Custom, Excise & Service Tax Tribunal
Sanjay Nachrani vs Raipur on 14 September, 2023
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CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI.
PRINCIPAL BENCH - COURT NO. II
Excise Appeal No.52053 OF 2018 (SM)
(Arising out of common Order-in-Original No.RPR/EXCUS/000/COM/CEX/053/2018 dated
28.03.2018 passed by the Principal Commissioner, Customs & Central Excise, Raipur
(Chattisgarh)]
Shri Sanjay Nachrani, Director Appellant
Of M/s. Sunil Sponge Pvt. Ltd.,
Plot No.96, 97, Phase-II, Siltara,
Industrial Area,
Raipur (C.G.).
VERSUS
Commissioner of CGST & Central Excise, Respondent
Central Excise Building, Dhamtari Road, Tikrapara, Raipur, Chattisgarh.
WITH
Excise Appeal No.52055 OF 2018 (SM)
(Arising out of common Order-in-Original No.RPR/EXCUS/000/COM/CEX/053/2018 dated 28.03.2018 passed by the Principal Commissioner, Customs & Central Excise, Raipur (Chattisgarh)] Shri Anil Nachrani, Director Appellant Of M/s. Sunil Sponge Pvt. Ltd., Plot No.96, 97, Phase-II, Siltara, Industrial Area, Raipur (C.G.).
VERSUS Commissioner of CGST & Central Excise, Respondent Central Excise Building, Dhamtari Road, Tikrapara, Raipur, Chattisgarh.
AND
Excise Appeal No.53324 OF 2018 (SM)
(Arising out of common Order-in-Original No.RPR/EXCUS/000/COM/CEX/053/2018 dated 28.03.2018 passed by the Principal Commissioner, Customs & Central Excise, Raipur (Chattisgarh)] M/s. Sunil Sponge Pvt. Ltd., Appellant Plot No.96, 97, Phase-II, Siltara, Industrial Area, Raipur (C.G.).
VERSUS Commissioner of CGST & Central Excise, Respondent Central Excise Building, Dhamtari Road, Tikrapara, Raipur, Chattisgarh.
2APPEARANCE:
Shri Bipin Garg & Ms. J. Kainaat, Advocates for the appellants. Ms. Tamanna Alam, Authorised Representative for the Respondent. CORAM:
HON'BLE MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) FINAL ORDER NOs. 51299-51301/2023 DATE OF HEARING: 18.05.2023 DATE OF DECISION: 14.09.2023 ANIL CHOUDHARY The brief facts are that appellant - Sunil Sponge Private Limited is a manufacturer of sponge iron and M. S. Billet. The sponge iron manufactured is partly sold and partly consumed captively for manufacture of billet. Appellant availed Cenvat credit on the inputs and capital goods. The other appellant - Mr. Sanjay Nachrani is the Director and Mr. Anil Nachani is the Managing Director of Sunil Sponge (P) Ltd.
2. There was a search in the premises of the appellant factory on 08.01.2008 and panchnama was drawn. The officers scrutinized the records and documents and resumed some of the documents for further scrutiny.
The officers also physically verified the stock of finished goods on basis of sectional weight-estimation, by measuring length and quantity of the billet and compared with the recorded balance. The stock of billet was calculated at 692.985 metric tons, whereas the recorded balance as on 08/01/2008 was 718.150 metric tons. Thus there appeared to be a shortage of billets by 25.030 metric tons.
3. On scrutiny of lose papers in file marked SP -1, invoices bearing i) serial No. 2429 dated 06/01/2008 (duplicate for transporter), page 269 of the file SP -1 and ii) invoice No. 2439 dated 07/01/2008 at page No. 275 of 3 file SP -1, were found. It appeared these were issued for sale of 22.850 metric tons and 22.350 metric tons of sponge iron to m/s Sunil steels, Raipur.
Similarly the original for buyer and duplicate for transporter copies of invoice No. 2360 dated 02/01/2008 was also found, even after lapse of 6 days from the date of issue. Further invoice No. 2439 dated 07/01/2008 (quadruplicate- extra copy) was found issued for captive consumption of 13.550 metric tons of billet (end cuttings). It appeared that these invoices were never cancelled nor any intimation in this regard was given to the Department, as required under Rule 11 of CER read with chapter 4 of Excise manual of supplementary instructions.
