Custom, Excise & Service Tax Tribunal
Shri Krishna Industries vs Cce & Service Tax on 9 January, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, WEST ZONAL BENCH AT AHMEDABAD
COURT I
APPEAL NO. E/985, 986, 987, 1163, 1602, 1603, 1604
& 1605/2007 Ahm
(Arising out of Order-in-Appeal No. 59 to 63/2007(Ahd-III)CE/KRB/Comr.(A) dated 20.7.2007 and Commr.(A)/238 to 240/VDR-II/2009 dated 29.09.2009 passed by the Commissioner of Central Excise (Appeals) II, Ahmedabad)
For approval and signature:
Honble Shri M.V. Ravindran, Member (Judicial)
1. Whether Press Reporters may be allowed to see : Yes
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Yes
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
Shri Krishna Industries
Hitesh H Parekh,
Ramesh Narandas Patel
Himsun Ceramics
Mukesh N. Patel
:
Appellant
Versus
CCE & Service Tax
Ahmedabad III
Respondent
Appearance Shri Alok Barthwal, Advocate with Shri R.K. Jain, Advocate for Appellants Shri J. Nair, Supdt. (A.R.) for Respondent CORAM:
Shri M.V. Ravindran, Member (Judicial) Date of Hearing : 28.11.2014 Date of Decision : 09.01.2015 ORDER NO A/10080-10087/2015 Dated 09.01.2015 Per : M.V. Ravindran
1. The Appeals involved herein being arisen out of common investigation are being disposed of by a common order.
2. The Appeal No. E/985/2007 to E/987/2007 has arisen out of Order-in-Appeal No. 59 to 63/2007 (Ahd-III) CE/KRB/Comr(A) dt. 20.07.2007 wherein duty demand of Rs. 18,64,103/- has been confirmed against M/s Shri Krishna Industries, Vadu and equivalent penalty. Further a penalty of Rs. 1,00,000/- each was imposed upon Shri Hitesh H. Parekh, Partner of M/s Giriraj Sales Agency, Morbi and Ramesh Narandas, Supervisor of M/s Shri Krishna Industries Vadu . The Appeal No. E/1603-1605/2009 has arisen out of Order in-Appeal No. Commr (A)/238 to 240/VDR-II/2009 dt. 29.09.2009 wherein a demand of Rs. 35,86,397/- was confirmed against M/s Shri Krishna Industries, Jambusar and equivalent amount of penalty was imposed. Further a penalty of Rs. 50,000/- was imposed upon Shri Mukesh Narottambhai Patel, Supervisor of Shri Krishna Industries, Jambusar and of Rs. 25,000/- upon Shri Hitesh H. Patel, partner of M/s Giriraj Sales Agency Morbi. The Appeal No. E/1602/2009 has arisen out of Order-in-Appeal No. Commr. (A)/241/VDR-II/2009 dt. 29.09.2009 wherein a demand of duty of Rs. 16,00,000/- was confirmed against M/s Shri Krishna Industries Jambusar. Appeal No. E/1163 of 2007 is filed by M/s Himsun Ceramics.
3. The facts arising for consideration are that M/s Shri Krishna Industries Ltd. having units at Vadu and Jambusar are engaged in the manufacture of Ceramic Fritz falling under chapter 32.07 and Sodium Silicate falling under chapter No. 28.39 of the schedule to the Central Excise Tariff Act, 1985. On the basis of investigation conducted by the officers of DGCEI, Zonal Unit, Ahmedabad, the Jambusar Unit was issued show cause notice dt. 17.11.2004 and Vadu Unit was issued show cause notice dt. 16.12.2004 alleging that during the period 2002 03 and 2003 04 they were indulged in clandestine removal of Ceramic Fritz. Further for the period 2004 05, the Jambusar Unit was issued another Show cause notice dt. 22.08.2007 proposing to disallow SSI Exemption on the ground that as a result of the investigation of clandestine removal, it was observed that the clearances value in the year 2003 04 exceeded the SSI Exemptions limit and hence the unit is not eligible for SSI Exemption during the year 2004 05.
4. The show cause notices dt. 17.11.2004 and 16.12.2004 relied upon the certain statements of buyers of ceramic fritz, suppliers of raw material Borax acid, two of the transporters, employee of M/s Shri Krishna and its proprietor Shri Sameer Parekh. The show cause notices placed reliance upon note books/ papers seized from the residence of Mukesh Patel, Supervisor & Accountant of Jambusar Unit and also Sales invoice, files note books of M/s Shree Krishna Industries, Vadu and Jambusar which were alleged to be containing details of purchase of Borax acid one of the raw material and sales details. The SCNs alleged that the documents seized from the residence of Shri Mukesh Patel contains the details of purchase of some of the raw material, production and sales details including name of supplier of raw material and buyer of finished goods. The value of goods stated in such seized records were added to the goods cleared on invoices by M/s Shree Krishna for raising demands. It was also alleged that some of the invoices appearing in one of the Bill book has same serial numbers. The Show Cause Notices also placed reliance upon the statements of Shri Mukesh Patel and other employees and it is alleged that Shri Samir Parekh, the proprietor of M/s Shree Krishna Industries agreed and accepted the contents of the said statements. The show cause notices on the basis of statement dt. 16.10.2003 of Shri Anilbhai Chimanlal Shah, EX- Supervisor of Vadu unit also contended that the fritz manufactured in Vadu Plant plant was sold to different customers under the cover of invoices/ delivery challans of M/s Shri Krishna Industries, M/s Pioneer Industries and M/s Associated Industries as per the direction of Shri Sameer Parekh, proprietor of Shri Krishna Industries.
