Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs Viki Industries P. Ltd on 9 February, 2018
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH
CHENNAI
Appeal No.E/278/2010
[Arising out of Order-in-Appeal No.14/10 [M-II] SLM dt.8.03.10 passed by the Commissioner of Central Excise (Appeals),Chennai]
Commissioner of Central Excise, Chennai-II Appellant
Versus
Viki Industries P. Ltd Respondent
Appearance:
Shri S Govindarajan, AC (AR) For the Appellant Shri M.A.Mudimannan, Advocate For the Respondent CORAM :
Honble Ms. Sulekha Beevi C.S. Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of hearing / decision : 9.2.2018 Per Bench FINAL ORDER No. 40405/2018 Brief facts are that the Officers of the Preventive Unit conducted search in the office & factory premises of the respondent on 13.12.2005 and recovered certain documents and a mahazar was drawn up on the same day. Certain loose papers were recovered from the table of Shri M.Penchal Naidu, Executive Secretary to the CEO, Sh.Gautam Reddy of respondent company. These papers made upto a file Miscellaneous file, contained details of daily inward/outward materials report for 17.8.2005 and production reports of MS Ingots and CTD/TMT Bars for 13.8.2005, 14.8.2005, and 17.8.2005. Statements of Sh.Penchal Naidu, Sh.M.Seetha Rama Reddy, General Manager and Sh.G.Gautam Reddy, CEO was recorded. It appeared to the Revenue that respondent resorted to clandestine manufacture and clearance of MS Ingots, CTD/TMT Bars and mis-rolls without payment of duty. Show Cause Notice was issued proposing to recover duty demand to the tune of Rs.23,70,784/- alongwith interest and also for imposing penalties. After due process of law, original authority confirmed the demand, interest and imposed equal penalty under Section 11AC besides separate penalty on the respondent under Rule 25 of CER, 2002. On appeal, the Commissioner (Appeals) set aside the same. The Revenue is thus before the Tribunal.
2. On behalf of department, the Ld.AR, Shri S.Govindarajan reiterated the grounds of appeal. He submitted that Sh.Gautam Reddy, Director cum CEO of respondent company in his statement dt.15.12.2005 admitted that 25% to 30% of the production reported in the factory generated reports were not brought to the books of account kept by respondent on the basis of which statutory returns were filed. Further Shri M.Seetharama Reddy, General Manager in his statement dt.25.4.2006 stated that certain quantity of scrap consumed were not taken into account in records. Thus both Director and General Manager have admitted correctness of the details found in the private records the Miscellaneous. He relied upon the decision in the case of Columbia Electronics Ltd 2002 (143) ELT 635 (Tri.-Del) and argued that in clandestine cases, the Revenue is not required to prove the case with mathematical precision.
3. On behalf of respondent, the Ld.Counsel, Sh.M.A.Mudimannan, made submissions supporting the impugned order which is summarized as under :
i. The entire case of the department is based on assumptions and presumptions. The entire demand is based on private documents. The department has not been able to find out any discrepancy in the statutory records maintained as per law. So also there was no physical stock taking of raw material or finished goods done by department to conclude that excess raw material than that has been accounted has been received in the factory or excess finished products has been cleared by respondent. The department has no case that there was shortage of inputs/raw materials.
ii. Though it is alleged that appellant cleared excess quantity of finished products, clandestinely, without payments of duty, the department has not adduced any evidence as to who are these buyers and how such goods were transported. There is no evidence for paying freight charges to transporters for removal of such huge excess quantity. There is no evidence to show corresponding consumption of electricity.
iii. The documents recovered from the premises are unsigned, unauthenticated documents. These documents show dates 13.8.2005, 14.8.2005 and 17.8.2005. Whereas, the visit by officers was made on 13.12.2005. The officers have found everything in order on date of visit. The department has not adduced any evidence of huge electricity consumption on these dates.
iv. The statements were obtained on force and coercion. The entire case is based statement and the private documents.
v. The Commissioner (Appeals) has rightly analysed the facts and evidence and set aside the demand.
4. Heard both sides.
5. As seen from the narration, the only documentary evidence is details contained loose sheets, a private document Daily inward/outward material report. The case of the department is that Sh.M.Seetharama Reddy, General Manager has admitted that production reports dt.13.8.2005, 14.8.2005, 17.8.2005 shown in these private records, regarding description, opening stock, production, despatches, closing stock and cumulative production and despatches are true and correct. That these figures do not tally with the figures in statutory records and that therefore the respondent has clandestinely removed finished products evading duty. The details in private record pertains to the month of August. Department officers visited the premises in December. The investigation continued for another two years as seen from statement of Sh.M.Seetharama Reddy which was recorded on 15.12.2005 and again on 25.4.2006. Still, the department has not made any investigation as to whether respondent had procured excess unaccounted inputs, or details of suppliers who have supplied unaccounted inputs/raw material for alleged unaccounted manufacture of finished products. Again, there is no evidence as to who are the buyers to whom such unaccounted finished products were sold by respondent. There is no evidence of any transporters for receiving unaccounted input or clearance of unaccounted finished product. There is no supporting electricity consumption details to show that there was excess manufacture. There is no details forthcoming for receipt of payment for the alleged clandestine clearance of finished products. There is no details of any payment made for excess purchase of raw materials.
6. The department has not taken any verification of stock at the time of visit. The investigation commenced in December 2005 and the Show Cause Notice is issued after 1 year and 9 months. Even then there is no details brought forth regarding the clandestine clearance or demand of duty. The Commissioner (Appeals) has discussed in para 7.1. of the Order-in-Appeal which is worth reproducing as under :
The lower adjudicating authority relied on certain papers containing details of daily inward / outward (materials) report and production reports which were recovered from the appellants and the statements of the CEO of the company and other two personnel of the appellants. In this case, the entire charge rests on the private records recovered from the appellants. The private record showing production details without corroborative evidence of corresponding raw material or excess disposal is not sufficient to prove clandestine removal. Consumption of electricity, purchase of excess raw material, evidence of purchase of unaccounted goods by buyers etc., normally establish clandestine production and removal. During the visit of the officers, no discrepancy in the stock of finished products and raw materials were noticed. There is no evidence to prove the allegation against the appellants that the receipt of raw material was not accounted in order to suppress production. No evidence regarding receipt of raw material to produce the alleged excess quantity has been shown. There is no evidence regarding the payment received by the appellants in respect of quantities alleged to have been supplied. No evidence has been adduced regarding payment made by the buyers to the appellants. No corroborative evidence has been adduced so as to establish transportation by way of lorry receipts, octroi entry, payment made to transporter etc. No evidence has been adduced to establish the disposal of manufactured goods received by the buyers. It is the burden of the Revenue to prove that the appellants had manufactured and removed goods clandestinely.
7. As already stated apart from private records and statements there is no material to establish clandestine clearance of goods. Clandestine clearance being a very serious charge, the department is duty bound to establish the same with reliable evidence. In Continental Cement Company vs. UOI 2014 (309) ELT 411 (All), the Honble High Court observed that there should be clinching proof with regard to purchase of unaccounted raw material, use of extra electricity, evidence of sale of finished products clandestinely, transportation, payment, realization of sale proceeds, mode of flow back of funds. The demand cannot be confirmed on mere suspicions. On analysing the materials placed before us, we do not find any ground to differ from the view taken by the Commissioner (Appeals).
8. In the result, the impugned order is upheld. The appeal filed by Revenue is dismissed.
(Operative part of the order pronounced in open court) (Madhu Mohan Damodhar) (Sulekha Beevi C.S) Member (Technical) Member (Judicial) Vsr/Rkp 7 1