 1944. Penalty under Section 11AC of the Central
Excise Act 1944 and Rule 25 of the Central Excise Rules 2002 has also been
proposed. The SCN also proposes penal action on Shri Mittalbhai
Bhikhabhai Patel under Rule 26 of the Central Excise Rules, 2002. In
adjudication the demands were confirmed by the adjudicating authority
vide impugned order dated 31-01-2013. Aggrieved, the appellants have
filed the present appeals.
2. The learned Advocate, Shri Devashish K. Trivedi appearing for the
appellants submits that as far the issue of mi-declaration of MRP prior to
01.03.2008, the same was decided in favour of tile manufacturers. He
placed reliance on the case of Acme Ceramic Vs. Commissioner of Central
Excise, Rajkot reported at -2014(304)ELT 542 (Tri. Ahmd.)
2.1 He also submits that said decision in the case of Acme Ceramic was
consistently followed amongst other in the following cases:-
• Suzuki Ceramics Vs. Commissioner of C. Ex. & ST., Rajkot -
2016(334)ETL 169 (Tri. Ahmd.)
• Commissioner of Central Excise, Rajkot Vs. Citizen Ceramic -
2016(339)ELT 105 (Tri. -Ahmd.)
• Commissioner of Central Excise, Rajkot Vs. Pengvin Ceramics -
2016(335)ELT 774 (Tri. Ahmd.)
• Ocean Ceramics Vs. Commissioner of Central Excise, Rajkot -Final
Order No. 12088-12113/2024 dated 23.09.2024.
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2.2 As regard the alleged clandestine clearance, he submits that a
perusal of show cause notice as well as impugned order would show that
the entire demand is based on assumption and presumption. There is
absolutely no corroboration. There is no investigation even in regard to the
production capacity of the unit.
2.3 He also submits that nobody has even tried to investigate whether
the quantity of alleged clandestine clearance could have been
manufactured by the appellant over and above the quantity which is
manufactured and cleared under invoice. There is absolutely no
investigation at the end of supplier of raw material of ceramic tiles, in order
to find out whether for the purpose of manufacturing alleged clandestinely
cleared Ceramic Tiles, whether raw material is surreptitiously procured. No
statements of raw material suppliers are recorded.
2.4 He further submits that nobody has found any cash flow back
received by the appellant against clandestinely cleared tiles without invoice.
Nobody has found anything about transportation of Ceramic Tiles Without
invoice. There is only a general investigation. The statements of
transporter, angadia, dealer etc. are only in regard to alleged under
valuation by suppressing MRP. However there is nothing in these
statements to support alleged clandestine clearance. He placed reliance on
the following judgments:-
• Sakeen Alloys Pvt. Ltd. Vs. CCE Ahmedabad - 2013(296)ELT 392
(Tri. Ahmd.)
• Commissioner of Central Excise Vs. Sakeen Alloys Pvt. Ltd. -
2014(308) ELT 655 (Guj.)
• Vishwa Traders Pvt. Ltd. Vs. Commissioner of C.Ex. Vadodara-
2012(278)ELT 362(Tri. Ahmd.)
• Commissioner of C,Ex. Vs. Vishwa Traders Pvt. Ltd. -2013(287)ELT
243(Guj.)
• Commissioner Vs. Vishwa Traders Pvt. Ltd. -2014(303)ELT A24(SC)
• Commissioner of Central Excise Vs. Kuber Tobacco Products Pvt. Ltd.
& Anr CEAC 40/2012 dtd. 11.03.2024.
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2.5 He argued that although statements of various people are recorded,
cross examination of the same is not afforded. Hence the statement of
witnesses would lose its credibility when the adjudicating authority fails to
grant cross-examination. He placed reliance on the following judgments:-
• Andman Timber Industries Vs. Commr. Of C.Ex., 2015(324)ELT 641
(SC)
• Jeen Bhavani International Vs. Commissioner of Customs, Nahva
Sheva -III (2023) 6 Centax 11 (Tri. Bom)
• Commr. Of C.Ex., Ahmedabad -II Vs. Gujarat Cypromet Ltd. -
2017(345)ELT 520 (Guj)
• J&K Cigarattes Ltd. Vs CCE - 2009(242)ELT 189 (Del.)
• CCE Vs. Govind Mills Ltd. -2013(294)ELT 361 (All)
2.6 He further argued that the statements of Director of the appellant
was retracted by way of affidavit before Notary Public. Same was informed
to the Adjudicating authority. Without prejudice to the same, even
otherwise, it is settled law that the statement alone in absence of the a
corroborative evidence cannot be made a basis of confirming allegation of
clandestine clearance. He placed reliance on the following judgments:-
• Godhavat Pan Masala Products Ltd. Vs. Commissioner of C.Ex. Pune -
2004(175)ELT 182 (Tri. Mumbai)
• Radheshyam Kanoria Vs. Commissioner of Central Excise. Thane -II -
2006(197)ELT 130 (Tri. -Mumbai)
• Pioneer Industries Vs. Commissioner of Central Excise, Mumbai -II -
2006(193)ELT 506 (Tri. Mumbai)
• Chandan Tobacco Company Vs. Commissioner of Central Excise, Vapi
-2014(311)ELT 593 (Tri. Ahmd)
2.7 He further submits that the DGCEI has claimed that they have found
two pen drive from the premises of the appellant. It is claimed that
accounts of surreptitious procurement of raw material and clearance of final
product (undervalued as well as clandestine) is found from the said pen
drive. However, the said pen drive is not reliable. The procedure
contemplated in Section 36B of the Central Excise Act was not followed. He
placed reliance on the following judgments:-
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• Commissioner of Customs, Lucknow Vs. Sanjay Soni -2022(381)ELT
509 (Tri.-All)
• Anvar P.V. Vs. P.K. Basheer -2017(352)ELT 416 (SC)
• J.P. Iscon Pvt. Ltd. Vs. Commr. Of Central Excise, Ahmedabad -I -
2022(63) GSTL 64 (Tri. Ahmd)
• S.N. Agrotech Vs. Commissioner of Customs, New Delhi -
2018(361)ELT 761 (Tri. Del.)
2.8 He also submits that the officers of DGCEI claims to have found
documents in form of 'Estimates' form the 'Pen-drive' said to have been
recovered from the premises of the M/s Sanyo. It is the case of the DGCEI
that in all those cases where said 'estimates' are available but there are no
corresponding invoices, they are all clandestine clearances. The officers
also claim to have found names of the buyers of said clandestine clearances
as well as transport vehicle used for transportation of said clandestine
clearances. It is pertinent to note that no investigation at all is conducted at
the end of said buyers as well as transporters. Neither the buyers nor the
transporters were confronted with the said estimates.
3. On other hand, Shri Rajesh Nathan, Assistant Commissioner (AR)
appearing for the Revenue has reiterated the findings recorded in the
impugned order, to support the adjudged demands confirmed in the
impugned order, against the appellants.