5. The demands and penalties as proposed in all the show cause notices were confirmed by the adjudicating authority and subsequently upheld by the Commissioner (Appeals). Hence the present appeals.
6. Learned Counsel appearing on behalf of the Appellants made the following submissions :
(i) the statements of the buyers of the finished goods relied upon does not shows clandestine removal. The statements of four buyers were recorded out of which two buyers namely Shri Jagdishbhai Prabhudasbhai Patel, Director of M/s Patidar Silico Pvt. Ltd, and Dharamsingh of M/s Bhimani Ceramics in their statements has clearly stated that the goods were received on invoices which has not been contradicted by the revenue. That the remaining two buyers Shri Girishbhai Bhailalbhai Thakkar, Director of Jalaram Ceramics, and Shri Mansukhbhai, partner of M/s Maruti Silver Ceramics whose statements were relied upon in their cross examinations have denied the receipt of goods or has stated that the goods were received under cover of invoices. That apart from these four persons no other investigation at the buyers took place or even if undertaken was not stated in the SCN. He submits that apart from these buyers no investigation was made from any other alleged buyers and thus it cannot be said that the Appellant has cleared goods without payment of duty.
(ii) That even though statement of raw material suppliers of Borax acid were recorded but these statements does not show clandestine receipt of Borax Acid. He dwells upon each statement, relied upon document, evidences adduced by the revenue and cross examination to put forth his point. He further submits that it is not appearing in SCN as to what quantity was received and how much was in excess. He also submits that the Borax Acid constitutes only small portion of the finished goods i.e Ceramic Fritz whereas about 8 items are the main raw materials required for manufacturing of Fritz. That except recording the statement of 3 4 suppliers who have supplied Boric Acid there is neither any evidence nor even allegation of Appellant having received any major raw material required for manufacture of Fritz. Borax powder hardly constitutes 10 12 % of the finished products whereas the major raw material is Quartz which is 45%, Dolomite 12 to 20%, Feldspar, Calcium and Zinc. Not a single supply of such goods as unaccounted has been alleged. There is no evidence showing that M/s Shree Krishna has purchased any raw material without recording the same in their books of accounts. In the SCN merely statements of suppliers which even though are inconsequential has been relied upon to show the receipt of only some quantity of Borax powder and other small quantity of raw material. Therefore in the facts and circumstances of the case the allegations are not sustainable as there has been no manufacture. He relies upon judgment of CCE Vs. BRIMS PRODUCTS 2011 (271) E.L.T. 184 (Pat.); VISHWA TRADERS PVT. LTD. Vs. CCE VADODARA 2012 (278) E.L.T. 362 (Tri. - Ahmd.) as upheld by the Honble High Court of Gujarat in case of CCE, CUS & ST Vs. VISHWA TRADERS P. LTD. 2013 (287) E.L.T. 243 (Guj.) ; CCE, CHENNAI Vs. DHANAVILAS (MADRAS) SNUFF CO. 2003 (153) E.L.T. 437 (Tri. - Chennai); S.T. TEXTURISER Vs. CCE, SURAT-I 2006 (200) E.L.T. 234 (Tri. -Mumbai);
(iii) He submits that statement of only two transporters were recorded and even these statements does not show any clandestine clearances. Shri Sunderbhai Chotalal Shah, Partner of M/s Shree Siddheshwari Roadlines in his statement dt. 14.06.2004 stated that he does not have any records nor he own trucks and only on the basis of details mentioned in invoices shown to him, he have stated that the trucks pertained to his transport company. In his cross examination also he clearly stated that he does not have any record. That only on the basis of some chittis in files seized from Vadu factory he stated that they have transported goods whereas no evidence is appearing of his transport company having transported the goods. That from his statement and cross examination it can be seen that there is no evidence of any goods stated in chittis to have been transported by M/s Shree Krishna. That even the chittis cannot be a ground for alleging any clandestine removal in absence of any enquiry from the persons who received the goods or to show that such goods were cleared without payment of duty.
(iv) That similarly statement of Shri Chetan Shah, proprietor of M/s Shah Roadways was recorded on 16.10.2013 wherein he stated that the letter K in transport register stands for Shree Krishna Industries. He further stated that he does not maintain any LR or any Bills to M/s Shree Krishna. That they have given trucks for transportation but does not have any record. That no Lorry receipt or record of transportation was found from his possession. That only on the basis of statement of the transporter, demand cannot be confirmed against M/s Shree Krishna as no enquiry even from the single buyer was conducted nor statement of even a single truck owner was recorded. That there is no record of any payments made to him or any of the truck owner towards transportation of goods were made.
