Custom, Excise & Service Tax Tribunal
Triveni Glass Ltd vs Ce & Cgst Allahabad on 26 June, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Excise Appeal No.56622 of 2013
(Arising out of Order-in-Original No.MP(Dem.-58/2011) 41 of 2012 dated
27.12.2012 passed by Commissioner of Central Excise, Customs & Service
Tax, Allahabad)
M/s Triveni Glass Ltd., .....Appellant
(Kanpur Road, Allahabad-211001)
VERSUS
Commissioner of Central Excise, Allahabad ....Respondent
(38, M.G. Marg, Civil Lines, Allahabad-211001) WITH
(i) Excise Appeal No.56623 of 2013 (Shri R. K. Sinha); (ii) Excise Appeal No.56624 of 2013 (Shri P. N. Agrawal); (iii) Excise Appeal No.56625 of 2013 (Shri J. K. Agrawal); (iv) Excise Appeal No.56626 of 2013 (Shri A. K. Dhawan); (v) Excise Appeal No.56627 of 2013 (Shri A. Chatterjee).
(Arising out of Order-in-Original No.MP(Dem.-58/2011) 41 of 2012 dated 27.12.2012 passed by Commissioner of Central Excise, Customs & Service Tax, Allahabad) APPEARANCE:
Shri Rajeev Kumar Agarwal, Advocate & Shri Sanjay Dixit, Advocate for the Appellant Shri A. K. Choudhary, Authorized Representative for the Respondent CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NOs.- 70346-70351/2024 DATE OF HEARING : 18 March, 2024 DATE OF DECISION : 26 June, 2024 P. K. CHOUDHARY:
The present appeals have been preferred against the adjudication Order dated 27.12.2012 passed by the Ld. Commissioner, Central Excise & Service Tax, Allahabad wherein he has confirmed the demand proposed in the Show Cause 2 Excise Appeal No.56622 of 2013 Notice1 dated 12.07.1995 for the period April, 1990 to March, 1995 on the allegation of clandestine removal of goods and also confirmed personal penalty of the key management personnel of the Appellant company. This is the second round of litigation. In the first round of litigation before this Tribunal, the matter was remanded to the file of the Ld. Commissioner for fresh adjudication as the earlier Order dated 30.12.2004 was passed in gross violation of the principles of natural justice.
2. Briefly stated, the facts of the case are that the Appellant Company is a manufacturer of glass sheets having four plants which undertake the manufacture of Sheet Glass, Plain Glass, Figures Wired and Coloured Glass, Tinted and Non-Tinted Glass. A surprise visit was made by the Central Excise Officers on 16.07.1994 wherein the officers found that several trucks were loaded and stationed in the factory premises but the details of the removal of loose glass sheets loaded in one of the trucks was not recorded in RG-1 register and the excise invoice was also not available and thus they confiscated such truck. Since there was stock of huge quantity of glass sheets, the physical verification of which would take considerable amount of time, a detention memo dated 17.07.1994 was issued and later, on 20.07.1994, the physical verification of stock of glass sheets was conducted with factory officials in all the four plants. On verification of the physical loose glass sheets with the Daily Stock Account, it was observed that loose sheet glass valued at approx. Rs.1.36 crores were not recorded in the RG-1 register which was seized under a Panchnama dated 20.07.1994. It was the contention of the Appellant that they do not maintain the account of loose glass sheets in RG-1 on a continuous basis but enter the quantity cleared in RG-1 only on the next date of clearance at 10 a.m. and such method of recording of loose glass sheets was known to the Department. The private records of the Appellant were compared with the Daily Stock Account (RG-1) and RT-12 to hold that they do not match with each other. Again, production quantity and sales quantity as computed/derived from figures of 1 SCN 3 Excise Appeal No.56622 of 2013 audited financial statements by arithmetical formulas which was found to be at variance with RG-1 and RT-12 figures. After coming to the conclusion that statutory records do not match with the private records and the derived production and sales quantities as reported in audited financial statements, the installed capacity of the four plants had been considered to propose and confirm the demand of clandestine removal on the basis of statements of three employees of the Appellant's company. Personal penalties have been imposed on the key management personnel also. Being aggrieved, the Appellants have filed the present appeals.
