Custom, Excise & Service Tax Tribunal
M/S. Belgium Glass & Ceramics Pvt. ... vs Commissioner Of Central Excise & S.T., ... on 12 May, 2015
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : E/1851-1854,1926-1928/2010 E/534,535,672-674,751,752,796-798/2011 E/11960-11962/2013, E/12386,12387,13289,13290, 13646,13649-13651,13688,13720,13721/2014 Application Nos. : E/Extn/14339-14342,16385,16396,16398, 16856, 16399/2014 E/Stay/14140-14141/2014 (Arising out of OIO-11/VDR-II/NAHAR/D-BRH/COMMR/2010 dated 26.8.2010, OIO-13/VDR-II/SUPREMEGLAZES/DBRH/COMMR/2010 dated 29.9.2010, OIO-32/VDR-II/MP/VISHWA/DBRH/ADJ/COMMR/2010 dated 17.1.2011, OIO-03/BRC-I/MP/2011 dated 28.2.2011, OIO-04/BRC-I/MP/2011 dated 22.3.2011, OIO-05/BRC-I/MP/2011 dated 23.3.2011, OIO-09/BRC-I/MP/2011 dated 20.5.2011, OIO-51/COMMR/SURAT-II/2013 dated 30.3.2013, OIO-AHM-EXCUS-003-COM-067-13-14 dated 29.3.2014, OIO-AHM-EXCUS-003-COM-010-14-15 dated 30.6.2014, OIO-AHM-EXCUS-003-COM-021-14-15 dated 07.10.2014, OIO-AHM-EXCUS-003-COM-020-14-15 dated 02.10.2014, OIO-VAD-EXCUS-001-COM-24-14-15 dated 26.11.2014, Passed by Commissioner Central Excise, Service Tax Ahmedabad, Vadodara, Surat) M/s. Belgium Glass & Ceramics Pvt. Limited : Appellant (s) Shri Pradip P. Patel Shri Rasikbhai Gordhanbhai Kanani Shri Dhirajlal Hansrajbhai Bathani M/s. Gibraltar Glass & Ceramics Pvt. Limited Shri Krishnadas D. Vachhani Shri Hitesh M. Vachhani Shri Bhavesh M Vachhani M/s. Spire Cera Frit Pvt. Limited M/s. Angel Cera Coat Shri Mahendra Virchand Patel M/s. Growmore Ceramics Pvt. Limited Shri Harshabhai Chimanbhai Patel M/s. Futura Ceramics Pvt. Limited M/s. Orient Glazes Limited Shri Manickchand Nahar Shri Manish Nahar Shri Ravikumar Chitrapu M/s. Wellsuit Glass & Ceramic Pvt. Limited Shri Balkrishna M. Thakkar Shri Raj Surana M/s. Nahar Colours & Coatings Limited M/s. Vishwa Glass & Ceramics Pvt. Limited Shri Dhulabhai Motibhai Patel Shri Shailesh Dahyabhai Patel M/s. Supreme Glazes Pvt. Limited M/s. Prime Ceramics Pvt. Limited M/s. Zirconia Cera Tech Glazes Shri Pravinbhai Narshibhai Patel VERSUS Commissioner of Central Excise & S.T., Ahmedabad : Respondent (s)
Commissioner of Central Excise & S.T., Vadodara Commissioner of Central Excise & S.T., Surat Represented by :
For Appellant (s) : Shri C. Harishankar, Senior Advocate Shri S. Sunil, Shri J.C. Patel,.
Shri Willington Christian, Advocates For Respondent (s) : Shri P.R.V. Ramanan, Special Counsel For approval and signature :
Mr. P.K. Das, Hon'ble Member (Judicial) Mr. H.K. Thakur, Hon'ble Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
YES 3 Whether their Lordships wish to see the fair copy of the Order?
Seen 4 Whether Order is to be circulated to the Departmental authorities?
Yes CORAM :
Mr. P.K. Das, Hon'ble Member (Judicial) Mr. H.K. Thakur, Hon'ble Member (Technical) Date of Hearing : 07.04.2015 Date of Decision : 12.05.2015 ORDER No. A/10541-10571/2015 dated 12.05.2015 Per : Mr. H.K. Thakur;
Following appeals have been filed by the appellants with respect to orders-in-original passed by the Adjudicating authorities; viz. Commissioner of Central Excise & Service Tax, Ahmedabad, Vadodara and Surat; against the Frit manufactures of Gujarat, regarding under valuation and clandestine removal of frit by frit manufacturers and cleared to the Ceramic Tiles manufactures:-
S. No. Appeal No./ Application Nos.
Appellant Orders-in-Original Numbers i E/1851/2010.
Nahar Colours & Coatings Limited OIO-11/VDR-II/NAHAR/D-BRH/COMMR/2010 ii E/1852/2010.
Raj Surana OIO-11/VDR-II/NAHAR/D-BRH/COMMR/2010 iii E/1853/2010.
Manish Nahar OIO-11/VDR-II/NAHAR/D-BRH/COMMR/2010 Iv E/1854/2010.
Manikchand Nahar OIO-11/VDR-II/NAHAR/D-BRH/COMMR/2010 v E/1926/2010.
Supreme Glazes Pvt. Limited OIO-13/VDR-II/SUPREMEGLAZES/DBRH/COMMR/2010 vi E/1927/2010.
Shailesh Dahyabhai Patel OIO-13/VDR-II/SUPREMEGLAZES/DBRH/COMMR/2010 vii E/1928/2010.
Dhulabhai Motibhai Patel OIO-13/VDR-II/SUPREMEGLAZES/DBRH/COMMR/2010 viii E/534/2011.
Vishwa Glass & Ceramics Private Limited OIO-32/VDR-II/MP/VISHWA/DBRH/ADJ/COMMR/2010 ix E/535/2011.
Pradip P Patel OIO-32/VDR-II/MP/VISHWA/DBRH/ADJ/COMMR/2010 x E/672/2011.
Prime Ceramics Pvt. Limited OIO-03/BRC-I/MP/2011 xi E/673/2011.
Rasikbhai Gordhanbhai Kanani OIO-03/BRC-I/MP/2011 xii E/674/2011.
Dhirajlal Hansrajbhai Bathani OIO-03/BRC-I/MP/2011 xiii E/751/2011.
Gibraltar Glass & Ceramics Pvt Limited OIO-04/BRC-I/MP/2011 xiv E/752/2011.
Krishnadas D Vachhani OIO-04/BRC-I/MP/2011 xv E/796/2011.
Belgium Glass & Ceramics Pvt Limited OIO-05/BRC-I/MP/2011 xvi E/797/2011.
Hitesh M Vachhani OIO-05/BRC-I/MP/2011 xvii E/798/2011.
Bhavesh M Vachhani OIO-05/BRC-I/MP/2011 xviii E/1016/2011.
Latin Rasayani P Limited OIO-09/BRC-I/MP/2011 xix E/1017/2011.
Vijay Organics OIO-09/BRC-I/MP/2011 xx E/1018/2011.
Ramson OIO-09/BRC-I/MP/2011 xxi E/1019/2011.
Mahendrakumar R Patel OIO-09/BRC-I/MP/2011 xxii E/11960/2013.
Spire Cera Frit Pvt Limited OIO-51/COMMR/SURAT-II/2013 xxiii E/11961/2013.
Angel Cera Coat OIO-51/COMMR/SURAT-II/2013 xiv E/11962/2013.
Mahendra Virchand Patel OIO-51/COMMR/SURAT-II/2013 xv E/12386/2014.
Zirconia Cera Tech Glazes OIO-AHM-EXCUS-003-COM-067-13-14 xvi E/12387/2014.
Pravinbhai Narshibhai Patel OIO-AHM-EXCUS-003-COM-067-13-14 xvii E/13289/2014.
Growmore Ceramics Pvt Limited OIO-AHM-EXCUS-003-COM-010-14-15 xviii E/13290/2014.
Harshabhai Chimanbhai Patel OIO-AHM-EXCUS-003-COM-010-14-15 xxix E/13646/2014.
Futura Ceramics Pvt Limited OIO-AHM-EXCUS-003-COM-021-14-15 xxx E/13649/2014.
Orient Glazes Limited OIO-AHM-EXCUS-003-COM-020-14-15 xxxi E/13650/2014.
Manickchand Nahar OIO-AHM-EXCUS-003-COM-020-14-15 xxxii E/13651/2014.
Manish Nahar OIO-AHM-EXCUS-003-COM-020-14-15 xxxiii E/13688/2014.
Ravikumar Chitrapu OIO-AHM-EXCUS-003-COM-021-14-15 xxxiv E/13720/2014.
Wellsuit Glass & Ceramic Pvt. Limited OIO-VAD-EXCUS-001-COM-24-14-15 xxxv E/13721/2014.
Balkrishna M. Thakkar OIO-VAD-EXCUS-001-COM-24-14-15 As the issues involved in all these appeals, except Srl No. (xviii) to (xxi) above) are same therefore, the same are being taken up for disposal under this common order. Extension of stay applications and stay applications are filed by some of the appellants in these appeals. After allowing the stay applications, regular hearing was held in these appeals on 06.04.2015 and 07.04.2015.
2. Sh. C. Hari Shankar (Senior Advocate) Sh. S. Sunil (Advocate), Shri Willingdon Christian (Advocate) and Shri J.C. Patel (Advocate) appeared on behalf of these appellants and also filed written submissions. Leading the arguments Shri C. Hari Shankar (Senior Advocate) brought the following facts on record as contained in the show cause notices issued to the appellants:-
(i) That in January 2008, DGCEI officers conducted certain investigating regarding large scale Central Excise duty evasion by Ceramic/vitrified tile manufactures of Gujarat, located in Morbi and Himmatnagar.
