Custom, Excise & Service Tax Tribunal
M/S Salasar Ispat Pvt. Ltd vs Cce & Customs, Nasik on 19 September, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
COURT NO. II
APPEAL NO. E/483, 484 and 485/2010 Mum
Arising out of Order-in-Original No. 20/CEX/2009 dated 23.12.2009 passed by the Commissioner of Central Excise & Customs, Nasik.
For approval and signature:
Honble Shri Ashok Jindal, Member (Judicial)
Honble Shri P.S. Pruthi, Member (Technical)
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
M/s Salasar Ispat Pvt. Ltd.
:
Appellant
Shri Pravesh Gautam
Shri Pravin Gautam
Versus
CCE & Customs, Nasik
Respondent
Appearance Shri D.B. Shroff, Advocate with Shri Ashok Kumar Singh, Advocate for appellant Shri S. Dewalvar, Addl. Commissioner (A.R.) For Respondent CORAM:
Shri Ashok Jindal, Member (Judicial) Shri P.S. Pruthi, Member (Technical) Date of Hearing : 19.09.2014 Date of Decision : ..2014 ORDER NO.
Per Ashok Jindal The main appellant namely M/s Shri Salasar Ispat Pvt. Ltd. has filed appeal against the impugned order confirming the demand of duty along with interest and imposition of penalty on account of clandestine removal of TMT/CTD bars. The co-appellants namely Shri Pravesh Gautam and Shri Pravin Gautam who are directors of the appellant Company are also in appeals against the impugned order imposing penalty under Rule 26 of the Central Excise Rules, 2002.
2. Brief facts of the case are that the main appellant is engaged in manufacture of TMT/CTD bars. On 18.12.2006, the DGCEI conducted a raids in the factory of the appellant, office of M/s. Gautam Enterprises in Mumbai and office of M/s. Salasar Ispat in Nashik on information that the appellant is engaged in a large scale evasion of duty on clearance of their final product clandestinely. During the course of search, no incriminating documents were found. No unaccounted raw materials or finished goods were found in the premises. All entries in the statutory records tallied with the stocks of inputs and finished product found were as per the accounts books maintained by the appellant but the department recovered three documents namely Record Nos. 23, 24 and 26 from the office premises of Gautam Enterprises in Mumbai. The claim of the appellant is that the office at Mumbai does not belong to the appellant but on the basis of records seized, certain entry was found for the period 27.06.2006 to 16.12.2006 relating to purchase of M.S. ingots by the appellants and sale of TMT/CTD bars manufactured out of such ingots and also certain purchase and sale entries made by the trading firm M/s Gautam Enterprises and M/s. Shiv Ganesh Parvati. On the basis of these records, statement of Shri Parvesh Gautam on 18.12.2006 and statement of broker Shri Faruk Sheikh on 19.12.2006 were recorded in which Shri Faruk Sheikh has stated that he has acted as a broker for various parties and he had brokered the purchase of 578.240 MT of TMT bars from the appellant during the impugned period. But during the course of cross-examination on 29.7.2009, Shri Faruk Sheikh retracted his statement saying that no goods were sold by the appellant to him without cover of excise invoices. He has also admitted that his statement was recorded under pressure. Statement of Shri Pravin Gautam was also recorded and statements of various suppliers and brokers were also recorded. On the basis of these records, a show-cause notice dated 25.11.2008 was issued alleging that the appellant had manufactured and clandestinely cleared 7697.010 MT during the period June 2006 to December 2006 clandestinely without payment of duty. Adjudication took place. The appellant contended before the adjudicating authority that the records No. 23, 24, and 26 are in the handwriting of Shri R.L. Gautam whose statement was never recorded and as observed by the revenue that nearly 75% of the entries mentioned in those records pertains to Gautam Enterprises and Shiv Ganesh Parvati. It is also contended that the Directors of the appellant company have retracted their statements recorded during the course of investigation stating that their statements were recorded under duress. It is further submitted that cross-examination of various persons was not granted who had given statements. Out of the numerous brokers and ingots manufacturers whose statements were recorded, the department offered for cross-examination only 1 ingot manufacturer and 3 brokers. On the basis of the statement of M.S. Ingots supplier, it is alleged that the appellant had purchased 7474.305 MT of Ingots and out of which 47.775 M.Ts of ingots were received in the factory of the appellant which were used in the manufacture of TMT/CTD bars but no documentary evidence was produced that the appellant had purchased the above material in their factory. It was contended 7426.530 MT of ingots to manufacture 7426.530 metric tons of TMT/CTD bars is only on presumption basis. It was contended by the appellant before the adjudicating authority in reply to the show-cause notice that the installed capacity of the appellants factory is only 4441 MT per year and as per the records during the period of six months in dispute, the appellant has already cleared about 2600 MTs of TMT bars on payment of duty. Therefore, it is contended that the appellant has not manufactured the quantity in dispute as the appellant has no manufacturing capacity to manufacture those goods. It is also contended that no evidence of any change in the pattern of production or in the electricity consumption or the capacity of the plant has been examined by the investigating team and it is also pleaded that there is no change in electricity pattern. No evidence was found by the investigating team regarding the use of furnace oil for the purpose of heating the furnace. For transporting the goods alleged to have been purchased and sold clandestinely, the appellants would have required over 1000 trucks during the impugned period. He further submits that during the course of searching no incriminating documents were found in the factory and office of the appellants. No excess raw material were found on verification of the stocks. It is prayed that as there was no corroborative evidence to prove that the appellants have cleared the goods clandestinely therefore, no case can be made against the appellants but the adjudicating authority after granting cross examination of four people came to the conclusion that the appellants have clandestinely cleared 7697.010 MT of TMT/CTD bars during the impugned period. Therefore, the revenue demanded duty thereon along with interest and penalty on the main appellant and penalties on the co-appellants. Aggrieved by the said order, the appellants are before us.