(v) That statement of sales broker Shri Hitesh H Parekh, Manager of M/s Giriraj Sales Agency was recorded on 16.10.2003. That he stated that M/s Swastik Corporation, a firm owned by his father has traded Fritz purchased from M/s Associated Industries, Vadu under cover of invoice of M/s Associated and sold the same to different tiles manufacturers under the cover of invoice of M/s Swastik Corporation. That though he stated that his cousin Shri Sameer Parekh has two industries i.e Shree Krishna Industries, Jambusar and M/s Associated Industries, Vadu and that prior to 10.10.2003 he obtained orders for them and also gave details of goods sold to different customers by M/s Shree Krishna Industries, Jambusar and M/s Associated Industries, Vadu, but he also stated that he does not have any record for substantiate the above transactions. That no investigation was conducted from the buyers or transportation of goods or receipt of payments in absence of which it cannot be said that there has been any clandestine removal. That from the contents of his statements it is absolutely clear that whatever goods were received from M/s Shree Krishna or M/s Associated were under cover of invoice. This shows that no goods were cleared without cover of invoice by M/s Shree Krishna.
(vi) He submits that the show cause notice and the investigation does not prove the allegations of the show cause notice and hence demands are not sustainable. He relies upon the judgments in case of PRATIBHA SILK MILLS, SURAT Vs. CCE 1989 (39) ELT 118 (T); ASSOCIATED CYLINDER INDUSTRIES Vs. CCE 1990 (48) ELT 460 (T) ; LEATHER CHEMICAL & INDUSTRIES LTD. Vs CCE 1984 (15) ELT 451; SHARADHA FORGE PVT. LTD. Vs CCE 2005 (179) ELT 336 (Tri. - Mumbai); MTK GURUSAMY & ANR. Vs. CCE, MADURI 2001 (94) ECR 684 (Tribunal); CCE MEERUT V/s RAMAN ISPAT (P) LTD 2000 (121) ELT 46 (Tribunal) and TGL Poshak corpn. & anr. Vs. CCE, Hyderabad, 2001 (99) ECR 424 (Tribunal).
(vii) That the show cause notice in para 17 itself accepts that for the year 2003 04, M/s Shree Krishna, Vadu did not operate the factory and the goods were manufactured by M/s Associated. That the goods were cleared by them under the cover of their invoice. Thus it cannot be said that any goods were cleared clandestinely by M/s Shree Krishna. As regard the goods allegedly cleared by M/s Shree Krishna, Shri Hitesh Parekh neither had any records nor any enquiry was conducted at any of the buyers and even if conducted nothing illegal was found which clearly shows that the allegation of the SCN and the impugned orders are not sustainable. Further Shri Hitesh Parekh in his cross examination himself stated that he does not know whether the material to parties was sold by Shree Krishna or Associated and whether the material was delivered or not. In such case no allegation of clandestine removal of goods by M/s Shree Krishna is proved.
(viii) That the statement of the employees and Shri Sameer Parekh, proprietor of M/s Shree Krishna cannot be basis for demand as there are no corroborative evidence. The statement alone cannot be a ground and especially in view of the fact that the investigation made from the buyers of Fritz , raw material supplier, transporter fails to establish the receipt of all the raw material or even the processing of raw material for manufacture of finished goods and the removal of finished goods from the factory or even the receipt of the goods by the buyers. Thus when the facts does not supports the case of the revenue, merely on the basis of statements, clandestine removal cannot be alleged. He relies upon the judgment of the Honble High Court of Gujarat, in the case of Nissan Thermoware Pvt. Ltd. - 2011 (266) E.L.T. 45 (Guj.). He also relies upon judgments of VIKRAM CEMENT (P) LTD. Vs. CCE, KANPUR 2012 (286) E.L.T. 615 (Tri. - Del.), as upheld by the Honble High Court of Allahabad as reported in case of Commissioner v. Vikram Cement (P) Ltd. - 2014 (303) E.L.T. A82 (All.)] to support his contention.
(ix) He further submit that the demands which are mainly based upon the records seized from residence of Shri Mukesh Patel, employee of M/s Shree Krishna were not maintained in ordinary course of business and were not seized from the business premises of M/s Shree Krishna. Also the statement of different persons itself does not support the allegation of the show cause notice. In that case the statement of Shree Sameer parekh losses its evidentiary value and cannot be made basis for fastening any demand against M/s Shree Krishna.
(x) That even the adjudicating authority in its order did not controverted the cross examination or statements. That once the cross examination does not supports the contention of the Show cause notice and the adjudicating authority does not hold otherwise as to the cross examination, in such circumstances the demand made against M/s Shree Krishna is absolutely erroneous.
(xi) That though the records seized from the residence premises of Shri Mukesh Patel alleged to be containing the details of many of the buyers of the Fritz, however no investigation is said to have taken place to identify as to whether any goods has been received or even if the revenue might have investigated the same, there is no evidence that the finished goods was cleared to such parties. In such view of the facts, merely on the basis of papers/ records seized from the residence of the employee of M/s Shree Krishna cannot be made basis for demanding duty by alleging clandestine removal.
