Custom, Excise & Service Tax Tribunal
Shree Krishna Laxmi Steel Udyog Pvt Ltd vs Jamshedpur on 13 December, 2024
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.1
Excise Appeal No.70301 of 2013
(Arising out of Order-in-Original No.51/Commr./2012 dated 22.11.2012 passed by
Commissioner of Central Excise & Service Tax, Jamshedpur)
M/s Shree Krishna Laxami Steel Udyog Private Limited
(NS-116,Phase VI, Adityapur Industrial Area,Gamharia, Jamshedpur)
Appellant
VERSUS
Commissioner of Central Excise & Service Tax, Jamshedpur
(143, New Baradwari,Sakchi, Jamshedpur-8231001)
Respondent
WITH Excise Appeal No.70300 of 2013 (Arising out of Order-in-Original No.51/Commr./2012 dated 22.11.2012 passed by Commissioner of Central Excise & Service Tax, Jamshedpur) Shri Devender Kumar, Director of M/s Shree Krishna Laxami Steel Udyog Private Limited (NS-116,Phase VI, Adityapur Industrial Area,Gamharia, Jamshedpur) Appellant VERSUS Commissioner of Central Excise & Service Tax, Jamshedpur (143, New Baradwari,Sakchi, Jamshedpur-8231001) Respondent APPERANCE :
Shri Prem Ranjan Kumar, Advocate for the Appellant Shri S.K.Singh,Authorized Representative for the Respondent CORAM:
HON'BLE MR.ASHOK JINDAL, MEMBER (JUDICIAL) HON'BLE MR.RAJEEV TANDON, MEMBER (TECHNICAL) FINAL ORDER NO.77826-77827/2024 DATE OF HEARING : 10 DECEMBER 2024 DATE OF PRONOUNCEMENT : 13 DECEMBER 2024 2 Excise Appeal Nos.70301,70300 of 2013 Per Ashok Jindal :
The appellants are in appeals against the impugned order wherein the demand of duty along with interest has been confirmed against the main appellant and penalties have been imposed on both the appellants.
2. The facts of the case in brief are that a show-cause notice was issued to the appellant on the basis of a search operation which was conducted on 19.03.2008 in the factory premises of the appellant and the residential premises of the co-appellant, which was being used as a secret office. Incriminating documents were recovered from both the places, which were seized in the in the presence of the independent panchas. Joint physical stock of M.S.Ingots was also taken before the co-appellant and the employees of the main appellant. Examination of the seized documents revealed that these were related to the business activities of the appellant and the stock was found to be short of that shown in the Daily Stock Account. The documents revealed that all the sponge iron received by the appellant was not accounted , actual production was not accounted and the finished goods were dispatched without issuance of invoices and where the invoices were issued, the value was declared lesser than what was realized by them. The ledgers revealed that payments had been made by them against receipt of raw materials and also received against sales, in cash or through third persons, in order to hide the extent and nature of transactions. The entries in the bank statements of the appellant and the accounted receipts of raw materials and despatches shown in the statutory records 3 Excise Appeal Nos.70301,70300 of 2013 of the appellant tallied with that in the seized note books/registers/ documents. The co-appellant and all concerned persons were summoned on several occasions to explain the discrepancies which all of them avoided on one pretext or the other. The documents as asked were also not submitted by the appellant or any of its Directors/ employees. Therefore, it was concluded that the appellant did not co- operate with the investigation and deliberately tried to delay the process.
2.1 On the basis of the said investigation, the show-cause notice alleges that the appellant was engaged in the activity of clandestine manufacture and removal of goods without keeping record with them and evaded payment of excise duty. Consequently, they are liable to pay duty along with interest and to impose penalties thereon. 2.2 Aggrieved from the said order, the appellants are before us.
3. The ld.Counsel for the appellants submits that the whole case has been made out against them on the basis of certain documents recovered from the possession of Shri Sati Ram who claims to be accountant at the residence of the co-appellant. No discrepancies were found at the factory premises of the appellant. Physical stock taking was done, which was found to be in order. On the basis of the documents recovered from the possession of Shri Sati Ram and comparison of the statutory records and on the basis of the statements of Shri Jitendra Singh, Shri Sati Ram, Shri Deepu Kumar and the Director of the co-appellant that it was alleged that the appellant is engaged in the clandestine manufacture and clearance of the dutiable goods without payment of duty. Therefore, the show-cause notice 4 Excise Appeal Nos.70301,70300 of 2013 proposed to demand of duty along with interest and to impose penalties on both the appellants.