3. We have heard Shri Rajeev Kumar Agarwal & Shri Sanjay Dixit, learned Advocates appearing for the Appellants and Shri A. K. Choudhary learned Authorized Representative appearing for the Revenue.
4. The Ld. Advocates of the Appellants strongly contested the impugned order confirming the demand on the allegation of clandestine removal of loose glass sheets. They have also filed a written submission alongwith a compilation of documents and judgments. They submitted as under:
A. The Appellant has explained the manufacturing process of the glass sheets by submitting that they are engaged in the manufacture of Sheet Glass, Figured Glass, Tinted Glass and Non-tinted Glass falling under Chapter Heading 7002 of the Schedule to the Central Excise Tariff Act in its four plants. The main raw materials required for the manufacture of the Silica Sand, Soda Ash, Dolomite, Limestone, Filspar, Broken Glass (Cullets) etc. which are used in the required proportion for the manufacture of final product in required size and thickness. A batch mix of the raw materials, determined on the basis of the quality of the glass to be produced, is fed into the furnace. The resultant molten mixture is then passed through a number of rolling machines and thereafter glass sheet is pulled out vertically. The glass sheets pulled through the rolling machine are then cut into the maximum possible sizes, which are then trimmed (to size out the irregular edges) and then the glass sheet in standard size are taken as initial production and accounted for in a private record called as "Daily Production 4 Excise Appeal No.56622 of 2013 Record" (hereinafter referred to as "DPR"). The DPR shows the daily PULL production in MT and the quality, thickness, the production in the morning, evening and the night shifts and the final production on a daily basis. It also shows the daily, monthly average and yearly average of the production, packing, packing in sq. meters and despatch. The trimming of irregular edges results in waste/breakage at the very production stage are the first type of breakage. The glass sheet so accounted for in the DPR are then visually inspected for defects like bubbles, scratches, stone etc. and in the course of such inspection the defective / unwanted portion of the glass is cut and the resultant waste i.e., cullets are collected in silos or bins. Such cullets are never sold but used entirely as raw materials for use in the manufacture of sheet glass. The cullets so generated are the second type of breakage. These inspected glass sheets are then cut into the standard marketable sizes and such quantity of glass obtained is sent to the packing section. Packing slips are prepared and the glass sheets are moved to the bonded warehouse on the strength of this packing slip. This packing slip is the basic documents which show the movement of the final sheet glass from the packing area to the bonded warehouse. Packing slips are also issued even in case where the sheet glass in loose forms is cleared without any packing and on the basis of this packing slip, the loading advice is prepared and the quantity of such loose glass sheets are recorded in the authenticated log book before actual clearance. The quantity of the sheet glass showing in the packing slip and issued to the bonded warehouse (which are in packed form) is the quantity of the final product which is accounted in the RG-1 register. The loose glass sheets as and when cleared are first recorded in the authenticated log book on the basis of packing and loading advice and thereafter, recorded in the RG-1 register on the very next day at 10.00 A.M. The finished product is cleared on payment of appropriate duty under the cover of invoices issued under Rule 52(A) of Central Excise Rules, 1944. The method of recording, particularly the loose glass sheets, was permitted by the then Range Superintendent vide his letter dated 01.10.1985. For recording of each lot of finished glass sheets, 5 Excise Appeal No.56622 of 2013 the Appellant maintained a log book which was authenticated by the Central Excise Officers. Whenever any lot of glass sheets acquires the character of finished goods i.e., packed primarily for clearance or whenever meant for removal in loose condition, it was noted down in the log book. It is from this register, a consolidated entry was made in the RG-1 register.
The removal of the goods from the bonded warehouse for clearance is based on loading slip issued. On the basis of the loading slips, the goods are removed from the bonded warehouse to the concerned vehicles and the details of such loading slips are also entered in the log book. After the completion of loading, on the basis of the loading slips and the corresponding entry in the log book, the relevant invoices are prepared for the quantity of goods so cleared. The actual RG-1 stage of the finished product manufactured is only after packing. Such practice has been approved by the departmental authorities.