(ii) That as per the investigation conducted, these tile manufactures were indulging in large scale undervaluation and clandestine removal of the tiles manufactured.
(iii) That huge amount of extra cash was alleged to be received by the manufactures of Frit through Shroffs and Angadias. That this extra cash was generated by selling the Ceramic tiles at much higher prices than the printed MRP at which the tiles were sold by the dealers of Ceramic tiles. Part of the such extra cash amounts collected by the dealers and distributers was spent by the dealers to meet some undeclared expenses and the remaining cash amounts collected by the dealers of Ceramic tiles were either personally collected by the authorized representatives of the frit manufactures from the dealers or by frit manufacturers sales personnel during their visit to the dealers or through Shroffs and Angadias.
(iv) That the most common method used for collecting cash was through bank accounts of ICICI and HDFC Banks. That certain Shroffs opened bank accounts in the name of large number of fictitious trading firms upon the instructions of Shroffs and these amounts used to be handed over either the manufactures directly or to their dedicated persons.
(v) That in order to keep the manufacturing cost of Tiles low in the sale invoices, the manufacturers of tiles were also procuring a number of raw materials including Ceramic Glaze Frit, (Frit) by cash payments and not showing the actual value of the raw material in the books of accounts.
(vi) That after the searches conducted by DGCEI on 17.1.2008, all the manufactures of Tiles in Gujarat increased drastically the MRPs of vitrified/ glazed tiles.
(vii) That when the prices of Ceramic tiles were being raised, the price of Ceramic glazed frit was also raised by the manufactures of frit.
(viii) That the impugned orders-in-original hold that appellants have cleared/sold the frit prior to February/March 2008 by using different product codes to make it appear that there were various varieties of frit and these varieties were sold at different prices. That the same quality of frit was sold to lesser known tile manufactures at lower price but was sold at higher prices to reputed tile manufactures.
(xiii) That the Adjudicating authorities have relied upon one unofficial ledger recovered from M/s. Comet Ceramics (Comet)(A ceramic tile manufacturer) to establish that appellants have collected extra cash from the Ceramic Tile manufactures. That statement of Director of Comet recorded by the investigation allege that this unofficial ledger contained details of unaccounted cash paid to various raw material suppliers, including the appellants, out of the cash amounts collected from dealers of under valued Ceramic tiles.
(xiv) That as per the statements of personnel of M/s. Laxmi Tiles and Navdeep Ceramics, it is alleged by the investigation that the extra cash/amounts so collected were paid directly to the appellants on behalf of Comets dealers.
(xv) That Revenue has also placed reliance on two Pen Drives recovered from M/s. Sanyo Cera Tiles recorded (SANYO), which are stated to have been opened in the presence of Director of SANYO Cera Tiles under various Panchnamas. That one of these pen drives contained a folder AJTAK which is stated by the adjudicating authorities to include extra cash payments made to various frit manufactures to compensate undervaluation and also with respect to frit clandestinely removed. Even in one CD, stated to be produced by Director of SANYO, it was alleged to include payments shown to have been made to Spenta Ceremics but were not reflected in the ledger of Spenta and was also unaccounted payment to the appellants on behalf of SANYO.
(xvi) The orders-in-original also rely upon the consumption of natural gas used by the manufacture of frits for manufacturing one unit of frit. Revenue relied upon the statements of the manufactures of frit that for manufacturing 1MT of frit a specific quantity of Natural gas is required by frit manufacturers which is claimed by lower authorities to have been admitted by frit manufacturers. Applying the average quantity of Natural gas consumed it is estimated by Revenue that there is also huge clandestine removal of frit by the Frit manufactures which is claimed to be supported by the Ajtak Ledger maintained by SANYO.
(xvii) That it is also contended by Revenue that in the case of Belgium Glass Pvt. Limited vs. CCE, 55 units of electricity were required for manufacturing one MT of frit which according to investigation, is in consonance with the calculations done on natural gas consumption. Similar co-relation have been made for other appellants also with respect to gas consumed, electricity used and time taken for packing Frit into plastic bags.
2.1. After giving the above factual details and making the bench go through the impugned orders-in-original and remand order dated 31.3.2014 in appeal Nos. E/893 & 894/2011 of this bench, Learned Senior Advocate appearing on behalf of the appellants made the following submissions during the course of hearing as well as through written submissions filed from time to time:-
(i) That all the statements of the witnesses relied upon by the Adjudicating authority should be tested under an examination as per the express language of Section 9D (1) of the Central Excise Act, 1944 followed by cross-examination. That the said procedure has not been followed in any of these cases, which is obligatory as held by the following case laws:
(a) J and K Cigarettes Limited vs. CCE - [2009 (242) ELT 189 (Del)]
(b) Basudev Garg vs. CC - [2013 (294) ELT 353 (Del)].
(c) CCE, Allahabad vs. Govind Mills vs. CC - [2013 (294) ELT 361 (All.)]
(d) Arya Fibers Pvt. Limited vs. CCE - [2014 (311) ELT 529(Tri. Ahmd.)] It was strongly argued by the Learned Senior Advocate that if cross-examination of the key witnesses is not given as per Section 9D and the above judicial pronouncements, than those statements can not be relied upon documents and have to be discarded as having any evidentiary value.
(ii) That the statements given by the appellants were retracted later by affidavits during adjudicating proceedings and can not be relied upon.
(iii) That clandestine removal can not be held to be established if no enquiries are conducted regarding unaccounted raw materials purchased and utilization of such materials including transportation of such raw materials/ finished goods either in transit or in stock as held in the case of Arya Fibers Pvt. Limited (supra) and Gupta Synthetics Limited vs. Commissioner of Customs, Ahmedabad-II - [2014 (312) ELT 255 (Tri.)].
(iv) That the credibility of the pen-drives can not be taken for granted in view of the discrepancies in the Panchnamas and due to the facts that pen-drives were improperly packed and sealed as has come out during cross-examination of Shri S.K. Katiyar, Superintendent, DGCEI before the Adjudicating authority in remand proceedings of Wellsuit Glass & Ceramics Pvt. Limited vs. CCE & ST, Vadodara [2014 (304) ELT 618 (Tri. Ahmd.)].
(v) That data contained in the folder AJTAK can not be used for loading value of all the frit manufacturers due to improper Panchnama as held by Apex Court in A. Tajuden vs. UOI [2015 (317) ELT 17].
(vi) That cross-examination of the third parties like, Tile Manufacturers has not been allowed as per Section 9D of the Central Excise Act, 1944 and all those statements can not be relied upon as evidence in these proceedings in view of ;
(a) Raj Ratan Synthetics vs. CCE [2013 (297) ELT 63 (Tri)]
(b) Santosh Tobacco vs. CCE [2014 (311) ELT 365 (Tri)]
(c) Pan Parag India Limited vs. CCE [2013 (291) ELT 81 (T)]
(vii) That in the absence of cross-examination of the Director of SANYO, it will be legally improper to apply the data of Comet AJTAK and CD relied upon by the Adjudicating authorities.
(viii) That corroboration of an evidence can only be done on the basis of evidences which itself is credible and conclusive. That no inference can be drawn on the premises which are themselves inconclusive and based on conjectures, in view of:-
(a) Sitaram Sao vs. State of Jharkhand [2007 (12) SCC 630]
(b) R.K. Tomar vs. CC [2008 (228) ELT 232 (Tri.)] That evasion of duty cannot be worked out on the basis of Natural Gas Consumption only by making presumptions and assumptions as held in the case of Ondh Sugar Mills Limited vs. UOI [1978 (2) ELT J172)]
(ix) That it is a well settled principle now that there is no bar on the part of an assessee selling the same product at different prices to different customer as per the concept of transaction value under Section 4 of the Central Excise Act, 1944 as held in the case of Hindustan Petroleum vs. CCE [2005 (187) ELT 479 (Tri.)] which was also upheld by the Hon'ble Supreme Court [2006 (196) ELT A72]
(x) That the extra evidences obtained from pen-drives SANYO stands discredited by the facts which have emerged in cross-examination in the case of appeal filed by Wellsuit Glass & Ceramics Pvt. Limited. Learned Senior Advocate made the bench go through the cross-examination of Shri M. Patel, Director of M/s. Sanyo Cera Tiles Pvt. Limited, held on 29.10.2014 that he was only 12th standard pass and not very well conversant with English Language. That as per cross-examination of Shri V.M. Thakkar, Superintendent, DGCEI on 11.11.2014 in the case of Wellsuit Glass, the authenticity of the papers obtained from pen drive AJTAK is highly suspicious and can not be regarded as an authentic and proper evidence.
(xi) That as per Para 9.3.3 of the Order-in-Original No. 05/BRC-1/MP/2011 dated 23.3.2011, in the case of M/s. Belgium Glass & Ceramics Pvt. Limited (E/796/2011), the names of frit manufacturers were not written on the relied upon documents and only a bald statement is made that payments were made by the tile manufacturers to the frit manufacturers. Learned Senior Advocate brought to the attention of the bench contents of Para 9.3.3 of the adjudication order in the case of Belgium Glass & Ceramics Pvt. Limited to highlight that Rs. 38,95,868/- has been calculated by the investigation to have been collected and sent by Shroffs and Angadias for various frit manufacturers but it is not further determined as to how much was given to each frit manufacturer, which is a pre-condition for making additional or extra consideration to be added to the assessable value/ Transaction value under Section 4 of the Central Excise Act, 1944. That Revenue can not adopt any best judgment valuation method as suggested in Central Excise Valuation Rules to arrive at such additional consideration even if all the statements/ documents relied upon are presumed to be admissible and correct.
