Custom, Excise & Service Tax Tribunal
Shri Sanjay Agarwal vs Raipur on 20 March, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST BLOCK NO. II, R.K. PURAM, NEW DELHI 11066
COURT NO. II
APPEAL Nos. E/1650 & 1651/2008 [SM]
[Arising out of Order-in-Appeal No.43/RPR-I/2008, dated 28.04.2008 passed by the Commissioner of Central Excise (Appeals), Raipur]
M/s. N.R. Sponge Pvt. Ltd.
Shri Sanjay Agarwal
Appellants
Versus
Commissioner of Customs & Central Excise,
Raipur
Respondent
Appearance Ms. Surabhi Sinha, Advocate for the Appellant Ms. Ranjana Jha, JCDR for the Respondent CORAM:
Honble Shri D.N. Panda, Judicial Member Reserved on 21.10.2014 Pronounced on 20.03.2015 FINAL ORDER NO.50777-50778/2015 Excise Duty demand of Rs.25,17,024/- arose on four counts in adjudication against the manufacturing company-appellant. Such demand of duty was followed by equal amount of penalty under section 11AC (hereinafter referred to as the Act) of the said Act as well as levy of interest. The other appeal relates to imposition of penalty of Rs.5,00,000/- on the Director of the manufacturing company.
2. During visit by Central Excise officers on 04.10.2006 to the premises of M/s. N.R. Sponge Pvt. Ltd., who is the main appellant, following material facts and evidence surfaced:-
(i) The daily stock register was maintained by appellant company upto 30.09.2006. Investigating team asked the Director of the appellant-Company to furnish stock of the finished goods and inputs as on 04.10.2006 as per records. The position of stock so furnished revealed that finished goods of sponge iron 247.080 MT was as per record. But when physical verification of such goods was made and inventorised in panchnma dated 04.10.2006 that resulted with shortage of 2.580 MT of such goods. Therefore, investigation took custody of records and documents as detailed in the Annexure to the panchnama for further scrutiny.
(ii) Investigating team recovered certain loose sheets from factory which related to loading advices and gate passes showing removal of excisable goods. Such sheets were maintained by the appellant for the period from 28.09.2006 to 02.10.2006. On comparison of the entries contained therein with the Central Excise invoices, it was revealed that 562.130 MT of Sponge iron and 81.010 MT of Dolochar were removed by the appellant-Company without issue of invoice and without payment of duty.
(iii) Records listed at serial nos.3,4,6,7,8,10,11 & 12 of the Annexure-B to panchanama dated 04.10.2006 were examined by the investigating officers. Statement of the shift supervisor Shri Satyanarayan Kunthia recorded on 04.10.2006 revealed that either he or his colleagues had written the registers and 1 tonne of Iron Ore was resulting in manufacture giving rise to Sponge iron to the extent of 56%. They found the input and output ratio. Statement of Shri Adeh Dongare, another shift supervisor record on 17.04.2007 revealed consumption of raw material which was worked out on the basis of feed rate as well as dip of the bunker. Scrutiny revealed that the appellant-Company had suppressed production of 1580.950 MT of Sponge iron.
(iv) Scrutiny of the record mentioned at s.no.22 of the Annexure to the panchnama dated 04.10.2006 which was pencil handwritten ledger revealed that the said ledger contained sale account of Sponge iron indicating the truck number and the payment receipt. When the entries therein were compared with Central Excise invoices issued by appellant-Company it came to the notice that in large number of cases entries in the ledger did not corroborate with Central Excise invoice. Accordingly, the ledger was photocopied and authenticated by the appellant-Company and were taken into custody by the team for scrutiny. Scrutiny thereof revealed that the appellant-manufacturer had removed 887.560 MT of Sponge iron without issue of Central Excise invoices and without payment of duty thereon.
(v) Statement dated 16.03.2007 of Shri Dhananjay Choundhary, Accountant/Cashier of the appellant-Company revealed that the ledger stated above was maintained by him and his subordinate. He also authenticated the photocopy of the ledger. He stated that the entries therein were correct and demonstrates evasion of duty. But he could not reveal whether the ledger in question maintained was with the knowledge Director Shri Sanjay Agrawal.