B. That the method of recording of the loose glass sheets in RG-1 Register was in accordance with the instructions issued by the Department. Reliance was placed on the following:
i. Letter issued by the Superintendent, Range V, Central Excise, Allahabad bearing C. No.1- Misc/Corr/R-V/85/117 dated 01.10.1985.
ii. Letter issued by Superintendent, Range-Naini- Rural
-I, Div-A, Allahabad bearing C. No
20CE/NRI/TSGW/Misc/Corr/17/93/594 dated
02.08.1994.
iii. Letter issued by the Assistant Collector, Central Excise, Division -I bearing C. No.V (17)Val.64/94/2705 dated 09.09.1994 iv. Copy of the letter of Appellant dated 01.10.1994.
v. Statement of employees Shri D.D. Dubey, Excise In-charge on 20.07.1994, Shri M.P. Srivastava, Loading Supervisor, on 27.07.1994, Shri Raees Ahmed Siddiqi, Loading Supervisor, on 27.07.1994 vi. Annual Stock Taking Report of the Central Excise Division, Range- Naini (Rural -I) dated 24.09.1992 6 Excise Appeal No.56622 of 2013 C. That no discrepancies have been noted w.r.t. physical verification and book records of the stock of Packed Glass Sheets which was taken on 20.07.1994.
D. There ought to be an inherent mismatch in the quantity as reported in RG-1 & RT-12 and as reported in the Audited Financial Statements & Some Private Records of the Appellant which is due to the method of recording of loose glass sheets in the RG-1 register.
E. That the allegations of mismatch made in Production Quantity and Sales Quantity as Derived from Mathematical Formula from Audited Financial Statement figures on statement of Shri M.K. Chattopadhyay Vs. quantity as reported in RT-12 Returns is arbitrary and without any recognised basis and therefore not sustainable in law. Reliance was placed on the judgment of the coordinate Bench of the Tribunal in A R Shanmuga Sundaram vs. CCE, Salem 2016 (333) E.L.T. 158 (Tri-Chennai) which has been upheld by Hon'ble Madras High Court as reported in 2022 (380) E.L.T. 151 (Mad), Belgium Glass & Ceramic Pvt. Ltd. vs. Commissioner, 2015 (325) E.L.T. A-51 (Tri.-Ahmd.) and CCE, Surat vs. K. K. Textile 2007 (215) E.L.T. 429 (Tri- Ahmd.).
F. That it is a settled law that charge of clandestine removal has to be based on tangible evidence and not on inferences involving unwarranted assumption. Reliance was placed on the judgment of coordinate Bench of the Tribunal in Durga Trading Company vs. Commissioner of C. Ex, Lucknow 2002 (148) E.L.T. 967 (Tri.-Del).
G. That the allegation of Excess Consumption of Soda Ash is based on sample batch mix report which has been used to compute the excess consumption of soda ash for the entire period in dispute in spite of the fact that other batch reports were also available which showed lower soda ash utilisation. H. That though searches were made on the transporters of the Appellant and enquires were made under regular panchnama but there is no adverse finding in the entire SCN. I. That no corroborative evidence of clandestine removal as alleged has been brought out against the Appellants. The entire charge of clandestine removal is based on mathematical calculations and picking and choosing which statement of 7 Excise Appeal No.56622 of 2013 employee can be used against the Appellant to allege clandestine removal of glass sheets.
J. That the determination of Production based solely on the Installed Capacity as deposed by one of the employees without any application of mind is bad in law.
K. That no corroborative evidence has been brought on record to show that the Appellant has made any unaccounted purchase of input/raw materials. Further there is nothing on record to show that there has been excess consumption of electricity or any unaccounted labour payment. No statement from buyers have been obtained to whom the goods which have been allegedly removed clandestinely. There is no evidence of any cash sales or flow back of fund.
5. The Ld. Authorized Representative of the Revenue has reiterated the findings made by the Ld. Commissioner in the impugned Order. He submitted that the Appellants have recorded the loose glass sheets in the RG-1 register only on the subsequent day of their clearance. He further submitted that the production quantity and sale quantity as derived from the audited financial statements do not match with the statutory records which show that the Appellants had clandestinely removed loose glass sheets and therefore the Ld. Commissioner was justified in computing the demand based on installed capacity of four plants.