(xii) That quantity of Frit manufactured based on gas consumption is not scientific as appellants have also taken several steps to reduce the consumption of gas on the lines stated in Para 3.2 to 6 of the order passed this bench in the case of Wellsuit Glass & Ceramics Pvt. Limited vs. CCE & ST, Vadodara - (supra). Learned Senior Advocate made the bench go through the relevant paras of CESTATs order dated 31.3.2014 of this order to bring home the point that in Para 6 of this case law, CESTAT has already opined that the manner of calculating frit quantity manufactured based on gas consumption was not correct. It was his case that on this basis alone the appeals where clandestine removal are estimated, need to be allowed as further studies have not been done by the Revenue in any of these appeals,. It was also his case that calculations/ estimations made on quantity of electricity consumed in certain processes and packing based calculations of finished goods also give different figures as compared to the clearances estimated on natural gas consumption based calculations. It was also argued that there is no basis in presuming that electricity consumption would be uniform per MT of frit manufactured when appellant is manufacturing different verities of frit which need different rounds of firing. Learned Senior Advocate also pointed to the data in annexures to show cause notices that there is vide variation in use of electricity and gas consumption even as per records maintained by appellant, which gives authenticity to the gas consumption records of the appellants.
(xiv) That method of estimation of quantity of frit manufactured on the basis of time taken in filling and packing is unreliable and based purely on presumptions as estimated.
(xv) That cross-examination of the Director of SANYO in the remand proceedings clearly gives the evidence that data said to be taken from the pen-drives of SANYO is not reliable piece of evidence and can not be used for enhancing value.
(xvi) That in the absence of cross-examination of the relied upon witnesses the statements relied upon has to be discarded as proper piece of evidences.
(xvi) That in the realm of transaction value under Section 4 of the Central Excise Act, 1944, there could also be different sale prices for the same product, depending upon the quality of finished goods contracted, long term association with the buyers etc. That slight variation in selling prices can not be made as the basis for enhancing assessable value of transaction and that too at the highest of such transaction value.
(xvii) That no excess/ shortages of raw materials were found in any of the appellants factory and no finished goods were seized anywhere by the investigation. That there is no corroboration that excess raw material required for such clandestine activity was procured clandestinely and no unaccounted and excess cash was seized anywhere and all the buyers of frit have given identical statements. Learned Senior Advocate made the bench go through the statements of different buyers of Ceramic tiles/ raw material supplier to show uniformity in the language/ contents of the statements.
(xviii) That allegations are wrongly made by the Adjudicating authorities that only 7 to 8 raw materials are major and that only these major raw materials effect the price of the product. It was his case that the cost of minor materials (more than 20) used in making of frit can not be ignored as a minor raw material could be very costly and make a difference in the price of the finished frit and the ceramic tiles manufactured.
(xix) Based on the remand proceedings in the case of Wellsuit Glass & Ceramics Pvt. Limited vs. CCE (Appeal No. E/13720/2014) case, learned Senior Advocate appearing on behalf of all the appellants also made the following submissions:-
(a) That cross-examination was not extended of all the witnesses in spite of the specific directions by this Bench;
(b) That tile manufacturers have stated that their statements were not voluntary and that they had neither made unaccounted purchases of frit nor paid any additional consideration to M/s. Wellsuit Glass. In this regard appellant relied upon the case law, A.Tajuden vs. UOI [2015 (317) ELT 177 (SC)]
(c) That evidential value of AJTAK printout taken from pen-drives of SANYO and CD can not be admitted as per cross-examination done in the de-novo proceedings of Wellsuit Glass and the facts which came into light.
(d) That quantity of natural gas consumed for making 1MT of frit was based only on a single days experimentation when only one product code was manufactured. That there is no basis to presume that the quality determined this way will be applicable to all the 12 months of a year for different product codes, different seasons etc. Learned Advocate also argued that pressure of gas, quality of gas and its calorific value may also vary from time to time as indicated in the grounds of appeal.
(e) That no finding has been given by the adjudicating authority to the aspect of modernization etc. undertaken by the appellants to reduce gas consumption as mentioned in Para 3.2 and 6 of the remand order dated 31.3.2014, in the case of Wellsuit Glass & Ceramics Pvt. Limited vs. CCE & ST, Vadodara (supra). It was specifically submitted by the Advocate of the appellants that such modernization/ changes were also undertaken by other manufacturers to reduce the gas consumption for better market competition, profitability and survival. It was strongly argued by the learned Senior Advocate that quantity for clandestine clearances can not be made on such flimsy, hypothetical and presumptuous grounds.
(f) That neither any expert opinion was sought from a Chartered Engineer nor any comparative study of units was ever conducted to work out quantity of natural gas required to produce a particular quantity of frit.
(g) That the Transaction Value under Section 4 of the Central Excise Act, 1944 can not be fixed on the basis of averaging and approximation as made by the Revenue because it is not a case of best judgment valuation under the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. That for determining the capacity of frit manufacturing Kilns, no notification under Section 3A of the Central Excise Act, 1944, has been issued to calculate deemed clearances as attempted by the investigation.
(h) That remand order in the case of Wellsuit Glass & Ceramic Pvt. Limited vs. CCE - [2014 (304) ELT 618 (Tri.)] has not been challenged by the Revenue in any manner.
2.2 Shri J.C. Patel (Advocate) appearing on behalf of his clients borrowed the arguments made by Shri Hari Shankar, Senior Advocate and also filed written submissions. It was also his case that some scribbling pads/ private ledgers can not be taken evidences of cash transactions as such documents are commonly use in all offices. That no cross-examination of the author of these pads/ ledgers in the case against M/s. Nahar Colours and Coatings Limited & Others was extended. Learned advocate also relied upon the case of J.K. Cigarettes Limited vs. CCE [2009 (242) ELT 189] in the written submissions to argue that cross-examination of witnesses was not given as per Section 9D of the Central Excise Act, 1944 which is akin to Section 138B of the Customs Act, 1962. That the increase in the price of frit after April 2008 was because appellants started manufacturing DFFF (Double Fast Firing Frit) which is higher quality frit. That, same product code can also be sold at different transaction values depending upon the market conditions, relationships with the client and assessable value of the highest of such transaction values can not be made as the basis of valuation under the provisions of existing Section 4 of the Central Excise Act, 1944. That other factors for increase in price of frit after January 2008 are:-
(a) Increase in the price of borax and boric acid, which are also imported by appellants.
(b) Exchange rate increased from Rs. 44.00 to Rs. 50.00 per Dollar.
(c) Increase in raw material cost.
2.3 Shri Willingdon Christian (Advocate) on behalf of his clients adopted the arguments made by other advocates and also filed written submission. In the written submission it was argued that the records of M/s. Prime Ceramics Pvt. Limited [Appeal No. E/672-674/2011] ware audited in February 2006, June 2007, September 2009 and no irregularity in the records and documents was ever noticed.
3. Shri P.R.V. Ramanan (Special Counsel) appearing on behalf of the Revenue, during the course of hearings as well as through written submissions, made the following arguments:-
(i) That the cases against frit manufacturers and the present appellants were the off shoot of investigations initiated by DGCEI against the ceramic/ vitrified tiles manufacturers in January 2008. That during the investigation against the tile manufacturers, it was noticed that frit manufacturers are indulging in large scale undervaluation and clandestine removals and that extra cash generated in the sales of ceramic tiles was diverted by the traders of ceramic tiles to the frit manufacturers and that such tile manufacturers also used force against the departmental officers for which police cases were also registered against the tile manufacturers separately.
(ii) That the tile manufacturers were also purchasing raw materials at lower prices to keep the cost of tiles low. That Frit was one such raw material for tile manufacturers which was obtained at lower invoice price and frit manufacturers were compensated by cash payments through Shroffs/ Angadias etc.
(iii) That as soon as the cases were booked against the appellants the price of the frit and tiles were increased drastically by the respective class of manufactures.
3.1 That the cases of undervaluation/ clandestine removals have been made against the appellants on the basis of private records such as ledgers maintained manually or in the pen drives, private notebooks/ diaries or parallel invoices. That 68 manufacturers of ceramic tiles have admitted during the course of investigations that they were receiving frits at a lower invoice price and the differential amounts over and above the invoice price were sent to frit manufacturers through hawala etc. That frit manufacturers have also admitted undervaluation and clandestine removal and receipt of cash over and above the invoice prices. That statements of dealers, Shroffs and Agandias also corroborate that excess cash was handed over to the frit manufacturers either through Shroffs/ Angadia or directly through individuals. That these statements clearly indicate that charges of undervaluation and clandestine removal are not only made on statements but also on the basis of corroborative evidences in the form of documents/ ledgers maintained by the appellants.
3.2 That statements of concerned persons have been retracted through affidavits and such retractions can not be accepted for the following reasons:-
i) Cross examination of witnesses cannot be claimed as a matter of right.
ii) Noticees took an inordinately long time to file their reply thus delaying the adjudication process.
iii) No satisfactory case was made out justifying cross examination o the individual witnesses.
iv) In most of the cases, the witnesses produced the records maintained by them or their firm and merely explained the entries made therein. Thus, they were only providing information on true facts relevant to the cases.
v) No counter evidence was produced to rebut such documentary evidence.
vi) Statements of manufacturers/dealers of tiles and shroffs in so far as it related to frit were never retracted.
vii) Noticees or their representatives had unequivocally accepted the veracity of the documentary evidence and the statements of several key witnesses, who vouched for the veracity and correctness of the documents.
3.2.1. That the grounds on which cross examination of witnesses has been rejected are valid in asmuch as most of the witnesses have provided documents/ records maintained by them or their firm and merely explained the entries made therein. That witnesses were only providing information on true facts relevant to the cases and in such circumstances, grant of cross-examination was really not necessary.