4. We have considered the detailed submissions made by both sides and
perused the records as also the written submissions filed by both sides.
4.1 We find that department demanded the central excise duty of Rs.
83,62,260/- on the ground that Appellant have undervalued the value of
Tiles. They have mis-declared MRP of the tiles in the central excise invoices
issued by them. The DGCEI prepared a chart to quantify the central excise
duty short paid by appellant on the ceramic tiles manufactured and cleared,
by undervaluation.
4.2 The undisputed facts are that the appellants are manufacturer of
ceramic/vitrified tiles and the said tiles are covered under the provisions of
Section 4A of Central Excise Act, 1944 (hereinafter referred to as 'the Act')
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and are discharging duty on MRP declared on the boxes cleared from their
factory premises. It is also undisputed that the appellant assessees are
selling their final product ex-factory.
4.3 We find that in the entire case of the Revenue as adjudicated by the
Ld. Commissioner, it has confirmed the demand based upon the evidences
such as the statements of various dealers who had stated that the tiles
which are manufactured and cleared by the appellant are sold at a price
more than the MRP declared on such tiles; statements of various
shroffs/angadiyas who had stated that the appellants were handed over an
amount in cash which were collected from various dealers and that the
appellant-assessee have increased their prices of the final product. On
perusal of the records, we find that the issue involved in this case is
regarding the demand of differential Central Excise duty under the
provisions of Section 4A of Central Excise Act, 1944 as it applies to the
period in question. We find that an identical issue has been decided by this
Bench in the case of Ocean Ceramics vide final order No. 12088-
12113/2024 dated 23.09.2024 on the basis of this Tribunal's larger bench
judgment reported as vide order No.01-23/2024 dt. 23.01.2024. We do not
find any reason to deviate from such a view already taken. The said order
dated 23.09.2024 is reproduced below:-
"These appeals have been filed by various manufacturers of tiles against
demand of central excise duty and imposition of penalties. 2. Similar issues
were earlier decided vide the decision in the case of Acme Ceramics vs
Commissioner of Central Excise, 2014 (303) ELT 542 (Tri. Amd.). In the
said decision, following was held:
"8. We have considered the detailed submissions made by both sides and
perused the records as also the written submissions filed by both sides after
the conclusion of hearing.
9. Essentially, the dispute in these cases relates to the demand of Central
Excise duty due to undervaluation of final product cleared by the appellant
in two periods i.e. prior to 1-3-2008 and post-1-3-2008.
10. The undisputed facts are that the appellants are manufacturer of
ceramic/vitrified tiles and the said tiles are covered under the provisions of
Section 4A of Central Excise Act, 1944 (hereinafter referred to as „the Act‟)
and are discharging MRP declared on the boxes cleared from their factory
premises. It is also undisputed that the appellant assessees are selling their
final product exfactory and the transportation arrangements are made by
the purchasers themselves.
10.1 The entire case of the Revenue as adjudicated by the lower authorities
has confirmed the demand based upon the evidences such as the
statements of various dealers who had stated that the tiles which are
manufactured and cleared by the appellant are sold at a price more than
the MRP/RSP declared on such tiles; statements of various
shroffs/angadiyas who had stated that the appellants were handed over an
7|Page E/11891-92/2013-DB
amount in cash which were collected from various dealers and that the
appellant-assessee have increased their prices of the final product after the
massive investigation which was carried out; application of weighted
average and redetermination of RSP is permissible even prior to 1-3-2008
and post-1-3-2008. 11. For the period prior 1-3-2008 as well as post-1-3-
2008, the basic statutory provision which needs to be considered by us are
the provisions of Section 4A of the Act and the provisions of Section 2(g)
and 2(h) of the Act which are reproduced herein below :-
Section 4A : Valuation of excisable goods with reference to retail sale price.
- (1) The Central Government may, by notification in the Official Gazette,
specify any goods, in relation to which it is required, under the provisions of
the Legal Metrology Act, 2009 (1 of 2010) of the rules made thereunder or
under any other law for the time being in force, to declare on the package
thereof the retail sale price of such goods, to which the provisions of sub-
section (2) shall apply.
(2) Where the goods specified under sub-section (1) are excisable goods
and are chargeable to duty of excise with reference to value, then,
notwithstanding anything contained in section 4, such value shall be
deemed to be the retail sale price declared on such goods less such amount
of abatement, if any, from such retail sale price as the Central Government
may allow by notification in the Official Gazette.
(3) The Central Government may, for the purpose of allowing any
abatement under sub-section (2), take into account the amount of duty of
excise, sales tax and other taxes, if any, payable on such goods.
(4) Where any goods specified under sub-section (1) are excisable goods
and the manufacturer -
(a) removes such goods from the place of manufacture, without declaring
the retail sale price of such goods on the packages or declares a retail sale
price which is not the retail sale price as required to be declared under the
provisions of the Act, rules or other law as referred to in sub-section (1); or
(b) tampers with, obliterates or alters the retail sale price declared on the
package of such goods after their removal from the place of manufacture,
then, such goods shall be liable to confiscation and the retail sale price of
such goods shall be ascertained in the prescribed manner and such price
shall be deemed to be the retail sale price for the purposes of this section.
Explanation 1. - For the purposes of this section, "retail sale price" means
the maximum price at which the excisable goods in packaged form may be
sold to the ultimate consumer and includes all taxes, local or otherwise,
freight, transport charges, commission payable to dealers, and all charges
towards advertisement, delivery, packing, forwarding and the like and the
price is the sole consideration for such sale :
Provided that in case the provisions of the Act, rules or other law as
referred to in sub-section (1) require to declare on the package, the retail
sale price excluding any taxes, local or otherwise, the retail sale price shall
be construed accordingly.
Explanation 2. - For the purposes of this section, -
(a) where on the package of any excisable goods more than one retail sale
price is declared, the maximum of such retail sale prices shall be deemed to
be the retail sale price;
(b) where the retail sale price declared on the package of any excisable
goods at the time of its clearance from the place of manufacture, is altered
to increase the retail sale price, such altered retail sale price shall be
deemed to be the retail sale price;
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(c) where different retail sale prices are declared on different packages for
the sale of any excisable goods in packaged form in different areas, each
such retail sale price shall be the retail sale price for the purposes of
valuation of the excisable goods intended to be sold in the area to which the
retail sale price relates.
