Custom, Excise & Service Tax Tribunal
Anita Synthetics P Ltd vs Surat-Ii on 15 May, 2024
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad
REGIONAL BENCH-COURT NO. 3
Excise Appeal No. 11250 of 2016- DB
(Arising out of OIO-SUR-EXCUS-002-COM-069-15-16 dated 18/03/2016 passed by
Commissioner of Central Excise, Customs and Service Tax-SURAT-II)
Anita Synthetics P Ltd ........Appellant
Block No. 46,
Gidc, Pipodara,
Surat, Gujarat
VERSUS
Commissioner of C.E. & S.T.-Surat-ii ......Respondent
New C.Ex Building...Opp. Gandhi Baug, Chowk Bazar, Surat, Gujarat- 395001 WITH
(i) Customs Appeal No. 11251 of 2016- DB (Anita Synthetics P Ltd)
(ii) Excise Appeal No. 11252 of 2016- DB (Rakesh Gajanand Agarwal)
(iii) Customs Appeal No. 11253 of 2016- DB (Rakesh Gajanand Agarwal) APPEARANCE:
Shri Hasit Dave Advocate for the Appellant Shri Rajesh K Agarwal, Superintendent (AR) for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. RAJU Final Order No. 11053-11056/2024 DATE OF HEARING: 22.11.2023 DATE OF DECISION: 15.05.2024 RAMESH NAIR These appeals are directed against Order-In-Original No. SUR-EXCUS- 002-COM-069-15-16 dated 18/03/2016 (hearinafter referred to as impugned order) passed by the Commissioner of Customs, Central Excise and Service Tax Surat-II.
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1.1 The brief facts of the present case are that the team of the Central Excise Preventive, Surat-I on intelligence visited premises of the M/s Anita Synthetics P Ltd and M/s Kusum Synthetics (100% EOU) ,602, Trividh Chamber, Surat and executed the search warrant issued by Joint Commissioner (Preventive), Central Excise and Customs, Surat-I. The officers searched the office premises in the presence of two independent Panchas and Shri Gajanand Surajbhan Agarwal, Director of both the units and seized the statutory records of M/s Anita Synthetics P Ltd (100%EOU).
Another team of Central Excise officer headed by Superintendent, Central Excise and Customs, HPIU-Ii Surat-I, visited the factory premises of M/s Anita Synthetics P Ltd (100%EOU) Block No.46, GIDC, Pipodara, Surat on 07.08.1999 for preventive checks. After detailed investigation and recordings of statements of various persons and records recovered from the different premises of the appellant a Show Cause notice F No. V(CH.54) 15-16/OA/2004 dated 07.05.2004 was issued wherein the following proposals were made:-
"26. Now, therefore, M/s. Anita Synthetics Pvt. Ltd. (100% EOU), Block No. 46, GIDC, Pipodara, Dist. Surat are hereby called upon to show cause to the Commissioner, Central Excise & Customs, Surat-11, 2nd floor, New Central Excise Building, Opp. Gandhi Baug, Chowk Bazar, Surat as to why:
(i) the duty of Customs amounting to Rs. 3,43,597/- (BCD @35% Rs.135262.00 + CVD @34.5% Rs.179995.00 + CESS @0.05% Rs.261.00 + SAD@ 4% Rs.28,079.00) leviable on the illicit removal of 7156.720 Kgs. Imported polyester filament yarn valued at Rs.3,86,463/- should not be recovered from them under section 72 read with proviso to sub section (1) of section 28 of Customs Act, 1962.
(ii) Central Excise duty equal to aggregate of Customs duty leviable under section 3 of CEA 1944 / Customs duty under Custom Act, 1962 amounting to Rs. 54,10,612/- leviable on raw material l.e.
110647.580 Kgs. of Polyester Filament Yarn valued at
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Rs.60,85,617/- (as detailed in attached Annexure 'B' to this notice) procured duty free under Notification No.1/95- CE dated 04.01.95 / Noti. No. 53/97-Cus dtd.03.06.97 and cleared illicitly, should not be demanded and recovered from them under proviso to Sub- Section (1) of Section 11A of Central Excise Act, 1944/ Section 72 read with proviso to Section 28(1) of Customs Act, 1962.