3.2.2 That notwithstanding the above submissions, a reference to the Order dated 31/3/2014 of this Honble Bench in the case of Wetsuit Glass and Ceramics P Ltd. Would be relevant here. In that case with similar facts, the matter was remitted for de novo adjudication after affording the opportunity of corss-examination. Transcripts of cross examination show that the entire cross examination was only w.r.t the statements. No evidence was produced that the statements were taken under duress, threat or inducement. Further, affidavits purportedly retracting from the statements were also produced only after a lapse of 8 to 9 months. That for the records and documents recovered from Sanyo or others there is no dispute raised by the appellants nor its veracity doubted and accordingly entire request for cross examination of witnesses is without any substance.
3.2.3 That it is pertinent to note that during the hearings held on 3/7-4/2015, the appellants did not press for remanding the matters for the purpose of affording cross examination. It was suggested that the statements are to discarded. There is no legal or factual justification for the same. As argued below.
3.2.4 That Adjudication authorities have held that the statements given by various witnesses, including Noticees, were made voluntarily and are admissible in evidence for the following reasons:
(i) Revenue had discharged its initial burden of proof by providing both documentary and oral evidence explaining the chain of events. Noticees also admitted the facts and accepted the statements as correct and true to facts.
(ii) No counter evidence has been produced by the Noticees to show that the statements were contrary to facts.
(iii) Statements of manufacturers/dealers of tiles and shroffs in so far as it related to frit were never retracted.
(iv) There is no dispute as to the recovery documents from the Noticees, wherever such recovery was made.
(v) No evidence has been produced to establish that the statements were given under threat or duress. That in response to some inconvenient questions, the manufacturers maintained silence and in some cases, the deponents refused to offer any explanation to a fact which stared at their face. This clearly indicated that they were not under duress or threat to answer in a particular way. The argument that all the persons whose statements were recorded were under threat or duress or coercion is indeed far-fetched, given the fact that the number of such persons exceeded 70. Nor can it be said that draft replies were kept ready by the investigating officers since many facts were within the exclusive knowledge of the persons who gave the statements. In this context, reference may be made to Para 6 at page 9 of the Appeal filed in the case of Belgium. There is no specific allegation of threat/coercion.
(vi) Statements were recorded by different officers and on different dates spread over a long period of time.
(vii) Facts as brought out in the statements find corroboration in the documentary evidence.
(viii) It was purported in quite a few cases that affidavits stating the inculcator portions of the statements were not true and were given under duress, were executed/affirmed soon after the statements were given. Such purported retractions, in so far as they were not submitted to the concerned authorities soon after they were purportedly executed/affirmed, cannot be taken as made in time. Since these affidavits were produced at the earliest along with defense replies.
(ix) That many cases, the noticees/their representatives denied having executed any affidavit when they were asked a specific question about the same in subsequent statements.
(x) That some cases (e.g. Belgium Glass) discrepancies were also noticed in the affidavit.
3.2.5 That the following case laws support the argument of the Revenue that retractions made by the appellants in the present proceedings are not acceptable.
(a) M/s Agarwal Overseas Corporation vs. Commissioner of Customs, Mumbai, reported in [2009 (248) ELT 242 (T-Mumbai)].
(b) M/s Em Pee Bee International Vs Commissioner of Central excise, Chennai, reported in 2008 (229) ELT 704 (Tri. Chennai),
(c) CCE, Mumbai vs. Kalvert foods India Pvt. Limited 2011 (270) E.L.T. 643 (S.C.), (d Thermotech vs. Commissioner of Central Excise, Delhi ) - [2013 (293) E.L.T. 712 (Tri. Del].
3.2.6 That as much as the provisions of section 9D of CE Act have not been complied with by the adjudicating authorities in all cases, the statements of various persons relied upon have to be eschewed from the following consideration.
(i) That in the light of Para 12 of the judgment of Honble High Court of Delhi in J & K. Cigarettes Limited - [2009 (242) ELT 189 (Del)], It is true that even in adjudicating proceedings, Section 9D can be utilized by the adjudicating authorities. This provision makes it clear that a statement given by a person who is dead or who cannot be found or who is incapable given evidence or who is kept out of the way by the adverse party or whose presence cannot be secured without unreasonable delay or incurring unreasonable expense. Thus, this is essentially a facilitating measure to help achieve finality as well as justice in any proceedings given the specified set of circumstances. Otherwise it could be argued that in such circumstances the concerned statement should be discarded as evidence.
(ii) Clause (b) of sub-section (1), on the other hand provides a tool to the Court to admit a statement in evidence in the interest of justice on the basis of examination of the person who gave the statement as witness. Thereupon, such a statement shall become relevant. The inference drawn of witness, followed by a cross examination, and admission of evidence before the same is held as relevant is not sound. It is well accepted that in adjudication proceedings there is no requirement of examination-in-chief and admission of each piece of evidence.
(iii) In the instant cases, Section 9D has not been invoked. But for reasons recorded in the Orders the adjudicating authorities have formed an opinion to deny cross examination of witnesses. While this opinion may be set aside by the appellate authority for violation of principles of natural justice but denial of cross-examination cannot by itself render statements recorded under Section 14 of CEA, invalid. Nor can the statement be eschewed from consideration. The Apex Court has held more than once that statements under Section 108 of CA, 62 (or section 14 of CEA, 44) are in the nature of an admission.
(iv) That after explaining the provisions of section 9D, The Honble Delhi High Court has in the case of Basudev Garg - [2013(294) ELT 353 (Del)] and the Honble Tribunal in the case of P.M.S International Pvt. Limited - [2014 (3090 ELT(165) have remitted the case for fresh consideration by the Commissioner/ Tribunal but have not eschewed consideration of the evidence. Therefore, if denial of cross examination is the bone of contention, the appellant can seek a remand but there is no case for discarding the statement as not relevant.
3.3 That an important issue common to all the Appeals is the admissibility of the Ledger called Ajtak maintained by the manufacturer of tiles, namely, Sanyo Cera Pvt. Limited, (SANYO) as evidence. It is argued by the appellants that in view of the discrepancies in the Panchnamas drawn at various points of time this piece of evidence merits rejection. It is submitted that the Pen-drive seized from the premises of SANYO was in a sealed envelope is evident from the second Panchnama and hence non mentioning of the Pen-drive being kept in a sealed envelope in the first Panchnama is only an inadvertent omission. It does not constitute an infirmity. Besides, sealing need not always be with lac. It may also be conceded that some confusion has arisen in the name of the Panch witness but an important fact to be reckoned with is that when cross examined in the de-novo adjudication proceedings, relating to Wellsuit Glass and Ceramics Pvt. Limited, Shri Mital Bhikabhai Patel, Director of SANYO, did not specifically dispute the recovery of the Pen-drive from SANYO or raise any doubt about the Pen-drive having been substituted or dispute the content of the Pen-drive. Nor has he specifically denied the existence of the Ajtak Ledger or disputed any entries even after 6 years from the recording of the statement. In these circumstances the so called shortcomings in the Panchnamas pale into insignificance. Printouts from the pen-drive ran to more than 1000 pages of which the Ajtak ledger was only about 90 pages and entries could be found against 14 frit manufacturers. It is also seen that this Ledger contains entries relating to purchases of many other raw materials. It is clearly a record kept by Sanyo in the normal course of business. Comparison with invoices issued by Frit manufacturers establishes the authenticity of Ajtak. Thus, the AJTAK Ledger retains its evidentiary value. Further, incriminating private records were recovered from 8 out of 14 frit manufacturers. Entries therein corroborated the practice of undervaluation and clandestine activity as revealed by the AJTAK ledger. In respect of 2 other frit manufacturers records similar to AJTAK were seized from M/s. Comet Ceramics. Hence, the present cases are not dependent only on entries in the AJTAK ledger.
3.3.1 That valuation provisions since 01.07.2000 entail determination of transaction value for each clearance. Since such information is not available in the instant case the values declared in the invoices have not to be accepted. That as per Section 4(1) (a) of CEA, 1944, the value for the purpose of assessment on each removal of the goods shall in the case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer are not related, and the price is the sole consideration for the sale, be the transaction value. By definition, a necessary concomitant of the transaction value is that the price should be the sole consideration for the sale. Thus, where additional consideration by way of cash flowed from the buyer to the assessee and the same was required to be paid by the buyer to the assessee, over and above the invoice price, one of the necessary conditions for the existence of the transaction value at the factory gate is not satisfied. Further, the price indicated in the invoice is not the price actually paid for each transaction, as established by the evidence lent by the Revenue. In other words, in the present cases, the transaction values as envisaged under Section 4(1) (a) of CEA, 1944 did not exist. The amounts recovered by all the frit manufacturers over and above the invoice prices should be regarded as additional consideration and added to the invoice process as has been done in the individual cases herein.
3.4. That the question of estimating actual production of frit by taking natural gas consumption per 1 MT of frit as the norm came up for consideration in the case of Wellsuit. Significantly enough, this Honble bench has, in its order dated 31.03.2011 [2014 (304) ELT 618 (Tri.-Ahmd)] expressed no objection to consider the norm of gas consumption to arrive at the production of frit. The Honble bench has only directed the respondent to conduct more representative studies on the gas consumption on the predominant frit codes manufactured by Wellsuit. By these directions the Bench has effectively approved the basic approach of faking gas consumption as a criterion to estimate production of frit.
3.5 That quantum of clandestine manufacture and clearance of frit has been worked out on the basis of average consumption of natural gas supplied as agreed to by the frit manufacturers. That out of 14 frit manufacturers units estimation on the basis of natural gas consumption/ PMT has been applied only with respect to 10 appellants as follows:-
S No. Appellant Criteria adopted per 1 MT of frit
1.
Supreme Consumption norm of 350 SCM (Lowest Avg.) based on data furnished was considered. This matched with the norm suggested by the management.
2. Vishwa Consumption norm of 273.8 SCM as suggested by the management was considered. Consumption norm SCM (Lowest Avg.) based on data furnished however was 263 SCM.