6. We have heard both sides and perused the appeal petition and documentary evidence placed on record.
7. We find that Ld. Commissioner in the impugned Order has rejected the submissions made by the Appellants and reiterated the findings made in the SCN. The Ld. Commissioner in the impugned Order has noted that the Appellants have not furnished its response to certain facts which weigh heavily against it. Before dealing with the observations made by the Ld. Commissioner, we take note of the fact that the Appellants had duly filed its response to the four issues raised in the impugned Order and therefore the observation that the Appellants have not furnished any response on the four issues is factually incorrect.
8 Excise Appeal No.56622 of 2013We now examine the four observations made by the Ld. Commissioner as under:-
6.1 The first observation is w.r.t. the difference in the dispatch of quantities shown in invoices vis-a-vis the Delivery Orders (DO). The Ld. Commissioner has noted one such discrepancy w.r.t. M/s Giridhar Das & Sons, Varanasi where the invoiced quantity is less than DO quantity and further noted that such difference has been admitted by Deputy Manager, Shri M. P. Srivastava. The Ld. AR of the Appellant submitted that the Appellant had duly explained the reason for the difference in its response to the SCN which is annexed in Vol IV. The Ld. AR further submitted that sometimes the exact quantity as per the DO is not dispatched due to various factors like the non-
availability of desired thickness of glass, desired quality, availability of packed material in warehouse and loading capacity of the truck etc and the variance in DO quantity and Invoice quantity cannot be deemed to be the quantity clandestinely removed. We have examined the statement of Mr. M. P. Srivastava dated 20.03.1995. In the said statement 10 cases have been noted where there was a difference in quantity as per DO vis-a-vis the quantity dispatched in invoice. We find that in two such cases the invoiced quantity is more than DO which are noted in SL. No.1 and Sl. No.5 at Page 3 of the said deposition. Therefore, we are of the view that the Appellant has reasonably explained the reason for mis-match and also it is not a case where in all cases the DO quantity is more than invoiced quantity. Further, the charge of clandestine removal on this point cannot be sustained as no enquiries have been made from the buyers.
6.2 The second observation is w. r. t. two parallel set of Daily Production Report (DRP) being maintained by the Appellant. The Appellant had submitted in response to the SCN that sometimes DPR is prepared manually when the computer system is not operating. It was also submitted 9 Excise Appeal No.56622 of 2013 that the computerised DPR is upto four decimals whereas manual DPR is only upto 2 decimals. We find that this submission of the Appellant has neither been controverted nor any other corroborative evidence is brought on record.
6.3 The third observation is w.r.t. the reliance based on the report of M/s S.R. Batliboi Consultants (P) Ltd. wherein the actual production for all four plants for the year 1992- 93 has been stated at 1,53,35,550 sq meters on 2mm basis whereas total production as per RT-12 is 1,46,77,184,505 sq. m. on 2mm basis. The Appellant in its response to SCN has duly explained the reason for such difference by submitting that the report of the said Consultant has been prepared on the basis of Monthly Production Report (MPR) without deducting breakage. The Ld. Advocate of the Appellant while explaining the manufacturing process has submitted that that production from furnace is the basis of DPR and thereafter breakage occurs at various stages viz at the time of quality inspection, desired size cutting, movement of glass sheets from production floor, handling etc. We find that the submission of the Appellant has not been controverted. We further take note Ld. Advocate in its submission has contended that since loose glass sheets are recorded at the time of clearance only such stock of loose glass sheets is included in the book figures but not in RT-12. Thus, we find that the charge of clandestine removal cannot be sustained on this ground.
6.4 The fourth issue is w.r.t. difference between the actual sale value vis-a-vis the collection/remittance during the year 1993-94. The observation pertain to Hyderabad Branch of Appellant whereas the search was conducted at the plants in Allahabad. The Ld. Advocate of the Appellant has submitted that such observations made in SCN are on totally misconceived notion and lack of basic accounting knowledge. It is his submission that collections can always 10 Excise Appeal No.56622 of 2013 be more than sales in a situation where the collections have been received during the year pertaining to sales effected during current year and also for earlier years. He further submitted that remittances can be more than collections if the branch has an opening balance of cash as on the first day of accounting year. We are in agreement with the submissions advanced by the Ld. Advocate and also note that the charge of clandestine removal cannot be sustained on such allegation.