4. The aforementioned copies of invoices found in the lose papers, were cross verified with the triplicate for assessee copies of the invoices issued by appellant. It was observed that invoice No. 2360 dated 01/02/2008 was issued to M/s Saurabh Rolling Mill Private Limited for removal of 26.580 metric tons of sponge iron, whereas as per the corresponding triplicate copy for assessee, the customer is Om Kiran Ispat Udyog. It appeared that as per the 2 different copies of the same invoice number, particulars like date, time of issue of invoice and quantity of sponge iron are same. On verification of invoice No. 2439 dated 01/07/2008, page 401 of file SP- 1, quadruplicate - extra copy, issued for captive consumption of 13.550 metric tons of billets was found with the appellant. As per records, same number of invoice, triplicate for assessee dated 01/07/2008, have been issued to M/s. Sunil Steels for sale of 22.350 metric tons of sponge iron. But the date and time of preparation of the invoices and removal of goods in both the copies of the invoices are same.
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5. Further from the private records resumed during search namely file marked SP-1, SP-2 and dispatch advice marked as SP 4, 'goods inward gate pass' (raw material) marked as SP-6 'goods inward gate pass' mark as SP - 7 and 'goods receipt note' marked as SP - 8, on scrutiny it was found that in such private records the details of excisable goods removed and inputs received in the factory of the Appellant have been recorded. On cross verification of the details relating to dispatch of excisable goods (as per private records) with their sale invoices, it was found that the dispatch particulars in some of the entries tally with the details in the corresponding sale invoices. But against 459.370 metric tons of sponge iron, 91.390 metric tons of billet and 32.0 metric tons of dolochar, no invoice was found to be issued by the appellant. (Details as given in the Annexure 1 of show cause notice). It appeared that the total value of goods (being 459.370M. T. of sponge iron and 91.3 90M. T. of billet and 32.0 M.T. of Dolochar) works out to Rs.87,45,603 involving Central Excise duty of Rs.14,41,275/-.
6. Further on cross verification of details relating to receipt of excisable goods - raw materials as per private records with their purchase invoices, it was found that incoming particulars in some of the entries tally with details in corresponding purchase invoices, but against 44.750 M.T. of scrap, 5.04 M.T. of silicon manganese, 33.740 M.T. of pig iron and 31.370 M.T. of sponge iron, no purchase invoice is available.
7. On scrutiny of the documents the officers came to the conclusion that the appellant No. 1 has clandestinely removed excisable goods without payment of central excise duty to M/s Sunil Steels (A sister concern of the appellant No.1) engaged in the manufacture of MS Billet and Re-rolled Products of Iron and Steel. In follow-up action, the Central Excise Officers conducted verification in the factory of M/s Sunil Steel on 11.01.2008 and withdrew some incriminating documents such as loose Papers, Notebooks etc. and Panchanama dated 11.01.2008 was prepared. In further follow-up 5 action the officers visited the Registered/City office of the appellant - Sunil Sponge and withdrew certain incriminating documents and a CPU of the computer. On scrutiny and comparing the records of appellant Co. and M/s Sunil Steels, it appeared that no invoice was issued by the appellant to M/s Sunil Steels against supply of 755.230 MT of sponge iron, 7.480 MT of Sillico Manganese, 11.880 MT of CI Scrap & 36.460 MT of PCM Scrap.
8. Statement of Shri Sanjay Nachrani (appellant), Anil Nachrani (appellant) the Directors and Kamta Prasad Verma - Excise Clerk of the appellant No.1 was recorded on 09.01.2008 & 17.01.2008 and 04.02.2008 & 04.02.2008 respectively. Further statement of Sh. Mahender Kumar Gupta director of M/s Saurav Rolling Mills Pvt Ltd was also recorded on 10.01.2008.
9. After scrutiny of records, show cause notice dt.24.12.2008 was issued demanding central excise duty of Rs.1,18,51,503 besides interest and proposal for imposing penalties. In reply, the appellants denied all the allegations and explained all the facts.
10. In the impugned Order-in-Original(2nd round) the adjudicating authority divided whole of the demand in seven issues- as follows:
(i) Evasion of Central Excise duty of Rs.90,749/-, in respect of alleged shortage of finished goods, as ascertained during physical stock verification,
(ii) Evasion of Central Excise duty of Rs.69,648, in respect of clearance made under parallel invoice No. 2360 dt.02.01.2008,
(iii) Evasion of Central Excise duty of Rs.54,550 and Rs.32,603, in respect of clandestine removals made under parallel invoice No. 2439 dt.07.01.2008,
(iv) Evasion of Central Excise duty of Rs.14,41,275, in respect of excisable goods removed clandestinely, evidences for which 6 were gathered from various incriminating records recovered from its premises.