Section 2. Definitions. - In this Act, unless there is anything repugnant in
the subject or context, -
(f) "manufacture" includes any process - (i) incidental or ancillary to the
completion of a manufactured product,
(ii) which is specified in relation to any goods in the Section or Chapter
notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986)
as amounting to manufacture; or
(iii)which, in relation to the goods specified in the Third Schedule, involves
packing or repacking of such goods in a unit container or labelling or re-
labelling of containers including the declaration or alteration of retail sale
price on it or adoption of any other treatment on the goods to render the
product marketable to the consumer;
and the word "manufacturer" shall be construed accordingly and shall
include not only a person who employs hired labour in the production or
manufacture of excisable goods, but also any person who engages in their
production or manufacture on his own account;
(g) "prescribed" means prescribed by rules made under this Act
12. For the period prior to 1-3-2008, we have to record that the provisions
of subsection (4) of Section 4A were enacted in the statute which is
reproduced hereinabove, if read, would indicate that if the manufacturer
declares retail price which is not the correct retail price as required to be
declared under the provisions of the Act, then the ascertainment of such
retail sale price will be done in a prescribed manner. We fine that though
the provisions of sub-section (4) of Section 4A was brought into statute
from 14-5-2003, how to redetermine the RSP in the case of misdeclared
RSP was not "prescribed" by the Central Government till the issuance of
Notification No. 13/2008-C.E. (N.T.), dated 1-3-2008. This would effectively
mean that the Legislature in its wisdom has considered a situation wherein
the RSP which is declared could be wrong RSP, thought of remedying the
situation by inserting the provision of sub-section (4) in Section 4A, but had
not prescribed the rules how the redetermination has to be done till 1-3-
2008. It can be seen from the definition of the word "prescribed" as
enshrined in Section 2(g) of the Act (as reproduced hereinabove) that it is
very clearly stated that it can be done only by the rules made under this
Act. Closer perusal of Notification No. 13/2008- C.E. (N.T.), dated 1-3-2008
indicated that the said notification was issued in exercise of powers
conferred by Section 37 read with sub-section (4) of Section 4A of the
Central Excise Act, 1944 (1 of 1944), the Central Government hereby
makes the following rules. It can be seen from the above preamble to the
Notification No. 13/2008-C.E. (N.T.), Central Government made the rules as
applicable for subsection (4) of Section 4A w.e.f. 1-3-2008. In the cases in
hand, for the period prior to 1-3-2008, the entire exercise of the Revenue in
redetermining the RSP, even if RSP is not in accordance with the law, is
faulty and not in accordance with the law, as prescribed manner of
redetermination of RSP was brought into statute only from 1-3-2008. We
find that once the Central Government has not framed the rules for
redetermining the RSP in a case where the RSP declared on the package
was sought to be rejected, though being empowered, authorities had no
power to redetermine the RSP in any manner; more so in a manner adopted
in these appeals. It is also provided in the statute, that as per sub-section
(4) of Section 4A of the Act, the manner has to be prescribed only by the
Central Government by rules, which came into force only from 1-3-2008,
which would also indicate that the provisions of Section 4A(4) could not
have been operationalised, till the manner for ascertaining the RSP was
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prescribed by framing the rules. In the absence of any rules for
redetermination of RSP, the contentions of ld. Special Counsel for the
Revenue that the Revenue can adopt best judgment method for
ascertaining the said RSP, is against the provisions of the law and cannot
held as correct, as the provisions of Section 4A of the Act do not indicate
any other manner for ascertainment of the RSP based upon the best
judgment method prior to 1-3-2008. The law on this is settled by the
decision of Apex Court in the case of Gulam Mohammad & Anr v. State of
Bombay & Others - AIR 1962 SC 97. We also find that if the Legislature
prescribes that if the thing is to be done in a particular manner, then the
same has to be done in the stated manner only, is the law which is settled
by the Apex Court. We find that our this view is fortified by the decision of
the Co-ordinate Bench of the Tribunal in the case of M/s. Ravi Foods Pvt.
Ltd., wherein similar issue came before the Bench. In the case of M/s. Ravi
Foods Pvt. Ltd., the Revenue sought to redetermine the RSP of the goods
which were covered under the provisions of Section 4A of the Act, by adding
the value/amount received not accounted for by the appellant therein. The
relevant paragraphs from the said judgment are reproduced herein below.
12. We find that the provisions of Section 4A during the relevant period
needs to be considered for coming to a conclusion whether the amount
quantified by the authorities in the show-cause notice as indicated
hereinabove would stand test of law or not. The provisions of Section 4A are
as under :-
SECTION 4A. Valuation of excisable goods with reference to retail sale price.
- (1) The Central Government may, by notification in the Official Gazette,
specify any goods, in relation to which it is required, under the provisions of
the Standards of Weights and Measures Act, 1976 (60 of 1976) or the rules
made thereunder or under any other law for the time being in force, to
declare on the package thereof the retail sale price of such goods, to which
the provisions of sub-section (2) shall apply.
(2) Where the goods specified under sub-section (1) are excisable goods
and are chargeable to duty of excise with reference to value, then,
notwithstanding anything contained in section 4, such value shall be
deemed to be the retail sale price declared on such goods less such amount
of abatement, if any, from such retail sale price as the Central Government
may allow by notification in the Official Gazette.
(3) The Central Government may, for the purpose of allowing any
abatement under sub-section (2), take into account the amount of duty of
excise, sales tax and other taxes, if any, payable on such goods.
(4) Where any goods specified under sub-section (1) are excisable goods
and the manufacturer -
(a) removes such goods from the place of manufacture, without declaring
the retail sale price of such goods on the packages or declares a retail sale
price which is not the retail sale price as required to be declared under the
provisions of the Act, rules or other law as referred to in sub-section (1); or
(b) tampers with, obliterates or alters the retail sale price declared on the
package of such goods after their removal from the place of manufacture,
then, such goods shall be liable to confiscation and the retail sale price of
such goods shall be ascertained in the prescribed manner and such price
shall be deemed to be the retail sale price for the purposes of this section.
Explanation 1 -- For the purposes of this section, "retail sale price" means
the maximum price at which the excisable goods in packaged form may be
sold to the ultimate consumer and includes all taxes, local or otherwise,
freight, transport charges, commission payable to dealers, and all charges
towards advertisement, delivery, packing, forwarding and the like and the
price is the sole consideration for such sale :
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Provided that in case the provisions of the Act, rules or other law as
referred to in sub-section (1) require to declare on the package, the retail
sale price excluding any taxes, local or otherwise, the retail sale price shall
be construed accordingly. Explanation 2. -- For the purposes of this section,
-
(a) where on the package of any excisable goods more than one retail sale price is declared, the maximum of such retail sale prices shall be deemed to be the retail sale price;
(b) where the retail sale price, declared on the package of any excisable goods at the time of its clearance from the place of manufacture, is altered to increase the retail sale price, such altered retail sale price shall be deemed to be the retail sale price;
(c) where different retail sale prices are declared on different packages for the sale of any excisable goods in packaged form in different areas, each such retail sale price shall be the retail sale price for the purposes of valuation of the excisable goods intended to be sold in the area to which the retail sale price relates.