3. Heard both sides.
4. In defence of their appeals, the learned Counsel for the appellants submits that the entire case is built up on the basis of information contained in the private note books/collection books/chits recovered from the premises of Gautam Enterprises at Mumbai. The said notebook is not written in the handwriting of any of the directors of the company. It is in the handwriting of Mr. R.L. Gautam whose statement was not recorded at all. Therefore the said records cannot be relied against the appellant. Moreover, whatever statements made by the appellants during the course of investigation have been retracted by the Directors of the appellant on first available opportunity as all the statements were recorded under duress. It is also submitted that the entries pertain to those records belongs to Gautam Enterprises and Shiv Ganesh Parvati which are the trading firms. He further submits that during the course of cross-examination, the supplier of MS Ingots has denied any clandestine removal. Moreover, the statements of 3 brokers relied by the revenue, recorded during the cross examination, have also stated that they have never purchased goods from the appellants without Central Excise invoices and their statements were recorded during investigation under duress. In these circumstances, the incriminating statement recorded during the course of investigation of these persons cannot be relied upon. Moreover, the appellants requested for cross examination of 31 persons whose statements have been relied upon in the show-cause notice were not afforded the cross examination of these persons which is in gross violation of Section 9(d) of the Central Excise Act, 1944. Therefore, impugned order is required to be set aside on this sole ground. It is further submitted that the impugned order is gross violation of principles of natural justice therefore, the same is required to be set aside as per the decision in the case of Parmarth Iron Pvt.Ltd. v. CCE 2010 (255) ELT 496 (All).
4.1 It is also submitted that unless the exceptions carved out in Section 9D of the Central Excise Act, 1944 are clearly made out, the statements cannot be regarded as being relevant and therefore cannot form the basis of proving the truth of the facts contained in the statements unless the deponents thereof are produced for cross-examination as held by the Honble Delhi High Court in the case of Basudev Garg v. CC 2013 (294) ELT 353 (Del).
4.2 The learned Counsel further submits that installed capacity of production was fixed in the year 1998 which shows that the production capacity of the appellants plant was only 4441 M.T. per year when the factory runs for 24 hrs a day and thereafter no change in the manufacturing pattern till the investigation conducted in the factory of the appellant and they had manufactured/cleared 2600 MT of TMT bars during the impugned period. If the production capacity is taken then the production works out to 2221 MT whereas the appellant had manufactured/cleared 2600 MT on the strength of Central Excise invoices. If the quantity of clandestine removal is taken into account, the appellant should have manufactured atleast 10,000 MT TMT bars during the impugned period. This is impossible to produce such a huge quantity during that period in the absence of excess machinery or production capacity in the factory of the appellant. To support this argument, the appellant also filed an affidavit dated 09.08.2014 stating that there is no change in the manufacturing pattern of the appellant factory from 1999 till 2006 but the department has not come out with any contrary evidence to this submission. It is also submitted that the appellant was directed during the course of hearing to produce electricity bills for the relevant period and succeeding periods of the electricity bills, the same were produced which show that there is no excess electricity consumption during the period and the electricity consumed remains similar all the times. He further submits that the department has not verified the production capacity and the electricity consumed. Therefore, the claim of the department is on presumption basis that such a huge production and clearance have been done without payment of duty is not tenable as per the decision of Galaxy Indo Fab Ltd. v. CCE 2010 (258) ELT 254 (T). He further submitted that no records pertaining to the alleged clandestine removal of the goods by the appellants were available and the allegations were solely made on the basis of calculation done by the department on the basis of the statements made by the director and the brokers and manufacturers of ingots who were not produced for cross-examination. During the course of cross-examination as sought by the appellant and the director of the appellant, has alleged that their statements were recorded under duress. No enquiry was made with any transporter and no octroi receipt was produced. As during the course of search in the factory, no incriminating documents were found and the stock of raw materials tallied with the Books of Accounts, therefore, the allegation cannot be made against the appellant for clandestine removal of the goods. He further submitted that the Balance Sheets of M/s Gautam Enterprises and M/s. Shiv Ganesh Parvati show that those firms were engaged in the activity of trading of ingots and sale of bars manufactured out of such ingots. To support this contention, the appellant has produced a copy of Income Tax Returns and final accounts which shows that they were engaged in the activity of trading of ingots and the same were disclosed before the Income Tax department. It is also submitted that entries were made in the Record Nos. 23, 24 and 26 are nothing but on the purchase and the sale of the goods of these trading firms. In these circumstances, it is prayed on behalf of the appellants that the impugned order is required to be set aside.
5. The learned A.R. who appeared for the Revenue has also submitted a written submission. On the basis of oral submissions, it is argued that the ingots were recorded as per the entries found in the private record seized during the course of investigation and they have admitted the supply of M.S. Ingots to the appellants. As per the Honble Supreme Court judgement in the case of CCE Madras v. Systems & Components Pvt. Ltd. 2004 (165) ELT 136 (SC), what is admitted, need not be proved. He further submitted that retraction of statement recorded before the Central Excise officer cannot be discarded. To support his contention he relied on the judgements of the Honble Supreme Court in the case of Surjeet Singh Chhabra vs. Union of India 1997 (89) ELT 645 (SC) and Vinod Solanki v. UOI 2009 (13) STR 337 (SC).