(iii) Central Excise duty equal to aggregate of Customs duty leviable under section 3 of CEA 1944/Customs duty under Custom Act, 1962 amounting to Rs.2,42,867/-leviable on raw material I.e. 4966.650 Kgs. of Polyester Filament Yarn valued at Rs.2,73,166/- (as detailed in attached Annexure 'C' to this notice) procured duty free under Notification No.1/95-CE dated 04.01.95/Noti. No. 53/97-Cus dtd.03.06.97 and cleared illicitly, should not be demanded and recovered from them under proviso to Sub-Section (1) of Section 11A of Central Excise Act, 1944/Section 72 read with proviso to Section 28(1) of Customs Act, 1962.
(iv) The interest at the appropriate leviable rate per annum on evaded duty mentioned at (1) above should not be demanded and recovered from them under Section 72 read with Section 28AB of Customs Act, 1962.
(v) The interest at the appropriate leviable rate per annum on the evaded Duty mentioned at Sr. No. (il) & (iii) above, should not be demanded and recovered from them under section 11AB of Central Excise Act, 1944/ under Section 72 read with section 28AB of Customs Act, 1962.
(vi) penalty should not be imposed upon them under Rule 209 of Central Excise Rules, 1944
(vii) penalty should not be imposed upon them under Section 11AC of Central Excise Act, 1944
(viii) Penalty should not be imposed upon then under section 72 & 112(a) of Customs Act, 1962.
(ix) Penalty should not be imposed upon them under Section 114A of Customs Act, 1962.
(x) The said goods 1.e.7156.720 Kgs of imported polyester filament yarn valued at Rs.3,86,-163/-, though not available for seizure, should not be confiscated under provisions of Section 111(0) of Customs Act, 1962 & redemption fine under Section 125 of Customs Act, 1962 should not be imposed on them & recovered by enforcing the terms of Bond & Bank Guarantee.
(xi) The said goods i.e.110647.580 Kgs of polyester filament yarn valued at Rs.60,85,617/-, though not available for seizure, should
4|Page E/11250 & 11252/2016 C/11251 & 11253/2016-DB not be confiscated under provisions of Rule 209 of erstwhile Central Excise Rules, 1944/ Section 111(0) of Customs Act, 1962 & redemption fine under Section 34 of Central Excise Act, 1944/ Section 125 of Customs Act, 1962 should not be imposed on them & recovered by enforcing the terms of Bond & Bank Guarantee
(xii) The said goods l.e.4966.650 Kgs of polyester filament yarn valued at Rs.2,73,166/-, though not available for seizure, should not be confiscated under provisions of Rule 209 of erstwhile Central Excise Rules, 1944 / Section 111(0) of Customs Act, 1962 & redemption fine under Section 34 of Central Excise Act, 1944 / Section 125 of Customs Act, 1962 should not be imposed on them & recovered by enforcing the terms of Bond & Bank Guarantee.
27.. Now, therefore, Shri Rakesh Gajanand Agarwal, Director of the Unit is hereby called upon to show cause to the Commissioner, Central Excise & Customs, Surat-II, 2nd Floor, New Central Excise Building, Opp. Gandhi Baug, Chowk Bazar, Surat as to why:
(i) the penalty should not be imposed upon him under section 112(b) of Customs Act, 1962.
(ii) the penalty should not be imposed upon him under Rule 209A of erstwhile Central Excise Rules, 1944."
1.2 The said show cause notice has been adjudicated vide impugned order dated 18.03.2016 wherein the following order was passed:-
"63. In view of the above, I pass the following order:-
(i) I confirm and demand duty of Customs of Rs. 3,43,597/- (BCD @35% Rs. 135262.00 + CVD @34.5% Rs.179995.00+ CESS @0.05% Rs.261.00+ SAD@ 4% Rs.28,079.00) leviable on the illicit removal of 7156.720 Kgs. imported polyester filament yarn valued at Rs.3,86,463/- and order its recovery from M/s. Anita Synthetics Pvt Ltd., 100% EOU, Pipodara, Surat under section 72 and proviso to sub section (1) of section 28 of Customs Act, 1962.
