Customs, Excise and Gold Tribunal - Tamil Nadu
M/S. Ambika Chemicals, Sri M. ... vs Commissioner Of C. Excise, Chennai on 26 June, 2001
Equivalent citations: 2000ECR158(TRI.-CHENNAI)
ORDER
Shri S.L. Peeran
1. All these appeal arise from a common order-in-original passed by the Commissioner of Central Excise. Chennai vide his Order-in-Original No. 13/98 dated 29.9.98. The final orders passed by him confirming duty and penalties is noted in para-40 which is extracted herein below:-
40 Consequently, I demand a sum of Rs. 12,72,815/- from Dinesh & Co., Rs. 28,04,023/- from M/s. Vidya Chemicals and Rs. 18,93,584/- from M/s. Ambika Chemicals as indicated in the work sheet enclosed with this order. The good seized on 11/9/1997 valued at Rs. 5,66,629, being excess production not accounted for in the statutory registers are liable for confiscation. However, since the same have been provisionally released, I appropriate a sum of Rs. 60,000/- in lieu of confiscation in terms of the bond executed by them. The payments already made by the firms are to be adjusted against the above demands.
I impose a penalty of Rs. 1,27,000/0 on M/s. DC, Rs. 2,80,000/- on M/s. VC and Rs. 1,89,000/- on AMC in terms of Rule 173Q of the CE Rules, 1944. I also impose a penalty of Rs. 2,93,130/- on D.C., Rs. 5,96,334/- on V.C. and Rs. 5,82,289/- on AMC in terms of Section 11AC of the C.E. Act, 1944. I further demand interest on the above amounts in terms of Section 11AB of the Act. I impose a penalty of Rs. 1,00,000/- each on M/s. Aksol Chemicals, Ranipet, and Shri A. Murugesan and Rs. 50,000/- on Shri M. Chakravarthy in terms of Rule 209A of C.E. Rules, 1944."
2. The facts of the case in brief are that Officers of the HPU made a surprise visit to the factories of the appellants on 11.09.97 and found an excess stock of goods valued at Rs. 5,66,629/- and a shortage of goods valued at Rs. 7,68,640/-. The excess goods were seized and the officers also recovered 8 small note books from the Chemist Sri R. Setty and monthly production statements prepared on the basis of small note books. The proprietor of M/s. Dinesh & Co.(DC) Sri A. Murugesan is also a partner in M/s. Vidya Chemicals (VC) along with his wife Smt. Suseela Murugesan and daughter Ambika M.Raja and also another firm M/s. Ambika Chemicals (AMC) is run by Mrs. Suseela Murugesan as a proprietory firm. M/s. Aksol Chemicals (AC) is a partnership firm consisting of S/Sri A. Murugesan & Mrs. Suseela Murugesan, formed exclusively to market the products manufactured by the above firms. Besides the above four entities, there is also another partnership firm M/s. Aksol Chemicals & Products (ACP) situated at the industrial estate, Ranipet, manufacturing some leather chemicals. The items declared by them in terms of Rule 173B and their profiles etc. were taken annexed in the show cause notice. Statements of various persons were recorded and after a detailed examination of the case, the revenue charged in the show-cause notice dated 05.03.88 as follows:-
(a) suppression of the production of leather chemicals and clandestinely removing the same without payment of duty and without observing the required Central Excise formalities;
(b) clearance of dutiable leather chemicals in the guise of exempted leather chemicals by manipulating the invoices and other connected delivery documents;
(c) undervaluing the leather chemicals in the manner above stated and also by selling them to their related person M/s. Aksol Chemicals, Ranipet; and
(d) deliberately fragmenting the above three firms as separate SSI units and incorrectly availing of Central Excise duty exemption in terms of Notification No. 1/93 dated 28.02.93 and No. 16/97 dt 1.4.97 (for 1997-98).
The show cause notice also raised demands against the appellants in para-6 in as follows:-
(a) as to why duty amount of Rs. 1,28,03,075/- detailed as per statements I to IV & VI to XI to this Notice should not be demanded from them in terms of Rule 9(2) read with proviso to Section 11A of C.E. Act, 1944;
(b) as to why the goods totally valued at Rs. 5,66,629/- seized in terms of Mahazar dt 11.9.97 and provisionally released to them vide order of even number dated 25.9.97 should not be confiscated in terms of Rule 173Q of C.E. Rules, 1944?