5.1 He further submitted that it was not essential for the department to prove the actual clearance of the final product, in the case of clandestine removal, without payment of duty by the appellant as per the decision in the case of Patel Products vs. CCE 2003 (151) ELT 650 (Tri. Del).
5.2 He further submits that clandestine activity at best can be established only by circumstantial evidence as held by the Tribunal in the case of Gulabchand Silk Mills v. CCE 2005 (151) ELT 650 (Tri. Bang.).
5.3 He further relied on the judgement of the Honble Supreme Court in the case of Collector of Customs, Madras and Others v. D. Bhoormull 1983 (13) ELT 1546 (S.C.) wherein it was held that the department is not required to prove its case with mathematical precision to establish the clandestine removal of the goods.
5.4 Further he filed a report dated 16.09.2014 with regard to cross-examination and production capacity of the appellant sought by this Tribunal. In the report, it is submitted that the annual capacity works out to 6419.04 MT after it is taken on the higher side of the production declared by the appellant in their statutory records. It is further submitted that the production capacity depends on number of hours and raw material used during the course of manufacturing of the final product. He further submitted that details of the transporter, vehicle No. etc were not necessary to be ascertained as the evidence for establishing the charge and proving the fact of clandestine removal is available in the records. In these circumstances, he prayed that the impugned order is required to be upheld.
6. After hearing both the sides, we find that allegation of clandestine removal of the goods by the department is on the basis of private records entered in the Diary No.23, 24 and 25 which were recovered from the premises of M/s Gautam Enterprises. We have seen that 75% of the entries mentioned in those records do not found to be related to the appellants by the lower authority. As all relied upon documents are to be described entirely but in this case half of the documents have been relied upon and half of the documents were denied. More over the claim of the appellant is that the hand writing in some of the records was not of the appellants. The said fact was not examined during the course of adjudication by the adjudicating authority. It is also found that the records recovered from the office premises of M/s Gautam Enterprises as claimed by the appellants are not in the handwriting of the appellants but in the handwriting of Shri R.L. Gautam but unfortunately no statement of Shri R.L. Gautam was recorded during the course of investigation to prove contrary to the claim of the appellants.
6.1 We further find that the statements of certain ingots supplier and broker were recorded. Out of 31 persons whose statement sought to have been relied upon in the show-cause notice, the adjudicating authority granted cross examination of only 5 persons and out of which only four persons appeared and all the four have denied the charges that they purchased goods without Central Excise invoices and have stated that no activity has been dealt with the appellant without any Central Excise documents. Revenue has not proved any contrary to these evidence with support of any documents on record.
6.2 Further, we observed that the department has alleged that the appellant has purchased 7474.305 MT of ingots and received in their factory. As the factory of the appellant is located in Dindori, Nasik and the ingots manufacturers situated at Sinnar, Nasik. Between the factory of the appellant and the supplier, there is an Octroi Naka but no efforts was made by the department to obtain octroi receipt for passing of the goods from ingots supplier to the factory of the appellants. This argument supports the case of the appellants that they have not received any goods without the cover of Central Excise invoices from the ingots supplier for the manufacture of TMT bars alleged cleared clandestinely.
6.3 We find that no efforts were made by the department with supporting evidence to prove that TMT/CTD bars were manufactured out of these MS ingots purchased without cover of Central Excise invoices and cleared clandestinely and no effort was made to prove how the goods were transported from the factory of the appellant to the market and no effort was made to find out is there any change in the pattern of production capacity or in the electricity consumption to manufacture these final product. No effort was made to find out is there any excess purchase of furnace oil for manufacturing of TMT bars as the same is used for heating the furnace. No effort has been made by the department to find out how the goods have been transported from the factory of the appellants which would have required more than 1000 trucks within a period of six months. It is an admitted fact that at the time of visit of the factory of the appellants, no incriminating documents were found. Moreover, stocks of raw material were tallied with the records maintained by the appellants. Therefore, to prove contrary, Revenue is required some supportive evidence to establish the case of clandestine removal documents which the revenue failed to do so.
6.4 We further find that during the course of adjudication, the appellant sought cross examination of about 31 persons whose statements were relied upon by the Revenue. Out of those persons, only 4 persons were allowed and all the 4 persons who appeared for cross-examination have stated that they have dealt with the appellants and all the dealings were done with the appellants under the cover of Central Excise invoices. No transaction was dealt with the appellants without cover of Central Excise invoices. Therefore, the statements of these 4 persons recorded in the investigation cannot be relied upon without supporting evidence.
