Custom, Excise & Service Tax Tribunal
M/S Manav Metal Industries vs Commissioner Of C.Ex. & Service Tax on 1 January, 2016
In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad Appeal No.E/1623,1624/2010; Application No.E/MA(EXTN)/13714, 13715/2014 [Arising out of OIA No.313/2010(AHD-I)/CE/MM/COMMR(A)/AHD, dt.13.09.2010, passed by Commissioner (Appeals), Central Excise & Service Tax, Ahmedabad] 1. M/s Manav Metal Industries, 2. Shri Mahendra G. Duggad Appellants Vs Commissioner of C.Ex. & Service Tax, Ahmedabad-I Respondent
Represented by:
For Appellant: Shri H.D. Dave, Advocate For Respondent: Shri N. Satwani, A.R. For approval and signature:
Honble Mr. P.K. Das, Member (Judicial)
1. Whether Press Reporters may be allowed to see the No 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 No in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen the order?
4. Whether order is to be circulated to the Departmental Yes authorities?
CORAM:
HONBLE MR. P.K. DAS, MEMBER (JUDICIAL) Date of Hearing/Decision: 01.01.2016 Order No. A/10009-10010 / 2016, dt.01.01.2016 Per: P.K. Das The relevant facts of the case, in brief, are that M/s Manav Metal Industries (Appellant No. 1) were engaged in the manufacture of Copper and Brass Rod/Patta Patti/Sheet/Section etc, classifiable under Chapter 74 of the Schedule of Central Excise Tariff Act, 1985. On 15.09.2008, the officers of Central Excise (Preventive) Department) Ahmedabad-I visited the Appellants factory. The said officers recovered the statutory records mainly RG1 and RG 23A Part I. They have also recorded the statement of Shri Mahendra G. Duggad, Authorised Signatory (Appellant No. 2) of the said firm. A Show Cause Notice dt.18.12.2009 was issued, proposing demand of duty of Rs.10,58,795.00 alongwith interest and penalty alleging that they have clandestinely manufactured the goods and cleared without payment of duty. It has also proposed imposition of penalty on Shri Mahendra G. Duggad, Authorised Signatory of M/s Manav Metal Industries. The Adjudicating authority confirmed the demand of duty of Rs.10,58,795.00 alongwith interest and imposed penalty of equal amount of duty on the Appellant No. I and also imposed penalty of Rs.3 lakhs on the Authorised Signatory of the Appellant firm, Appellant No. 2 By the impugned order, the Commissioner (Appeals) upheld the Adjudication order. Hence, both the Appellants have filed these appeals.
2. The learned Advocate on behalf of the Appellant submits that the Central Excise Officers visited their factory on 15.09.2008 and no stock verification was conducted and no weighment of the finished goods or raw material including scrap was done. He submits that the statement of the Authorised Signatory of the Appellant firm was recorded on 15.09.2008, 13.05.2009, 18.09.2009. None of the statements, the Appellant accepted the clandestine removal of the goods. It is further submitted that the entire demand was raised on the basis of alleged shortage of raw material by theoretical calculation, which was converted with manufacture of goods and clandestinely removed. There is no material available of manufacture and clearance of the goods. It is also submitted that the Appellant had furnished the consumption of gas, which was not considered by the authorities. He relied upon the decision of Honble Gujarat High Court in the case of Commissioner,Customs, & Service Tax, Daman Vs Nissan Thermoware P. Ltd - 2011 266 ELT 45 (Guj.) He further submits that the mere statement of the Director cannot be the basis for demanding the tax and relied upon the decision of Honble Allahabad High Court in the case of Commissioner Vs Vikram Cement (P) Ltd V 2014 (303) ELT A 82 (All.) and Commissioner Vs Sunil Kumar Gupta 2015 (315) ELT A89 (All.). He further submits that the Tribunal consistently held that mere shortage of the raw materials without verifying the other aspects of manufacture and clearance of the goods, it cannot be treated as clandestine removal of the goods. He relied upon the decision of the Tribunal in the case of Mahavir Metals Industries Vs CCE Daman 2014 (313) ELT 581 (Tri-Ahmd).
3. On the other hand, the learned Authorised Representative on behalf of the Revenue reiterates the findings of the Commissioner (Appeals). He submits that the Appellant could not explain the difference between the consumption of raw materials and finished goods and therefore, there is no requirement of physical stock verification of the goods. It is strongly submitted that the Appellant admitted the shortage of raw material and has not given any explanation for the same and it is presumed that the goods are manufactured and cleared clandestinely. It is also submitted that this fact was supported by the statutory record, purchase/sales documents and showing short quantity of balance in stock.
4. After hearing both the sides and on perusal of the records, I find that on 15.09.2008, the Officers of the Central Excise, Preventive Wing, Ahmedabad-I, visited the appellants factory. The Central Excise Officers took a round of the factory premises alongwith appellant No. 2 and panch witnesses and observed that production was going on in the Melting furnance, Extruction Press, Draw Bench, Cutter, Straightening Machine etc., installed in their factory. It has found the records were lying incomplete. After examining the records, the Central Excise Officers found that the total quantity of the raw-materials of 33740.430 kgs., should have been in balance as on 15.09.2008. The Central Excise Officers recorded the statement of the appellant No. 2 on 13.05.2009 and 18.09.2009. It has been stated that whatever scrap was purchased, the same had been utilized in the process. It is also stated that there is no fix ratio regarding utilization of brass scrap and copper scrap for production of the finished goods. It is further stated that in the entire process of production, the waste generated at all stages were being utilized within the factory for further process. He further stated that they were utilizing gas supplied by M/s. Adani Energy Limited, Ahmedabad for the production and had been no fixeratio between gas consumption vis-`-vis quantity of final product. The demand of duty of Rs. 10,58,795.00 was determined on the basis of theoretical input-output calculation and presumptive clearance of finished goods. Admittedly, the Central Excise Officers took a round of the factory with panchas, but, no stock verification conducted by the Central excise officers. It is seen that the Department had not verified the consumption of the gas on the basis of the documents furnished by the appellants. In my considered view, the demand of duty cannot be raised merely on the basis of theoretical calculation without any verification of the documents such as gas consumption, supply of the finished goods etc. I also noticed that the appellant No. 2 had not admitted the clandestine removal of the goods. Hence, allegation of the clandestine removal cannot be sustained in absence of evidence of clandestine manufacturing and clearance of the goods.