(c) why the payment of duty amount of Rs. 4,18,410/- (Rs. 1 lac vide TR6 challan dated 13.9.97, Rs. 1,06,332/- vide TR 6 challan dt 17.9.97, Rs. 12,078/- vide TR 6 challan dt 17.9.97 and Rs. 2 lacs vide TR 6 challan dt 17.11.97) should not be adjusted towards demand of duty as per (a) above; and
(d) why a penalty in terms of Rule 173Q of C.E. Rules, 1944 r.w.s. 11AC of the C.E. Act, 1944 should not be imposed on them, either individually or collectively for the contravention of Rules mentioned above.
3. Appellants denied the allegations brought out in the show cause notice. We have noticed from the impugned order that the entire case against the appellants has been made out on the basis of seizure of private note books and production details recorded therein maintained by the Chemist Shri R. Settu. The department has taken recorded statements from (i) Shri M. Chakravarthy. Manager for entire group of firms (ii) Shri r. Ganesan, Chemist, Dinesh & Co., (iii) R. Setty, Chemist, ACP (iv) K. Rajenderan, Chemist, ACP and (v) S. Petchi Raj, Chemist, DC. Finally, the statement of partner of Vidya Chemicals Shri A. Murugesan was recorded. There is no recording of statement from any of the partners of other firms on whom the Commissioner has proceeded to confirm duty.
4. Shri M. Chakaravarthy, whose statement was recorded on 19.9.97 which according to him was taken under duress and coercion and by force at 1'o clock in the night, immediately resiled from all the statements alleging that it was taken under duress and force by sending telegram to the Commissioner and also by sending detailed letter retracting from the statement. However, the Commissioner in the impugned order in para-21 has rejected the retraction by holding that the points discussed in the statement were based on the records of a firm, which were either maintained by himself or by his sub-ordinates duly verified by him. The Commissioner has noted that the facts confirmed by him were based on figures recorded in the accounts and found to be in conformity with the intelligence gathered by the officers. He has noted that Aksol Chemicals admitted that the goods were sold through invoices raised at Kanpur by M/s. Aksol Chemicals where the price of Solfat V has been quoted as ranging from Rs. 58.35 to Rs. 159.80, are dutiable goods such as Binder S. Acpol Ground, Pentin, 279 etc. and not Solfat V, that the price of Solfat V was only Rs. 17.10/- customers like M/s. Madras Shoe Fabrik Ltd., Walajapet, Mahadev Industries, Ranipet and few others in Kanpur have confirmed that they have purchased different goods other than Solfat-V either from the firms directly or through M/s. Aksol Chemicals. He has noted that few parties like Maiden Footwear Co., Mumbai have denied having purchased anything from the firms/Aksol Chemicals, which means that bills have been raised on fictitious names for Solfat-V to offset the clandestine removal of dutiable goods. Therefore, on this basis, he held that retraction of the statement dated 29.9.97 has no basis or evidence. The admission in the statement are deemed to have been proved through incontrovertible evidences and hence he has held that retraction deserves rejection.
5. The appellants contend that the note books were all maintained by the Chemist Shri R. Settu whose statement has been recorded including the statement of partner namely A. Murugesan. Both of them did not dispute the contents of the diaries maintained by them. They disputed the facts as alleged in the SCN and their contention is that in respect of all the units in which the note books have been maintained, there are clearances on large number of days which are entered in R.G. 1 register which are more in number in quantities compared to what is written in the note book. Further, there are days on which clearances have been shown in R.G. 1 register while in the note book, no entry is found. There are large number of entries to be of certain goods which they did not manufacture at all. There is also entry of unpacked goods which have not reached R.G. 1 stage and therefore entries in various diaries did not represent the clearances but only about certain other details pertaining to the manufacture and therefore it is pleaded by the appellants that total reliance on these small note books maintained by the Chemist without any corroborative evidence and without any evidence of any nature does not prove the case of the department. In this regard, appellants had relied on large number of judgement to contend that mere entries in private note books cannot be the basis for confirming the demand. However, the said contention has not been accepted in terms of judgements by the Commissioner except to say that said judgements are distinguishable. A finding on this aspect is found in para-35 & 36 which are reproduced below:-
"35. Now, to refer to some of the other citations made, I find that the following decision have been cited to claim that clandestine removal has to be established beyond doubt by the Dept. (1) Ganga Rubber Industries Vs CCE 1989 (39) ELT 650 (T) Ratio: In respect of the two accounts books stated to be seized from the premises of the appellants, the claim made is that these books were planted by one of the disgruntled employee.