(ii) I confirm and demand Central Excise duty of Rs. 54,10,612/ equal to aggregate of Customs duty leviable under proviso to section 3 of CEA 1944/Customs duty under Custom Act, 1962 leviable on raw material i.e.110647.580 Kgs. of Polyester Filament Yarn valued at Rs.60,85,617/- procured duty free under Notification No.1/95- CE
5|Page E/11250 & 11252/2016 C/11251 & 11253/2016-DB dated 04.01.95 / Noti. No. 53/97-Cus dtd.03.06.97 and cleared illicitly, and order its recovery from M/s. Anita Synthetics Pvt Ltd., 100% EOU, Pipodara, Surat under proviso to Sub-Section (1) of Section 11A of Central Excise Act, 1944/ Section 72 and proviso to Section 28(1) of Customs Act, 1962. The demand is being confirmed both under Customs and Central Excise provisions because the assessee had not maintained separate registers entries for procurement of indigenous raw material or imported goods. Also they could not segregate or identify the origin of raw materials - imported or indigenous.
(iii) I confirm and demand Central Excise duty of Ps.2,42,867/-
equal to aggregate of Customs duty leviable under proviso to section 3 of CEA 1944 leviable on raw material i.e. 4966.650 Kgs. of Polyester Filament Yarn valued at Rs.2,73,166/- procured duty free under Notification No.1/95- CE dated 04.01.95 / Noti. No. 53/97-Cus dtd. 03.06.97 and cleared illicitly, and order its recovery from M/s. Anita Synthetics Pvt Ltd., 100% EOU, Pipodara, Surat under proviso to Sub-Section (1) of Section 11A of Central Excise Act, 1944/Section 72 and proviso to Section 28(1) of Customs Act, 1962. The demand is being confirmed both under Customs and Central Excise provisions because the assessee had not maintained separate registers entries for procurement of indigenous raw material or imported goods. Also they could not segregate or identify the origin of raw materials imported or indigenous.
(iv) The interest at the, appropriate rate per annum on evaded duty mentioned at (i) above is confirmed under Section 72 read with Section 28AB of Customs Act, 1962.
(v) The interest at the appropriate rate per annum on the evaded Duty mentioned at Sr. No. (ii) & (iii) above, is confirmed under section 11AB of Central Excise Act, 1944/under Section 72 read with section 28AB of Customs Act, 1962.
(vi) I impose penalties of Rs. 54,10,612/- and Rs. 2,42,867/- on M/s. Anita Synthetics Pvt Ltd., 100% EOU under Section 11AC of Central Excise Act, 1944/Section 114-A of the Customs Act, 1962. In case, the amount of duty confirmed along with interest and reduced penalty is paid within 30 days of the receipt of this order, then the penalty amount shall be reduced to 25% in terms of proviso to the above Sections
(vii) I impose a penalty of Rs. 3,43,597/- on M/s. Anita Synthetics Pvt Ltd., 100% EOU, Pipodara, Surat under Section 114-A of the Customs Act, 1962. In case, the amount of duty confirmed along with
6|Page E/11250 & 11252/2016 C/11251 & 11253/2016-DB interest and reduced penalty is paid within 30 days of the receipt of this order, then the penalty amount shall be reduced to 25% in terms of proviso to Section 114-A ibid.
(viii) Since I have imposed mandatory penalties, I do not impose separate penalties under Section 112-(a) of Customs Act and Rule 209 of Central Excise Rules.
(ix) I order confiscation of 7156.720 Kgs of imported polyester filament yarn valued at Rs.3,86,463/, under Section 111(0) and (i) of Customs Act, 1962 and impose a fine of Rs.40,000/- under section 125 of Customs Act, 1962 on M/s. Anita Synthetics Pvt. Ltd., 100% EOU, Pipodara, Surat and in terms of Bond & Bank Guarantee.
(x) I order confiscation of 110647.580 Kgs of polyester filament yarn valued at Rs.60,85,617/- and 4966.650 Kgs of polyester filament yarn valued at Rs.2,73,166/-, under Rule 209 of erstwhile Central Excise Rules, 1944/Section 111(0) & (1) of Customs Act, 1962 & impose a total redemption fine of Rs. 6,50,000/- against M/s. Anita Synthetics Pvt Ltd., 100% EOU, Pipodara, Surat under Section 34 of Central Excise Act, 1944/Section 125 of Customs Act, 1962 and in terms of Bond & Bank Guarantee..
64. I impose a penalty of Rs. 1,00,000/- on Shri Rakesh Gajanand Agarwal, Director of the Unit separately under section 112(b) of Customs Act, 1962 and Rule 209A of erstwhile Central Excise Rules, 1944.
65. I impose a penalty of Rs. 10,000/- on Shri Mohan Singh J. Chauhan, Prop. of M/s. Raman Synthetics, Sachin, Surat under section 112(b) of Customs Act, 1962.