3.1 In fact, during the course of adjudication, the appellants sought to cross-examination of the witnesses whose statements have been relied upon the basis to corroborate the allegation of clandestine removal of goods, but no cross-examination was granted , which is violation of the provisions of Section 9 D of the erstwhile Central Excise Act, 1944. To support his contention, he relies on the following decisions :
(1) Anand Timber Industries Vs Commissioner of C.Ex. Kolkata-
2015(324) ELT 641(SC) ;
(ii) J & K Cigarettes Ltd Vs. Collector of Central Excise-2009(242) ELT 189 (Del) ;
(iii) G-Tech Industries Vs. UOI-2016(339)ELT 209 (P&H) ;
(iv) Commissioner of C.Ex. Lucknow V Premier Alloys Ltd-2019 (366) ELT 659(All) ;
(v) Flevel International Vs. Commissioner of Central Excise-2016 (332) ELT 416(Del);
3.2 He further submits that the sole basis for confirming the huge demand is based on the seized private records maintained by one Staff who was store in-charge which remained un-verified, un-corroborated and un-authenticated from any source despite every detail found in the alleged recovered private records. Hence, the demand based on such unverified and un-corroborated statements and documents cannot be fastened.
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Excise Appeal Nos.70301,70300 of 2013 3.3 It is his further submission that no follow up enquiry either from the raw material suppliers, transporters, commission agents, buyers of finished goods specially when each and every details were allegedly available in the alleged private records seized from an employee of the Appellant. Merely because an employee who was store supervisor and not even concerned with maintaining the accounts of the company has admitted the details contained in those writing pads, would not be sufficient enough to fasten the duty liability on the company without any corroborative evidence. To support his contention, he relies on the following decisions :
(i) Nabha Steels Ltd. Vs. Commissioner of Central Excise Chandigarh-2016 (344) ELT 561 (Tri-Chandigarh);
(ii) Ambica Iron & Steel Pvt. Ltd. Vs. Commissioner of C.Ex.
Kolkata-2022 (380) ELT 351(Tri-Kolkata);
(iii) Arya Fibre Pvt. Ltd. Vs. Commissioner of C.Ex., Ahmedabad- 11-2014(311) ELT 529 (Tri-Ahmedabad);
(iv) AUM Aluminum Pvt. Ltd. Vs Commissioner of C.Ex. Vadodra- 2014 (311) 354 (Tri-Ahmedabad);
(v) Hingora Industries Pvt. Ltd. Vs. Comm. of C.Ex. Daman - 2015 (325) ELT 116 (Tri-Ahmedabad);
(vi) J.P.Iscon Pvt. Ltd. Vs. Commissioner of Central Excise, Ahmedabad - 2022 (63) GSTL 64 (Tri.-Ahmedabad)
(vii) Prempreet Textile Industries Limited Vs. Commissioner of Central Excise, Surat I-2001 (134) ELT 691 (Tri.-Mumbai) ; 6
Excise Appeal Nos.70301,70300 of 2013
(viii) Kisco Castings India Limited Vs. Commissioner of CentralExcise & Service Tax, Chandigarh-I : 2017 (347) ELT 346 (Tri.- Del.)
(ix) Sharma Chemicals Vs. Commissioner of Central Excise, Calcutta II : 2001 (130) ELT 271 (Tri.Kolkata). 3.4 He further submits that the private writing pads or the loose sheets referred to in the show cause notice did not belong to the Appellant Company as they were not recovered from the factory premises or their office.