The Department could have made enquiries to find out if the entries in the two books were genuine or not, besides the principle of law is that it is upto the Dept. to prove reliability of the books."
(2) Kashmir Vanaspati (P) Ltd. Vs CCE 1989 (39) ELT 655(T) Ratio: "Note book maintained by labourers containing unauthenticated entries and over-writings not a dependable record to establish clandestine removal unless the same is supported by other evidences."
(3) Rama Textiles Ltd. Vs CCE 1989 (44) ELT 233(T) Ratio: "Clandestine removalon the basis of rough note book of employee not established when entries of production in note book are less than entries of the said production in R.G. 1 on relevant dates".
(4) Corona Cosmetics & Chemicals (P) Ltd. Vs CCE 1991 (55) ELT 118 (T) Ratio: "Production not determinable with any amount of accuracy from the private accounts when production shown in RG 1 register greater than that in private records".
(5) Ashwial Vanaspati Industries Pvt. Ltd. Vs CCE 1992 (59) ELT 175 (T) Ratio: "Private register indicating only day-to-day production and despatch of goods still in unfinished and liquid stage to cold storage room for slidification and not removal of these goods from the factory - Clandestine removal cannot be said to be established."
(6) Gurpreet Rubber Industries Vs CCE Chandigarh 1996 (82) ELT 347 (T) Ratio: "Note book maintained by a casual worker containing entries of production not be relied upon to establish clandestine removal unless supported by other evidence such as installed capacity of factory, raw material utilisation etc. (7) Rishab Refractories Pvt. Ltd. Vs CCE Chandigarh 1996 (87) ELT 93 (TO) Ratio: "Declaration of inflated figures of sales before the Department of Industry with supporting affidavit not sufficient to establish clandestine removal of excisable goods for demanding duty."
(8) 1997 (23) RLT 609 (CEGAT)-
Ratio: "Allegation of clandestine removal based on entries made by appellants employees in a diary not established when investigation is not done from other sources to corroborate the entries."
(9) 1997 (23) RLT 707 (CEGAT) Ratio: "Allegation based on entries in a private diary maintained by authorised signatory- no correlation with entries in statutory records done- entries not corroborated by other evidence case is remanded for denovo adjudication."
36. I observe that the ratio emerging from all the above decisions is that clandestine removal cannot be established merely on the basis of private records maintained by the employees of the manufacturing firm unless supported by other corroborative evidence and that when R.G. 1 entry shows more production than in the private records, such private records cannot be relied upon. I find that in this case, although on certain dates, the RG1 entries showed more production than the private records when the entire financial year's production month wise was taken vis-a-vis the production entered in the small note books and the monthly statements prepared by R. Setty, Chemist, the production as recorded in the private registers was much more than that recorded in the statutory RG1 registers. Further, in addition to the private note books, it has also been established by corroborative evidences in the form of statements of R. Settu, Chemist who maintained the records, Shri Murugesan, Proprietor of DC and partner of other concerns and also the invoices recovered from the distributor M/s. Aksol Chemicals that excess goods have been removed more than whatever was accounted for in the RG1. Therefore, I have to distinguish the above decision to hold that they are not applicable to the present case. Accordingly, I confirm that there was excess production of the leather chemicals during the period 1994-95 to 1997-98 (upto 11/9/1997) as indicated in the annexures to the SCN. Of course, these annexures did not distribute such excess production, amongst the 3 factories. But, as I have decided to drop the proposal to club the clearances of the 3 factories, the duty demandable on account of such excess production and clearance, factory wise is indicated in the work sheet enclosed with the order."
6. The Commissioner in the impugned order has thoroughly examined the issue and dropped proceedings alleged in the SCN with regard to clubbing of clearances by clearly giving a finding that there is no flow back and that the units are independent units and are not dummy units and hence with this finding, the allegation that the clearances of all the factories are required to be clubbed was dropped and the Commissioner has held that each unit is an independent unit but, however, there were clandestine removals in terms of private note books, and hence demands are required to be confirmed.