66. I impose penalties of Rs. 50,000/- each on Shri Harishkumar Rameshchandra Agarwal, Proprietor of M/s.Harsh Vardhan Exports Pvt. Ltd. Plot No. 342, GIDC, Sachin, Surat, Shri Shivkumar T. Arora, Director of M/s.Mahalaxmi Processors, Plot No.821, GIDC, Sachin, Surat and Shri Ashish Janakkumar Agarwal, Director of M/s. Aditya Yarn Pvt Ltd separately under section 112(b) of Customs Act, 1962 and Rule 209A of erstwhile Central Excise Rules, 1944."
1.3 The adjudicating authority while confirming the demand, confiscation
relied upon various statements, physical stock taking and records
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recovered from the appellant. Being aggrieved by the Order-In-Original the appellants filed the present appeals.
2. Shri Hasit Dave Learned Counsel appearing on behalf of the appellants submits that the Commissioner Surat has passed impugned order without complying the direction given by the CESTAT in the remand order dated 26.11.2014. According to which the Commissioner was suppose to conduct the cross-examination which he miserably failed to do so despite the specific request made by the appellant. Therefore, all the statements relied upon in the present case are liable to be straightaway discarded and if this be so statements being a sole basis of this case the entire impugned order liable to be set aside.
2.1 As regard first demand of Rs. 3,43,597/-, he submits that it is only based on finding weight of physical stock of grey fabrics (finished goods) less by 7156.720 Kgs since the recorded stock was 13257 Kgs admeasuring 66426 Linear meters. However, the officers also found that the length in linear meters is matching. Therefore, the allegation is on the assumption that 7156.720 Kgs of raw material (PFY) used in these finished grey fabrics was removed clandestinely.
2.2 He submits that the allegation is based on mere inferences and hypothecation without any evidence, since the department is merely assuming that by showing more stock of grey fabric (finished goods) in their books in reality they had sold 7156.720 Kgs of PFY (raw material) to one M/S Raman Synthetics based on statements alone. Therefore, on this
8|Page E/11250 & 11252/2016 C/11251 & 11253/2016-DB basis demand is not correct. He further submits that there was no shortage in total recorded quantity of 66426 linear meters of stock of grey fabrics as recorded in the books and found tallying with on physical verification by the officers of Custom Excise. Hence, differences in weight of finished goods was only because final weighment was not done and was yet to be recorded in the books.
2.3 He also submits that weight of finished goods (Grey Fabrics) cannot be assumed or counted to be the same as the imported raw materials (PFY) to allege such illicit removal of PFY. The weight of raw material used in manufacturing process would be much lesser, than the weight of finished goods finally produced. Therefore, on this assumption it cannot be said that the raw material has been cleared clandestinely.
2.4 As regard the demand of Rs. 54,10,612/- and Rs. 2,42,867/- under Section 3 of Central Excise Act are concerned, he submits that by assuming that the appellant has clandestinely removed duty free raw material by showing manufacturing and clearing grey fabrics (finished goods) showing excess weight than the actual weight of grey fabrics in their statutory record, is also based on assumptions and presumptions only. This is only based on the statements of 3 buyers only, whose cross examination was not permitted and who have vaguely stated that they have received less grey fabrics less by 20 Kgs per 100 linear meters. Admittedly none of these 3 buyers have ever raised such issue of less weight, but rather paid the full invoice value for these goods received by them, under AR3As duly also accepted by their Range Superintendent by counter signing the same.
Therefore in the continuous supplies to these 3 buyers without any
9|Page E/11250 & 11252/2016 C/11251 & 11253/2016-DB complaint by them their statement appears taken in coercion and the same is not correct.
2.5 He further submits that in the entire investigation the department has not found a single buyer of the alleged diverted raw materials, nor any financial flow back from the appellant of these 3 buyers. No financial flow back from 3 buyers nor as any diverted raw material been ever intercepted nor has the department found single piece of evidence to support their version. The another evidence of the department to allege clandestine removal of raw material is based on 1 test report of the chemical examiner dated 21.01.1999, which showed that weight of grey fabrics is less in the sample drawn than what is recorded in the books of accounts.
2.6 He submits that the director of appellant company had immediately stated during investigation that these samples on which the test report is conducted are taken from 1 lot only of rejected consignment, having both low quality and weight of goods. Therefore, test report based on such 1 lot of rejected goods, cannot be made the basis for alleged clearance of 110647 Kgs of PFY (Raw material). Therefore, the test report cannot be relied for allegation of clandestinely clearance.