3. Prime Consumption norm of 340 SCM (Lowest Avg.) based on data furnished was considered. This matched with the norm suggested by the management.
4. Gibraltar Consumption norm of 258 SCM (Lowest Avg.) based on data furnished was considered. The norm suggested by the management was 280.
5. Belgium Consumption norm of 450 SCM (Lowest Avg.) based on data furnished was considered.
6. Growmore Consumption norm of 484 SCM (Lowest Avg.) based on data furnished was considered. The norm suggested by the management was 500.
7. Futura Consumption norm of 307.34 SCM based on observing a days production in respect of selected varieties of frit was considered. The norm suggested by the management was 310.
8. Wellsuit Consumption norm of 389 SCM based on test run in respect of selected varieties of frit. This was accepted by the management. Lowest Average consumption as per data furnished was seen to be 318 SCM and the same was taken as the norm.
9. Zirconia Consumption norm of 438 SCM (Lowest Avg.) based on data furnished was considered. The norm suggested by the management was 480.
10. SVM Cera The norm suggested by the management was 280. Consumption norm of 263 SCM (Avg.) based on test run in respect of selected varieties of frit was considered for adoption.
3.5.1 That varying criteria have been adopted for estimating production of frit. Consumption norm based on test run results was applied in the case of Futura (7) and SVM Cera (10). In the case of Vishwa (2) the norm suggested by the management was applied. In all other cases, Lowest Average consumption as per data furnished was applied; in fact in respect of S. Nos. 1,2,5,6,7 and 10, this norm matched with the estimate given by the management or was close to it. Apparently, the factors applicable to each factory have been taken into account since reported consumption was as per verifiable data obtained from GAIL/ONGC etc. If one uniform criterion is to be applied then the Lowest Average consumption as per data furnished would appear to be the appropriate one.
3.6 That in view of the principles of Preponderance of Probability and the available documentary evidences, all the orders passed by Adjudicating authority are required to be upheld as per the following case laws:-
(i) Maharashtra State Board of Secondary & Higher Education vs. K.S. Gandhi & Others [1991 (2) SCC 716]
(ii) D. Bhoormull [1983 (13) ELT 1546 (SC)]
(iii) Shah Guman vs. State of Andhra Pradesh [1983 (13) ELT 1631 (SC)]
(iv) Manilal Bhanabhai Patel vs. UOI [1992 (60) ELT 99 (Guj.)]
(v) Rishikesh Singh vs. The State of Uttar Pradesh - [AIR 1970 All 51]
(vi) Gulabchand Silk Mills vs. CCE, Hyderabad-II [2005 (184) ELT 263 (Tri. Bang.)]
5. Heard both sides and perused the case records and the written submissions filed by either sides. The issues involved in appeals No. E/1016 to 1019/2011 mentioned at Sr. No. (xviii) to (xxi) of Para 1 is regarding clubbing of clearances of more than one units on the basis of consumption of natural gas connection pertaining to one unit. This aspect was not argued during the course of hearing. Though special Counsel appearing on behalf of the Revenue has filed written submission on these appeals but it is observed from the case records that none appeared on behalf of these appellants and no written submissions are filed. As the issue involved in appeal Nos. E/1016 to 1019/2011 is different and not argued during hearing, therefore, the same are ordered to be separated from this order for fixing another date for hearing by issuing notice to both sides.
5.1 Appeals Nos. E/1926 to 1928/2010, E/534 to 535/2011, E/672 to 674/2011, E/751 to 752/2011, E/796 to 798/2011, E/13289 to 13290/2014, E/13646 to 13647, E/13720 to 13721/2014 and E/12386 to 12387/2014 are those where clandestine clearance of goods have been worked out on the basis of average consumption of natural gas used in the manufacture of Frits. In addition, value of grit manufactured by these manufacturers is proposed to be enhanced alongwith clandestine removal of frit on the basis of private records, pen-drives and CD recovered from the tile manufacturers. In addition personal ledger recovered from a tile manufacturers M/s. Comet and certain writing pads and diaries recovered from the tile manufacturers.
5.2 The issue involved in Appeal Nos. E/1851 to 1954, E/11960 to 11962/2013, E/13649 to 13651/2014 is only regarding enhancement of value of frit based on the pen-drive recovered from SANYO and writing pads recovered but no clandestine clearances have been estimated by investigation on the basis of average consumption of natural gas as done in the case of appeals mentioned in Para 5.1 above.
6. In these proceedings the following issues are required to be deliberated upon:-
(i) Whether the appellants mentioned in Para 5.1 above have indulged in clandestine manufacture and clearance of Ceramic Glazed Mixture (Frit), in view of the adjudication orders passed the adjudicating authorities on the basis of natural gas consumption norms per metric ton?
(ii) Whether the appellants mentioned in Para 5.1 and 5.2 have indulged in undervaluation of frit and also clandestinely cleared frit as per a personal ledgers retrieved from a pen-drive recovered from SANYO and other personal records and pen-drives from the ceramic tile manufacturers read with their statements ?
(iii) Whether the adjudicating authorities were justified in denying cross-examination of witness under the provisions of Section 9D of the Central Excise Act, 1944 read with the judicial pronouncements on the issue?
7. For the purpose of point No. 6(i) above and clandestine removal of frit by the frit manufacturers adjudicating authorities have mainly relied upon average consumption of natural gas for manufacturers one MT of frit by taking data either from the appellants or by conducting some gas consumption studies. Besides certain studies/ data with respect to average packing time taking for filling of finished goods (Frit) in the plastic bags and consumption of electricity units per MT of Frit on the basis of appellants records, have also been used to support that clandestine manufacture and clearances have been effected by the concerned appellants.
8. As per Para 3.5 above, clandestine manufacture and clearance of frits by the appellants have been estimated by taking different gas consumption norms which either got suggested by the appellant or worked out by the investigation. Average gas consumption from 263 SCMs to 484 SCMs were fixed for different appellants and were considered by the Adjudicating authorities for calculating/ confirming the demands and imposing penalties. Following observations have been made by the Adjudicating authority in the case of Belgium Glass & Ceramics Pvt. Limited (Appeal Nos. 796 to 798/2011) in paras 24.4.4, 24.5.4 and 24.5.5 while passing OIO No. 05/VRC-1/MP/2011 dated 23.03.2011 and justifying the calculations/ estimations made by Revenue:-
24.4.4. Thus, even by considering that 5 nos. of kiln operated by M/s. Belgium during the entire past period, were of lowest size, viz. 146x6, each one of which is having 4000 SCMs of natural gas consumption per day of 24 hours, the net output of ceramic frit per kiln per day by consuming 450 SCMs of gas would not be less than 8.888 MTs. In other words, the minimum monthly production of frit per kiln would be at least 266.640 NTs, and the total minimum monthly production for all the 5 kilns would not be less than 1333.200 MTs.
24.4.5. The above production of M/s. Belgium is fully substantiated from the Annexure F referred supra, wherein it is observed that during a period of 18 months out of the total 65 months covered therein, they have reported production of frit exceeding the quantity of 1300 MTs. In fact, during the month of July 2005, the recorded production quantity was 2574.500 MTs with a total gas consumption rate of 370.557 SCM per MT, which clearly reveals that the aforesaid calculated capacity of 1333 MTs is the barest minimum. Scrutiny of the chart, however reveals that during 15 months, they have declared production quantity less than 1000 MTs per month even with much higher rate of gas consumption. During 32 months, the total quantity declared by them in their statutory records was less than 1275MTs wherein also the gas consumption was exceeding the average requirement of 450SCM per MT.
24.5.4. Thus the above Panchnama proceedings, unambiguously revealed that the normal time required for manufacturing 50 Kgs of frit was 8 minutes, i.e. 100 Kgs in 16 minutes and 1 MT in 2 hours 40 minutes. This reveals that one Kiln can manufacture 10 MT of frit per day of 24 hours, which means that the total quantity of frit produced by M/s. Belgium with their 5 Kilns is 50MTs per day. Thus, it is observed that normal quantity of frit which could be produced in the factory of M/s. Belgium by using 5 Kilns at a time, would be 1500MT per month.