7. The appellants have forcibly put forth that there is no working out of each of the demands with respect to each of the items manufactured. There is no evidence of purchase of inputs, flow back of funds by the appellants for purchase of inputs etc. There is no evidence of use of electric power, employment of labour, removal of goods, sale to respective customers etc., and therefore merely proceeding on the basis of entries made by Mr. Setty, who has not in his statement implicated about the clearances, cannot be the basis for confirming all the demands, It is pleaded that Mr. Chakaravarthy, Manager was the person, who had initially admitted about clearance and it was because of coercion and threat given by the investigating officials, he was forced to accept that the diaries is a authentic document but later resiled from the same. Even on independent examination of the diaries, it goes to clearly disclose that the entries do not lead to the conclusion that there was suppressed manufacture of clandestine removals without payment of duty.
8. The further charge was that M/s. Ashok Chemicals, who were marketing agents was a related person and therefore the price adopted by the Aksol Chemicals for sale of goods of four units should be adopted for the purpose of valuation. On this point, appellants pointed out that the during the period in question, the marketing unit had reorganised itself, and the partnership deed was reconstituted by taking independent partners in said marketing agencies, who had independent sales to various persons and also several products manufactured by other persons. There was no change in the price and the price was constant through out the period, hence they cannot be considered as a related person. However, on this aspect, no clear finding has been given by the Commissioner. The Commissioner has also not given any clear cut finding on the details of entries in the note book vis-a-vis R.G. 1 entries and merely has upheld the allegation in terms of the findings recorded in para-36 which has already been reproduced.
9. We have heard Shri S.S. Radhakrishnan, Learned Advocate for the appellants and Shri G. Sreekumar Menon, Ld. SDR for the Revenue.
10. Ld. Counsel reiterated all the grounds made in the appeal and in the written submissions. He pointed out that the only evidence on which the Revenue has proceeded is the note books maintained by Mr. Settu, Chemist who in his statement has not implicated or given any incriminating statements or made any admission of suppressed manufacture of clandestine removal. he pointed out from the statements that it referred to certain entries made which was unconnected with the manufacture of final product and removals. He, however, pointed out that department had posed questions to him and he had answered and the answers did not relate to any of the goods manufactured. However, in the SCN, the department alleged abbreviations shown in the diary to be those of products manufactured however the same were not manufactured at all. There are large number of entries against each of the individual companies which showed that the clearances in R.G. 1 register were higher for those period than the entries made in the note book. This aspect, when pointed to the Commissioner, the Commissioner has brushed aside the same by taking total average of the entries instead of individual entries for the day's production which would be the correct method to adjudge the authenticity and correctness of the note books. He referred to the detailed cross examination of Mr. Setty who had clarified everything pertaining to manufacture. He has clearly indicated that the note book did not reflect the true and correct fact of production of entries and therefore it is not at all a reliable document to uphold the serious charge on each of the companies. Ld.Counsel also referred to the statement of Shri M. Chakaravarthy, who was the Manager, who was posed with questions at the dead of the night under duress and threat and even this statement has been resiled immediately on the very next day. This has also been brushed aside by the Commissioner, relying on the earlier statement without pointing out as to which portion of the statement is incriminating in nature. Even on our closer look into the said statements, it not give any specific clue to the quantum of production and items removed and funds received. The statements are general in nature which cannot be the basis for confirmation of demands. One of the partners Shri Murugesan's statement also is not incriminating in nature. Although the note books are not denied but the same were not maintained for the purpose of making any entry of production or for the purpose of clandestine removal. They were maintained only to keep record of certain test of materials of intermediate product and other details pertaining to items which did not reach the R.G. 1 stage. he has produced comparative detailed chart pertaining to each of the unit in which clearances vide R.G. 1 register were made and compared with production note book to show