(xii) that the value of clearances from Vadu factory for the year 2003-04 is not liable to be added to the clearance value of M/s Shree Krishna Industries, in as much as during the year 2003-04, the factory at Vadu was not run by the appellant but by M/s Associated Industries as admitted in the show cause notice itself. That it is admitted fact of the show cause notice that possession of the factory premises at Vadu, which was taken on rental basis by the appellant from M/s Associated Industries, was given back to its owners. M/s Shri Krishna had purchased raw material and given to M/s Associated Industries for manufacture on job- work basis. It is by now a well established principle of law that supplier of raw material is not a manufacturer under Section 3 of the Act. The job-worker is the manufacturer, liable for payment of duty. He places reliance upon the decision of the Tribunal in the case of KERALA ELECTRICITY BOARD v. COLLECTOR OF CENTRAL EXCISE, reported at 1990 (47) ELT 62 (Tribunal) as upheld by the Hon'ble Supreme Court as reported at 1992 (62) ELT A52 (SC). That moreover during the course of cross-examination of Shri Dharamsibhai Patel, Partner of M/s. Bhimani Ceramics, conducted on 20.1.2006 it has come out that during this year he had received goods worth Rs.1,59,000/- from M/s. Associated Industries and goods worth Rs.4,34,000/- from M/s. Shree Krishna Industries. The goods sold by the appellant were manufactured by M/s. Associated Industries on job-work basis, for which, as already submitted M/s Shri Krishna cannot be considered as manufacturers. Similarly, Shri Hitesh S. Parekh of M/s. Giriraj Sales Agency has deposed on 21.3.2006 that 50 tons of ceramics fritz was received from M/s. Associated Industries and the same was received under cover of bill of the said party. It is, therefore, clearly proved from the records and depositions of the witnesses that during the year 200304 the factory was run by M/s. Associated Industries, who had manufactured goods on their own behalf and for the appellant on job work basis, for which no duty liability can be fastened on the appellant.
(xiii) He also relies upon the judgment of ESSVEE POLYMERS (P) LTD. Vs. CCE, CHENNAI 2004 (165) E.L.T. 291 (Tri. - Chennai); ARCH PHARMALABS LIMITED Vs. CCE, HYDERABAD 2005 (182) E.L.T. 413 (Tri. - Bang.); PAN PARAG INDIA LTD. Vs. CCE, KANPUR 2013 (291) E.L.T. 81 (Tri. - Del.); KUBER TOBACCO PRODUCTS LTD.Vs. CCE, DELHI 2013 (290) E.L.T. 545 (Tri. - Del.); CCE Vs. BRIMS PRODUCTS 2011 (271) E.L.T. 184 (Pat.); CCE, CHANDIGARH I Vs. LAXMI ENGINEERING WORKS 2010 (254) E.L.T. 205 (P & H) to fortify his point that the evidence/ statements relied upon by the revenue cannot be accepted as proof of clandestine manufacture and removal of goods.
(xiv) He further submits that the demands are not sustainable for the following reasons:
(a) There is no evidence of receipt of raw material for manufacture of goods alleged to have been cleared clandestinely. Even the show cause notice shows the receipt of only one of the raw material whereas there are major raw materials required for manufacture of fritz for purchase/ receipt of which there is no evidence nor allegation in the show cause notice.
(b) No evidence towards transportation of raw material used in manufacture of goods alleged to have been cleared without payment of duty.
(c) Except recording the statement of 3 4 suppliers which have supplied Boric Acid, and Borax which constitutes only 10 12 % of Fritz, no evidence of receipt of major raw material required for manufacture of Fritz. The major raw material are Quartz required 40 to 45%, Dolomite 12 to 20%, Feldspar, Calcium, Zinc. Not a single supply of such goods in excess alleged.
(d) No evidence of any payments made towards excess purchase of raw material.
(e) No payment of excess labour charges.
(f) No evidence of any excess or disproportionate use of gas for manufacture of fritz in comparison to manufacture of goods shown by M/s Shree Krishna in their book of accounts.
(g) No enquiry from buyers of fritz except three buyers whose statements and cross examination does not support the revenues case.
(h) No evidence of any amount having been received by M/s Shree Krishna of goods alleged to have been cleared without payment of duty.
(xv) He submits that in view of above submissions and judgments, the demands confirmed against M/s Shree Krishna Industries as well as penalties imposed upon them and other Appellants are not sustainable and are required to be set aside.
(xvi) that in case of Appeal No. E/1603 1605/2009 related to M/s Shree Krishna Industries, Jambusar and othrs the adjudicating merely on the basis of investigation made in the show cause notice and on the basis of order passed order against M/s Shree Krishna Industries, Vadu has passed the order and since the orders are based upon the same investigation and the adjudication order in case of M/s Shree Krishna Industries, Vadu, therefore it is prayed to take the aforesaid submissions on records in case of Appeal No. E/1603 1605/2009 also.