7. We also consider it necessary to examine the allegations made in the SCN which have been confirmed in the impugned OIO as serious allegation of clandestine removal of goods against the Appellants.
7.1 On perusal of the SCN, we find that the suppressed quantities of glass sheets clandestinely removed have been determined by estimating production based on maximum installed capacity and such maximum installed capacity has been determined based on the statement of three employees of the Appellants. The suppressed quantities alleged to be clandestinely removed have been computed by deducting such production from the figures as reported by the Appellants in its RT-12 returns during the period in dispute.
7.2 The SCN notes the justification of resorting to the estimation of production based on the maximum installed capacity. It states that the Appellants are competent to manufacture and obtain much higher production than the installed capacity, the records regarding production and dispatches are not reliable, collections being higher than sales volume and excess consumption of raw materials than normally required shows that to determine the duty liability on the basis of single line of documents does not appear to be authentic. It further states that the determination of suppressed quantities can best be determined on the basis of maximum production quantities.
11 Excise Appeal No.56622 of 20137.3 We find that at the time of visit of the Central Excise Officers, no entry in RG-1 register was found for one of the many trucks loaded with loose glass sheets and also no excise invoice for such loading was issued. This was the starting point for the presumption that the Appellants had clandestinely removed loose glass sheets. We also find that, when the Appellants were confronted as to why no entries have been made in the RG-1 Register, the employees of the Appellants in their deposition categorically submitted that the Appellant company does not maintain the account of loose sheets in RG-1 on a continuous basis but enter the quantity cleared in RG-1 only on the next date of clearance at 10 AM but the dispatch/ clearance are recorded in the authenticated log book after issuing the necessary packing slip and such procedure of recording has been permitted by the Superintendent, Central Excise (Range-V), Allahabad vide Letter No.- MISC/Corr/R- V/85/117 dated 01.10.1985.
7.5 We have examined the letter of the Collector, Central Excise addressed to the Secretary, CBEC, New Delhi and to the Asst. Collector, Allahabad dated 12.09.1985, the letter dated 01.10.85 issued by the Superintendent, Range V, Allahabad and the letter bearing C. No. V (17)Val.64/94/2705 dated 09.09.1994 was issued by the Assistant Collector, Central Excise, Division -I. From the letter dated 12.09.1985 it can be gathered that glass and glassware were dispatched/ sold in packed cases only and therefore the Board had agreed to the proposal of the Collector of Central Excise, Calcutta that RG-1 stage in respect of sheet glass may be fixed at packing stage in the case of one M/s Hindustan Pilkington Glass Works, Asansol. The letter further notes the fact that the Appellant had sold 7.28% loose glass sheets and the balance in packed condition in the month of May 1985 and thus to obviate the problem of the manufacturer (Appellant), instructions have been issued to enter the loose glass sheets also at RG-1 stage where these are to be cleared as such. Based on this letter, the Superintendent, Range V, Allahabad vide its letter dated 01.10.1985 instructed the 12 Excise Appeal No.56622 of 2013 Appellant "that loose glass sheets may henceforth be entered in RG-1 register at the stage where these are to be cleared as such." The Ld. AR of the Appellant has strongly argued that sheet glass is generally sold in packed condition only and on receipt of any order for loose glass sheets, it is cleared as such and therefore the recording in RG-1 stage is the date of clearance which is as per the instruction of the Department. We further take note that the letter dated 09.09.1994 issued by the Assistant Collector, Central Excise, Division -I, Allahabad which directs the Appellant to record henceforth the production- clearance etc in loose stage itself and further states that the Range Superintendent letter dated 01.10.1985 stands withdrawn. The Ld. Advocates for the Appellants have also placed the Annual Stock Taking Report of the Central Excise Division, Range- Naini (Rural -I) dated 24.09.1992. The said report specifically reflects the packed quantity and loose quantity and categorically records that "there is no discrepancy in the account book and the balance shown in the RG-1 is correct and tallies with the actual balance lying on the floor of the Ware House".