3.5 It is his further contention that the con-appellant retracted his coerced statement recorded on 19.03.2008 regarding the GRMs recovered from Shri Narender Bahera who faked his identity as Shri Radhey Shyam in connivance with Shri Sati Ram and clarified that the GRM recovered from Shri Radhey Shyam did not belong to his company as his company has printed GRMs with company's name printed on it whereas the GRMs recovered are not having company's name printed on it. Further, on returning to his residence, when his cook Shri Ashok Kamat informed him about visit of Shri Sati Ram in his absence and handing over of a bag to some persons, the co-appellant mentioned all these facts in his retraction dated 20.03.2008. Hence, it was incumbent upon the investigation Authority to verify the truthfulness of recovered documents, which was never done. Therefore, the said statement cannot be relied upon.
3.6 He further submitted that the alleged private records seized from the possession of Sh. Sati Ram are manipulated documents to harm the company. A simple enquiry from the raw material suppliers, 7 Excise Appeal Nos.70301,70300 of 2013 transporters, commission agents and purchasers of finished goods whose details were available in those seized documents would have brought the true facts. But no enquiry was made. 3.7 He further submitted that Shri Sati Ram had ulterior motive to harm the company by Shri Sati Ram and associates as the Company had declined any raise in salary during the relevant period. This is evident from the very fact that Shri Sati Ram was working as Store In- charge but he claimed to be the Accounts Manager in order to justify the reason for being in possession of seized documents. 3.8 He, therefore, prays that the impugned order is not sustainable in the eyes of law and the same is required to be set aside.
4. The ld.A.R. for the Revenue submits that the documents were seized from the possession of the employees, which were maintaining in secret office. Shri Sati Ram made the statement that these documents belong to the appellant company. In that circumstances, the demand has correctrly raised against the appellants.
5. Heard both the parties and considered the submissions and verified the documents placed before us.
6. After hearing the parties, the ld.Counsel for the appellants has raised the following issues :
(a) Whether in the absence of giving cross-examination to the witnesses, whose statements have been relied upon to implicate the appellants in the proceedings, is admissible or not ?
(b) Whether the documents recovered from the possession of the third party and without any corroboration thereof, can the demand be raised against the appellants ?8
Excise Appeal Nos.70301,70300 of 2013
(c) Whether the investigation done is not proper and having lacuna and as any suppliers/buyers/transporters or any documents, which could have been visited easily from the name and address and available on record, the demand can be raised against the appellants or not ?
Issue No.(a) Whether in the absence of giving cross-examination to the witnesses, whose statements have been relied upon to implicate the appellants in the proceedings, is admissible or not ?
7. We find that in this case, the Revenue has relied upon on the statements of Shri Sati Ram, Shri Jitendra Singh, Shri Radhey Shyam. All the statements made were relied upon to be tested in terms of Section 9D of the Central Excise Act, 1944, which stipulates that any statement recorded during the course of investigation under Section 14 of the Act, is required to be first examined in Chief and thereafter, to provide cross-examination thereof to the appellant. The said procedure has not been followed in this case. Therefore, as the Hon'ble Supreme Court in the case of Andaman Timber Industries (supra) has held as under :
"6. According to us, not allowing the assessee to cross- examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses.9
Excise Appeal Nos.70301,70300 of 2013 Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.
7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17-3-2005 [2005 (187) E.L.T. A33 (S.C.)] was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.10
Excise Appeal Nos.70301,70300 of 2013
8. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show cause notice."
Further, the Hon'ble Delhi High Court in the case of Flevel International (supra) has held as under :
"42. It is settled law that the denial of an opportunity of cross-examination of a witness whose statements have been relied upon in the adjudication order would vitiate the order of adjudication. In Basudev Garg v. Commissioner of Customs - 2013 (294) E.L.T. 353 (Del.), this Court referred to Section 9D of the CE Act and noted that even while upholding its constitutional validity in J & K Cigarettes Ltd. v. Collector of Central Excise - 2011 (22) S.T.R. 225 (Del.) = 2009 (242) E.L.T. 189 (Del.), a Division Bench of this Court had observed that the circumstances under which the right of cross-examination can be taken away would have to be „exceptional‟. This would include circumstances where the person who had given the statement was dead or cannot be found or is incapable of giving evidence or is kept out of the way by adverse party or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances, the Court considers unreasonable. It was held by the Court in Basudev Garg (supra) that "it is clear that unless such circumstances exist the noticee would have a right to cross- examine the person whose statements are being relied upon even in quasi judicial proceedings."