(v) Evasion of Central Excise duty of Rs.38,58,809/- on 1,064.323 MT of Billets removed clandestinely, for which evidences were gathered from production records recovered from its premises,
(vi) Evasion of Central Excise duty of Rs.18,42,036/- and Rs.1,80,042/-, in respect of finished goods and inputs respectively, removed clandestinely, as gathered from incriminating records recovered from the premises of the consignee, namely M/s Sunil Steels, Raipur, and
(vii) Evasion of Central Excise duty of Rs.42,81,791/- on the alleged suppression of production and clandestine removal thereof of goods, noticed in the incriminating notebook recovered and seized from the common office premises of the group companies.
11. After considering the defence submissions the adjudicating authority dropped demand amounting to Rs.1,01,10,151 and confirmed Rs.17,41,352 besides interest and penalties.
12. In appeal on behalf of all the appellants, Ld. counsel Sh. Bipin Garg made issue wise submissions and also submitted a chart explaining the details of demand. Submissions of the counsel are as follows:
(i) Rs.90,749/- :
It was submitted that out of recorded quantity of Billet of 718.015 MT, on verification 692.985 MT was found hence 7 there was a shortage of 25.030 MT, which comes to around 3.5% which is a meager shortage. It is also submitted that that there was no actual weighment but only on estimation basis. It was explained by Sh. Sunil Nachrani in his statement. Hence the demand is not sustainable. He relied upon the case of Super Iron Steel Pvt. Ltd. vs. CCE [2021 (378) ELT 180].
(ii) Rs.69,648/- :
It is alleged that the appellants made clearances under parallel invoice No. 2360 dt. 02.01.2008. It was explained in the statement dt. 09.01.2008 by Shri Sanjay Nachrani that invoice No. 2360 dt. 02.01.2008 was issued in the name of M/s Sourav Rolling Mill Pvt. Ltd. Raipur, however material was rejected by them and the same Truck was diverted to M/s Om Kiran Ispat Udyog. The appellants filed invoice issued to Sourabh Rolling Mill Pvt. Ltd as well as issued to Om Kiran Ispat Udyog of the same number (on re- sale), which clearly shows that every thing was same as in the invoice of Sourav Rolling Mill Pvt. Ltd. The appellants also submitted Ledger account as well as Bank Statements showing receipt of the amount from Om Kiran Ispat Udyog.
The appellants also submitted that they made request to cross examine Mr. Mahinder Kumar Gupta-director, but it was not allowed. The Adjudicating Authority recorded his finding, that it is a procedural lapse on the part of the appellants, however, demand was confirmed.
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(iii) Rs.54,550/- & Rs.32,603/-
It is submitted that the invoice No. 2439 dt. 07.01.2008 was issued in the name of M/s Sunil Steels Ltd. who rejected the goods and the same were returned to the appellants factory. In his statement Shri Sanjay Nachrani explained that the goods was rejected by the consignee. There was no further investigation by the department such as from Transporter/Driver etc. Copy of invoice as well as Goods Receipt Note was submitted. There is no further evidence/investigation in this regard. The Adjudicating Authority confirmed the demand for the reason of procedural lapse on the part of the appellants.
(iv) Rs.3,98,700/- :
The appellants allegedly evaded Central Excise Duty of Rs.14,41,275/- by removing excisable goods clandestinely. Adjudicating Authority however confirmed the demand of Rs.3,98,700/- and dropped the demand of Rs.10,42,575/-. The counsel explained as follows, that there was no clandestine clearances :-
(a) For S. No. 1 of the chart it was observed that as per kaccha parchi the goods cleared were Sponge Iron whereas the invoice No. 2440 dt.07.01.2008 is for Dolochar (Coal Ash). It is submitted that no investigation was conducted from the Consignee, Transporter, Driver etc. The private records were maintained/generated at different section of unit for Internal Control purposes. Kaccha parchi is not an authenticated document. It is not known who wrote this document. It is further submitted that there is no evidence at all to show that Sponge Iron was cleared and invoice was issued for Dolochar.9
(b) S. No. 2 of the chart: Kaccha parchi shows the date 28.12.2007 whereas invoice No. 2303 issued on 29.12.2007. There may be mistake by wrongly mentioning the date in kaccha parchi or entry might be made on 28.12.2007. There is no evidence of clandestine clearance.