that on large number of days, the production figure in the R.G. 1 register were much more higher than in the private note book. Ld.Counsel refers to said comparative chart to submit that even on number of days, where there were clearances in R.G. 1 register which were shown as NIL in the private note book. He submits that there is no independent evidence to implicate the appellants with regard to purchase of inputs, manufacture and sale by clandestine removals. Hence, basing the case only on this production note book and on the first statement of Chakaravarthy, the demands cannot be confirmed in the light of several judgements cited by him. He points out that Aksol Chemicals were only trading agents. They took orders and marketed it. They had maintained material records. The allegation that 12 invoices were used for undervaluation is totally incorrect. Further allegation is that they had scored out invoices and show that they had removed dutiable goods in the guise of exempted goods is totally incorrect as they has paid correct duty on the dutiable goods. The Commissioner has not examined this aspect except to hold that these invoices disclosed undervaluation, which is totally not supported by any evidence. He points out that some of the statements of the purchasers for non-receipt is totally incorrect as their cheques has been encashed in their accounts, and they had issued invoices. All these evidences had been produced. He took us through the paper book and correlated to the charge in the SCN to demonstrate that there was no undervaluation or clandestine removals. He further points out that 9 invoices out of 12 invoices pertained to the production of Aksol Chemicals Pvt. Ltd. The said firm has remained through out within the limits of exempted and hence there is no need to manipulate the invoices. He points out that they had been filing RT-12 returns regularly and the same had been assessed and there was no allegation brought out at any point of time regarding suppressed production by any of the four units. He points out that Aksol Chemicals was not a related person. He submits that they have produced documents to show that they were independent persons. However, the Commissioner has not recorded the finding nor examined this aspect. He took us through these documents in the paper book to show that Aksol Chemicals was having independent persons unrelated to the partner of these four firms and also showed that independent sales and persons and there was no change in the price and hence their valuation cannot be adopted.
11. On the other hand Ld.SDR Shri G.S. Menon relied on the various paragraphs of the order and findings to support the order. On a specific query posed to him to show any citation that tainted private book could be relied on for confirming demands in the absence of any correlatable evidence, Ld.SDR was unable to place any judgement in support of his contentions. On a specific query being posed as to why various judgements noted in para-35 (which has been extracted supra) are not applicable to the facts of this case, and only the private books, which did not reflect the true and correct facts could be relied for confirming the demands, Ld.SDR submitted that the Commissioner has given findings on this aspect which could be relied. He points out that the argument of appellants have been taken as a theoritical one and it does not show the truth of the matter. On a further specific query to explain with regard to details of R.G. 1 clearances being more on various dates in each of the company as reflected from R.G. 1 compared to the production book, and in such circumstances how the production book could be accepted, Ld.SDR pointed out to the finding of the Commissioner who had taken the total average of the clearances from both the registers to show that clearances in the note books were more, hence leading to the conclusion of clandestine removal of goods without payment of duty.
12. Countering the arguments, Ld.Advocate pointed out from the finding itself and the Ld.Commissioner had clearly upheld their plea for non-clubbing of clearances and also about non-mutuality of interest in each of the firms. Therefore, mere statement of Chakaravarthy who is not the author of the note book cannot be accepted for the purpose of confirmation of demands, and further note books does not reflect correct and dependable.
13. On a careful consideration of the submissions, we notice from the order of the Commissioner that he has summarised the charges into major headings i.e. (i) suppression of production and clearance
(ii) removal of dutiable goods in the guise of exempted goods
(iii) undervaluation of the goods by sale through their relative M/s. Aksol Chemicals and (iv) artificial fragmentation of the units and creation of new units for availing the SSI exemption individually.
14. With regard to fourth issue, the Commissioner has held in favour of the appellants and noted that each of the units are independent and there is no mutuality of interest and hence he has dropped the charge on this issue.