(vi) Statement dated 10.04.2007 of the Director Shri Sanjay Agrawal of the appellant-Company revealed that the ledger book pertained to the sale of the goods and entries therein were correct as and admitted to pay the duty on the goods which were cleared without invoices.
3. Search was conducted to the office/business premises of the transporter M/s. Purwanchal Road Carriers, Raipur, on 15.12.2005. Various bilty books were seized therefrom. Statement was recorded from Shri Rajendra Tiwari, an employee of the transporter company on 27.06.2007. He admitted that the consignment notes were prepared after unloading of the goods at the destination. After perusal of the disputed consignment notes he confirmed that the quantity of the goods mentioned therein have been transported from the consignor to the consignee resulting in removal of 69.180 MT of Sponge iron without issue of Central Excise invoice.
4. The scrutiny of the bilty books recovered from the business premises of M/s. Giriraj Roadlines, Raipur on 20.12.2006 revealed that the appellant-Company had removed substantial quantities of Sponge iron without payment of duty. Statement of Shri Prabhakr Chapale, Proprietor of the transporter company recorded on 22.12.2006 revealed that the particulars appearing in the disputed consignment notes were correct and the goods were transported from consignor to the consignee through the consignment notes resulting in removal of 55.855 MT of Sponge iron without issue of Central Excise invoice.
5. The entries appearing on various private records and documents recovered from the factory premises of M/s. Kailash Traders, Proprietor Shri Kailash Agrawal, a broker/commission agent of iron & steel on 20.12.2006 also confirmed that the appellant-Company had removed a large quantity of excisable goods without payment of duty.
6. The records seized from the various business premises of the appellant-Company and others revealed that the Company had removed 1574.725 MT of Sponge iron valued at Rs.1,57,27,368/- involving Central Excise duty of Rs.25,16,375/- and education cess of Rs.50,330/- and 81.010 MT of Dolochar valued at Rs.4051/- evading Central Excise duty of Rs.649/- and education cess of Rs.13/- suppressing production of goods. Such goods were clandestinely removed with intent to evade payment of duty. However, the Appellant-Company deposited basic excise duty amounting to Rs.21,59,770/- and education cess of Rs.43,195/- prior to adjudication.
7.1 Learned counsel Ms. Surabhi Sinha at the outset submitted that the adjudication order is nothing but a replica of the show-cause notice and what that was reported by investigation was simply endorsed by the adjudicating authority without testing the veracity thereof. The statement recorded from Shift Supervisor is not admissible in evidence because they are incompetent to give such statement. Presumption of arise of 56% of output from an unit of input has no sanction in law for which there cannot be presumption of any unaccounted quantity manufactured by appellant.
7.2 It was also submission on behalf of appellant that to make allegation of clandestine removal, department did not record any statement from the buyers of the goods in question which shows that there was no destination of the clandestinely removed goods. To make allegation of unaccounted manufacture of 1580.950 MTs of Sponge Iron there should be evidence by Revenue to show that 3000 MTs of iron ore was purchased by appellant and used in manufacture thereof. In absence of any evidence, entire allegation of investigation fails. When there was no evidence showing suppression of raw material purchased and no evidence showing unaccounted transport of goods made, the adjudication does not sustain. Similarly, in absence of any excess consumption of electricity and unaccounted labour payment, estimation of the clandestine clearance is uncalled for. There was no cash receipt discovered by investigation to allege unaccounted clearance of the goods. There should be chain of evidence required to be established to hold that investigation successfully proved its case. Revenue did not discharge its burden of proof. When cross-examination was not allowed, the statement of persons who gave statement should not have been used by Revenue against the appellant. Private records do not provide any degree of reliance. When there were no positive evidence of clandestine removal, allegations of Revenue became baseless. The ledger recovered by investigation did not prove maintenance of any fake record.
7.3 Learned counsel relied on the following case laws:-
(a) T.G.L. Poshak Corporation Vs. CCE, Hyderabad 2002 (140) ELT 187 (Tri. Chennai)
(b) CCE, Chandigarh I Vs. Shingar Lamps Pvt. Ltd. 2010 (255) ELT 221 (P&H)
(c) CCE, Meerut I Vs. R.A. Castings Pvt. Ltd. 2011 (269) ELT 337 (All.)