(c) S. No. 3 of the chart: the goods were sold to M/s Iskan Strips. Loha Udyog is a broker through whom the goods were sold against proper invoice.
Copy of Invoice issued to M/s Iskan Strips, Ledger and Bank Statement was submitted.
(d) S. No. 4 to 6 of the chart : The demand has been raised on the basis of dispatch advice which is merely an instruction advice to dispatch department. It is not the document for removal of goods. However the goods at S.No. 5 were cleared to M/s Sunil Steel under invoice No. 1689 dt.27.10.2007 on payment of duty, which is on record.
(v) Rs.38,58,809/- :
Whole of the demand is dropped.
(vi) Rs.10,88,887/- + 1,80,042/-:
The allegation was that evasion of Central Excise duty of Rs.18,42,036/- and Rs.1,80,042/- in respect of Finished Goods and Inputs respectively, removed clandestinely. This allegation was made on the basis of incriminating records recovered from the premises of the consignee M/s Sunil Steels.
It was submitted that the demand is confirmed on the basis of some record(s) recovered from the premises of the consignee. The Director of the consignee's unit denied the maintenance of such records at their instructions. There is no evidence that who maintained such record, and also no investigation was made in this regard. It is urged that the appellants submitted supporting documents and explained 10 all the facts, however the adjudicating authority dropped the demand in part of Rs.7,53,149/- and confirmed the demand of Rs.10,88,887/-. For the demand of Rs.5,31,834/-, the appellants had cleared Dolochar whereas the department alleged that as per the record recovered from the consignee's premises, the goods cleared were sponge iron. The demand is confirmed on the basis of third-party record without any corroboration which cannot be sustained.
It is further submitted that there is no evidence at all that the appellants had cleared inputs clandestinely. No investigation is made for this allegation also.
(vii) Rs.1,94,514/-:
It is submitted that the allegation was that the appellants evaded Central Excise Duty of Rs.42,81,791/- by removing excisable goods clandestinely on the basis of incriminating notebook recovered and seized from the common office premises of the group companies, however he confirmed the truncated demand of Rs.1,94,514/-.
It is submitted that there is no evidence for confirming this demand. Burden is upon the department to prove its allegation. Finding given by the Adjudicating Authority is vague and has no legs to stand.
(a) It was explained that the entries found i.e. Rs.5,52,161 & Rs.2,92,340 totaling Rs.7,64,501 upon which evasion of duty comes to Rs.1,25,990. It was submitted that Rs.5,52,161 is shown at Page No.10 of the documents submitted relating to issue No. VII. In fact, two invoices were issued one invoice No.2732 dt.13.03.2007 of Rs.3,05,909 and another invoice No.2751 dt.15.03.2007 11 of Rs.2,46,252. both Issued to M/s Steel Abrasive Ltd.
Copy of invoices, Ledger Account and Bank Statement was submitted which are at Page No.5 to 9. Hence demand of Rs.1,25,990 is not sustainable.
(b) As regard demand of Rs.68,524 it was submitted that the adjudicating authority after discussing in Para 20.1 dropped the same. This fact is clear from the S.No.1 of the chart in Para 20.1. Whereas in Para 20.2 without any reason he confirmed the demand of Rs.68,524.
(c) It is submitted that demand confirmed Rs.1,25,990 & Rs.68,524 (1,94,514) is not sustainable.
13. Learned Counsel submitted that there is no evidence of clandestine clearances and only on the basis of some unauthenticated rough note books resumed from the consignee M/s Sunil Steels, and some unauthenticated kaccha parchi/record resumed from the factory of the appellants, it is presumed that the appellants had cleared the goods clandestinely. It is important to submit that the department did not provide 'non-relied upon documents' even after directions given by this Hon'ble Tribunal. It is further submitted that originally total demand was of Rs.1,18,51,503 out of which the adjudicating authority was satisfied with the submissions of the appellants, however confirmed only an amount of Rs.17,41,352.
14. it is further submitted that neither the adjudicating authority examined the witnesses nor allowed cross examination. Only for this reason the impugned order is not sustainable and liable to be set aside.
15. The Authorized Representative of the department reiterated the findings given by the adjudicating authority and submitted that all the appeals filed by the appellants should be rejected.