6.5 We further find that the appellants have relied upon the decision of Basudev Garg (supra) wherein the Honble High Court of Delhi has observed as under:-
14.?The Division Bench also observed that though it cannot be denied that the right of cross-examination in any quasi judicial proceeding is a valuable right given to the accused/Noticee, as these proceedings may have adverse consequences to the accused, at the same time, under certain circumstances, this right of cross-examination can be taken away. The court also observed that such circumstances have to be exceptional and that those circumstances have been stipulated in Section 9D of the Central Excise Act, 1944. The circumstances referred to in Section 9D, as also in Section 138B, included circumstances where the person who had given a 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 and expense which, under the circumstances of the case, the Court considers unreasonable. It is clear that unless such circumstances exist, the Noticee would have a right to cross-examine the persons whose statements are being relied upon even in quasi judicial proceedings. The Division Bench also observed as under :-
29.?Thus, when we examine the provision as to whether the provision confers unguided powers or not, the conclusion is irresistible, namely, the provision is not uncanalised or uncontrolled and does not confer arbitrary powers upon the quasi judicial authority. The very fact that the statement of such a person can be treated as relevant only when the specified ground is established, it is obvious that there has to be objective formation of opinion based on sufficient material on record to come to the conclusion that such a ground exists. Before forming such an opinion, the quasi judicial authority would confront the assessee as well, during the proceedings, which shall give the assessee a chance to make his submissions in this behalf. It goes without saying that the authority would record reasons, based upon the said material, for such a decision effectively. Therefore, the elements of giving opportunity and recording of reasons are inherent in the exercise of powers. The aggrieved party is not remediless. This order/opinion formed by the quasi judicial authority is subject to judicial review by the appellate authority. The aggrieved party can always challenge that in a particular case invocation of such a provision was not warranted. 6.6 Further in the case of J & K Cigarette Ltd. 2009 (242) ELT 189 (Del.) the issue of constitutional validity of Section 9D of Central Excise Act, 1944 came up before the Honble High Court wherein the Honble High Court has held as here-in-as under:-
32.?Thus, we summarize our conclusions as under :-
(i) We are of the opinion that the provisions of Section 9D(2) of the Act are not unconstitutional or ultra vires;
(ii) while invoking Section 9D of the Act, the concerned authority is to form an opinion on the basis of material on record that a particular ground, as stipulated in the said Section, exists and is established;
(iii) such an opinion has to be supported with reasons;
(iv) before arriving at this opinion, the authority would give opportunity to the affected party to make submissions on the available material on the basis of which the authority intends to arrive at the said opinion; and
(v) it is always open to the affected party to challenge the invocation of provisions of Section 9D of the Act in a particular case by filing statutory appeal, which provides for judicial review. 6.7 Further we find that the principle laid down by the Honble Delhi High Court in the case of J & K Cigarette Ltd. (supra) and Basudev Garg (supra) has not been followed. Therefore, we hold that principles of natural justice have been violated by the adjudicating authority. In the circumstances, the statements recorded during the course of investigation cannot be relied on to prove the charge of clandestine removal of the goods by the appellants in this case.
6.8 We further find that the appellants have contended in reply to the show-cause notice as well as before the adjudicating authority that their production capacity was fixed in the year 1998 under the scheme of compounded levy and the production capacity was fixed @ 4441 MT per year and thereafter there is no change in pattern of production. The capacity was fixed for 24 hrs of working by the appellant in their factory. In these circumstances, when the production capacity has not been increased as claimed by the appellant and has not disproved by the adjudicating authority in the adjudication order, moreover, the electricity consumption remains the same prior and after the impugned period, therefore, without ascertaining the fact whether the electricity has been consumed excessively which is main input to produce TMT/CTD bars, the charge of clandestine removal of the goods has remained not proved.
6.9 A similar issue came up before this Tribunal in the case of Galaxy Indo Fab Ltd. 2010 (258) ELT 254 (Tri. Del.) wherein the appellant has raised a specific point relating to the impossibility of production capacity from the appellants factory to the extent of demand made by the department and the adjudicating authority ignored the said ground taken as defence by the appellant that the installed capacity could not permit production of huge quantity of processed fabrics as has been calculated by the department. In those situation, this Tribunal came to the conclusion that the department has not verified during the course of investigation that the production capacity of the appellant factory. Even the electricity consumption record in respect of the appellants factory was not checked. In these circumstances, it will be absurd to believe the claim of the department about the possibility of huge production and clearance thereof without payment of duty by the appellants from their factory during the relevant period. In this case also the production capacity of the appellant was fixed in the year 1998 and thereafter it is the claim of the appellant that there is no increase in production capacity fixed by the revenue and as this claim has not been examined during the course of investigation as well as in adjudication, we find it is a vital evidence for the fate of issue. Moreover, the electricity consumption was also not checked. Therefore, the ratio laid down by this Tribunal in the case of Galaxy Indo Fab Ltd. (supra) squarely applicable to the facts of this case and we hold that it will be absurd to believe the claim of the department about the possibility of huge production and clearance thereof without payment of duty by the appellants from their factory during the relevant period. The installed capacity of the appellants factory is only 4441 MT per year and the statutory records show that the appellant had manufactured/cleared 2600 MT during the impugned period. It is alleged that apart from 2600 M.T. the appellant has manufactured and cleared 7697.10 M.T clandestinely. As discussed above, such huge quantity cannot be produced in the factory of the appellant. We also find that the appellant, in alternate, has claimed that entries pertains in private records are of trading activities which has not been discarded by the revenue but the appellants have produced some evidence for these trading activities by way of IT Returns and Balance Sheets. We also note that the Central Excise duty payable on the manufacture of the goods, as the goods in question cant be produced by the appellant, the demand of excise duty is not sustainable.
6.10 The case laws relied on by the learned A.R. are not concerned to the facts of this case as the appellants have retracted the statements recorded on the first available opportunity. In the case of Shri Surjeet Singh Chobbra (supra), the corroborative evidence was available. The circumstantial evidences go in favour of the appellants.
