Customs, Excise and Gold Tribunal - Bangalore
Dalmia Vinyls (P) Ltd. And Ors. vs The Commissioner Of Central Excise on 19 January, 2005
ORDER T.K. Jayaraman, Member (T)
1. Revenue proceeded against appellants No 1 for clandestine production and removal of coated cotton fabrics without payment of duty. In the impugned order, the following decisions were taken.
Duty Confirmed Rs 5,95,776/- 12/97 to 3/98 Rs 29,48,441/- 4/98 to 11/98 Rs 46,893/- Modvat on inputs Rs 7,347/- On Maruti Sales Corpn Penalty imposed Rs 35,43,787/- under Section 11 AC Rs 46,893/- under Rule 571 Rs 2,00,000/- under Rule 173Q Fine imposed Rs 5,00,000/- under Rule 173 Q Rs 21,000/- on SN Corporation Rs 15,000/- on Maruti Sales Corporation Penalty Rs 7,50,000/- under Rule 209A on Shri Manoj Kumar Dalmia and Rs 10,000/- on Shri Lalit Kumar Zoota
2. The appellant No1 is a manufacturer of coated cotton fabrics, an excisable commodity. They purchase yarn and send the same to their job workers, for conversion into fabric. The fabric so received is then subjected to process of coating by using chemical and release paper. They cleared their goods to dealers in various cities on payment of duty. The dealers are non-exclusive dealers and therefore, are engaged in the trading of coated cotton fabric manufactured by other manufacturers also. During investigations, the department recovered a Register pertaining to the use of release paper at some finished stage maintained in the production department of the appellant. This Register was numbered `12 F' by the Department. During the search on 9.1.99, the department recovered certain slips which the appellants suspected were being planted in their premises. These slips were placed in a file and numbered as `13 F'. The officers effected seizure of certain quantity of coated cotton fabric from dealers at Hyderabad, Chennai and Delhi. Based on the above investigation, show cause notices were issued to the appellants. The proceedings culminated in the issue of OIO dated 2.8.01 which is impugned before us.
3. Shri G. Shivadas learned advocate and Shri L.N. Goyal learned consultant appeared for the appellants and Sri L. Narasimha Murthy, learned SDR appeared for the revenue.
4. The learned advocate and consultant took us through various documents relied on by the Revenue for sustaining the demand. The demand of Rs 29,48,441/- has been made on the basis of document `13 F' recovered by the Department from the factory. A statement of Shri T. Balakrishna Rao who is reported to have admitted in the preparation of the document `13 F' has been taken by the Department. According to the Department the quantities mentioned in the private slips (13 F) represents the total quantity of coated cotton fabric cleared by the appellant to a dealer. After deducting the quantity mentioned in the invoice, referred to in the same primate slip the differential quantity has been arrived at. Duty has been demanded on the differential quantity. It has also been assumed that this quantity has been cleared to the same dealer. It was pointed out that there is absolutely no corroborative evidence to sustain the charge that the total quantity cleared by the appellant is what is indicated in the slips in `13 F'. There is no evidence for receipt of unaccounted fabric or yarn at least to an extent of Rs 2.61 lakh meters to manufacture the coated fabrics. Further there is no evidence of receipt of unaccounted chemicals like resin for use in manufacture of the coated fabric. Department has also not found any evidence of excess consumption of electricity. There is also no evidence regarding receipt of any excess payment from the purchaser. There is no evidence of purchase of purported unaccounted goods. The appellants raised doubt regarding the genuineness of the document `13 F' and bonafides of its writer Shri T. Balakrishna Rao. As he has not made available for cross-examination no reliance can be placed on his statement. The learned advocate relied on a plethora of case laws. As regards the seizure of excess quantity at Chennai, the dealer of M/s Maruthi Sales Corporation in his cross-examination has stated that he has been dealing with others goods also. The goods seized at Madras were having bundle Nos but whereas, per show cause notice the appellants do not put bundle Nos in their goods. So the charge that the seized goods at Chennai are those cleared clandestinely by the appellant has no basis. As for seizure at Delhi, the dealer stated that the said goods do not relate to the appellants. In respect of the seizure of goods at M/s Dalmia Traders, the department released the goods unconditionally after investigation. In view of the above, the demand of Rs 29,48,441/- based on document `13 F' cannot be sustained.
5. The demand of Rs 5,95,776/- is based on a paper production register for the period from December 97 to March 98. This is called 12 F. Department relied on the statement of Shri V.V. Damodaran, Factory manager, Shri Damodaran is the author of the note book `12 F'. He has not been cross-examined. He has also indicated that he was not in the employment during the period when the document has been made. Therefore this document cannot be relied upon. In any case, the note book indicates the process at a semi finished stage. Even as per the statement of Shri Damodaran relied on in the show cause notice, there are subsequent processes to be undertaken. Further the period in the note book is a period of four months and the quantities could have been accounted for in the subsequent months in RG I. In the absence of corroborative evidence, the note book cannot be used to allege excess production. The learned counsel and advocate conceded that the demands of Rs 46, 893/- being modvat taken on inputs cleared is correct. In view of the above submissions they urged that the entire demand, penalties, fine as well as interest demanded should be set aside.
6. Shri L. Narasimha Murthy, SDR reiterated the points in the adjudication order.
7. We have gone through the records of the case carefully. The charge of clandestine removal is sought to be established on the basis of private records whose authenticity is doubted by the appellant. No doubt, private records throw some light on the activities of the appellant unit but to sustain the charge of clandestine production and removal revenue should have unearthed corroborative evidences. In this case, unfortunately, there is no corroborative evidence at all to sustain the charge that the appellants cleared goods for the period from 11/97 to 11/98. In the following case laws it has been held that clandestine production and removal cannot be sustained merely on the basis of private documents seized without any corroborative evidences.
1) Woodmen Industries v. CCE Patna (2004 (164) ELT 339
2) Sharma Chemicals v. CCE Calcutta-II (2001 (130) ELT 271
3) CCE v. Moon Beverages & Vice versa (1999 (33) RLT 153)
4) CCE v. Annapurna Industries (2003 (153) ELT 586)
5) K. Rajagopal v. CCE (2002 (142) ELT 128)
6) T.G.L. Poshak Corporation v. CCE (2002 (140) ELT 187)
7) Krishna Bottlers (Vijayawada Pvt Ltd. v. CCE (1999(32) RLT 845)
8) CCE Bangalore v. Jindal Aluminium Ltd., (1998 (29) RLT 183)
9) Suvarna Polymers Pvt Ltd. v. CCE (2000 (38) RLT 891)
10) Final Order No 96-100/2004 dated 12.1.05 in the case of Sapthagiri Cements v. CCE
8. The quantity of purported clandestine production and clearance has been arrived at on certain assumptions and presumptions. Moreover the authors of the private documents have not been cross-examined. There is no evidence of excess consumption of electricity. There is also no evidence of unaccounted purchase of raw-materials. The revenue has not unearthed any evidence regarding the buyers of the so called unaccounted goods. Under these circumstances following the ratio of the cases enumerated above, we have no other option but to allow the appeals. Since the demand of Rs 46,893/- is accepted, we confirm that part of the OIO demanding the above amount being modvat on inputs claimed. All the other demands of duty, penalty fine and interest are set aside in view of our findings.