16. I have gone through the rival submissions. The appellants explained all the issues in detail and relied upon the judgements. Firstly the 12 department did not provide 'non-relied documents', neither examined the witnesses nor opportunity of cross-examination was given. The appellants submitted that clandestine removal being serious allegation and the department is required to establish beyond doubt by production of sufficient and positive evidence. It was also submitted that there was no shortage of goods at the time of visit. In fact the weighment was taken on estimation basis and the demand is not sustainable.
17. So far the first issue is concerned for Rs.90,749/-, I find that the physical stock taking had been done by way of estimation and there is no exact weighment done. Thus, the variation in the physical stock being less than 10%, is considered to be normal variation, not calling for any adverse inference. Accordingly, I set aside the demand of Rs.90,749/-.
18. So far the 2nd issue of Rs.69,648/- is concerned, I find that the appellant had given cogent explanation during the course of investigation being - that as the goods were not accepted by the Saurabh Rolling Mills Pvt. Ltd., the same were diverted by way of sale in transit to M/s. Om Kiran Ispat Udyog. I further find that the court below erred in confirming this amount, solely based on the statement of the Director of Saurabh Rolling Mills, without examining the said Director in the adjudication proceedings. Such evidence is not reliable as in spite of request by the appellant, cross examination was not allowed. Thus, the evidence of Shri M.K. Gupta is hit by the provisions of Section 9 D of the Act. Further, I find that there is no other evidence or reason to reject the cogent explanation given by the appellant. Accordingly, I allow this ground and delete the demand of Rs.69,648/-.
19. So far the 3rd demand of Rs.54,550/- and Rs.32,603/- is concerned with regard to Invoice No.2439 dated 07.01.2008, the appellant had given a 13 cogent explanation that the goods have been dispatched to M/s. Sunil Steels Ltd. The goods were rejected by the consignee /buyer. The same were returned to the factory of the appellant. In his statement, Shri Sanjay Nachrani, Director had explained that the goods have been received back on the rejection by the buyer and further, in support thereof, submitted the goods receipt note for proper accounting of the same. I find that Revenue had not made further investigation in the matter nor I find the cogent explanation to be false. Thus, due to some error in record keeping or procedural lapse on the part of the appellant, the demand is held to be unsustainable. Accordingly, this ground is also allowed and the demand of Rs.54,554/- and Rs.32,603/- is deleted.
20. So far (the demand of 4th issue) of Rs.3,98,700/- is concerned, this demand has been confirmed out of the total alleged duty evaded of Rs.14,41,275/-, on the allegation of removal of excisable goods clandestinely. I find that the said demand has been confirmed on the basis of the kachcha parchi(s), which was found and resumed from the factory of the appellant during search. The appellant had given cogent explanation during investigation, that these kachcha parchies are not the statutory records or the records maintained on the instructions of the Management. These are generated by the staff at different sections of the unit for internal control purposes. Further, no author of the kachcha parchies has been identified. Further, there is no evidence of clearance of Sponge Iron clandestinely. Further, there is also no evidence that in the garb of invoice for dolochar, sponge iron was cleared. Thus, I find that the demand has been confirmed on the basis of the assumptions and presumptions, in spite of cogent explanation given by the appellant. Accordingly, I hold that this demand is also not tenable and the same is deleted. 14
21. Further, on going through the other findings recorded by the Adjudicating Authority for confirming this demand, I find that for each of the instance/allegation, the appellant have given cogent explanation explaining the nature of kachcha parchies, which have not been found to be false. Further, no evidence has been found of any clandestine removal. Accordingly, I hold that the said demand o Rs.3,98,700/- is unsustainable and the same is hereby deleted.
22. The (5th issue) demand of Rs.38,58,809/- is already dropped by the learned Commissioner.
23. So far (6th issue) the demand of Rs.10,88,887/- is concerned, the same is based on third party records. I find that there is no corroboration nor any admission. Further, the said third party (Sunil Steels) have denied the evidence, as to have been maintained by them or at their instance. Thus, I find that the demand is simply presumptive, hence the same is deleted.
24. So far the (7th issue) demand of Rs.1,41,514/- is concerned, the same is confirmed on the allegation of clandestine removal. I find that there is no basis to confirm the demand, based on rough note book and thus, the demand is presumptive. Hence, I set aside the same.
25. In view of my findings and observations, the appeals are allowed and impugned order is set aside.
[Order pronounced on 14.09.2023.] (ANIL CHOUDHARY) MEMBER (JUDICIAL) Ckp 15