(xvii) that in case of appeal No. E/1602/2009, the demand has been made on the ground that during investigations in case of Appeal No. E/985/2007 and E/1603/2009, it was found that the turnover of M/s Shree Krishna in the year 2003 - 04 exceeded the SSI exemption limit and hence they are not eligible for the exemption in the year 2004 05. That since the demands raised in case of Appeal Nos. No. E/985/2007 and E/1603/2009 are not sustainable, consequentially the turnover of M/s Shree Krishna does not exceeds the SSI Exemption limit and hence there is no reason to demand duty of Rs. 16,00,000/-. In such case the impugned order is required to be set aside.
7. The Ld. AR appearing for the revenue would submit that the goods were cleared by M/s Shree Krishna without payment of duty as found during investigation and supports the impugned orders. The Ld. AR also filed written submission stating that incriminating documents of purchase, manufacture and sale was recovered from the residential premises of Shri Mukesh N. Patel and also from factory, transporters, broker Shri Hitesh Parekh. That further incriminating documents were also seized from premises of supplier of raw material and buyers of clandestine removed goods under valid panchnama. That Shri Samir Parekh admitted the contents of the said records seized from different premises and thus the case of illicit clearance of goods by M/s Shree Krishna is proved beyond doubt. That neither any panchnama has been disputed nor any statement has been retracted during cross examination. That the statements are valid piece of evidence. The Ld. AR relies upon the judgment of M.R.Tobacco Pvt. Ltd. Vs. Commissioner of Central Excise, Delhi 2006 (202) ELT 64 (TRI DEL) that author of loose sheets was not identified is of no consequences in view of admission by the director of the firm. He also relies upon the judgment of Tribunal in case of Commissioner of Central Excise, Chandigarh Vs. Pushpanjali Steel Alloys Pvt. Ltd. 2004 (166) ELT 59 (TRI) wherein it was held that the admisiso from the director cannot be legally ignored. That the evidence in the form of delivery challan and invoices showed clearance effected by M/s Shree Krishna during 2003 04 and that the Appellant reliance upon the para of the show cause notice that the factory was run over by M/s Associated Industries does not hold good.
8. Heard both the parties and perused the records/written submissions.
9. On careful consideration of the facts and submission I find that the case was booked on the basis of note books mainly seized from the residence of employee of M/s Shri Krishna and the statements of some buyers, supplier of raw material and transporter as well as employee and director of the firm. I find that out of the four buyers whose statements were recorded, two of the buyers Shri Jagdish of M/s Patidar Silico and Shri Dharamsingh of M/s Bhimani Ceramics in their statements has clearly stated that the purchases were made by them from M/s Shree Krishna under the cover of invoices. Shri Dharamsingh in his cross examination dt. 20.09.2003 also stated that during the year 2003 04 the goods were purchased from M/s Shri Krishna and M/s Associated under cover of invoice. The third buyer Shri Girishbhai Bhailal Thakkar, director of M/s Jalaram Ceramics in his statement has produced statement of accounts showing the purchase of goods under cover of invoice of M/s Shri Krishna which has not been disputed. Also in his cross examination he has denied buying of raw material from any other related concern of M/s Shri Krishna. I am of the view that from the investigation conducted at these three buyers and the statements, nowhere it appears that there has been any clandestine clearance by M/s Shri Krishna. In case of fourth buyer Shri Mansukh Bhai of M/s Maruti Silver Ceramics, I find that during investigation he was shown the note books seized from factory and residence of Mukesh Patel employee of M/s Shri Krishna alleged to be containing details of clearance; he was also shown bill book of M/s Shri Krishna alongwith sheet prepared on the basis of details of goods appearing in said note books and bill book. Shri Mansukh Bhai accepted that the goods were purchased by them from M/s Shri Krishna and M/s Associated under the cover of invoice as well as the details of clearance of goods appearing in note books. However in his cross examination dt. 20.01.2006 he clearly stated that all the purchases from M/s Shri Krishna or M/s Associated was under the cover of invoice and denied that he purchased any goods without invoice. His cross examination has not been controverted or questioned by the Adjudicating authority. I find that except his statement which stands nullified in cross examination, and the note books no other corroborative evidence of clearance of goods by M/s Shree Krishna and receipt of the said goods by M/s Maruti is appearing on record. No investigation was conducted at the end of M/s Maruti Ceramics regarding receipt of goods and the charges were made only on the basis of notebooks and statement. I find that once the cross examination does not support the statement and the adjudicating authority does not contradict the contents of the cross examination, in that case it cannot be said that M/s Maruti Ceramics has received any clandestine clearances of M/s Shri Krishna.