It can be seen from the above reproduced Section 4A of the Central Excise Act, 1944, that the said section provides for determination of duty payable on excisable goods on the basis of RSP as per the provisions of Standards of Weights and Measures Act, 1976 and Rules made thereunder. It is undisputed that in the month of December, 2001 and January, 2002, the appellants filed monthly returns indicating the assessable value after availing the abatement in accordance to the notification issued under the said section i.e. 65% of the MRP. There is also no dispute that the MRP which was declared on the goods cleared during the relevant period was either obliterated or scored out. It can be seen from the above reproduced Section 4A that sub-section (4) was introduced by the Legislature w.e.f. 1- 3-2008. It is also to be noted that the recalculation or re-quantification of an amount received in excess of the MRP declared and collected from the customers has to be done in a prescribed manner. The provisions of MRP Valuation Rules under subsection (4) of Section 4A was introduced w.e.f. 1- 3-2008 wherein the Central Government prescribed a procedure to be followed for redetermination of RSP and MRP in case where assessee has collected an amount in excess of the RSP/MRP declared. This re- determination has to be done, failing which the RSP/MRP cannot be revised by the authorities. We find that the C.B.E. & C. vide Circular No. 334/1/2008-TRU, dated 29- 2-2008 made it clear that the MRP Valuation Rules are effective from 1- 3-2008. This would indicate that prior to 1-3- 2008, there was no procedure to revise the MRP and demand the duty even though there being a provision under sub-section (4) of Section 4A of the Central Excise Act, 1944. In the absence of any legal machinery during the relevant period, re-determination of RSP/MRP by the Department is without any authority of law. We find that in the case of Millennium Appliances India Ltd. v. CCE, Hyderabad [2009 (248) E.L.T. 713 (Tri. - Bang.)], this Bench on this point has held as under :-
"9. Another issue involved in this case is regarding the situation that arises where there are no clear cut statutory provisions to arrive at the value. We find that strong force in the contentions raised by the appellants on the provisions of Section 4A of the Central Excise Act (as is reproduced in Para 8 hereinabove). We find that the Department did not issue any guidelines or rules for determination of value as provided under sub-section (4) of Section 4A of the Central Excise Act. We find that Notification No. 13/2008- C.E. (N.T.), dated 1-3-2008 incorporates Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 which reads as under :-
Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008. [Notification No. 13/2008-C.E. (N.T.), dated 1-3-2008] In exercise of the powers conferred by Section 37 read with sub-section (4) of Section 4A 11 | P a g e E/11891 -92/2013-DB of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby makes the following rules, namely :-
RULE 1. (1) These rules may be called the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008.
(2) They shall come into force on the date of their publication in the Official Gazette RULE 2. In these rules, unless the context otherwise requires,-
(a) ‟Act‟ means the Central Excise Act, 1944 (1 of 1944);
(b) ‟retail sale price‟ means the retail sale price as defined in Section 4A of the Act; and
(c) Words and expressions used in these rules and not defined but defined in the Act or any other rules made under the Act shall have the meaning as assigned therein.
RULE 3. The retail sale price of any excisable goods under sub-section (4) of Section 4A of the Act, shall be determined in accordance with these rules. RULE 4. Where a manufacturer removes the excisable goods specified under sub-section (1) of Section 4A of the Act -
(a) without declaring the retail sale price on the packages of such goods; or
(b) by declaring the retail sale price, which is not the retail sale price as required to be declared under the provisions of the Standards of Weights and Measures Act, 1976 (60 of 1976) or rules made thereunder or any other law for the time being in force; or
(c) by declaring the retail sale price but obliterates the same after their removal from the place of manufacture, then, the retail sale price of such goods shall be ascertained in the following manner, namely :-
(i) if the manufacturer has manufactured and removed identical goods, within a period of one month, before or after removal of such goods, by declaring the retail sale price, then, the said declared retail sale price shall be taken as the retail sale price of such goods :
(ii) if the retail sale price cannot be ascertained in terms of clause (i), the retail sale price of such goods shall be ascertained by conducting the enquiries in the retail market where such goods have normally been sold at or about the same time of the removal of such goods from the place of manufacture :
Provided that if more than one retails sale price is ascertained under clause
(i) or clause (ii), then, the highest of the retail sale price, so ascertained, shall be taken as the retail sale price of all such goods.
Explanation - For the purposes of this rule, when retails sale price is required to be ascertained based on market inquiries, the said inquiries shall be carried out on sample basis.
RULE 5. Where a manufacturer alters or tampers the retail sale price declared on the package of goods after their removal from the place of manufacture, resulting into increase in the retail sale price, then such increased retail sale price shall be taken as the retail sale price of all goods removed during a period of one month before and after the date of removal of such goods :
Provided that where the manufacturer alters or tampers the declared retail sale price resulting into more than one retail sale price available on such goods, then, the highest of such retail sale price shall be taken as the retail sale price of all such goods.
RULE 6. If the retail sale price of any excisable goods cannot be ascertained under these rules, the retail sale price shall be ascertained in accordance 12 | P a g e E/11891 -92/2013-DB with the principles and the provisions of section 4A of the Act and the rules aforesaid."
It can be noted that these rules came into force with effect from 1-3- 2008. We are of the considered opinion that if these rules came to be effective on 1-3-2008, the ascertaining of value of similar goods has to be done so, with effect from 1-3-2008 and cannot be used to determine the value for the clearances made prior to 1-3-2008. We find strong force in the contention raised by the learned Counsel that the decision of the Tribunal in the case of Aditya Cement (supra) would squarely cover the issue in favour of the appellants. The relevant ratio in Para 9 of the said decision is reproduced :-
"9. It can be seen from the above reproduced rule that it was in context of the definition of "person liable for paying the Service Tax". This provision in itself may not suffice revenue to direct the appellant to discharge the service tax liability as service receiver, on the face of the fact that notification under Section 68(2) of the Finance Act, 1994, was issued by the Central Government only on 31-12-2004. If the contention of the learned SDR is to be accepted, then there was no necessity for the Government to issue Notification No. 36/2004-S.T. notifying the service receiver from non- resident having no office, to pay Service tax, as receiver. By issuing the said Notification, Central Government intended to tax the service receiver from non-resident, with effect from 1-1-2005, which, in corollary would be that no service tax is payable by this category prior to 1-1-2005. If that by so, then the amount paid by the appellant is not a tax, which the revenue cannot kept with it.
" 13. It is seen from the findings of the adjudicating authority in paras 55, 56 and 57 that the adjudicating authority has confirmed the demand based only on the ground of undervaluation and extrapolating the amount for the period December, 2001 and January, 2002 as being 65% of the MRP declared and confirmed the demand. As we have already held that this could not be done by adjudicating authority in the absence of any rules or authority under the section, the demand is not sustainable. We find that in paras 55 and 57, the adjudicating authority has recorded a finding which is as under :-
55 .................. Thus, in this case, the suppression of turnover is admitted and can be either on account of undervaluation or on account of volume."
57 .............. As the suppressed turnover is in value terms only, no enquiry need be made for establishing the turnover to the use of raw materials etc. The suppressed turnover, being the excess collection over and above the recorded value or income in their books, is related to the sale value which escaped assessment under the Central Excise Act. Once the suppressed turnover is admitted beyond any doubt and the assessee opts to accept the tax liability under the Income-tax Act, no meaningful purpose would have been served to cause further detailed probing under the Central Excise Act and Rules."