7. With these observations, we find that when the department has failed to prove the manufacturing of excess quantity of alleged clandestine removal by the appellant therefore Central Excise duty cannot be demanded. Moreover, when the claim of the appellant is that these activities pertain to trading activity. In these circumstances, we hold that the Revenue has failed to prove their case of manufacturing of excess quantity of goods and clandestine clearance thereof without payment of duty. In these circumstances, the charge of clandestine removal of the goods is set aside. Consequently, the impugned order is set aside and the appeals of the appellants are allowed. As there is no charge of clandestine removal of the goods, therefore, penalties are also not impossible. Accordingly, penalties imposed on the appellants are also set aside.
9. With these terms, the appeals are allowed by setting aside the impugned order.
(Pronounced in Court on ) (P.S. Pruthi) Member (Technical) (Ashok Jindal) Member (Judicial) nsk Per : P.S. Pruthi I have carefully gone through the facts of the case. As I have a different opinion, I am recording a separate order.
11. The facts may not be repeated. The whole case centers around the various evidences which were produced through investigations and relied upon by the department. On the other hand, my learned Brother has found lack of evidences in establishing the evasion of duty. Therefore, I think it would be appropriate to analyse the matter evidence-wise.
12. Various evidences brought out in the investigations need to be considered. First, they are in the form of confessional statements of the Directors of the appellant Company, brokers, manufacturers of M.S. Ingots and customers. The 2nd evidence relates to the production records. The 3rd evidence is the cross-examination of various people involved in the complete transactions from purchase of M.S. Ingots to the sale of TMT bars. The 4th piece of evidence is the various records seized particularly the Records at Sl. No. 23, 24 and 26 recovered during the search of the office premises of M/s. Salasar Ispat Pvt. Ltd. (SSIPL in short).
12.1 I note that the main concerned persons of SSIPL, namely the Directors Shri Pravesh Gautam and Shri Pravin Gautam have in their statements dated 18.12.2006, 02.01.07, 05.01.07, 06.01.07 and 20.12.06 accepted the correctness of the transactions reflected in their private records. The brokers through whom the M.S. Ingots were procured viz. Shri Kamal Singh Dassani vide his statement recorded on 09.01.2007, Shri Vijay Kumar Jindal on 09.01.07, 15.01.07 and 17.01.07 admitted the clandestine deals. Shri Jindal identified the entries in Record Nos. 23 and 24 relating to clandestine sale of M.S. Inngots to SSIPL in cash. Further Shri Harish Kumar Gandhi on 09.01.07, Shri Vijay Mittal on 10.01.07, Shri Ramesh Chandak on 10.01.07, Shri Naresh Oza on 11.01.07, Shri Rajeshwar Goya on 16.01.07, Shri Ajay Baheti on 22.01.07 confirmed the said transactions regarding the clandestine sale of M.S. Ingots to SSIPL in cash and without bills. Then the manufacturers of M.S. Ingots, who had supplied the Ingots through the brokers, namely Shri Amit Burakia (Bhagwati Steel Cast Ltd.) vide his statement on 22.01.07, Shri Suresh Mittal (M/s.Ishu Super Steel Pvt. Ltd.) on 23.01.07, Shri Mohit Satbir Sarlia (M/s. Silver Ispat Pvt. Ltd.) on 23.01.07, Shri Jayprakash Mittal (M/s. Silver Ispat Pvt. Ltd.) on 16.01.07 and Shri Stbir Sarlia (M/s Sarlia Steel Pvt. Ltd.) on 23.01.07 also corroborated the transactions of clandestine sale. Mr. Manek Shah of MITC Rolling Mills in his statement dated 23.07.2007 identified the entries in Record No.23 regarding sale of ingots without bills and without payment of duty to SSIPL through broker Shri Harish Gandhi. Finally the customers whose names appears on the seized records and who had purchased the TMT bars from SSIPL namely Shri Arvind S. Shah on 18.12.06, Shri Jinesh V. Parekh, Proprietor of M/s. Chetan Steels on 12.01.07, Shri Mukesh J. Gupta, Proprietor of M/s R.J. Steel Traders on 18.01.07, Shri Kunal Kishore Gandhi, Proprietor of M/s Mangal Steels on 17.01.07, Shri Harshad K Modi, Proprietor of M/s. Rushin H. Modi on 18.01.07, Shri Ketan H. Shah, Patner of M/s. D. Ketan & Co. on 22.01.07 also confirmed the clandestine transactions. In fact, Shri Arvind Shah, Shri Chirag Busa in his statement dated 23.5.2008, Shri Bhupendra Amarchand Shah in his statement dated 16.5.2008, Shri Kunal Kishore Gandhi, Shri Lalit Jain in his statement dt. 19.01.2007 all confirmed entries in Record No.23 which reflect clandestine transactions in cash between them and SSIPL without any bills.
12.2 It is contended that the department has not been able to establish or provide any evidence regarding the clandestine removal such as details of transporters, vehicle No., Octroi records to prove that the appellants received the inputs goods without cover of the Central Excise invoices. I find from the records that the transactions reflected in the seized note books and other records do not give any indication regarding the transport documents. In this view of the matter it was obviously not possible to provide such documents and conduct enquiries in relation to the transport. It is true that in cases of clandestine production and removal, assessees will try not to leave any evidence which can trap them. On the other hand, paras 2.1 and 2.1.1 of Annexure I to the show-cause notice show how methodically the Revenue has been able to decipher the records. The sample pages of Note Books seized from Shri Umesh Modi which figure at Sl.No. 1,2,3,4,5,6 of the annexure to Panchanama dated 18.12.06 indicate how intelligently the officers were able to decipher the records. The sample pages as shown in paras 2.1 and 2.1.1 of the show-cause notice indicate the date, name of the customer, description of goods/quantity supplied, value of goods and name of supplier. They are shown below.