10. I also find that investigation were conducted at the end of the supplier of raw material on the basis of note books seized from the residence of Shri Mukesh Patel and factory premises. Shri Rishi Trehan of Rishi Enterprise in his statement accepted the sale of raw material in six consignments. I find that three of the consignments pertains to Vadu factory in year 2003 04 when the factory was in possession of M/s Associated. The details of remaining three consignments are appearing in files seized from residence of Mukesh Patel. However no evidence is appearing of these 3 consignments having been received in factory of M/s Shri Krishna. I also find that Shri Rishi Trehan was called for cross examination but he did not appear for cross examination and instead one Shri Uday Sheth on his behalf sent communication that his statement is correct. In such circumstances when he has not presented himself for the cross examination and except his statement there is no other evidence, I find that his statement is not sufficient evidence to hold charges of illicit receipt of raw material by M/s Shri Krishna. Even there is no evidence of receipt of such goods in the factory of M/s Shri Krishna as no evidence of transportation of goods is appearing on record. In case of other supplier M/s Sun Borax, I find from the submission of the Appellant and statement dt. 03.12.2003 of Partner, Shri Manharbhai, Partner of M/s Sun Borax, that his statement is based upon the notebooks shown to him after which he had given details of 13 consignments sold to M/s Shree Krishna Industries under the cover of invoices issued in the name of dummy parties and also submitted that the list was prepared by him to the best of his belief, knowledge and memory. However during his cross examination he has stated that the goods were sold to the parties in whose names the invoices were issued. I find that except relying upon his statement, no investigation was undertaken at the end of the parties whose name were appearing in the invoices. In view of such a fact that came out during cross examination as well as non corroboration of statement with any evidence, I am of the view that the allegation of receipt of raw material by M/s Shree Krishna is not sustainable. Statement dt. 01.12.2003 of another supplier Shri Yogesh Bhupatlal Bavisi, Proprietor of M/s M.M. Auxitex has been relied upon. I have gone through his statement and the list appended to his statement. I find that all such invoices issued by M/s Auxitex and its sister concern M/s Chemicare were found from the residence of Shri Mukesh Patel. However it is not coming on record as to whether such goods were received in factory of M/s Shri Krishna and how payments of such goods were made. Even Shri Yogesh did not submitt accounts of his own firm. Shri Pawan Kedia, Proprietor of Pawan Chemical another alleged supplier in his statement dt. 23.12.2003 was said to have been shown the files seized from residence of Mukesh Patel, employee of Shri Krishna containing invoice No. PC/44/03 dt. 29.08.2003 to which he stated that the invoice is duplicate and further stated that he supplied goods i.e Bora Pent and Bora Deca to Shree Krishna in cash and did not show the same in accounts and original invoice was issued to some other party. However in his reply to show cause he has stated that they have sold only one consignment of 10 MT boric acid under cover of invoice to M/s Associated and during the year 1999 2000 to 2003 04 did not made any transaction with M/s Shree Krishna. Shri Hasmukhlal Mangaldas Thakkar, proprietor of M/s Astron Ceramics though stated in his statement stated that he supplied Zirconeum Powder i.e Zir Flour and Quartz Powder under the cover of invoices issued in the name of M/s Associate and M/s Pioneer whereas goods were supplied to M/s Shree Krishna only and also produced chart showing such clearances, but in his cross examination denied having made any sale without invoices to M/s Shri Krishna. I therefore find that the statements are not corroborated with any evidence. These suppliers have not produced their records or it is not forthcoming from the investigation as to how the entire transaction took place and the use of the inputs in manufacture. I also find that almost all the suppliers are of Boric Acid which constitutes only 10% to 12% of Ceramic Fritz whereas the other raw material which are required in larger quantity like Quartz which is 45%, Dolomite 12 to 20%, Feldspar, Calcium and Zinc, no evidence is appearing which can show that the other raw materials were also consigned to Appellant or were appearing in the seized documents.
11. I also find that the show cause notice has relied upon the investigation and statements of two transporters. The Statement Shri Sunderbhai Chotalal Shah, Partner of M/s Shree Siddheshwari Roadlines has been relied upon. However I find that neither he owns any trucks nor he has any records. Only on the basis of some chithis seized from Vadu factory he stated that the transportation took place whereas no investigation was carried out from the persons to whom the goods were appearing in such chitthis were appearing to have been transported. Investigation was also undertaken from Shri Chetan Shah, proprietor of M/s Shah Roadways who stated that in his Truck Booking register the letter K stands for M/s Shree Krishna Industries. That he does not maintain any LR or any Bills to M/s Shree Krishna. That they have given trucks for transportation but does not have any record and that on average basis have given 20 to 22 trucks monthly having capacity of 10 to 12 tons. I find that no Lorry receipt or record of transportation was found. There is no quantity determined which he has transported. Only on the basis of statement, demand cannot be confirmed against M/s Shree Krishna. Since there is no consignee of the goods who has received any goods through M/s Shah Roadways. I am of the view that his statement cannot be a ground to make allegation against M/s Shri Krishna. Merely on the basis of the transporter statements, allegation of clandestine removal does not sustain.