14. We find that the above said findings recorded by the adjudicating authority are directly in conflict of the law which has been settled by the higher judicial fora as regards the confirmation of demand of the duty on an assessee on the ground of undervaluation in respect of goods covered under Section 4A of Central Excise Act, 1944.
15. In the case before us, the question of undervaluation would not arise, and assuming even if it arises, during the relevant period (in this case prior to 1-3-2008) there was no procedure under Section 4A of the Central Excise Act to demand the duty, as the said procedure came into statute from 1-3- 13 | P a g e E/11891 -92/2013-DB 2008 only. As regards the finding by the ld. adjudicating authority that suppression could be on account of volume, we have already recorded that there is no corroborative evidence nor there is any finding as to the exact quantity of goods clandestinely cleared to come to the conclusion that the value of Rs. 3.75 crores is attributable to the specific quantity of goods on amount of clandestine removal. In the absence of any such details, we are of the considered view that the impugned order is unsustainable.
16. Before parting with the case, we would like to record that since we disposed off all the appeals only on the merits of the case, we are not recording any finding on the other submissions made by both sides on various issues.
17. In view of the foregoing findings, we are of the view that the impugned order is not sustainable and is liable to be set aside and we do so. The impugned order is set aside and all the appeals are allowed with consequential relief.
13. Identical views were expressed by the Tribunal in the case of M/s. ABB Ltd. (supra), we would like to record here that the 3 decisions of the Tribunal i.e. M/s. Millennium Appliances India Ltd, M/s. Ravi Foods Pvt. Ltd., M/s. ABB Ltd. have held a view that prior to 1-3-2008, in the absence of any provisions for re-determining the RSP, in the form of prescribed rules, the Revenue authorities cannot redetermine the RSP under any of the provisions available to them. It has to be noted that there is no contrary view which has been taken by the Tribunal.
14. At this juncture, we would like to refer to the submissions made by the ld. Special Counsel for the Revenue that in the case of M/s. Schneider Electrical India Pvt. Ltd. (supra), Hon‟ble Member (Technical) has differed with the views of Hon‟ble Member (Judicial) who has relied upon all these three case laws. In our considered view, the diferring Member has incorrectly applied the law in the case of M/s. Mahim Patram Pvt. Ltd. to take a different view from the views already existing. On perusal of the said decision of Apex Court in the case of M/s. Mahim Patram Pvt. Ltd., we find that the Apex Court was dealing with a dispute wherein in the absence of rules having been prescribed under the Central Sales Tax for determining the manner in which the sale price of transfer of goods under Works Contract was to be calculated, would the levy of Works Contract be sustainable in the State of Uttar Pradesh by computing the value of taxable turnover in accordance with the rules framed under Uttar Pradesh Trade Tax Act, 1948. The Apex Court while dealing with the issue noted that Central Sales Tax Act, 1956 provides that the authority who is empowered to assess, re-assess, collect, and enforce payment of any tax under General Sales Tax law of the appropriate state, shall on behalf of the Government of India, assess, re-assess, collect and enforce payment of tax under the Central Sales Tax Act and for this purpose, they may exercise all or any of the powers they have under the General Sales Tax law of the State; Section 3(3) of the Central Sales Tax provides that State Government may make rules not inconsistent with the provisions of the Act and rules made thereunder. The Uttar Pradesh State Government has framed Central Sales Tax (U.P. Rules) 1957, in exercise of the powers conferred under the CST Act, 1956, and Rule 9 of the said Rules provided that the provisions of Uttar Pradesh Sales Tax Act, 1948 and U.P. Sales Tax Rules, 1948 as amended from time to time or the rules made thereunder would apply to the dealer liable for assessment under Central Sales Tax Act and U.P. Sales Tax Rules, 1948, Rule 44(B) prescribed the manner of determining the turnover of the goods involved in execution of Works Contract. The relevant findings of the Apex Court were rendered on this factual aspect as contained in Para 27 of the judgment. In our considered view, the ratio decidendi from this judgment is that merely because the rules were not framed in Central enactment, it would not mean that no tax is leviable if rules have been 14 | P a g e E/11891 -92/2013-DB framed under said enactment and there is a provision for referential incorporation of the said act in the Central Act. We are of the view that the ratio laid down by Apex Court in the case of M/s. Mahim Patram Pvt. Ltd. does not in any manner support the case of the Revenue as well as the view of the differing member in the case of M/s. Schneider Electrical India Pvt. Ltd.; in the cases in hand the ascertainment/redetermination of RSP has not been enacted or prescribed in any other enactment and as no provisions have been incorporated by reference under Central enactment. In our view, there being no contrary judgment to the views expressed by the 3 decisions of the Co-ordinate Benches of the Tribunal on this issue, even assuming that there was misdeclaration of RSP, period prior to 1-3-2008 the RSP cannot be re-determined by the Revenue in any manner.
15. We also find that in the cases in hand, on factual matrix also, there is a strong case in favour of the assessee i.e. manufacturer of tiles. The statements recorded of the individuals of manufacturer of the tiles, specifically state that they were declaring a RSP of Rs. 100/- on each box which were cleared by them from the factory premises, it is also stated that the said clearances are effected on ex-factory basis and transportation of such boxes are in the hands of the buyers. If it is the case of the Revenue that RSP was later on changed and sold to the ultimate consumer at higher price, it was for the Department to first ascertain who has changed the said MRP. In our view, the person who has altered the RSP on the goods is the person who can be held as a manufacturer on alteration of RSP; as the definition of manufacturer in Section 2(f) of the Act (hereinbefore reproduced) specifically talks about the process of declaration or alteration of RSP on the product which are covered under the provisions of Section 4A of the Act would be considered as a manufactured product. As stated hereinabove, it is the case of the Revenue that there was an alteration of the MRP, there is nothing on record which indicates that the appellant- manufacturers herein are the persons who have altered the MRP in godown/places of the dealers. The dealers whose statements were recorded by the Revenue authorities state that they have sold the goods at a higher price than the price at which goods were cleared from factory premises of the appellants. We are unable to understand the investigating authorities‟ mind, as during the course of investigation there is a specific admission of the dealers that they have sold the goods at higher MRP than the declared MRP; no question was put any of the dealers as to who altered the RSP declared on boxes of glazed/vitrified tiles. In our considered view, this clinching evidence has not been recorded by the investigating authorities, for the reasons best known to them. If there would have been any evidence in any form as to who altered the RSP, then the duty liability in our considered view, gets crystallized in the hands of such persons as goods become manufactured goods; is the law which can be deduced from the provisions of Central Excise Act, 1944. In the absence of any evidence suggesting as to who altered the MRP on the boxes of tiles, we are of the view that the Revenue authorities cannot turn around and take a stand that the manufacturers are liable to duty, which would effectively mean that they are the persons who have altered the RSP. Yet another angle to the entire case is absence of evidence as to there being alteration of RSP; inasmuch as when the investigations were conducted by the authorities, we find that the investigating authorities have not seized a single carton of the offending goods in the Pan India operation at different dealers‟ premises, wherein different RSP was declared. It would be beyond imagination that the dealers could not have had any stocks of glazed/vitrified tiles received from the appellants, in their hands when the investigation took place. In the absence of such a crucial evidence, we are unable to hold that the appellant herein can be saddled with a liability of Central Excise duty based upon redetermined RSP, for the period prior to 1-3-2008 15 | P a g e E/11891 -92/2013-DB
16. We also find the statements of the authorized persons of the manufacturers have stated that they have cleared the glazed/vitrified tiles based upon a RSP declared, which was in their opinion a correct price is not contraverted by leading any evidence that the declared price was not the correct one was known to the manufacturer. We find that the contention of ld. Counsel that the belief of manufacturer has always considered that declared RSP was correct, is supported by the statements of individuals who were either partners/proprietors of appellant manufacturer. We find strong force in the contentions raised by ld. Counsel for the appellant that the manufacturers may be unaware that the RSP on the box was obliterated or altered after the removal from their place of manufacturer, as none of the dealers have stated that the RSPs were changed on direction of manufacturer; or manufacturer was instrumental to order such a charge. In the absence of any contrary evidence, we have to take an adverse inference against the Revenue.