7.6 The Ld. Advocates of the Appellants have placed reliance on the judgments in the case of Patidar Products vs. Commissioner of Central Excise & Service Tax, Bhavnagar (2023) 9 Centax 231 (Tri.-Ahmd.) and Commissioner of C. Ex, Ahmedabad-III vs. Ronak Laminex P. Ltd. 2008 (232) E.L.T. 861 (Tri.-Ahmd.) wherein the coordinate Bench of this Tribunal noted that since the goods were still within the factory and there was no evidence to show that the same were to be cleared clandestine without payment of duty, the same was not liable for confiscation.
7.7 In the light of the discussion made supra, we find no plausible reason to disagree with the contention of the Ld. Advocates that the practice of recording the loose glass sheets was consistently done at the stage of clearance and this very fact was known to the Department. We also find that such loose 13 Excise Appeal No.56622 of 2013 sheets were duly recorded at the time of despatch in the log book, authenticated by the Department, after issuance of the packing slip and before clearance though recorded in RG-1 after clearance. Therefore, the allegation of clandestine removal and suppression of facts on the ground of non-recording of loose glass sheet at the stage of production itself miserably fails. Had the Department also not carried and agreed to the view that the RG-1 stage for loose glass sheets would be the point when such loose sheets are decided to be cleared as such, there was no need to withdraw the letter dated 01.01.1985 by a subsequent letter dated 09.09.1994 which was after the date of the search.
7.8 We also agree with the contention of the Ld. Advocates that the excise invoice is mandatory when the goods are removed from the factory and when the sole truck was stationary in the factory premises, fully loaded but without excise invoice, no presumption can be drawn that loose glass loaded therein were to be cleared clandestinely without payment of duty in the absence of any positive or corroborative evidence. Further the stock of loose glass sheets seized during physical verification on the reason that the same was not recorded in RG- 1 also does not lead to a reasonable suspicion of clandestine removal particularly in view of the consistent method of recording such stock by the Appellants as discussed supra.
7.9 We find that the physical verification of the stock of glass sheets in all four plants was undertaken and the only discrepancy found therein is w.r.t. non-recording of the loose glass sheets in RG-1 as is discernible from the SCN. That when the Appellants had since the beginning of the search, contended that it records loose glass sheets only on clearance, we are unable to comprehend as to how such discrepancy noted in physical verification can even form a presumption that the Appellants are involved in clandestine removal of loose glass sheets. There is absolutely no allegation of any discrepancy in the packed stock of glass sheets. In such glaring facts, we agree with the contention of the Ld. Advocates of the Appellants that 14 Excise Appeal No.56622 of 2013 the allegation made in the SCN to the effect that there is a difference in packing production and production as per RT-12 is itself arbitrary and contradictory as no such discrepancy with respect to the packed glass sheets was found and noted in the physical verification.
7.10 One reason for rejecting the statutory excise records is the significant variation observed in such records vis-a-vis the production and sales quantity derived by mathematical formula from the cumulative production and sales figures as reported in audited financial statements. Such figures were derived by the employee of the Appellants company, Shri M.K. Chattopadhyay, Company Secretary cum Chief Accountant, at the directions of the investigating Officers. The Ld. Advocates have strongly contested such action and submitted that the production quantity has been derived, on certain assumptions, based on mathematical formula i.e. Total Cost of production (Figures as per audited financial statements less selling expenses) divided by weighted average cost of Opening and Closing Stock is not sustainable in law to fasten the serious charge of clandestine removal against the Appellants in absence of any corroborative evidence. With regard to the sales quantity, the Ld. Advocates have submitted that the same has been derived by dividing the stock value by unit sale value without appreciating the two basic facts, stock value represents the closing stock as on the last date and is values at lower of cost or market value prevailing on that closing date and second that Sale value per unit includes profit element.