15. We shall take each of the charges for consideration and see as to whether there is sufficient evidence on record to confirm the demands and also see as to whether the findings are sustainable. As regards the first charge is concerned, the department is proceeding on the basis of eight small note books maintained by the Chemist of the firm with regard to production of various leather chemicals on a day-to-day basis. Ld.SDR was trying to show from the order that the entries are in batch wise and tallied with the monthly production, statements prepared by Mr. Setty. This has been noted by the Commissioner in para 15 of his order. However, on our closer scrutiny of the small note books, we do not find any substance in the findings. The reason being that from the statement of Setty & Murugesan, there is nothing self-implicating admissions to implicate themselves about the suppressed manufacture and clandestine removal of goods without payments of duty. We notice that there are higher entries in RG.1 entries regarding clearances while for the same period in the production note books, there was no entry of clearance or there are lesser number shown as against RG1 entries. The Commissioner has solely proceeded on the basis of average production figures. The finding is not acceptable for the reason that once it is shown that production note book entries are not correct and Settu also in his cross examination has clearly explained as to what these entries were, then in such circumstances, we are not inclined to accept the entries to be reflecting the 'gospel truth' and reflecting the correct picture of quantum of manufacture and of clandestine removal of various items. We notice from the deposition of Settu, Chemist before the Commissioner on 16.7.98 that he has stated that he was interrogated between 11.30 a.m. & 10 p.m. in the night of 29.9.97. He was asked to explain regarding the enclosures to the SCN and was asked to identify the in-process products. His reply is as follows:-
"Saltan Black - There is no such product manufactured
Saltan Gel Black - -do-
In-process material - Binder SM
PCMD
Bismark Brown
Salt & AK - No such product
Salt & V - -do-
Fat lac - -do-
Any product which has been manufactured if it fails in the test, will be subjected to further processing or reprocessing. The status of that product while in reprocess is also known as inprocess material. I had seen only few samples and had stated that they tally with the production note book. From my experience I can say that the figures noted in the production note book being the yield obtained and not tested and sometime intermediate products, it cannot be transferred to RG. 1 at that stage. I have no idea as to how the statutory records are maintained."
16. The above deposition has not been challenged by the Commissioner. This clearly indicates that the statement given by Sri. Setty is supported by the statement given by Sri Chakaravarthy that he was interrogated at dead of the night and therefore retraction given by him should be accepted. Once we hold that the Chakravarthy's retraction is acceptable then his initial statement loses credibility. The department has not produced any independent evidence cogent, clear and acceptable evidence with regard to purchase of inputs, production and also production capacity, source of funds, sale of items to independent customers and receipt of consideration. There is no investigation towards this angle. The investigation agencies were satisfied and well contended with the seizure of these production private note books and statement recorded from Chakaravarthy. The department failed to proceed further. Shri Chakaravarthy resiled on the very next day from his statement. Further, the investigating agency have not revealed as to the inputs from which each of the final products were manufactured and how the funds were acquired and to whom it was sold. There is no investigation at all on these vital aspects of the matter and no evidence has been placed by the department. Therefore, in the absence of this material evidence, mere statement of Mr. Chakaravarthy cannot be taken as 'gospel truth'. On our careful examination, we notice even from the alleged admitted statement of Chakaravarthy, it does not disclose specific figures of daily production and clearances. He has merely stated that he agrees that these small production note books were basic documents and he relied on the same to know the production. Further, he has noted that he agreed with the consolidated monthly production statement prepared by Mr. R. Setty are the total of the production recorded on various dates in the small note books, and admitted that he has failed to compare the production of goods as recorded in the above statements with that of the figures given in RT-12 returns for the four units. He has stated that since the RG. 1 figures of production all normally recorded only, when the chemicals were packed, he was not prompted to compare the figures of production. He also submitted that there were sales made and most of the sales were through cash and without bills. He stated that he is not in a position to give further details and he does not know the quantity, value and excise duty involved on such sales without bill (or) bills with Solfat-V names in the past years, and he has stated that details of which may be enquired from Mr. A. Murugesan. On a perusal of this statement, we do not see any incriminating nature in it, which the Ld.Commissioner holds this statement as sufficient to uphold the charges. Ld.Commissioner has not given any finding as to how this statement is helpful to department to lead to a conclusion of clinching nature regarding production and clearance of specific quantity of each of the materials. Shri Chakaravarthy had only stated that he was depending on the note book to know the production. This would not lead to a conclusion that so much quantity of final products were manufactured and it was in a in the packed condition, and they were removed by not entering in R.G. 1 registers. Although Chakaravarthy has stated that there were sales without cash receipts, but no corroborative evidence has been produced. He is only a Manager. The partners of other firms have not been examined, which was very vital for the purpose of confirming the demands. The department has simply failed in its attempt to gather sufficient corroborative evidence in the matter. Even the statement of Shri Murugesan is not implicating in nature. He has clearly denied any receipt of funds of manufacture and clandestine clearance without payment of duty. When the partner of one firm has denied about any such activity, then merely to rely on a resiled statement of Chakaravarthy which is also not supportive to the department, therefore it is difficult to accept the rejection of appellants' defence by the Commissioner in the impugned order. The finding is not at all inspiring and it is based on mere assumptions and presumptions and on the basis of general inferences and based merely on entries in the private note books. The appellants have explained the entries which itself is sufficient to drop the proceedings.