43. In the present case, the Court finds that despite a specific request made by the appellant for cross-examination of the witnesses whose statements were recorded and were being relied upon by the Department, no serious attempts were made to 11 Excise Appeal Nos.70301,70300 of 2013 secure their presence in the adjudication proceedings. A perusal of the adjudication order of the CCE shows that as far as Mr. Pradeep Bhargava is concerned, the summons issued to him were returned with the remarks „left without address‟ by the postal authority. No further attempt appears to have been made to secure his presence. After simply noting the above fact the CCE in the order-in-original dated 14th January, 2004 observed that "hence no purpose was going to be served by sending a fresh summons to him."
44. To say the least, this was the most perfunctory way of dealing with the request, particularly since the statements made by Mr. Pradeep Bhargava, a former employee of M/s. Thermoking, to the effect that 1022 compressors had been diverted by M/s. Thermoking to the appellant, formed one of the strong pieces of evidence with the Department to conclude that they had been used for manufacture of ACs. The Department failed to show the existence of any of the extraordinary circumstances under Section 9D of the Act to justify the denial of right to cross-examine Mr. Pradeep Bhargava. In the considered view of the Court, this was a serious infraction which vitiated the adjudication order.
45. As regards the request for cross-examination of the other witnesses, the adjudication order again dealt with this perfunctorily. It simply stated in para 36 that if the request made by the appellant in the letter dated 31st January, 1985 for cross- examination of "such a large number of persons was granted it would have taken the case to a non-ending process." This cannot be a justified reason within the meaning of Section 9D of the Act to deny that opportunity to the appellant. Further the CCE proceeds to observe that in their reply dated 3rd February, 2002 the appellant had somehow shortened the list of persons it wanted to cross-examine. This is not borne out from the reading of the reply dated 3rd February, 2002.
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Excise Appeal Nos.70301,70300 of 2013
46. The CCE also wrongly proceeded on the basis that there was no right of cross-examination overlooking the fact that Section 9D of the Act restricts the grounds on which the cross-examination can be denied. It also overlooks the decision of the Supreme Court in Swadeshi Polytex Ltd. v. Collector of Central Excise - 2000 (122) E.L.T. 641 (S.C.) and Laxman Exports Ltd. v. Collector of Central Excise - 2002 (143) E.L.T. 21 (S.C.) to the effect that when a statement is used against an assessee an opportunity of cross-examining the persons who made those statements ought to be given to the assessee."
We hold that the statements recorded during the course of investigation in the absence of any examination in Chief, thereafter, cross examination to the appellants are not sustainable. Therefore, on the basis of the statements, which have been relied upon by the authorities below, the demand cannot be raised.
Issue (b) Whether the documents recovered from the possession of the third party and without any corroboration thereof, can the demand be raised against the appellants ?
8. Whether on the basis of the documents seized from the possession of Shri Sati Ram, can the demand be raised against the appellants or not ?
9. We find that in this case, although the statement of Shri Sati Ram was recorded and some documents were recovered from his possession, these documents were required to further investigation like, investigation at the end of suppliers of the raw materials, buyers of the finished goods, transporters, commission agent, whose details were available in the record seized from the possession of Shri Sati Ram, the 13 Excise Appeal Nos.70301,70300 of 2013 authenticity of the documents/records from the possession of Shri Sati Ram is doubtful. In this regard, this Tribunal in the case of Arya Fibres Pvt.Limited (supra) has laid the principles that in cases of clandestine manufactuere and clearances, certain fundamental criteria have to be established by the Revenue, which are as follows :
"(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;
(d) instances of sale of such goods to identified parties;
(e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him;
(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."