12. The SCN also relies upon the statement of Shri Hitesh H Parekh, Manager of M/s Giriraj Sales Agency who is said to be purchasing Fritz from M/s Shri Krishna and selling to other parties. I find that in his statement though he stated that he purchased goods from M/s Shri Krishna and M/s Associated and sold the same to different tiles manufacturers and also gave details of goods sold to different customers by M/s Shree Krishna Industries, Jambusar and M/s Associated Industries, Vadu, but no record of any transaction has been found to support his statement . Further I find that he has stated that whatever goods were received from M/s Shree Krishna or M/s Associated were under cover of invoice. I also find that Shri Hitesh Parekh in his cross examination himself stated that he does not know whether the material to parties was sold by M/s Shree Krishna or M/s Associated to the parties and whether the material was delivered or not. Even the revenue did not conducted investigation at the end of the alleged buyers. In such case no allegation of clandestine removal of goods by M/s Shree Krishna is proved. Also for the year 2003 04, the goods were manufactured by M/s Associated who cleared such goods under the cover of their invoice. During this period M/s Shree Krishna also got goods manufactured from M/s Associated and cleared the same. In such case the statement of Shri Hitesh parekh not supported by any evidence cannot be made a ground for holding charges of clandestine removal by M/s Shri Krishna.
13. I find that in the present case except the alleged receipt of Borax Acid which is one of the material required for manufacturing of Fritz, there is no evidence appearing in the seized records or otherwise that the Appellant has received any other raw material clandestinely. Even no transportation of any of the other raw material required for manufacture of fritz is appearing nor alleged in show cause notice. The allegation of the clandestine removal needs to be established by showing receipt of major raw materials, atleast of some quantity, use of excess raw material, input output ratio, transportation of raw materials, use of such goods in manufacture of finished goods, excess utilization of power, fuel, transportation of finished goods, investigation at the buyers end, receipt of money etc. However I find that none of the above factors are taken into consideration during the investigation, which leads me to the conclusion that charges of clandestine removal are not established.
14. The investigation made from the buyers of Fritz, raw material supplier and transporters fails to establish the receipt of all the raw material, the processing of raw material for manufacture of finished goods, removal of finished goods from the factory or even the receipt of the goods by the buyers. In these facts merely on the basis of statements, clandestine removal cannot be alleged. I find that mere statements based upon some note books cannot be a basis of alleging clandestine removal when the investigation does not support the allegations. In the case of VISHWA TRADERS PVT. LTD. Vs. CCE 2012 (278) ELT the Tribunal has held that On careful perusal of the entire records of the case, we find that there is nothing on record as to unrecorded purchases or consumption of various other raw material in the manufacture of Frit, there is also nothing on record to indicate that the appellant had purchased the Quartz, Feldspar, Zinc, Borax Powder, Calcium and Dolomite and without accounting them used for the manufacture of Frit for clandestine removal. There is also nothing on record nor there is any statement of the suppliers of other raw materials, which would indicate that the appellant had received unaccounted raw material from the suppliers of these raw materials. There is a solitary evidence in the form of statement of supplier of one of the raw material i.e. Borax Powder, who indicated that the appellant had procured Borax Powder and not accounted the same in his record; and the said entries and information were deduced from the documents of the premises of Shri Anil Jadav and whose evidence has been discarded for having not been produced for cross examination; in the absence of any other tangible evidence to show that the appellant had been procuring the other major raw materials required for manufacture of Frit without recording in books of accounts, we are unable to accept the contentions of the ld. AR appearing for the Revenue and the findings of the adjudicating authority, that there was clandestine manufacture and clearance of the finished goods. The investigation has not proceeded further to bring on record unaccounted purchases of all the raw materials required for manufacturing of Frit.
I find that the order of the Tribunal is squarely applicable in the present case which was upheld by the Honble High Court of Gujarat as reported in 2013 (287) E.L.T. 243 (Guj.).
15. The Honble High Court of Patna in case of COMMISSIONER OF CENTRAL EXCISE Versus BRIMS PRODUCTS 2011 (271) E.L.T. 184 (Pat.) has held In our opinion, since the charge was for clandestine manufacture and surreptitious removal of finished final product, the same is required to be proved beyond doubt by the Revenue. One has to keep in mind that, though being the main ingredient, betel-nut is not the only raw material which is used in manufacture of Pan Masala. That apart, since the investigation has been carried only at the transporters end, no presumption could be drawn with regard to manufacture and removal of the final product. Presumptions and assumptions cannot take place of positive legal evidence, which are required for proving the charge. Even if, it is assumed that some raw materials were received at the factory of the respondent during the said period, the same cannot become conclusive proof of production and clandestine sale to different parties. Due to lack of positive evidence, benefit of doubt will always go in favour of the assessee.