17. On this factual matrix also, we are of the view that Revenue‟s case is unsustainable for the demand of duty from the appellants.
18. As regards the demand of duty for the period post-1-3-2008 in all these cases even though it has been contended that the demand for this period is unsustainable, both on facts (as there is no evidence to show that RSP declared on the package was false to the knowledge of the manufacturer) as also in law (though the rules have been framed for determination of RSP, the demand has not been computed in the manner prescribed in rule), we are of the view that the Department ought to be given an opportunity to compute the demand in terms of the rules, if they come to a conclusion that the declared RSP was false to the knowledge of manufacturer. It appears from the examples quoted in the written submissions that even if the Department‟s theory of cash consideration flowing back was assumed to be correct, even then the total consideration earned by the manufacturer even after including the other elements of cost, seems to not exceed the declared RSP at Morbi. This aspect, in our considered view, needs greater verification, if necessary, after granting cross-examination especially in the light of the facts that the documents have been recovered from the premises of third party who have not been made noticee. If after going through the evidence and statements, it is felt that there is, in fact, evidence of extra cash consideration, then it will have to be seen whether the declared RSP at Morbi was proved to be false to the knowledge of manufacturer or not. If the declared RSP is found to be false to the knowledge of manufacturer at Morbi, then RSP will have to be determined in the manner prescribed in the rules which have been enacted w.e.f 1-3- 2008, instead of being determined in any other manner. To that extent, we remand the matter to the adjudicating authority for reconsideration of determining the RSP post-1-3-2008 as per the directions hereinabove and in accordance with law. The adjudicating authority will follow the principles of natural justice before coming to any conclusion.
19. Regarding the demand of duty in respect of cases where the clandestine removal has been alleged, we find that the said allegations and the findings reached by the adjudicating authority are not challenged and during the course of personal hearing, were not pressed. Hence, we, without examining the maintainability or otherwise of these demands on merit, uphold the same along with interest and equal penalty.
20. Since we have disposed of the appeals or merit for the period prior to 1- 3- 2008 and post-1-3-2008 remanded the issue, we are not recording any findings on various other submissions made by the both sides.
21. In sum, the demand of duty for the period prior to 1-3-2008 is set aside as also the penalty imposed on the manufacturer assessee and other individuals, and for the period post-1-3-2008, the demands are set aside 16 | P a g e E/11891 -92/2013-DB and matters remanded back to the adjudicating authority to reconsider the issue.
22. All the appeals are disposed of as indicated hereinabove."
3. The orders impugned in the instant case were similar in the case to the orders impugned in the cases decided in the decision of Acme Ceramics (supra). When the matter came up before this bench, the aforesaid decision of Tribunal in the case of Acme Ceramics was doubted and the matter was referred to the Larger Bench on the following grounds:
"9 In view of above this matter may be placed before the Hon‟ble President for constitution of a larger bench to examine the following questions of law
1) In the facts and circumstances of the case and in view of the contrary precedent decisions of tribunal in the cases of ACME (Supra) and in case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra), is it permissible to ascertain RSP for the purpose of assessment under Section 4A of CEA, 1944, in respect of clearances made prior to issue of notification 13/2008- CE(NT) dated 1-3-2008 ?
2) If yes, can it be done by using best judgment method, based upon material available and in a manner consistent with principles and provisions of Section 4A of the Central Excise Act, 1944, including the principles and provisions incorporated in the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 ?"
Subsequently, while deciding the application filed for rectification of mistake in the order dated 10.01.2019 of division bench, division bench of Ahmedabad Tribunal referred the following additional questions to be decided by Larger Bench.
"3. Subsequently, while deciding an application filed for rectification of mistake in the aforesaid order dated 10.01.2019 of the Division Bench, a Division Bench of the Ahemdabad Bench of the Tribunal referred the following additional issue to be decided by the Larger Bench:
"(3) In the facts and circumstances of the case, if the evidence establishes that the RSP was manipulated fraudulently at the behest of the appellant by any other person, can the liability of duty be fastened on the appellants."
The aforesaid questions were answered in the following manner by the Larger Bench vide Interim order No. 1-23 of 2024 dated 23.01.2024:
"90. The reference made by the Division Bench to the Larger Bench of the Tribunal is, accordingly, answered in the following manner:
(i) It is not permissible to ascertain the retail sale price of goods removed from the place of manufacture, without declaring the retail sale price of such goods on the packages or declaring a retail sale price which is not the retail sale price or tampering with, obliterating or altering the retail sale price declared on the package of such goods after their removal from the place of manufacture, in respect of clearances made prior to 01.03.2008, on which datethe Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 came into force;
(ii) In view of the answer to the first question, there is no necessity of answering the second question; and
(iii) It is not necessary to answer the third question as both learned counsel for the appellant and the learned special counsel appearing for the department have stated that this question may not be answered by the Larger Bench.
91. The papers may now be placed before the Division Bench of the Tribunal for deciding the appeal."
It is apparent that the interim order removes the doubts raised by this bench with respect to the decision in case of Acme Ceramics (surpa). Consequently, the earlier decision of Tribunal in the case of Acme Ceramics becomes a binding precedent decision that needs to be followed in the instant case. The findings of the precedent decisions are also recorded in 17 | P a g e E/11891 -92/2013-DB para 2 above. Consequently, following the decision in case of Acme Ceramics the matters are disposed of in identical terms as prescribed in para 18 of the said decision.
4. In sum, the demand for the period prior to 01.03.2008 are set aside as also the penalty imposed on the manufacturer assessee and other individuals. For the period post 01.03.2008, the demands are set aside and matters remanded back to the adjudicating authority to reconsider the same, in light of above findings."