24.5.5 Comparison of the monthly production of frit accounted for by M/s. Belgium in their statutory records as appearing in Col. No. 2 of the Annexure-F vis-`-vis the actual quantity which would have produced by them in their factory as discussed above, fully substantiates large scale suppression of production by them. The fact that the quantity recorded in their statutory records during some months, exceeds the aforesaid average quantity of 1500MT per month, indicates that the physical verification conducted at the factory and inference drawn in respect of their production capacity is factual. In order to have an idea on the quantum of the suppression of production by M/s. Belgium Col. No. 7 has been added to the Annexure-F which indicates the difference of quantity accounted for in the official records as against the average production of 1500MT per month. The chart indicates that except during a period of 7 months, the monthly average production noticed during the aforesaid Panchnama dated 26.09.2009 exceeded the quantity accounted for by M/s. Belgium in their statutory records. 8.1 From the above findings of the adjudicating authority gas consumption of 450 SCM per MT of frit manufacture has been arrived at for M/s. Belgium Glass & Ceramics Pvt. Limited which according to Revenue will gave a capacity of 1333.2 MTs per month to that appellant. In Para 24.5.4 and 24.5.5, the adjudicating authority observed that the normal quantity of frit that could be manufactured by this appellant will be 1500MTs per month. It has also been fairly mentioned by the adjudicating authority that in certain months the production of this appellant was also more than 1500MT. Adjudicating authority has only seen one side of the coin that a production of more than 1500MT is possible, therefore a capacity of around 1300MTs is justified. The other side of coin will be that appellant has also reflected a quantity of more than 1500MTs of Frit manufactured per month in the records. Such a depiction in the books of accounts gives a certification to the correctness of the data maintained by the appellant. The very fact that using gas consumption method and time taken for packing finished goods adopted by the lower authorities gives different estimations of manufacture and clearances by this appellant, the same can not be taken as a correct/ dependable method for calculating clearances and is also not prescribed. In the case of Belgium Glass & Ceramic Pvt. Limited, as per Annexure-F to the show cause notice dated 08.10.2009, gas consumptions of 383.715SCM and 321.959 SCM for manufacturing one MT have also been indicated in the records of the appellants alongwith higher consumption of gas. It is not understood as to why an arbitrary figure of 450SCM per MT is required to be taken for estimating the production/ clearance of finished goods Frits. In the same Annexure-F the units of electricity consumed in certain months is less than 55 units and is even as low as 40.153 units. The above data of the appellant contained in Annexure-F to the show cause notice dated 08.10.2009 reflects that records maintained by this appellant are genuine and correct. There is no corroborating evidence of excess/ short raw materials of frit procured clandestinely by this appellant or any of the other appellants. There is no seizure of clandestinely removed goods from any of the appellants or any excess stock of finished goods. No cash has been seized from any of the premises searched by the Revenue when crores of cash has been alleged to have been transferred to the appellants across the country. There is also no evidence of excess procurement of raw materials. It is also claimed by the appellants that calorific value of the gas supplied by GAIL vary in GCV (Gross Calorific Value) and NCV (Net Calorific Value) which also effect consumption of gas alongwith the type of frit grade manufactured. It is observed from the ground (d), of the grounds of appeal filed by M/s. Belgium Glass & Ceramic Pvt. Limited, in the case of Belgium that such documentary evidences of gas having different GCV and HCV exist on records. This argument has been brushed aside by the adjudicating authority that Shri Piyush Makadia, Director of the appellant has agreed to consumption of 450SCM/PMT (plus/minus) 10% gas consumption. The above calculations are thus based on statement of Shri Piyush Makadia, Director reproduced in OIO dated 23.03.2011 at Paras 53 & 54. However, such statements can not be relied upon unless the cross-examination of the witnesses is extended to the appellants.
8.2 In the remaining cases also where clandestine clearances have been estimated on the basis of natural gas consumption, there is no evidence of excess raw material purchased by the appellants. No shortages/ excess of raw materials or finished goods have been detected any where during the investigations. In none of the cases there is any seized cash or seizure of clandestinely removed finished goods during transportation from the factory premises of the appellants. In this regard appellants have relied upon the case laws of Arya Fibers Pvt. Limited vs. CCE, Ahmedabad-II [2014 (311) ELT 529 (Tri. Ahmd.)] and Gupta Synthetics Limited vs. CCE, Ahmedabad II [2014 (312) ELT 225 (Tri. Ahmd.)]. Para 38 and 40 of the case law of Arya Fibers Pvt. Limited vs. CCE Ahmedabad-II is relevant and is reproduced below:-
38.?It was, therefore, the submission of the ld. Senior Advocate that, in three cases cited by the ld. Special Counsel for the Revenue, this Tribunal and Honble High Court of Gujarat had taken a view that there was no need to prove such clandestine clearance with mathematical precision. These were cases where evidence was available regarding unaccounted duty paid goods being found, shortage of finished goods found and evidence regarding supply of raw materials and receipt of commission by brokers, which were all tangible evidence of clandestine clearances. It was further submitted by the ld. Senior Advocate that the cases cited by him were cases where no such evidence was available at all and the law laid down as applicable to such cases, to which category the present case belongs.
40.?After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well-settled that, 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;
(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. Needless to say, a precise enumeration of all situations in which one could hold with activity that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. 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 be responsible officials of the manufacturer or even of its Directors/partners who are not even permitted to be cross-examined, as in the present case, without one or more of the evidences referred to above being present. In fact, this Bench has considered some of the case-law on the subject in Centurian Laboratories v. CCE, Vadodara [2013 (293) E.L.T. 689]. It would appear that the decision, though rendered on 3-5-2013, was reported in the issue of the E.L.T., dated 29-7-2013, when the present case was being argued before us, perhaps, not available to the parties. However, we have, in that decision, applied the law, as laid down in the earlier cases, some of which now have been placed before us. The crux of the decision is that reliance on private/internal records maintained for internal control cannot be the sole basis for demand. There should be corroborative evidence by way of statements of purchasers, distributors or dealers, record of unaccounted raw material purchased or consumed and not merely the recording of confessional statements. A co-ordinate Bench of this Tribunal has, in another decision, reported in the E.L.T. issue of 5-8-2013 (after hearings in the present appeals were concluded), once again reiterated the same principles, after considering the entire case-law on the subject [Hindustan Machines v. CCE [2013 (294) E.L.T. 43]. Members of Bench having hearing initially differed, the matter was referred to a third Member, who held that clandestine manufacture and clearances were not established by the Revenue. We are not going into it in detail, since the learned Counsels on either side may not have had the opportunity of examining the decision in the light of the facts of the present case. Suffice it to say that the said decision has also tabulated the entire case-law, including most of the decisions cited before us now, considered them, and come to the above conclusion. In yet another decision of a co-ordinate Bench of the Tribunal [Pan Parag India v. CCE, 2013 (291) E.L.T. 81], it has been held that the theory of preponderance of probability would be applicable only when there are strong evidences heading only to one and only one conclusion of clandestine activities. The said theory, cannot be adopted in cases of weak evidences of a doubtful nature. Where to manufacture huge quantities of final products the assessee require all the raw materials, there should be some evidence of huge quantities of raw materials being purchased. The demand was set aside in that case by this Tribunal. 8.3 Appellants have also relied, inter-alia, on the judgment of Allahabad High Court in the case of CCE, Meerut-I vs. RA Castings Pvt. Limited [2012 (26) STR 262 (All.)], which is upheld by the Hon'ble Supreme Court as reported in 2011 (269 ELT A108. The facts of this case and the orders of the Allahabad High Court is as follows:-
[Order]. - These appeals under Section 35-G of the Central Excise Act, 1944 (hereinafter referred to as the Act) are against the order of the Tribunal dated 19-6-2008 [2009 (237) E.L.T. 674 (Tri. - Del.)], by which the Tribunal has allowed the appeals of the respondents and quashed the order passed by the adjudicating authority.
2.?The Respondent Nos. 1 and 2 were involved in the manufacturing of MS ingots and in respect thereof had maintained the books of account as provided under the Central Excise Rules and were furnishing the returns and paying the central excise duties. The Superintendent issued the show cause notices dated 1-12-2006 asking the respondent to show cause why the demand towards central excise duty may not be confirmed for the period from 2001-02 to 2004-05 by invoking the proviso to Section 11A(1) of the Act and why the penalty should not be imposed under Rule 25(1) of the Central Excise Rules, 2002 read with Section 11AC of the Act. Various allegations have been made in the show cause notices and from the perusal of the show cause notices it appears that the excess production has been estimated on the basis of the higher electricity consumption. The respondents filed their reply. The Commissioner of Central Excise, Meerut-I, vide its order dated 30-7-2007 has confirmed the demand against the respondent nos. 1 and 2 and also imposed the penalty on the respondent nos. 1 and 2 and on other respondents alleged to have been involved in the clandestine removal of the goods.
3.?Being aggrieved by the impugned orders, the respondents filed appeals before the Customs, Excise & Service Tax Appellate Tribunal, New Delhi. The Tribunal observed that it is settled principle of law that the electricity consumption can not be the only factor or basis for determining the duty liability, that too on imaginary basis, especially when Rules 173E mandatorily requires the Commissioner to prescribe/fix norm for electricity consumption first and notify the same to the manufacturers and thereafter ascertain the reasons for deviations, if any, taking also into account the consumption of various inputs, requirements of labour, material, power supply and the conditions for running the plant together with the attendant facts and circumstances. The Tribunal further observed that no experiment have been conducted in the factories of the appellants for devising the consumption norms of electricity for producing on MT of steel ingots. Tribunal also observed that the electricity consumption varies from one heat to another and from one date to another and even from one heat to another within the same date. Therefore, no universal and uniformly acceptable standard of electricity consumption can be adopted for determining the excise duty liability that too on the basis of imaginary production assumed by the Revenue with no other supporting record, evidence or document to justify its allegations. The Tribunal has also considered the report of Dr. Batra, which has been relied upon for making the allegations that there was higher electricity consumption. It appears that Dr. Batra in his report has observed that for the production of 1 MT of steel ingots, 1046 units electricity required. 8.4 In view of the settled proposition of law laid down above, estimation of quantity of goods manufactured and clandestine removal of goods by the appellants can not be slapped on the basis of averages arrived and calculated based on norms of gas consumption in manufacture of 1 MT of frit. It is rightly contested by the appellants that frit manufactured is not covered by any notification issued under Section 3A of the Central Excise Act, 1944 where Compounded Levy has been prescribed and capacity of the unit is required to be fixed on gas consumption basis, as done by the Revenue. It is observed that Revenue has attempted to adopt an estimation method for demanding duty and proving clandestine removal which is not prescribed by law.