12.3 Similarly the records seized from the possession of Shri Farukh Shaikh, the broker under panchnama dated 18.12.2006 are referred in para 2.2 of the show-cause notice. This para gives a sample of page No.129 of Collection Book for 2006-07 recovered from the possession of Shri Faruk Shaikh where entries have been deciphered to indicate the name of supplier (wherein the words Salasar has been scored out and Praveen has been written) quantity of goods, rate per Kg. of goods, value of goods and payment details. With reference to this records Shri Faruk Shaikh confessed that the clearances effected by the manufacturers of TMT bars as recorded in the two collection books covering the period 2005-06 and 2006-07 were clandestine in nature. The sample pages are shown below to understand the nature and extent of clandestine activities.
The sample pages of the seized records depicted above reveal the intricate details of clandestine receipt, production and clearance of goods by SSIPL.
12.4 The above records indicate that the explanation of the persons involved were commensurate with the contents of the said documents. The details mentioned in the records have been deposed by the said persons in their statements to be true. The acts of SSIPL have been corroborated by documents resumed from other persons who were connected with the transactions such as the supplier of raw material or the purchaser of the finished goods. Simply because some of the persons retracted their submissions will not nullify and abrogate the submissions with reference to the records seized. The private records seized and deciphered cannot be brushed away as evidence without substance evidence. The records speak of definite entries which are admitted by the persons such as Shri Faruk Shaikh and Shri Pravesh Gautam. Therefore, mere retraction of the statements does not help unless countered by detailed explanations. In fact, the repeated retractions of Shri Pravesh Gautam after every occasion when his statement was recorded itself shows that the retraction may not be believed. In case Shri Pravesh Gautam was under duress, he could have easily approached higher authorities/Court; rather he continued to give confessional statements although retracting them later.
13. The next piece of evidence relates to the production reflected in the records, vis-`-vis Annual Production Capacity determined in the year 1999 under Compounded Levy Scheme. The contention of the learned Counsel is that the Annual Production Capacity determined in June 1999 by the Range was 4444 M.T only whereas the clandestine clearance alleged by the department comes to 7697 M.T. for the six months period from July 2006 to December 2006, which far exceeds the actual capacity of production. I note that the capacity fixation of 4444 M.T in the year 1999 was based under the Compounded Levy Scheme on various important factors such as distance of pinions, rpm, reduction ratio of gear box, pully systems of high speed or low speed and number of utilized hours. Having declared these parameters, the duty payable by an assessee would be fixed and constant. It is a historical fact that the scheme did not work and was withdrawn later by the Government, precisely because the actual capacity could be tweaked by changing the above parameters but the duty payable would remain the same. In other words, the capacity practically could be much more than declared and verified capacity. In any case, the plea of the Counsel that the capacity was not changed after 1999 cannot be accepted because it was never verified subsequently. Capacity determined in 1999 has no relevance in 2006. The change in number of utilized hours itself could have increased the capacity very significantly. That the figure of capacity fixed in 1999 cannot be accepted for the period in dispute is evident from the large variation in production shown in the declared records i.e. ER-1 returns during the period in dispute. This is shown in the table below:-
Sr.No. Month and Year Production quantity declared by appellant in ER-1 return Quantity alleged to have been cleared clandestinely based on Annexure II(a), II(b) and II(c) to Show Cause Notice Total quantity ought to have been declared in ER-1 Returns as production 1 July, 2005 173.120 31.110 204.23 2 Sept.2005 245.360 39.485 284.845 3 Oct.2005 223.160 18.925 242.085 4 Nov.2005 195.250 16.935 212.185 5 Jan.2006 Not available 61.240 6 Feb.2006 Not available 21.085 7 April,2006 219.580 21.940 241.520 8 May,2006 366.410 40.785 407.195 9 June,2006 273.120 18.975 292.095 10 July,2006 364.020 895.865 1259.885 11 Aug,2006 372.850 1074.425 1447.275 12 Sept,2006 349.495 1580.750 1930.245 13 Oct,2006 401.050 1751.555 2152.605 14 Nov,2006 534.920 1437.180 1972.100 15 Dec,2006 511.210 686.755 1197.965 The above table shows that the variation in production between the months of July 2005 and December 2006 is almost 300%. Similarly the electricity bills produced by the appellant show massive variation which is inexplicable for a unit (rolling mill) whose consumption per MT is expected to be in the range of 100 units only. Therefore, in my view no sanctity is to be attached to the declared capacity of 1999.