16. In the case of Dhanvilas (Madras) Snuff Co. 2003 (153) ELT 437 (TRI) CHENNAI the Tribunal held revenue is relying on the statement of the accountant and the entries. Revenue has only examined 5 customers out of 65 customers to whom the goods were supplied. Out of these 5 customers, two of them had given statements initially in favour of the Revenue. However, same has been resiled and they have clearly stated that they had received the goods under invoices. Likewise two other witnesses did not appear for cross examination and the one who appeared clearly stated that he had received the goods under invoices and against full payment. In a circumstance like this, it is not possible to hold that Revenue has produced sufficient evidence with regard to manufacture and clearance of goods clandestinely. Revenue ought to have produced the evidence of purchase of raw material, manufacture and clearance of goods clandestinely by examining the workers and also those who have received the goods without payment of duty. In view of lack of evidence, the Commissioner has rightly dropped the proceedings with regard to the charge pertaining to clandestine removal. However, he has upheld the charge pertaining to certain other charges and has confirmed duty and penalties. The partys appeals have already come up before the Tribunal and the Tribunal has upheld that charge and the findings recorded by the Commissioner except for giving benefit of reduction in penalties. On a total examination of facts and circumstances and in the light of the judgments cited before me, I am satisfied that the order passed by the Commissioner was just and proper and it does not require any interference. For lack of evidence, the Commissioner has dropped the proceedings as before him there was no concrete evidence shown which has escaped the notice of the Commissioner while recording the order. As there is no merit in the appeal, the same is rejected.
17. I find that the above judgments are squarely cover the issue. In the facts and circumstances of the present case as the revenue has examined only 3- 4 customer out of 50 60 customer and even the statements and cross examination of these customers does not support the allegation of show cause notice; I therefore hold that the charges of clandestine removal against M.s Shri Krishna are not proved.
18. The investigation has relied upon the notebooks seized from the factory premises of M/s Shri Krishna and residence of its employee. However even if such documents were recovered, it is necessary to have corroboration by evidence of production and removal of goods. I find that in the present case the production of finished goods, its removal and investigation at the end of the buyers does not support the allegations. I am therefore of the view that the charges of clandestine removal of goods cannot be established. In case of M/s LAXMI ENGINEERING WORKS VS. CCE, CHANDIGARH I 2010 (254) ELT 205 (P&H) the Honble High Court held -
After hearing the learned counsel for the revenue, we are of the considered view that even if some record recovered during the raid and corroborated by some supportable evidence holding that there was an attempt of clandestine production and removal of goods, then it is necessary to have the same positive evidence of clandestine production and removal of goods.
19. I further find that the statement of employees of M/s Shri Krishna and the proprietor Shri Sameer Parekh has been relied upon to allege the clandestine removal. It is alleged that they have authenticated the seized records/ note book and accepted that the contents mentioned therein. I find that when the statements and records relied upon by the revenue are not considered to be sufficient ground for clandestine removal, in that case merely on the basis of statements authenticating the said records cannot be a ground to allege clandestine removal. The investigation has not been able to substantiate the charges of clandestine removal.
20. I also find from the facts of the case and the show cause notice itself states that for the year 2003 04, M/s Shree Krishna, Vadu did not operate the factory and cleared the goods on their own invoice. During the said period M/s Assocaited Industries took back the possession of factory from M/s Shri Krishna and manufactured goods for itself as well as for M/s Shri Krishna. M/s Shri Krishna cleared goods on its invoice to their buyers. In such view of facts I hold that M/s Shri Krishna cannot be considered as manufacturer of goods at Vadu factory during the year 2003 04. My views are based upon the judgment of KERALA ELECTRICITY BOARD v. COLLECTOR OF CENTRAL EXCISE, reported at 1990 (47) ELT 62 (Tribunal) as upheld by the Hon'ble Supreme Court as reported at 1992 (62) ELT A52 (SC).
21. As regard Appeal of M/s Jambusar Unit, I find that the adjudicating authority merely confirmed the demands and imposed penalties on the ground that in case of Vadu Unit, the adjudicating authority under same set of investigation has passed the order against M/s Shri Krishna. I therefore hold that since the investigation and the allegation of the show cause notice issued to M/s Shri Krishna, Vadu are not proved and the same set of investigation has been relied upon in case of M/s Jambusar, the demands made against the Jambusar Unit are also not sustainable.
22. In the case of Appeal No E/1602/2009, the demand is solely based upon the ground that looking to the value of clearances arrived at as a result of investigation, the turnover of M/s Shree Krishna in the year 2003 - 04 exceeded the SSI exemption limit and hence they are not eligible for the exemption in the year 2004 05. I find that since the charges of clandestine removal against M/s Shri Krishna does not stands proved and the demands raised in case of Appeal Nos. No. E/985/2007 and E/1603/2009 are not sustainable, therefore the benefit of SSI Exemption to M/s Shree Krishna for the year 2004 05 is not deniable and hence there is no reason to demand duty.
23. In the absence of tangible evidence of clandestine production and removal of the goods from the factory premises of M/s Shri Krishna and in the peculiar facts and circumstances of the case, I hold that the impugned orders of demands and penalties against M/s Shree Krishna in all the appeals are not sustainable and are therefore set aside.
24. Since I have set aside the demands and penalties of M/s Shri Krishna in all the appeals, consequentially the penalties on various other Appellants who are in appeal before me are also set aside.
25. Accordingly, all the appeals are allowed with consequential relief, if any.
(Order pronounced in Court on ..) (M.V. Ravindran) Member (Judicial) nsk 2