8.5 In the case of appellant M/s. Wellsuit Glass & Ceramics Pvt. Limited - [2014 (304) ELT 618 (Tri. Ahmd.)], this Bench remanded the case to the Adjudicating authority to get, inter-alia, some more studies done on the gas consumption per metric tonne of different grades. It has been argued by the Revenue that the studies suggested by the Bench are not possible now and such studies are also not possible with respect to the other appellants. Para 3.2 and 6 of the order passed by this Bench in the case of M/s. Wellsuit Glass & Ceramics Limited (supra) are reproduced below:-
3.2?With regard to consumption of gas, learned Advocate relied upon the statements of Shri Balkrishna M. Thakkar, Managing Director, that the consumption of gas would vary on the quality of frit, raw material used, condition of Kiln, gas pressure, fluxes used, etc. It was thus argued that there are various factors which affect the consumption of gas and there cannot be a fixed ratio of consumption of gas for a specific frit output. He also argued that in October, 2007, there was a change in the management and the new management took a series of steps to improve quality of frit and made the gas consumption efficient. They also installed three new Refractory Kiln with greater production capacity and used superior refractories which were better maintained from time to time. He drew attention of the Bench to the fact that services of a Ceramic consultant was engaged to get better yield. He relied upon the submissions and records to show the purchase of new Kiln and generating set. It was due to these efforts that the ratio of gas consumption from 2008-09 onwards went down from 844 SCM/MT to 286 SCM/MT as indicated in Para 13.2 of order-in-original dated 10-5-2011. That before 2008 there was no generator available with appellant and every time there was a power failure, large quantities of gas was used in re-firing the Kiln. He produced documents relating to installation of DG Set. He referred to the purchase bills to show superior quality of refractories replaced in the Kilns after 2008-09. He argued that as per the statement of Shri Balkrishna Thakkar himself, which is recorded by the department, there cannot be any fixed ratio of gas consumption and that after the new management took over, they have improved the efficiency of the unit and that mere gas consumption cannot be used as a factor for clandestine manufacture and removal. He explained that frit consists of two components i.e. glass and silicone dioxide. That the melting point of glass is very high and other materials called fluxes are added, as per expert consultations, to lower melting point such as borax, boric acid and zinc oxide, etc. That when fluxes are used, the melting point required for manufacture of frit is reduced. Learned advocate referred to extracts from the book, Industrial Ceramics by Felix Singer and the book Glassing and Decoration of Ceramics Tiles by Autorivari and extracts from the journal. Ceramic Industry, January, 2000 as well as various extracts downloaded from internet to support his case. He referred to the following decisions to submit that gas consumption alone cannot be the sole basis of clandestine manufacture and removal of the finished product :-
(i) Vishwa Traders Pvt. Limited v. CCE- [2012 (278) E.L.T. 362]
(ii) CCE v. Vishwa Traders Pvt. Limited - [2013 (287) E.L.T. 243]
(iii) Mukesh Dye Work v. CCE - [2006 (196) E.L.T. 237]
(iv) Southern Ispat Limited v. CCE - [2009 (248) E.L.T. 270]
(v) SVM Cera Tea Limited v. CCE - [2013 (292) E.L.T. 580] 4 ..
5 ..
6.?On the issue of clandestine removal of frit, based on the gas consumption of the main appellant, it is observed from Para 13.2 of the order-in-original dated 10-5-2011 that records maintained by main appellant show the gas consumption for making 1 MT of frit from 844 SCM to 286 SCM. It has been contested by the appellant that gas consumption varied from season to season, from one quality of frit to other quality of frit, use of better technology, etc. It has also been brought on record that after change in the management in Oct., 2007 and installation of new furnaces and new refractories, the gas consumption has reduced. Further appellant has also brought on record that due to expert consultations and use of certain fluxes also the gas consumptions per MT of frit have come down. Evidences were also brought on record during the course of hearing regarding installation of an Electricity Generator and replacement of better quality refractories in the kilns by the main appellant. Under the above factual matrix, the method used by the investigation cannot be a sound method to demand duty on assuming 318 SCM of gas required for manufacturing one MT of any quality of frit. The improper method adopted by the Revenue for calculating duty was agitated by the appellants before the adjudicating authority as per Para 4(xi) to (xxxiii) of the order-in-original dated 10-5-2011. It is observed that during conducting of gas consumption studies on 23/24-2-2010 by investigation only frit product code OP 202 was being manufactured. It has been contested by the appellant that different frit product codes may consume different quantities of gas. As the appellant is not undertaking the manufacture of one standard product, in the interest of justice, it will be appropriate to conduct a few more representative studies of different frit product codes in order to arrive at a more realistic gas consumption PMT of frit manufactured.
8.6 In view of the above observations made by this Bench it has already been held that method adopted by the investigation to estimate clandestine removal of finished goods is not sound and has to be discarded. However, Revenue was given an opportunity to strengthen their case by corroborating evicence with some more factual data from additional studies. No appeal has been filed by the Revenue against the above order passed by this Bench. It is also observed from 3.2 of the remand order that appellant has made certain changes in the plant and machinery and other methodologies to reduce gas consumption. Even in the remand proceedings also adjudicating authority has not countered the arguments taken by the appellant as to why the steps taken by them from time to time, does not effect gas consumption. On a specific query from the Bench, the learned Senior Advocate also argued that similar modernization in processes of manufacture, as undertaken by M/s. Wellsuit Glass in the manufacture of frit, have also been undertaken by other appellants. No findings have been given by the Adjudicating authorities in countering the claims of the appellants, justifying the modernization done to reduce consumption of gas from time to time. No expert opinion has been obtained by the Revenue to challenge the gas consumption pattern adopted by the appellants to indicate that claim of the appellants was wrong.
8. In view of the above observations and judicial pronouncements, methodology adopted by the Adjudicating authorities in estimating and demanding duty from the appellants; based on consumption of natural gas, electricity consumed and packing time taken; is not acceptable and is required to be rejected.
9. So far as points mentioned at Para 6(ii) and 6(iii) are concerned, it has been held by the adjudicating authorities that undervaluation and clandestine removal stand provided in view of the pen-drives, AJTAK XYZ of SANYO, personal ledger of Comet, private diaries/ writing pads and the statements of ceramic tile manufacturers. Appellants have argued that the print-out taken from the pen-drive AJTAK XYZ are not admissible as a piece of evidence as the same are not the documents admissible as evidence under the relevant Section of the Central Excise Act, 1944. It was also argued by the appellants that the number of Panchnamas recorded and the opening of the said pen-drive clearly suggest that the data recovered from the pen-drive is highly objectionable, suspicious and not acceptable. It is observed from the case records of Wellsuit Glass & Ceramic Pvt. Limited [E/13720/2014] that seizure of the said pen-drive was effected on 17.7.2008 under a Panchnama and it was not stated in this Panchnama that the pen-drive was put inside a sealed cover. It has been admitted by Shri V.N. Thakkar (Superintendent) DGCEI in the cross-examination before the Adjudicating authority that when an article is seized, the same is placed in a sealed cover and mention of the same is made in the Panchnama. It is also admitted by Shri Thakkar that as he remembers the seized pen-drive was placed in a paper cover and sealed with adhesive tapes. It is the claim of the appellants that the way the said pen-drive was handled, it is possible that the same could be tempered with as the same was kept in the paper cover sealed with adhesive tapes. A second Panchnama was made on 30.8.2008 where the said pen-drive was mentioned to have been taken out of a sealed cover when the first Panchnama never mentioned keeping the said pen-drive in a sealed cover. It is also observed that on 30.8.2008 the sealed cover was opened but contents of the silver pen-drive were not opened on 30.8.3008 but instead another black colour pen-drive was opened. On 06.9.2008 under a Panchnama the said silver pen-drive taken out of the sealed cover and on opening this pen drive in the Tally Folder, no data was found to be available. However, under another Panchnama dated 12.09.2008, when the said silver pen-drive was opened data was found in Tally Folder which is the relied upon as Aajtak XYZ. There is a strong force in the arguments made by the appellants that when no data was found in Tally folder on 06.9.2008, how the relied upon documents got generated on 12.09.2008. Shri V.N. Thakkar, Superintendent in his cross-examination explained the reason for non retrieval of data on 06.9.2008 to be due to operational lack, but he admitted that no mention of any operational lack is made in the Panchnama dated 06.9.2008. Further, it is observed that in Panchnama dated 12.09.2008, the print out of account AJTAK taken contained 52 pages and account of appellant Wellsuit appeared at page 30 out of 52 pages. Another Panchnama dated 24.09.2008 indicate in Annexure A3 that the number of pages of Account Aajtak were 94 and the name of appellant existed at page 43 as against page 30 mentioned in Panchnama dated 12.09.2008. Appellants have also raised the issue regarding discrepancies in the name of the panch witnesses. It is also contended that Revenue had not followed the procedure as stipulated in Section 36B of the Central Excise Act, 1944. In view of the above discrepancies the authenticity and veracity of data retrieved by investigation from the silver pen-drive is not reliable and can not be accepted as a piece of evidence in deciding the case of undervaluation and clandestine removal against the present appellants with respect to point mentioned in Para 6 (ii).
10. So far as the question mentioned at Para 6(iii) regarding denying cross-examination of witnesses whose statements were used for establishing undervaluation/ clandestine removal of frit based on the private records, the statements of tile manufacturers and Shroff/ Angadias is concerned; it is argued by the appellants that the entire exercise of such quantification has been made as per the statements of the witnesses whose cross-examination has not been allowed by the adjudicating authority as per Section 9D of the Central Excise Act, 1944. Appellants relied upon the following case laws:-
(i) J.K. Cigarettes Limited vs. CCE [2009 (242) ELT 189 (Del.)]
(ii) CCE, Allahabad vs. Govind Mills Limited - [2013 (294) ELT 361 (All.)]
(iii) Basudev Garg vs. CC [2013 (294) ELT 353 (Del.)]