2.7 He further submits that the demand is also barred by limitation since search conducted on 07.08.1999 and statements obtained then, cannot permit the invocation of the larger period therefore goods cleared under statutory invoices, AR3A's, received re-ware housing certificates for such clearances and filed monthly returns from time to time. Therefore, there is no suppression of fact. The demand beyond the normal periods is clearly 10 | P a g e E/11250 & 11252/2016 C/11251 & 11253/2016-DB time barred. Accordingly, on merit as well as limitation demand, interest, and penalties are not sustainable. In support of his submission, he placed reliance on the following judgments:-
Vijeta International Vs. CC- 2006 (199) ELT 89 (T) CCE Vs. Ponjestly Filament (P) Ltd.- 2003 (156) ELT 235 (T) CCE Vs. Ayyappan Textiles Ltd.-2003 (108) ECR 104 (T) Superfil Products Ltd. Vs. CCE-2002 (48) RLT 319 (Cegat) CCE Vs. Cambodia Mills Ltd.- 2001 (128) ELT 373 (Mad.) SRF Ltd. Vs. CCE- 2001 (45) RLT 190 (Cegat) Kiran Spinning Mills Vs. CCE- 1988 (33) ELT 137 (T) Madhu Wool Spinning Mills Vs. UOI - 1983 (14) ELT 2200 (Bom.) Standard Woollen Mills Vs. CCE -1987 (28) ELT 417 (T)
3. Shri R K Agarwal, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.
4. We have carefully considered the submission made by both the sides and perused the record. We find that in this matter earlier the matter was remanded by this Tribunal vide order dated 26.11.2014 with a direction to comply with the principles of Natural Justice. In the remand proceedings the appellant have specifically requested for cross-examination of the witnesses who have given the statements including the 3 buyers of the alleged clandestinely purchased goods. However, Learned Adjudicating Authority has not granted the cross examination. In this regard, we refer to Section 9D of Central Excise Act, 1944 which reads as under :-
11 | P a g e E/11250 & 11252/2016 C/11251 & 11253/2016-DB "[9D. 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 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 proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court.]"
4.1 From the plain reading of Section 9D of Central Excise Act, 1944, we find that it is mandatory on the part of the Adjudicating Authority to conduct the examination-in-chief of the witnesses and thereafter allow the assessee to cross-examine the witnesses. After that when the witness stands by with their statement those statements can be used as admissible evidence for adjudication of the case. In the present case the Adjudicating Authority has rejected the request for cross-examination of the witnesses. Therefore, the statements which are heavily relied upon in the present case cannot be used as evidence. Therefore, all the statements relied upon in the present case are straightway discarded as evidence. Our this view is supported by the following judgments:-
12 | P a g e E/11250 & 11252/2016 C/11251 & 11253/2016-DB J.P. ISCON PVT. LTD. Vs. COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD-I-2022 (63) G.S.T.L. 64 (Tri. - Ahmd.) JINDAL DRUGS PVT. LTD. Vs. UNION OF INDIA-2016 (340) E.L.T. 67 (P & H) Basudev Garg V CC - 2013 (294) ELT 353 (Del.) CCE V Premier Alloys Ltd - 2019 (266) ELT 659 (All.) 4.2 From the statutory provision of Section 9D coupled with the above judgments, it is settled that the statements which have not passed the test of examination-in-chief and/ or cross-examination of witnesses, are not admissible in evidence. Therefore, the case based on the statements will not stand. As regard other evidence that there is a difference in weight since, it is also based on statement, the allegation majority stand diluted on this account also.
4.3 As regard the demand of Rs. 3,43,597/-, it is only based on the finding that weight of physical stock of grey fabrics ( finished goods) less by 7156.720 Kgs since the recorded stock was 13257 Kgs admeasuring 66426 linear meters. However, it is admitted fact that there is no difference in the length of the fabrics. Moreover, the officer also found that even length in linear meter matching there is different recorded weight of 6100 Kgs. In this position, we are of the view that the allegation is clearly based on assumption that 7156.720 Kgs of raw material (PFY) used in these finished goods ( grey fabrics) was removed clandestinely.