(d) Padala Veera Reddy Vs. State of Andhra Pradesh & Ors AIR 1990 SC 79
(e) CCE Vs. Vandana Art Prints Pvt. Ltd. 2008 (221) ELT 27 (Guj.)
(f) Kumar Trading Company Vs. Commissioner of Trade Tax, Lucknow 2008 (230) ELT 240 (All.)
(g) Hilton Tobaccos Ltd. Vs. CCE, Hyderabad 2005 (183) ELT 378 (Tri. Bang.)
(h) CCE, Ludhiana Vs. Renny Steel Castings (P) Ltd. 2013 (288) ELT 45 (P&H)
(i) Basudev Garg Vs. Commissioner of Customs 2013 (294) ELT 353 (Del.)
8.1 Revenue on the other hand, submitted that on four counts, the demand arose. The first count is that physical inventory proved shortage of 2.580 MTs of Sponge Iron which was admitted. That pointed out that the lose sheet recovered in the course of search unerringly proved unaccounted clearance of 562.130 MTs of Sponge Iron and 81.010 MTs of Dolochar. Secondly, the pencil written ledger (Sl. No. 24 of Panchanama dated 4.10.2006) proved unaccounted sales of Sponge Iron with full details of truck number and payment receipts. That corroborated with majority of entries in the excise record and invoices and unrecorded transactions gave raise to demand against 887.560 MT of Sponge Iron escaping duty liability being sold without any invoice. Thirdly, the materials recovered from premises of M/s. Purwanchal Road Carriers proved that there was an admitted clearance of 69.180 MT of Sponge Iron without issuance of central excise invoice. Fourthly, records recovered from M/s. Giriraj Roadlines proved unaccounted clearance of 55.855 MT of Sponge Iron.
8.2 According to Revenue, entire unaccounted clearances were corroborated from the materials recovered from the premises of Sri Kailash Agarwal who was commission agent of the appellant-company and confirmed that the appellant had removed large quantities of excise goods without payment of duty.
8.3. According to Revenue, all the statements recorded from the Shift Supervisor, transporters, Accountant and the Director successfully proved the questionable modus operandi of the appellant, its oblique motive in clearance of clandestinely removed goods. Shortage of finished goods found during physical verification also demonstrated clandestine removal thereof by the appellant. 32 loose sheets as well as pencil written ledger supported case of Revenue proving unaccounted goods cleared. When search was made to Kailash Agarwals premises, he proved bility wise clearance of the goods by the appellant to which he was prime witness and all payments were received in cash. That also proved all unaccounted dealings of appellant clandestinely clearing excisable goods and evading duty.
9. Heard both sides and perused the records.
10.1 Recovery of the loose sheets and pencil written ledger from the premises of the appellant in the course of search proved the entries therein as representative of the clandestinely removed goods which were well within the knowledge of the appellant. Active involvement of appellant in that regard came to record since those materials were in the custody of the appellant. It is common sense that the materials having utility to the possessor thereof are only possessed by him. He proves ownership thereof and is answerable to the contents therein. Entries on such incriminating materials demonstrated clandestine clearance of 562.130 MT of Sponge Iron and 887.560 MT of such goods respectively well explained by appellant. That also proved clandestine removal of 81.010 MT of Dolochar by the appellant. Such removals were further proved from the records seized from the transporters M/s. Purwanchal Road Carriers and M/s. Giriraj Roadlines. The materials recovered from transporters brought out the evidence of clandestine removal of 69.180 MT of Sponge Iron and 55.855 MT of such goods respectively. Those clearances were not substantiated by excise invoices. When certain entries in the pencil handwritten ledger matched with the central excise invoices and other entries did not match, the unmatched entries, became testimony of clandestine removals not supported by invoices. Accordingly, such clearances became subject-matter of allegation in respect of removal of 887.560 MT of Sponge Iron without payment of excise duty. Similarly, the loose sheets when evaluated, that proved removal of excisable goods without payment of duty to the extent of aforesaid quantity of goods.
10.2 The statement recorded from shift supervisors being self speaking cannot be brushed aside because they were the persons within whose knowledge goods were manufactured and cleared. Their evidence was believable, cogent and credible for the reason that they vividly described methodology of production.