(iv) Swiber Offshore Construction Pvt. Limited vs. Commissioner of Customs, Kandla [2014 (301) ELT 119 (Tri. Ahmd.)] 10.1 Section 9D of the Central Excise Act, 1944 is reproduced below:-
9-D.?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 the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
(2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceedings under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court. 10.2 In the case of J.K. Cigarettes Limited vs. CCE (supra), following conclusions were drawn by the Delhi High Court, in Para 32:-
32.?Thus, we summarize our conclusions as under :-
(i) We are of the opinion that the provisions of Section 9D (2) of the Act are not unconstitutional or ultra vires;
(ii) while invoking Section 9D of the Act, the concerned authority is to form an opinion on the basis of material on record that a particular ground, as stipulated in the said Section, exists and is established;
(iii) such an opinion has to be supported with reasons;
(iv) before arriving at this opinion, the authority would give opportunity to the affected party to make submissions on the available material on the basis of which the authority intends to arrive at the said opinion; and
(v) it is always open to the affected party to challenge the invocation of provisions of Section 9D of the Act in a particular case by filing statutory appeal, which provides for judicial review. 10.3 In the adjudicating proceedings, a list of witnesses to be relied upon by the Revenue is disclosed to the appellants alongwith the show cause notice. The reasons for relying upon the statements are also available from the facts narrated in the show cause notice. It is not necessary that all the witnesses should be called by the Adjudicating authority suo-moto for examination in a quasi-judicial proceedings for cross-examination. However, as per the provisions of Section 9D (1)(b) of the Central Excise Act, 1944, read with the judicial pronouncements relied upon by the appellant every adjudicating authority should call the witnesses when requested by the party against whom those statements are to be used. If by making efforts for a few occasions the witnesses summoned do not appear than automatically the case could be mature for accepting the statements as admissible evidences under Section 9(D)(1)(a) of the Central Excise Act, 1944. However, it was not open to the adjudicating authorities to straightaway reject the request for cross-examination in view of the law laid down by the judicial pronouncements relied upon by the appellants. The reasons for rejecting the appellants request for not allowing are also required to be intimated to the appellants as per the case law of J.K. Cigarettes Limited (supra) so that appellant may explore the possibility of filing appeal against such rejections. The ratio laid down by the J.K. Cigarettes case (supra) has also been followed in series of other judgments. No such rejection orders were given by the adjudicating authorities separately. Hon'ble Supreme Court in the case of UOI & Anr. vs. GTC India and Ors in order dated 03.01.1995 arising out of SLP (C) No. 218131/1994 has already laid the following ratio:
Special leave granted.
Heard.
The impugned order dated 05.9.94 has to be read alongwith Section 9D of the Central Excise and Salt Act, 1944. SO read, there is no infirmity in the impugned order.
It may, however, be clarified that in case reliance is placed on the provisions of Section 9D of the Act in respect of any particular witness, intimation of the same is required to be given to the respondents and it would be open to the respondents to approach the High Court against the order made by the authority in that behalf.
That appeal is disposed of in these terms. No costs. Further in Para 16 and 19 of case law A.Tajudeen vs. UOI [2015 (317) ELT 177 (SC)] Apex court very recently held as follows on admissibility of statements and cross-examination:-
16.? Having given our thoughtful consideration to the aforesaid issue, we are of the view that the statements dated 25-10-1989 and 26-10-1989 can under no circumstances constitute the sole basis for recording the finding of guilt against the appellant. If findings could be returned by exclusively relying on such oral statements, such statements could easily be thrust upon the persons who were being proceeded against on account of their actions in conflict with the provisions of the 1973 Act. Such statements ought not to be readily believable, unless there is independent corroboration of certain material aspects of the said statements, through independent sources. The nature of the corroboration required, would depend on the facts of each case. In the present case, it is apparent that the appellant - A. Tajudeen and his wife T. Sahira Banu at the first opportunity resiled from the statements which are now sought to be relied upon by the Enforcement Directorate, to substantiate the charges levelled against the appellant. We shall now endeavour to examine whether there is any independent corroborative evidence to support the above statements.
17 & 18 .. ..
19.? We shall now deal with the other independent evidence which was sought to be relied upon by the Enforcement Directorate to establish the charges levelled against the appellant. And based thereon, we shall determine whether the same is sufficient on its own, or in conjunction to the retracted statements referred to above, in deciding the present controversy, one way or the other. First and foremost, reliance was placed on mahazar executed (at the time of the recovery, from the residence of the appellant) on 25-10-1989. It would be pertinent to mention, that the appellant in his response to the memorandum dated 12-3-1990 had expressly refuted the authenticity of the mahazar executed on 25-10-1989. Merely because the mahazar was attested by two independent witnesses, namely, R.M. Subramanian and Hayad Basha, would not led credibility to the same. Such credibility would attach to the mahazar only if the said two independent witnesses were produced as witnesses, and the appellant was afforded an opportunity to cross-examine them. The aforesaid procedure was unfortunately not adopted in this case. But then, would the preparation of the mahazar and the factum of recovery of a sum of Rs. 8,24,900/- establish the guilt of the appellant, insofar as the violation of Section 9(1)(b) of the 1973 Act is concerned? In our considered view, even if the mahazar is accepted as valid and genuine, the same is wholly insufficient to establish, that the amount recovered from the residence of the appellant was dispatched by Abdul Hameed, a resident of Singapore, through a person who is not an authorised dealer in foreign exchange. Even, in response to the memorandum dated 12-3-1990, the appellant had acknowledged the recovery of Rs. 8,24,900/- from his residence, but that acknowledgment would not establish the violation of Section 9(1)(b) of the 1973 Act. In the above view of the matter, we are of the opinion that the execution of the mahazar on 25-10-1989, is inconsequential for the determination of the guilt of the appellant in this case. In view of the above, by not allowing the cross-examination of the relied upon witnesses under Section 9D of the Central Excise Act, 1944, the evidentiary value of such statements does not survive and is required to be discarded. We accordingly hold so.
11. It is also the case of the appellants that all the transactions are made by the appellants at the factory gate. That only exact amount of additional consideration received by each appellant has to be added to the transaction value and that no such quantification has been done by the Revenue which could be attributed to each manufacturer. That Revenue can not adopt any best judgment valuation method as suggested in Central Excise Valuation Rules even if all the statements/ documents relied upon by the Revenue are presumed to be correct admissible as evidences.
12. Before giving observations on this argument raised by the appellants, it will be relevant to glance through the relevant portion of the provisions of Section 4 of the Central Excise Act, 1944 alongwith definition of transaction value:-
4. VALUATION OF EXCISABLE GOODS FOR PURPOSES OF CHARGING OF DUTY OF EXCISE.
(1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, then, on each removal of the goods, such value shall -
(a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value;
(b) in any other case, including the case where the goods are ot sold, be the value determined in such manner as may be prescribed.
(2) .
(3) .
(a) .
(b) .
(d) transaction value means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to , or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertise or publicity, marketing and selling organisation expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.
13. It is not the case of the Revenue that the value of the goods cleared by the appellants is not determinable at the Factory gate and therefore, some other method under the Central Excise Valuation Rules is required to be adopted to arrive at the assessable value. Rather the case of the Revenue on valuation is that certain additional consideration coming to the appellant by way of cash flow from the tile manufacturers to the frit manufacturers is required to be added to the assessable value. In the present circumstances and factual matrix the exact amount of such additional consideration was required to be determined for addition to the transaction value even if all the statements and documents were held to be admissible evidence and satisfied the test of Section 9D of the Central Excise Act, 1944. In Appeal Nos. E/11960/2013 and E/12386/2014, the valuation has been enhanced solely based on the assumption that after booking of the case these appellant enhanced their prices. In the case of transaction value realm the same product can be sold at different prices as per Section 4 of the Central Excise Act, 1944 unless actual additional consideration has been shown to have flown back to the appellants. Appellants in these appeals and in Appeal Nos. E/13720/2014 and E/534/2011 have also not admitted during investigation that they have received any additional consideration. In other appeals on the issue of undervaluation investigation attempted to show the flow back of such additional cash flow through the statements of ceramic tile manufacturer and the statements of Shroffs and Angadias. The amount so worked out has been worked out to be Rs. 38,95,860/- as per the statement of Shri Jayesh Patel, Prop. Of M/s. Kevel mentioned in Para 9.3.3 of OIO dated 23.03.2011 in the case of M/s. Belgium Glass & Ceramics. This statement clearly conveys that amount of Rs. 38,95,860/- was paid to various frit manufacturers and at the same time mentions that the names of the frit manufacturers are not written against each payment in the concerned documents. Under the above factual matrix appellants had the right to cross-examination the witnesses especially Shroffs and Angadias as to what portion of such payment belongs to a particular appellant. As mentioned in the definition of Transaction Value in Para 11.1 above, only actual price paid or payable has to be added to the transaction value and not a hypothetical value based on averaging of prices or standardizing of frit grades. As already mentioned under the realm of transaction value as per Section 4 even the same product could be sold at different prices depending upon several market factors and all these prices will be acceptable as permissible transaction value. Present Section 4 does not go by the concept of Normal Price of the old Section 4 of the Central Excise Act, 1944. In the absence of exact quantification of cash received by individual frit manufacturer, transaction value can not be enhanced even if there are half cooked circumstantial evidences to the proceedings indicating suspected undervaluation. It is now well understood that suspicion howsoever grave can not take the place of an evidence. Therefore, it may not be correct to hold that preponderance of probability should always be given to the Revenue, as Hon'ble Apex Court in a particular held it to be so. Each case has to be decided in view of the facts of that case. In view of the above observation and the law laid down by the Apex Court in the case of A. Tajudeen vs. UOI (supra) preponderance of probability can not always be allowed in favour of the Revenue when there is no independent corroboration of the facts and the case is made only on the basis of statements which were not allowed to be tested under cross-examination as per Section 9D (1)(b) of the Central Excise Act, 1944.
14. In view of the reasons recorded above, appeals filed by the appellants mentioned in paras 5.1 and 5.2 of this order, are allowed with consequential reliefs, if any. Miscellaneous applications are also disposed of accordingly.
(Pronounced in the open Court on 12.05.2015)
(P.K. Das) (H.K. Thakur)
Member (Judicial) Member (Technical)
..KL
2