4.4 As regard the allegation of clandestinely removal, there is absolutely no evidence such as movement of goods, transportation, etc. Irrespective 13 | P a g e E/11250 & 11252/2016 C/11251 & 11253/2016-DB of any difference which is on hypothetical basis unless until the tangible evidences brought on record with regard to removal of goods clandestinely, only on the basis of weight differences, particularly when the linear meters of the fabric is matching, the demand cannot be sustained. It is also submitted by the appellant that the weight of finished goods was not done and was yet to be recorded in the books, for this reason also it cannot be said that there is a weight differences and clearance of the same clandestinely.
4.5 We are also of the view that weight of the finished goods (grey fabric) cannot be assumed or counted to be the same as the imported raw material PFY to allege such illicit removal of PFY. Admittedly the raw material used in manufacturing process would be much less than weight of finished goods. Hence mererly by taking statements which are not admissible as held above, the clandestine removal is not established.
4.6 As regard the demand of Rs. 54,10,612/- and Rs. 2,42,867/- under Section 3 of Central Excise Act are concern. We find that it is an allegation that the appellant has clandestinely removed duty free raw material by manufacturing and clearing grey fabric (finish goods) showing the excess weight than the actual weight of grey fabrics, in their statutory records is also based on assumption and presumption only. This allegation is based on firstly the statements of 3 buyers only, whose cross examination was not permitted and who have vaguely stated that they have received less grey fabric by 20Kgs per 100 linear meters. It is surprising that if there is a less quantity of grey fabrics, none of these three buyers ever raised any 14 | P a g e E/11250 & 11252/2016 C/11251 & 11253/2016-DB issue of less weight but rather paid the full invoice value for the goods received by them. The removal of the goods from the 100 % EOU is under statutory documents that AR3As which have been accepted by the Range Superintendent of the recipient party by counter signed the same.
Thereafter doubting about the weight of the good is not correct.
4.7 We also find that there is no evidence that due to difference in weight as stated by these buyers whose statements have already been discarded, there is no financial flow on this account. This further reinforced that the buyer's statements are not correct.
4.8 It is also observed that the fabrics are supplied continuously to these 3 buyers over a long period of time and they have not made any complaint regarding weight of the goods. Therefore, the buyer's statements are not tenable. It is also found that the allegation of the department is that appellant under the guise of showing overweight of the final product cleared the raw material (PFY) clandestinely. However, neither any investigation was carried out to find out any single buyer of such alleged clandestinely removal of raw material nor any evidence has been produced in this regard. Therefore, in absence of any tangible evidence regarding clandestinely removal of raw material such as transportation, buyer, money transaction, etc. it cannot be established that appellant have cleared the raw material clandestinely.
15 | P a g e E/11250 & 11252/2016 C/11251 & 11253/2016-DB 4.9 The adjudication also relied upon one test report of the Chemical examiner dated 21.09.1999 according to which it was alleged that the weight of grey fabric is less in the sample drawn, than what is recorded in the books of accounts. In this regard, the appellant have vehemently submitted that the director of the appellant immediately clarified during investigation itself in his statement dated 11.07.2002 that these sample on which the test report is conducted are taken from 1 lot only of rejected consignment, having both low quality and weight of goods. Hence, the test report based on such one lot of rejected goods cannot be made basis for the alleged clearance of huge quantity of 110647 kgs of PFY. It is settled law that merely by testing sample of 1 lot in the entire quantity the same cannot be applied. In this regard we get support from the following judgments:-
a) In the case of R.K.K.R. Steels Ltd Vs. Commissioner of Customs (Export), Chennai reported at 2019 (367) ELT 346 Hon'ble Madras High Court has passed the following decision:-
"7. We do not agree with the stand taken by the Tribunal, because the test reports are based on random samples drawn by the Department. Admittedly, when the first sample was drawn, after the assessee presented the bills of entry for clearance, there was no notice to the importer as to from which container the samples were drawn. Though the goods have been released, it is only a case of provisional release and the Department having accepted the request made by the appellant for a re-test and the test report on the second test having gone in favour of the assessee and the benefit having been extended to the remaining goods, in our considered view, the transaction cannot be split up into two, more so when there is no notice issued to the assessee as to from which containers the samples were drawn at the first instance. "
b) In the case of Jupiter Trading Company vs. Commr. Of Cus. C.Ex. & S.T. reported at 2019 (369) ELT 1524 CESTAT Bangalore bench has passed the following order:-
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"5. After considering the submissions of the Learned AR and after going through the order passed by the Commissioner, we find that the Commissioner has passed a detailed and exhaustive order after considering each and every submission made by both parties. Further we find that the only ground on which the Revenue has filed the appeal is that the Commissioner should have confirmed the entire demand in the show cause notice but the Commissioner after examining the evidence and entire material on record has come to the conclusion that the samples have been drawn in respect of 14 items/consignments in 7 Bills of Entry whereas the show cause notice proposes to apply the results of these test reports to 61 Bills of Entry during the period from 21-11-2005 to 12-4-2006. Further the Commissioner has observed that to make the test results applicable, all the parameters have to be similar, i.e. description of the goods, the supplier of goods, importer and the price of the goods should be the same. If any one of the parameters is changed, then the test results cannot be applied to those situations. Only when all the parameters are identical, it can be reasonably concluded that the goods were also identical. Further we find that since all the goods were not identical and therefore one test report cannot be applied for all the goods and the same has rightly been considered by the Commissioner. In view of the cogent and convincing reasoning given by the Commissioner with regard to each and every ground, we are of the considered opinion that there is no infirmity in the impugned order which we uphold by dismissing the appeal of the Revenue."