7.11 The Ld. Advocates of the Appellants have placed reliance on the judgment of the coordinate Bench of the Tribunal in A R Shanmuga Sundaram vs. CCE, Salem 2016 (333) E.L.T. 158 (Tri-Chennai) wherein it has been held that the departmental authorities could not raise demand on the basis of mathematical formula by taking notional quantity of one raw material. We find that the said judgment of the Tribunal has been upheld by the Hon'ble Madras High Court which is reported 15 Excise Appeal No.56622 of 2013 in 2022 (380) E.L.T. 151 (Mad.). He has further placed reliance on the following judgments in case of Belgium Glass & Ceramic Pvt. Ltd. vs. Commissioner 2015 325 E.L.T. A-51 (Tri.-Ahmd.) and CCE, Surat vs. K K Textile 2007 (215) E.L.T. 429 (Tri-Ahmd.) where identical views have been upheld by the Tribunal. We find considerable force in the arguments made by the Ld. Advocates that such mathematically derived figures which are based on assumptions cannot be a basis of alleging the serious charge of clandestine removal more so when nothing adverse has been brought on record.
7.11 The SCN also alleges excess consumption of Soda Ash which is one of the raw materials used in manufacturing of glass sheets. The Ld. Advocates for the Appellants have submitted that such allegation is based on assumption that soda ash consumption is 14% of the raw materials mix. They drew our attention to the statement of Chief Chemist, Mr. C.D. Chattopadhyay, wherein he had stated that soda ash required for manufacture of sheet glass varies from 17% to 22% depending upon the various compositional adjustments for glass. He further submitted soda ash percentage of 14% has been assumed only on one batch mix of 18.11.1994 and the same percentage has been applied for the entire period in dispute of 5 years which is unreasonable. We find that no evidence has been brought on record to dispute the actual consumption of soda ash and further the Revenue has failed to establish that if the Appellants had shown excess consumption of soda ash whereas other raw materials have been short consumed vis-a-vis actual consumption of such other raw materials in the total batch mix.
8. The Ld. Commissioner has further rejected the submissions made by the Appellants by placing reliance on the principle of preponderance of probabilities and relied on various judicial precedents to emphasize that clandestine activity can be established with circumstantial evidence. However, we find that no corroborative evidence has been brought on record. The demand has been confirmed on assumptions and presumptions 16 Excise Appeal No.56622 of 2013 without making necessary enquiries to bring out the charge against the Appellants. The Ld. Advocates of the Appellants have relied on the judgment of the Hon'ble jurisdictional High Court in Commr. of Cus. C.E. & S.T., Ghaziabad vs. Auto Gollon Industries Limited, 2018 (360) E.L.T. 29 (All.) wherein it held that:
"13. Upon examining the matter, the Tribunal has recorded a clear finding of fact that the revenue failed to establish the case of clandestine removal. The only thing, the revenue produced was a rough work progress register, which was admittedly not a statutory register.
14. The revenue failed to produce any cogent evidence in respect of raw materials, which was required for production of Starter Motors. Also, the revenue did not allege anywhere that the assessee was buying any unaccounted for copper wire, yolk, bearings, brakes, slot insulators, laminations and commutators, which are also required for the manufacture of starter motors as in the absence of these essential raw-materials, it was thus not possible for the assessee to manufacture their final product with just Armature Assemblies.
15. The Tribunal records that I agree with the contentions of the Ld. Advocate that the allegations of clandestine removal are serious allegations and are required to be established beyond doubt by production of sufficient and positive evidence. The doubts, however, strong cannot be converted into evidence so as to confirm the demand. There is no inculpatory statement by any of the representative of the manufacturers; no enquiry as regards the buyers of the said starter motors so as to establish their identity; no enquiry as regards procurement of various raw materials required for manufacture of final products; no enquiry as regards the transportation of the goods; no enquiry as regards the receipt of consideration of the said clandestinely removed final product. It is well-settled law that shortage of one of the raw-materials cannot lead to the inevitable conclusion of clandestine manufacture and removal. Further, it also stands held by various courts that the confirmation of demand of duty cannot be on the oretical basis of input output ratio. The appellants' 95% production is being sold to the manufacturers of three wheeled motors, who will admittedly not accept clandestinely removed goods as unaccounted for goods.