10.3 Added to the above, the director admitted clandestine removal of the goods not supported by excise invoices. That resulted in loss of revenue. He therefore admitted to make payment of the duty evaded without controverting the Revenue implication of the entries in pencil handwritten ledger and chits recovered from possession of appellant during search. Entire pleading of the appellant therefore failed to sustain when malafide of the appellant came to record. Clandestine removal was well within the knowledge of the shift supervisors, accountant, Director, transporters and commission agent. Each others evidence corroborated all of them and established unaccounted goods cleared without payment of duty. The most lively evidence of Kailash Agarwal brought the appellant-company to the root of allegation. All of them established inextricable link of evasion. Shri Agarwal by his evidence attached all the persons involved in the chain of clandestine clearance without their detachment.
10.4 Preponderance of probability was against the appellant. Pleading of no statement recorded from buyer, no excess electricity consumption found, no raw material purchase found unaccounted and no input output ratio prescribed by law is of no use to it. Revenue discharged its onus of proof bringing out the allegation in the show-cause notice succinctly. But, the appellant miserably failed to discharge its burden of proof. It did not come out with clean hands.
10.5 It is not only one evidence, but multiple echoed evidence demonstrated oblique motive of the appellant and proved its malafide. Therefore, appellant fails on all counts. Revenues investigating was successful and its suffering was established..
10.6 It may be stated that tax evasion which retards growth of the economy, is to be deterrently dealt under law. The Honble Madras High Court has held in the case of Alagappa Cements Pvt. Ltd. Vs. CEGAT, Chennai - 2010 (260) E.L.T. 511 (Mad.) that no existence of the finished goods found during physical inventory proves clandestine removal. Similarly, in the case of CCE Vs. International Cylinders Pvt. Ltd. - 2010 (255) E.L.T. 68 (H.P.), the Honble Himachal Pradesh High Court held that no person will maintain authentic record of illegal activities. Burden shifts to manufacturer once Department proves something illegal being undertaken. It is elementary jurisprudence that no law can be interpreted in a manner so as to give premium to illegal and criminal activities. Honble High Court of Rajasthan in the case of Rajesh Goyal Vs. Union of India 2012 (284) ELT 164 (Raj.) viewed that tax evasion may be termed as Royal Thievery which is opposed to both democracy and society order. Evading excise duty or tax which is required to be paid by the industrialists or businessmen, if not paid honestly by them is also an indirect form of corruption in this civilized society of democratic State. Such act of evasion of excise duty not only affects the economy of the State but destroy the cultural heritage also. Unless nipped in the bud at the earliest, it is likely to cause turbulence shaking of the socio-economic-political system in an otherwise healthy, wealthy, effective and vibrant society and ultimately, such excise duty or the tax evaders can create a parallel economy in the state which may pose a serious threat to the nation. In the present State of affairs, the economic offences are undoubtedly more grave in nature than those offences which are otherwise said to be grave. Revenue need not prove its case with mathematical precision. Evasion occurs under the concealed mind of the evader who brings out entire story of evasion only when investigation interrogates him. The concealed evasion when discovered, that brings out the modus operandi followed, to light. Therefore, appellants reliance on various decision would be of academic interest since Revenue need not prove its successful investigation bringing out plethora of evidence. What it requires is to bring out the materials pointing out the evaders conduct. Preponderance of probability favoured case of Revenue. Therefore, on the aforesaid facts and circumstances and analysis of evaluation of evidence appeal of the appellant-company fails for which that is dismissed.
11. So far as penalty of Rs.5,00,000/- imposed on the Director is concerned, it may be stated that without human intervention evasion does not occur by an artificial person which is a company. Presumption of innocence is presumption Juris but it may be successfully encountered by the presumption of guilt from the recovery of various incriminating documents. Thus burden of Revenue was considerably lightened by preponderance of probability. Sri Sanjay Agarwal, Director, showed his knowledge about possession of various incriminating evidence by the company. That demonstrated the methodology of evasion. However, considering that the appellant-company has faced the duty demand of Rs.25,67,367/- with equal amount of penalty of that extent and the penalty was imposed on him is under Rule 26, that is reduced to Rs.1,00,000/- (Rupees one lakh only) as a preventive measure to arrest recurrence of mischief. His appeal is partly allowed.
(D.N. PANDA) JUDICIAL MEMBER
Rex
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