c) In the case of Maghu Wool Spinning Mills Vs. Union of India & Ors.
reported at 1983 (14) ELT 2200 Hon'ble Bombay High Court has following view:-
"9. There is one more aspect of the matter which cannot be overlooked. The first two tests were carried out by drawing samples from bale Nos. 12 and 34, while the core-drilling was carried out on bale No. 19 only. Even assuming that the wool content of bale No. 19 was found to be below 50 per cent, still it is difficult to understand how the Customs authorities can jump to the conclusion that the wool content of all the remaining 36 bales including bale Nos. 12 and 34 were less than 50 per cent. The positive conclusion arrived at after inspecting Bale Nos. 12 and 34 was that the wool content was more than 40 per cent, but ignoring that conclusion the authorities resorted to levy duty by resort to the finding arrived at by core- drill test on bale No. 19. The procedure adopted by the Customs authorities was entirely misconceived and cannot be sustained either in law or by principles of natural justice. In my judgment, the finding of the Customs authorities that the import of woollen rags by the petitioners is not eligible for duty exemption is totally incorrect and deserves to be set aside. The petitioner are entitled to the clearance without payment of any duty."
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e) In the case of York Exports Vs. Commissioner of Customs (Export), Mumbai reported at 2004 (169) ELT 175 the CESTAT Mumbai Bench has following view:-
"3. We note that only two test reports covering two shipments, out of the sixteen export consignments from which samples were drawn, showed adverse reports viz., presence of acrylic fibres. In all eighteen consignments were exported and no samples were drawn from two export shipments. The Commissioner accepted the description of export consignments from which no samples were drawn. Thus, out of eighteen shipments only two shipments are under dispute.
4. As soon as these adverse findings of the test report were brought to the notice of the appellants, they contested the correctness of the test reports and requested the concerned authorities to subject the remnants of samples or the duplicate samples for a re-test. This request, we note, has not been acceded to. Instead, the contents of the test report are justified in the impugned order by saying that the laboratory could not have recorded the presence of "acrylic fibre" if the same was not present in the export product. In this connection, we would like to emphasise that the appellants have a right to contest the correctness of the test report. Denial of this right is denial of natural justice. In the absence of a re-test report, the findings of the said test report have to be discarded as also the findings based on the said report.
5. Accordingly on this limited point, we note that, the order passed by the Commissioner cannot be sustained. Consequently, we set aside the impugned order, and allow the appeal, with consequential relief, if any, in accordance with the law."
From the above judgments, the ratio of the same applicable in the present case that merely on the basis of test report of 1 lot it cannot be assumed that the entire finished goods have been over weighted and the difference was cleared clandestinely in respect of PFY.
5. As per our above discussion and finding, we find that the department could not establish clandestinely removal of goods. Therefore, the entire demands including penalties are not sustainable. Since, we decide the matter of fact and merit of this case, we are not addressing the issue on 18 | P a g e E/11250 & 11252/2016 C/11251 & 11253/2016-DB limitation, hence the same is left open. The impugned order is not sustainable. Hence, the same is set aside Appeals are allowed.
(Pronounced in the open court on 15.05.2024) RAMESH NAIR MEMBER (JUDICIAL) RAJU MEMBER (TECHNICAL) Raksha