4.4 Accordingly, following the ratio laid down in the case of Acme Ceramics (supra) and this Tribunal's Final Order dated 23.09.2024, we hold that the demand of Rs. 83,65,260/- is not sustainable.
4.5 As regard the demand of Rs. 2,38,45,969/- confirmed by the impugned order, we find that the said demand was confirmed by the Ld. Commissioner on the basis of the documents i.e. price list, private diary, ledger note-book, estimate debit memos, Private chits etc. recovered from the premises of Appellant as well as premises of various dealers & shroffs and statements recorded by the investigating officers. We noticed that in the said matter appellant requested for cross-examination of witnesses which was rejected by the Ld. Adjudicating authority. Further the director of M/s. Sanyo has also retracted his statement dated 18.07.2008 by filing affidavits. It was on records that Appellant have raised the dispute on statements of witnesses recorded during the course of investigation by investigating officers. Therefore the said statements cannot be relied upon as admissible evidence in terms of the provisions of Section 9D of the Act. The provisions of Section 9D is reproduced as under:-
"9D. Relevancy of statements under certain circumstances. - (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, -
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
(2) The provision of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court."
18 | P a g e E/11891 -92/2013-DB The above Section deals expressly with the circumstances in which a statement recorded before a gazetted officer of Central Excise (under Section 14 of the Act) can be treated as relevant for the purpose of proving the truth of the contents thereof. Reliance is placed on the ruling of the Hon'ble Punjab & Haryana High Court in the case of Jindal Drugs (Infra), 2016 (340) E.L.T. 67 (P & H) wherein the Hon'ble High Court laid down the detailed procedure, inter alia, providing for cross-examination of the witness of the Revenue by the Adjudicating Authority and thereafter, if the Adjudicating Authority is satisfied that the statement of the witness is admissible in evidence then the Adjudicating Authority is obligated to offer such witnesses for cross-examination by the other side/assessee. Such view has also been affirmed by the Hon'ble Supreme Court in the case of Andaman Timber (Infra) - 2015 (324) E.L.T. 641 (S.C.) = 2017 (50) S.T.R. 93 (S.C.).
4.6 Statements recorded during investigation in the present matter, whose makers are not examination-in-chief before the adjudicating authority, would have to be eschewed from evidence, and it will not be permissible for Ld. Adjudicating Authority to rely on the said evidences. Therefore, we hold that none of the said statements were admissible evidence in the present case.
4.7 We also find that the demand is also not sustainable only on the basis of private records, note books, chits, private documents recovered by the revenue without corroborative evidences. In cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following :-
(i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions;
(ii) Evidence in support thereof should be of :-
(a) raw materials, in excess of that contained as per the
statutory records;
(b) instances of actual removal of unaccounted finished
goods (not inferential or assumed) from the factory without payment of duty;
(c) discovery of such finished goods outside the factory;
19 | P a g e E/11891 -92/2013-DB
(d) instances of sale of such goods to identified parties;
(e) receipt of sale proceeds,;
(f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty;
(g) statements of buyers with some details of illicit manufacture and clearance;
(h) proof of actual transportation of goods, cleared without payment of duty;
(i) links between the documents recovered during the search and activities being carried on in the factory of production; etc. Needless to say, a precise enumeration of all situations in which one could hold with certainty that there have been clandestine manufacture and clearances, would not be possible. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of note books or diaries privately maintained or on mere statements of some persons, may even by responsible officials of the manufacturer or even of its Directors who are not even permitted to be cross-examined. In the present matter there is no proof that Appellant has used 100% of its capacity for production of Tiles. Except for these private records, diary, chits entries, there is no substantial material to show that such a huge quantity of Tiles has been cleared to customers without payment of duty. There is no proof of purchase of raw materials for such huge quantity of Tiles. No evidence has been led by the Revenue to show that Appellant had actually produced alleged qty. of tiles supplied by them clandestinely. There is no evidence of transportation of tiles from factory. Undoubtedly, huge quantities of raw material would be required for manufacturing such a huge quantity of alleged cleared qty of tiles. No evidence has been brought either in the SCN or in the Adjudication Order to show that raw materials have been purchased by Appellant for manufacture of such a huge quantity of Tiles. There is no proof of any extra payment receipts in the present case. In the absence of these evidences the charge of clandestine removal cannot be sustained only on the basis of some loose paper/ document/ chits recovered by the revenue form the 20 | P a g e E/11891 -92/2013-DB premises of dealers , appellant and other third party person. In this context we also find support from the following judgments:-
(i) In CCE v. Laxmi Engg. Works [2001 (134) E.L.T. 811 (Tri.-Delhi)], during the search of factory premises, slips showing sale of different types of electric fans were recovered and seized. There was nothing on record to show if on physical verification of stock any excess raw material or finished goods were found lying in the factory premises.
In the absence of any corroborative evidence, merely on the basis of the slips allegedly recovered from the factory premises which did not even contain names of the customers or any other details regarding receipt of raw material or manufacture and clearance of electric fans by the respondent, Tribunal held that duty liability as demanded could not be fastened. In the reference application filed by the Commissioner against the said order of Tribunal, the Hon'ble High Court of Punjab & Haryana held that even if some record recovered during the raid and was corroborated by some supportable evidence holding that there was admission of clandestine production and removal of goods, it is necessary to have some positive evidence of clandestine production and removal of goods. The question of law preferred whether in the light of the private record discovered during the raid, the Tribunal was right in holding that there was no positive evidence of clandestine production and removal of goods was answered against the Revenue and in favour of the assessee.
(ii) In T.G.L Poshak Corp. v. CCE [2002 (140) E.L.T. 187], Tribunal considered the issue as to whether the demands can be confirmed on the basis of recovery of exercise note books and certain balance sheets maintained by the assessee and in the absence of any corroborative evidence. In fact, in a tabulated form Tribunal dealt with the judgments which were referred to, to support the plea that demands cannot be confirmed which contained the reason for this Tribunal coming to the conclusion that, in the absence of any corroborative evidence, of a tangible nature, clandestine removal cannot be established. Tribunal relied on the tabulated list of citations furnished by the Counsel and observed that unless there is 21 | P a g e E/11891 -92/2013-DB clinching evidence in the nature of purchase of raw material, use of electricity, sale and mode of flow back of funds, demands cannot be confirmed solely on the basis of note books maintained by some workers.
(iii) In Hilton Tobacco v. CCE [2005 (183) E.L.T. 378], certain private documents maintained in the factory were seized under which it appeared that the appellant had not accounted for raw material procured by him. Tribunal held that an inference cannot be based on certain private documents only when there is no corroborative evidence recorded. Investigation had not found out at least a few buyers who had received the goods cleared clandestinely. There was no evidence of excessive consumption of electricity. When the unit was visited there was no unaccounted stock of raw material. Charges were based purely on theoretical working out based on private document which are not statutory. Relying upon the earlier decision of the Tribunal, it was decided that clandestine removal cannot be sustained. The source of procurement of raw material had not been established, buyers of finished goods had not been contacted and receipt of sale proceed had not been proved. There was, therefore, no corroborative evidence in support of the Revenue's case.