5. The Tribunal in the case of Mahavir Metals Industries vs. Commissioner of Central Excise & Customs, Daman, Vapi 2014 (313) E.L.T. 581 (Tri.-Ahmd.) held as under:-
7.?I further note that my learned brother has also recorded that in absence of any specific evidence to support the clandestine removal of the quantity, it is necessary that the details given by the appellant subsequently are considered and commented upon. While agreeing with my learned brother that there is no specific evidence to uphold the finding of clandestine removal, the remand of the matter for re-calculation of shortages would be only a theoretical exercise. It is settled law that such calculation of shortages arrived at on the basis of input-output calculation, cannot be made the basis of clandestine removal. The appellants have also challenged that the statement of the authorized signatory as also by the partner do not stand corroborated with sufficient evidence as they are against the record and cannot be made the sole basis for holding against them. I agree that the veracity of the statements has to be gauged from the accompanying circumstances and has to be corroborated by way of same independent evidences, which is fully absent in the present case. As such, I am of the view that in the light of various decisions relied upon by the appellant in their memo appeal, such statements which are inconsistent with the documentary evidences, only raises a doubt, but cannot take the place of an evidence. As such, I am of the view that the impugned order is required to be set aside in totality and the appeal is required to be allowed.
6. In the case of Commissioner of Central Excise, Lucknow vs. Sigma Castings Limited 2012 (282) E.L.T. 414 (Tri.-Del.), the Revenue appeal held as under:-
6. He also observed that the charges of clandestine removal are serious charges and in the absence of any evidence of removal of goods mere shortages cannot be held to be a justifiable ground for confirmation of duty. He relied upon various Tribunals decision to that effect.
7. I find that? apart from the shortages, which are also contested by the assessee, inasmuch as there was no proper stock taking, there is no evidence showing the manufacture of the goods and their clearances without payment of duty. The clandestine removal being a positive act, the burden of proving the same is on the Revenue and cannot be discharged on the basis of conjectures and assumptions. I fully agree with the findings arrived at by the Commissioner (Appeals) that the effect of shortages by itself cannot lead to the findings of clandestine removal, especially when such act does not stand accepted by the assessee. The statement of the respondents authorised representative, has nowhere accepted that such shortages are on account of clandestine removal.
7. In the case of Vikram Cement (P) Limited vs. Commissioner of Central Excise, Kanpur 2012 (286) E.L.T. 615 (Tri.-Del.) allowed the appeal filed by the appellant. It has held as under:-
13. Plethora of judgments have held that is for the it revenue to establish the case of clandestine removal by production of concrete and tangible evidence. I find that apart from loose papers, which on the face of it cannot be related to the appellants business accounts and the sole statement of director, there is no other evidence to reflect upon the clandestine activities of the appellants. The appellants have also taken a stand that it is beyond their capacity to manufacture more than 1000 MT per month and as such the Revenues allegation that they cleared more quantity in the month of February, 2004 have to be taken with the pinch of salt.
8. In the case of Saru Concast Alloys P. Limited vs. Commissioner of Central Excise, Meerut-I 2013 (289) E.L.T. 310 (Tri.-Del.), the Tribunal allowed the appeal and held as under:-
4. I find that as regards the excesses, there is no evidence showing that the appellant was in the process of removing the goods without entering the same in the records. The appellant at the time of seizure itself had taken a categorical stand that the said excess found wire was received by them from their job worker on the date of visit of the officers and the entries in respect of the same was to be made within a period of 24 hours. As such extending the benefit to the appellant, I set aside the confiscation of excess found scrap and wire.
5. As regards, confirmation of demand on the shortages of inputs, I find that the admittedly quantity of 5511 kg. of semi-finished goods was found by the officers at the time of physical verification of the goods. The said quantity was manufactured out of the said raw material alleged to be found short. As such this is not a case of removal of the inputs from the factory but as a mere case of technical error of not making entry for issuance of inputs in the statutory records. As such there in no justification for confirmation of demand of duty.
9. In the present case, the Revenue proceeded on the basis of theoretical calculation of the input-output ratio and alleged the clandestine removal of the goods. The appellant particularly furnished the documents of gas consumption. No attempt was made to verify the physical stocks and the said documents. On perusal of the impugned order, it is seen that the adjudicating authority observed that he has found enough reason to presume manufacture and clearance of final products from the raw material. Thus, the demand of duty was confirmed on the basis of presumption and assumption, without any evidence. Hence, the demand of duty alongwith interest and penalty on the appellants cannot be sustained.
10. In view of the above discussion, I find that the impugned order cannot be sustained. Accordingly, it is set aside. The appeals filed by the Appellants are allowed. The applications for extension of stay order are dismissed as infructuous.
(Dictated & Pronounced in Court) (P.K. Das) Member (Judicial) cbb ??
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