14. The next piece of evidence which has been discussed is the cross examination. The contention of the appellant is that out of 31 persons, cross-examination was conducted in only 5 cases. It is seen that Shri Ashok Kumar Singh at the time of personal hearing held on 01.07.2009 before the Commissioner, C.Ex. & Cus., Nashik, showed his willingness to cross-examine 5 persons, namely (i) Shri Pradip Sargoi (ii) Vijaykumar Mittal (iii) M/s Bhavshakti Steel Mines Pvt. Ltd. (iv) Shri Farukh Shaikh and (v) Arvind Shah. Accordingly, letter dt 06.07.2009 with a copy to Shri Singh was issued to the persons mentioned at Sr. No.(i) to (iv) above for appearing on 29.7.2009 at 11:00 hrs. for cross-examination. The cross-examination of Shri Farukh Shaikh was held on 29.7.2009 and that of Shri Mithunlal Gupta, Director of M/s Bhavshakti Steels Mines Pvt. Ltd. was held on 04.8.2009. At the time of cross-examination on 04.8.2009, Shri Singh again requested for coss-examination of the remaining two persons namely, Shri Pradip Sargoi and Shri Vijaykumar Mittal as they did not appear for cross-examination and the next date was fixed on 08.9.2009. Accordingly, letter dtd 04.8.2009 was issued to Shri Pradip Sargoi and Shri Vijaykumar Mittal to appear on 08.9.2009. However, the appellant vide their letter dtd 5.8.2009 requested for postponement of hearing fixed on 08.9.2009 to 09.9.2009 as their counsel representing the case was not available on the said date due to hearing in the High Court, Mumbai in some other case. Accordingly, the date was postponed to 09.9.2009 and all the three concerned were intimated vide letter dt 07.08.2009. However, due to inevitable administrative inconvenience, the date was postponed to 18.09.2009 and all the three concerned were intimated vide letter dt 19.08.2009. On 18.9.2009, neither Shri Pradip Sargoi nor Shri Vijaykumar Mital appeared for cross-examination. Shri Singh appearing on 18.9.2009 requested for cross-examination of two new persons, namely, Shri Madhu Singh Parmar and Shri Harshad Modi. Accordingly, letter dt 22.9.2009 was issued to Shri Madhu Singh Parmar and Shri Harshad Modi to appear on 06.10.2009 for cross- examination. Shri Madhu Singh Parmar and Shri Harshad Modi appeared on 06.10.2009 for cross-examination. After the cross-examination held on 06.10.2009, the appellant vide their letter dtd 30.10.2009 informed that they would file reply within 10 days. Shri Singh filed reply in the matter vide his letter dtd 30.10.2009. Shri Singh filed another reply vide his letter dtd 18.11.2009. The case was finally heard on 18.11.2009. Shri Singh appeared on the said date. Thus no fresh cross-examination was requested by Shri Singh.
14.1 From the above it is clear that adequate opportunity for cross-examination was given. In any case, the evidence is based on private records seized which have been corroborated by the persons involved.
15. Regarding the 4th piece of evidence, it has been very strongly argued by the learned Counsel that the private Note Books recovered from the premises of Gautam Enterprises was not written in hand writing of any of the Directors viz. Shri Prevesh Gautam and Pravin Gautam and it is in the hand writing of Shri R.L. Gautam, their father. Further he contended that a number of entries had not been taken into consideration as they were not applicable to the appellants. The plea is that the entire quantity of 7447 M.T. is purchased as a part of the trading activity of that firm. The fact that only entries pertaining to appellant which were suspect and in respect of which corroborative confessions were made by persons involved in the transactions needed to be considered. This shows that Revenue was just and fair. Also, I find that the Directors Pravesh Gautam and Pravin Gautam had in their statements confessed to the contents of the diaries Shri Pravesh Gautam deposed that he was one of the Directors of M/s SSIPL and other directors were Shri Pravin Gautam (his brother) and Mrs. Murli Gautam; that he was also proprietor of one trading firm namely M/s Shri Shiv Ganesh Parvati Steel; that his father Shri Roshanlal Gautam was the proprietor of M/s Gautam Enterprises, which was engaged in the trading of Iron and Steel products; that he admitted that M/s. SSIPL used to purchase the M.S. Ingots either through brokers or directly from various manufacturers without cover of Central Excise invoice and without payment of Central Excise duty, that the record no. 23 & 24 seized from his office premises at Mumbai contained the information relating to transactions of M.S.Ingots/TMT Bars and the record No.26 contained the information relating to receipts and payments against the sale and purchase, either by way of cash or by cheque; that this book contained details for the period from 27.03.2006 to 16.12.2006; that most of the entries were written by him in the said records.
15.1 In his statements, Shri Pravesh Gautam confessed to making the entries. This was corroborated by Shri Pravin Gautam in his further statement dated 17.05.2008 that the record nos. 23, 24, and 26 seized from the Mumbai office premises of M/s SSIPL on 18.12.2006 under Panchanama, and he admitted that the seized record no.23 and 24 contained transactions pertaining to the sale of TMT Bars manufactured by M/s SSIPL and the purchase of raw materials viz. M.S. Ingots along with certain other trading transactions and the seized record no. 26 was the cash book maintained by his brother Shri Pravesh Gautam. On being shown page nos. 17 and 18 of record no.30, seized from the Nashik office premises of M/s SSIPL on 18.12.2006 under Panchanama he stated that the said pages contained entries pertaining to the sale of TMT Bars manufactured by M/s. SSIPL. He finally confirmed that 7426.530 MTs of M.S. Ingots were indeed received in the factory premises of M/s. SSIPL and the entire quantity of M.S. Ingots was used in the production of M.S. Bars and the resultant production of M.S. Bars were sold in cash by M/s. SSIPL.
15.2 In view of the above it is clear that the seized records at Sl.No.23, 24 and 26 (2 Note Books containing entries of transactions and one Note Book containing bills and receipts of payments) reflected the clandestine transactions done by Shri Pravesh Gautam and Shri Pravin Gautam. Shri Pravesh Gautam had confessed to the Panchas that the said premises was used as office premises for SSIPL and M/s. Gautam Enterprises (his father R.L. Gautam being Proprietor). In the face of all the private records seized, the appellants have not succeeded in their belated pleas as they have not explained the various entries which indicate clandestine production and removal.