(iv) In Vishwa Traders Pvt. Ltd. v. CCE [2012 (278) E.L.T. 362], the appellant had submitted that the Adjudicating Authority has passed the order on conjectures and surmises. It was submitted that documents recovered from the premises of the employees and third parties are not official records. Their cross examination had also been denied by the Adjudicating Authority. Serious charge of clandestine removal cannot be sustained on the basis of documents recovered from outside the premises of the assessee. It was submitted that despite large scale investigation including visits to the premises of raw material suppliers, there was nothing brought on record to show that the appellant had purchased raw materials without recording the same in their books of accounts. The submission of the appellant was that demand cannot be upheld on clandestine removal on the basis of documents along with 22 | P a g e E/11891 -92/2013-DB statements unless there is tangible, independent, corroborative proof like financial flow back, actual manufacture and clearance, excess purchase of raw material, electricity consumption, statement of workers, actual transportation of the goods, and statement of purchasers. It was contended on behalf of the Revenue that the case was based on parallel invoices recovered from the residential premises of the factory manager and accountant. Lorry receipts indicated that there was no movement and even if there was any movement they were not clandestine clearances. The Managing Director of the company had even stated that they were making clandestine clearance of the finished products without recording the same in their books of account. The request for cross examination of some of the persons whose statements were relied upon was rejected by the Adjudicating Authority only on the ground that the assessee had not given any reason and justification for their cross examination. Tribunal held that this approach of the Adjudicating Authority is inconsistent with the law of evidence. On a careful perusal of the entire records of the case, the Tribunal found that there was nothing on record as to unrecorded purchases or consumption of other various raw materials in the manufacture of finished products. There was no statement of suppliers of raw material, except in respect of one of the raw materials. His cross examination has also been rejected. In the absence of any other tangible evidence to show that other major raw materials had been procured without recording the same in books of accounts, this Tribunal did not accept the contention of the Revenue that finished goods had been clandestinely manufactured and cleared. After referring to several earlier decisions of the Tribunal on the subject, the Tribunal held that the charge of clandestine manufacture was not established. This decision was taken by the Commissioner of Central Excise in appeal before the Hon'ble High Court of Gujarat which was dismissed by the Hon'ble High Court [2013 (287) E.L.T. 243 (Guj.)]. The Hon'ble High Court quoted with approval paragraph Nos. 12, 13 & 16 of the order of the Tribunal which were extracted, stating that from findings of the Tribunal, it is clear that the appellant had not made any clandestine manufacture which he had removed clandestinely and on which duty was payable. 23 | P a g e E/11891 -92/2013-DB 4.8 We also find that demand of Rs. 59,06,146/- out of total demand of Rs. 2,38,45,969/- alleged clandestine clearance are completely based on the so-called ledger account retrieved from a pen-drive known as 'Aaj Tak'. The said ledger was compared by the revenue with the ledger account maintained by the appellant in their regular course of business. As per department there was a difference in the two ledgers. However, we find that the said pen drive 'Aaj Tak' which is made basis of allegation is not reliable evidence. The procedure contemplated in Section 36B of the Central Excise Act was not followed by the department. In this context we find that the Hon'ble Apex Court in case of M/s. Anvar P.V. v. P.K. Basheer
- reported at 2017 (352) E.L.T. 416 (S.C.) has prescribed certain guidelines before accepting electronic documents as an admissible piece of evidence. The Hon'ble Supreme Court held that -
"13. Any documentary evidence by way of an electronic record under the Evidence Act, in view of Sections 59 and 65A, can be proved only in accordance with the procedure prescribed under Section 65B. Section 65B deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer. It may be noted that the Section starts with a non obstante clause. Thus, notwithstanding anything contained in the Evidence Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document only if the conditions mentioned under sub-section (2) are satisfied, without further proof or production of the original. The very admissibility of such a document, i.e., electronic record which is called as computer output, depends on the satisfaction of the four conditions under Section 65B(2). Following are the specified conditions under Section 65B(2) of the Evidence Act :
(i) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly used to store or process information for the purpose of any activity regularly carried on over that period by the person having lawful control over the use of that computer;
(ii) The information of the kind contained in electronic record or of the kind from which the information is derived was regularly fed into the computer in the ordinary course of the said activity;
(iii) During the material part of the said period, the computer was operating properly and that even if it was not operating properly for some time, the break or breaks had not affected either the record or the accuracy of its contents; and
(iv) The information contained in the record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity.
24 | P a g e E/11891 -92/2013-DB
14. Under Section 65B(4) of the Evidence Act, if it is desired to give a statement in any proceedings pertaining to an electronic record, it is permissible provided the following conditions are satisfied :
(a) There must be a certificate which identifies the electronic record containing the statement;
(b) The certificate must describe the manner in which the electronic record was produced;
(c) The certificate must furnish the particulars of the device involved in the production of that record;
(d) The certificate must deal with the applicable conditions mentioned under Section 65B(2) of the Evidence Act; and
(e) The certificate must be signed by a person occupying a responsible official position in relation to the operation of the relevant device.
15. It is further clarified that the person need only to state in the certificate that the same is to the best of his knowledge and belief. Most importantly, such a certificate must accompany the electronic record like computer printout, Compact Disc (CD), Video Compact Disc (VCD), pen drive, etc., pertaining to which a statement is sought to be given in evidence, when the same is produced in evidence. All these safeguards are taken to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tampering, alteration, transposition, excision, etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice.
16. Only if the electronic record is duly produced in terms of Section 65B of the Evidence Act, the question would arise as to the genuineness thereof and in that situation, resort can be made to Section 45A - opinion of examiner of electronic evidence.
17. The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements under Section 65B of the Evidence Act are not complied with, as the law now stands in India.
18. It is relevant to note that Section 69 of the Police and Criminal Evidence Act, 1984 (PACE) dealing with evidence on computer records in the United Kingdom was repealed by Section 60 of the Youth Justice and Criminal Evidence Act, 1999. Computer evidence hence must follow the common law rule, where a presumption exists that the computer producing the evidential output was recording properly at the material time. The presumption can be rebutted if evidence to the contrary is adduced. In the United States of America, under Federal Rule of Evidence, reliability of records normally go to the weight of evidence and not to admissibility."
The above prescribed certain guidelines were not followed by the Revenue during the investigation of impugned matter before accepting electronic documents as an admissible piece of evidence. Therefore in our view no demand is sustainable on the basis of contents of said pen drive. 25 | P a g e E/11891 -92/2013-DB
5. As per the above discussion and finding the impugned order is not sustainable, hence the same is set aside. Appeals are allowed with consequential relief, if any, as per law.
(Pronounced in the open court on 25.11.2024) (RAMESH NAIR) MEMBER (JUDICIAL) (C L MAHAR) MEMBER (TECHNICAL) Raksha