16. The Tribunal while examining the matter has also examined the law in respect of clandestine removal and has rightly come to the conclusion that in the absence of any allegation as regards receipt of other raw-materials no demand could have been confirmed on the basis of one of the inputs shown to have been sold for assembling of final product.17 Excise Appeal No.56622 of 2013
17. The Tribunal categorically records that the department failed to establish its allegation and charges made against the appellant for clandestine removal specially in view of the fact that the appellant was able to give an explanation for each and every Armature Assembly/shaft that is finally produced and supplied to the industry using them which was all accounted for.
18. Learned Counsel for the respondent has relied on a decision of this Court in the case of Continental Cement Company v. Union of India reported in 2014 (309) E.L.T. 411 (All.) to state that unless there is clinching evidence of the nature of purchase of raw- materials used in the manufacture of the final product clandestine removal cannot be presumed against the manufacturer. Clandestine removal it may be stated is a serious charge and the burden is upon the revenue to establish such a charge on the basis of cogent and real evidence.
19. The department it may be stated here in the present case has not been able to discharge the burden of proof by way of any real evidence of any kind of clandestine removal. It has not even made an attempt to make a search and investigation in the matter.
20. In view of the above established facts in this particular case, it is the opinion of this Court that the Tribunal has rightly come to the conclusion that there was no case of clandestine removal."
9. In conclusion, we observe that none of the reasoning advanced in the SCN and confirmed in the impugned Order for rejecting the statutory records are sustainable. In coming to this conclusion, we have noted that no evidence of unaccounted purchases of inputs have been brought on record by making enquiries from the suppliers of such material. There is no evidence of any unaccounted sales which has been brought on record by making enquiries from either the transporters or the buyers of alleged clandestinely removed glass sheets. Interestingly, the SCN notes that enquiries had been initiated against the transporters but no finding, much less an adverse finding, has been noted in the SCN. Even no unaccounted payments to the transporters have been alleged. The allegation of clandestine charge has been made solely on self-evolved mathematical analysis of figures of audited financial statements, computing the production quantity and sales quantity by 18 Excise Appeal No.56622 of 2013 employing formulas, making assumptions in computing such derived quantities and then comparing the same with the statutory excise records are clearly unsustainable when a serious charge of clandestine removal has been made against the Appellants. The revenue has utterly failed to discharge the burden of proof by bringing on record any evidence of any kind to substantiate the charge of clandestine removal.
10.1 Since we have already held that the charge of clandestine removal of goods is not sustainable for the reasons discussed supra, we would have resisted from dealing with the manner of computation of such alleged demand which has been done on the differential amount of estimated production based on maximum installed capacity and figures as reported in RT-12 returns but only for the basis adopted by the Revenue we are dealing with the same.
10.2 Out of the statements of the three employees, one Mr. S. Sinha, (GM- Technical) who deposed the maximum production of four plants was taken as the maximum installed capacity. Based on such installed capacity when the suppressed production was computed for the F.Y. 1991-92 it was a negative figure. However, the Ld. Commissioner was not satisfied with such computation and therefore the suppressed quantity for F.Y. 1991-92 was computed on the basis of the statement of Mr. M.K. Chattopadhyay, Company Secretary cum Chief Accountant. No reasonable basis whatsoever has been noted in the SCN for relying on such statements. Further the truthfulness of such statements remained un-corroborated. The machine invoices, technical details of the machine and the capacity of production as per the technical literature issued by the manufacturer has not been taken into consideration. We are also in agreement with the submission of the Ld. Advocates that the production capacity is dependent on the efficiency of the furnace and age of the furnace which has not been taken into cognizance. Further, considering the very nature of the industry and the manufacturing process detailed by the Appellants, factors such 19 Excise Appeal No.56622 of 2013 as normal breakage and thickness of the glass produced have been completely ignored. We, therefore hold that maximum installed capacity determined is without any basis whatsoever and is therefore, liable to be rejected.
11. The impugned Order dated 27.12.2012 is thus set aside and all the six appeals are allowed with consequential relief, if any, as per law.
(Order pronounced in open court on - 26th June, 2024) (P. K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) LKS