17. We have also seen the comparative statement between the R.G. 1 register and the production private note book, which have been produced before us, to show that entries in R.G. 1 register were more in quantity for several days and there was no entry in the private note book. This aspect cannot be overruled and the Commissioner cannot proceed on the basis of average figures of the entire note book to arrive at the conclusion that there was production of various chemicals. For production of various chemicals, appellants are required to purchase inputs and use electricity and labour. No such evidence has been proved by revenue to discharge their burden. There is no evidence collected to show the persons to whom the goods were sold. Mere reliance on a tainted book in which the entries are also incomplete and also in view of clearances noted in R.G. 1 were more than what is entered in the note book, therefore we have to hold that the private note book cannot be accepted as a complete and reliable document for confirming the huge demands on all the appellants.
18. The appellants have produced large number of judgements to show that private note book cannot be accepted as evidence. In this regard, the Commissioner has noted in para-35 all those citations and has given his finding in para-36 which is extracted supra holding that same are distinguishable, without coming out with his finding as to how it is distinguishable. The law on private diary being maintained by the workers or employees being not a reliable evidence is well settled from the judgements noted. In order to take a departure from such a finding, there has to be corroborative and substantial evidence which should be clinching in nature. In this case as noted, the investigation stopped with the seizure of note books and recording of statements from Sri. Chakaravarthy, Settu and Murugesan and other customers. Except the initial statement of Chakaravarthy, there is nothing on record to confirm the demands. Even from the statement of Chakaravarthy, the details of production and sale does not come out clearly. Therefore, there is nothing in his statement to say that there was production and clearance individually by each of the units. Further, as noted, the investigation agency has not examined any responsible person/partner of the other four units. Revenue has miserably failed to prove the case in this regard.
19. As regards the charge pertaining to removal of dutiable goods in the guise of exempted goods, scrutiny of invoices which were shown to us, proves that the duty had been correctly paid on dutiable goods. They had not removed dutiable goods in the guise of exempted goods. There is no clear cut finding at all given by the Commissioner on this aspect of the matter. He has only relied on statements of some persons, but appellants have rebutted by showing that sales were through invoices and appellants had received cheques and the same has been encashed. When this documentary evidence has been presented before us, it overrules the initial presumption drawn by revenue. Some purchasers have not made entries in their own records for the reason best known to them, the appellants cannot be held responsible for inaction of some of their customers is not making entries in their books. The appellants records indicate that those customers have paid through cheques for purchases of items and those cheques have been realised. Bank statements were produced before us alongwith various registers, with entries, and RT-12 returns have been assessed and finalised. Therefore, charge brought out on this count also fails.
20. As regards the charge of undervaluation of goods by sale through their marketing agents, Aksol Chemicals on the ground that they are related persons, appellants have produced partnership deed to show that said partners were independent persons and the firm had been reorganised and the clearances pertained to this period, when the firm had been reorganised. This aspect of the matter has been conveniently overlooked by the Commissioner and his finding is not correct and acceptable. The appellants have also shown that there was independent sales by the manufacturing units to third parties also and the price of those goods sold to the third parties is also not higher than the price at which the goods were sold to Aksol Chemicals. Ld.Counsel has produced all the documents to show that the price was same of what was sold to Aksol Chemicals and to other parties. The evidence on record clearly demonstrates this point. The Commissioner has remained silent on this aspect and merely has upheld the charge. We are not impressed with his finding. In view of enormous evidence produced by appellants to show that Aksol Chemicals was an independent person and not related one, we accept the contention of appellants by holding that this charge has not been proved.
21. In the result, we are of the considered opinion that Revenue has failed to prove the charges in the show cause notice, as there is no substantial evidence produced to prove suppressed manufacture and clandestine removal of goods. Further, we notice that there is no evidence available to show that appellants had manipulated the bills to sell dutiable goods in the guise of exempted goods. We also find that there is no concrete evidence to show Aksol Chemicals was a related person. In that view of the matter, the impugned orders are set aside and appeals allowed without consequential relief, if any, as per law.
(Pronounced in open court on 26.6.01)