15.3 It has been argued by appellants as to how more than 1,000 trucks which would have been required to transport the alleged production, could have been used without any other incriminating evidence. I find that 1000 trucks used in six months would only mean 5 to 6 trucks every day which is easily possible. Lack of evidence regarding the truck No. etc. is explained by the fact that the clandestine records did not reveal any details of trucks used. It is not always not possible to provide all the evidence in cases of clandestine activity which can, at best, be established only by circumstantial evidence as held by the Tribunal in the case of Gulabchand Silk Mills Pvt. Ltd. v CCE Hyderabad II 2005 (184) ELT 263 (Tri. Bang.). It was held by the Tribunal that in any type of clandestine activity, the persons try their best not to leave any evidence. We cannot expect persons indulging in clandestine clearance to faithfully put the details of all such clearances in some register and append their signature. This is never done. Hence, clandestine activity at best can be established only by circumstantial evidence. It would be too much to expect that the Investigating Officers should establish by what transport on which dates and where the supposed non-duty paid goods were sent and who received them, when and how they were distributed and all the financial dealings etc. We are very sure that humanly it would be impossible to establish all the links of clandestine activity without any break. In this case, the statements or the admissions are supported by the recovery of non-duty paid goods as well as incriminating documents.
In the present case I find that the statements and admissions are indeed supportive of the incriminating documents.
16. Learned Counsels contention that the statements have been retracted is of no help in the face of the Honble Supreme Court judgement in the case of Surjit Singh Chhabra vs. Union of India 1997 (89) ELT 646 (SC) wherein it was held that the confession, though retracted, is an admission and binds the petitioner. So there is no need to call Panch witnesses for examination and cross-examination by the petitioner. 16.1 I find from the facts that the Directors kept giving confessional statements even after retracting them. They never complained to any of the Senior Officers of the department that the statements were under duress. The repeated retractions only reflect only a fickle mind and in any case the point to be noted is that the Directors verified the entries in the seized records to be true. In case they wanted to say that these entries were not true, they could have come up with documentary evidence such as purchase bill, sale bill, payment details, accounts of purchasers and sellers etc. which they failed to do satisfactorily.
16.2 It was held by the Honble Supreme Court in the case of CCE Madras vs. System Components P. Ltd. 2004 (165) ELT 136 (SC) that what is admitted need not be proved. The department is not required to prove its case with mathematical precision to establish clandestine removal as held by the Honble Supreme Court in the case of Collector and Ors. Vs. D.Bhoormull 1983 (13) ELT 1546 (SC). The Honble Supreme Court also held that If the Collector had given the fullest opportunity to accused to establish the alleged acquisition of the goods in the normal course of business and there was no violation of the rules of natural justice, it cannot be said that he was throwing the burden of proving on the accused what the Department had to establish. In fact, he was simply giving him an opportunity of rebutting the first and foremost presumption that arise out of the tell-tale circumstances in which the goods were found regarding their being smuggled goods by disclosing facts with special knowledge. In the present case, evidences in the form of diaries recovered are corroborated by the confessional statements of various persons. Therefore, the department has discharged its burden whereas the appellants have not come up with any creditable evidence to explain away the various entries in the diaries and to prove that these entries only related to trading. They have not come up with the invoices of manufacturers or the Books of Accounts of purchaser to conclusively support their case that the entries did not relate to clandestine procurement of inputs and removal of finished goods by the appellants.
In view of the above, demand of service tax is upheld.
17. As the activities of clandestine procurement of inputs, clandestine product and clearance of finished goods stand established, interest under Section 11AB and penalties under Section 11AC on M/s Salasar Ispat Pvt. Ltd. and the penalties under Rule 26 of the Central Excise Rules, 2002 on Shri Pravesh Gautam and Shri Pravin Gautam are upheld.
18. In the above terms, the impugned order is upheld and appeals are dismissed.
(P.S. Pruthi) Member (Technical) 40 Difference of opinion In view of the difference of opinion between Member (Judicial) and Member (Technical), the matter may be placed before the President to nominate 3rd Member to resolve the difference of opinion on the following points:-
1. In the facts and circumstances of the case whether Member (Judicial) is correct in holding that the appellant is not having the production capacity to manufacture 10,000 tons of TMT/CTD bars during the impugned period. Therefore, on the basis of records seized during the course of investigation are for the trading activity of the appellant and no duty is payable on the trading activity.
Or Member (Technical) is correct in holding that the capacity was never determined during the period in question and duty is to be demanded from the appellant for clandestine clearances.
2. Whether Member (Judicial) is correct in holding that the evidence on the basis of which the demand has been confirmed against the appellant are not sufficient to hold that the appellant has removed the goods clandestinely.
Or The evidence collected by the Investigating team during the course of investigation are sufficient to prove the charge of clandestine removal as held by Member (technical).
3. Whether the Member (Judicial) is correct after relying on the case law in the case of Basudev Garg (supra) that the cross-examination was not granted to the persons whose statements have been relied on to hold that the charge of clandestine removal is in violation of principle of natural justice Or Member (Technical) is correct in holding that adequate opportunity was given and further cross-examination was not requested especially on last date of hearing by the advocate and relying on case of Surjit Singh Chhabra (supra).
(Pronounced in court on ) (P.S. Pruthi) Member (Technical) (Ashok Jindal) Member (Judicial) nsk ??
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