As none of the said criteria has been followed by the investigating team, in the absence thereof, it cannot be alleged that the appellant engaged in the activity of clandestine manufacture and clearance of the goods. The same view has been taken by this Tribunal in the case of Ambica 14 Excise Appeal Nos.70301,70300 of 2013 Iron & Steel Private Limited (supra) wherein this Tribunal has observed as under :
"15.In the instant case, the entire case of the Revenue is based on the Kaccha Chithas seized from the residence of the Director. The manner in which the said Kaccha Chithas is seized has been strongly agitated by the Appellant. We find that the said Kaccha Chithas/documents should have been seized in the presence of the Director. There is considerable force in the contention of the Appellant that the Kacha Chithas relied upon by the Revenue cannot be a basis to uphold the serious charge of clandestine clearance. It is settled legal position that charge of clandestine clearance is a serious charge and the onus to prove the same is on the Revenue by adducing concrete and cogent evidence. In the absence of corroborative evidence, the issue of fact i.e. in the present case "the charge of clandestine clearance" cannot be levelled against the assessee.
16.We find that in the entire proceedings, no evidence, much less corroborative evidence, has been adduced to show that input goods has been procured to manufacture goods for clandestine clearance. No efforts have been made by the investigating agencies to establish the existence of any unaccounted manufacturing activity in the form of unaccounted raw material, shortage of stock, shortage of raw material/finished goods, excess consumption of electricity, unaccounted labour payments, interrogation of buyers/transporters or any incriminating record/document to suggest any flow back of cash etc. The Revenue authorities in this case have failed to discharge the burden of proving the serious charge of clandestine clearance or undervaluation with cogent and clinching evidence. It has been consistently held that no demand of clandestine manufacture and clearance can be confirmed purely on assumptions and presumptions and the same is required to be proved by the 15 Excise Appeal Nos.70301,70300 of 2013 Revenue by direct, affirmative and incontrovertible evidence, as has been held in the following cases :-
• Bihar Foundary & Castings Ltd. v. CCE, Ranchi [2019 (8) TMI 527-CESTAT, Kolkata] - Para 18 • Continental Cement Company v. Union of India [2014 (309) E.L.T. 411 (All.)] - Para 12 • Balashree Metals Pvt. Ltd. v. UOI [2017 (345) E.L.T. 187 (Jhar.)] - Para 5(vi) • CCE, Meerut-I v. R.A. Castings Pvt. Ltd. [2012 (26) S.T.R. 262 (All.) = 2011 (269) E.L.T. 337 (All.)] • Popular Paints and Chemicals v. CCE & Customs, Raipur [2018 (8) TMI 473 (Tri. - Delhi)] - Para 17
17. ..........................................................
18. ...........................................................
19. ...........................................................
20.We are of the view that the Learned Commissioner made a fundamental error by making assumptions only just to confirm the demand on the allegation of clandestine clearance. It is a well settled position of law that serious allegation cannot be made merely on assumptions and presumptions and in the absence of detailed supporting evidence, the charge of clandestine removal cannot be upheld."
In view of the above, we hold that whole of the demand raised against the appellant is without proper investigation and without any corroborative evidence/documents or otherwise, the allegation against 16 Excise Appeal Nos.70301,70300 of 2013 the appellants on the clandestine manufacture and clearance of the goods, is not sustainable.
Issue (c)
(c) Whether the investigation done is not proper and having lacuna and as any suppliers/buyers/transporters or any documents, which could have been visited easily from the name and address and available on record, the demand can be raised against the appellants or not ?
10. We further take note of the fact that in this case, although the Revenue was having every documents which were recovered from the possession of Shri Sati Ram to allege clandestine manufacture and removal of goods, but the investigation did not bother to corroborate the evidence by way of verifying the veracity of the documents from supplier of the raw materials, buyer of the finished goods, transporter or commission agent etc. or other, whose details were available in those documents.
11. In that circumstances, we hold that whole of the investigation is faulty and on the basis of the faulty investigation, it cannot be alleged that the appellants were engaged in the activities of clandestine manufacture and clearance of excisable goods.
12. In view of the above, we do not find any merit in the impugned order, therefore, the proceedings against the appellants are not sustainable and no demand can be raised against the appellants. Consequently, no penalties are imposable on the appellants. 17
Excise Appeal Nos.70301,70300 of 2013
13. In view of this, we set aside the impugned order and allow the appeals with consequential relief, if any.
(Pronounced in the open court on 13.12.2024)
(Ashok Jindal)
Member (Judicial)
(Rajeev Tandon)
mm Member (Technical)