Custom, Excise & Service Tax Tribunal
Cce, Raipur vs M/S. Hi Tech Abrasives Ltd on 7 October, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing: 17.6.2016
Date of Pronouncement: 07.10.2016
Appeal No. E/2387/2008-EX[SM]
[Arising out of Order-in-Appeal No. 114/RPR-I/2008 dated 29.08.2008 passed by the Commissioner, Customs & Central Excise (Appeals), Raipur-I]
CCE, Raipur Appellant
Vs.
M/s. Hi Tech Abrasives Ltd. Respondent
Appearance
Shri G.R. Singh, DR - For the appellant
Ms. Rinky Arora, Advocate - For the respondent
CORAM: Honble Mr. V. Padmanabhan, Member (Technical)
Final Order No.54032/2016, dated 07.10.2016
Per Mr. V. Padmanabhan :
The present appeal filed by Revenue is against the order dated 29.08.2008 passed by the Commissioner (Appeals), Raipur. The assessee is a manufacturer of iron and steel items such as steel shorts, CI shots and MS ingots etc. falling under Chapter 72 of the Central Excise Tariff Act. The departmental officers visited their factory on 6.6.2003 and carried out the verification of inputs as well as finished products and found shortages as follows:
Raw material
S.
No.
Description
O.B. as on 6.6.2003 (M.T.)
Qty. Found on physical verification
Difference (excess/
shortage)
Value (Rs.)
Centra1 Duty Involved (Rs.)
1.
Sponge Iron
302.735
200.00
102.735(-)
7,44,828
1,19,172
2.
Kabadi Scrap bundle
Nil
20.00
20(+)
Being Kabadi Scrap
Nil
3.
Cast-Iron Scrap (Pig Iron)
123.550
125.000
1.450(+)
-
-
Finished goods
1. Steel Short (HAL 0 to HAL 4) 34.950 68.375 5.387(-) 1,18,272 18,923 Steel Shorts (HAL 5 to HAL 8) 26.151 Steel Shorts (HAL 9 to HAL 11 12.650
2. Steel Grits G 1.20 to 3) 2.800 55.750 0.200(-) 3,900 624 Steel Grits G4 to 6) 18.050 Steel Grits G7 to 10) 35.100
3. Runner/Risers 4.750 4.750 Nil Nil Nil
4. CI Shots SAI-10-14 1.490 2.050 0.540(-) 7,560 1,209 CI Shots SAI-05-09 0.600 CI Shots A11.2 04 0.500
5. CIGrits-G120-G3 2.150 5.200 0.146(-) 1,898 303 Ci Grits-G04-G-6 1.350 CI Grits-G-07-G10 1.846
6. Steel Ingots 32.250 22.536 9.714(-) 1,13,887 18,222
7. Waste & Scrap 1.000 1.000
-
-
-
2. The department undertook investigation and came to the conclusion that the assessee has cleared inputs on which Cenvat credit have been taken as well as some finished products clandestinely without payment of duty. On conclusion of investigation a Show Cause Notice dated 11.7.2007 was issued to the assessee which was adjudicated vide order dated 09.05.2008 in which Central Excise duty to the extent of Rs.28,19,972/- was demanded from the assessee along with interest and imposition of penalty. Also a penalty of Rs.7 lakhs was imposed on the assessee under Rule 25 of the Central Excise Rules. The assessee challenged this order before the Commissioner (Appeals) who set aside the order and vacated all the demands. Revenue is presently in appeal against this impugned order of Commissioner (Appeals). They have argued that the Commissioner (Appeals) has wrongly vacated the demand. Accordingly, Revenue prays for reinstating the Order-in-Original.
4. During the checks, loose papers, kacha papers and other documents like notebooks were recovered by the officers, Shri Pramod Kumar, the authorised person, deposed in his statement dated 6.6.2003 that the resumed papers were related to date wise receipt of raw material as well as despatches. He also accepted the shortages noticed during search. Thereafter, statement of Shri N.P. Tekriwal, Director of the unit, was recorded in which he admitted that some goods were despatched without payment of duty and without cover of invoices. He also showed his satisfaction with the method of verification of stock.
5. Simultaneous search was also conducted on 06.06.2003 at factory of M/s. Steel Abrasives India Ltd. (SAIL), Raipur, a sister concern of assessee. Out of the records recovered by the departmental officers from M/s. Steel Abrasives Ltd., some of the documents pertained to M/s Hi-Tech Abrasives Ltd. Shri Tekriwal, the Director of M/s Hi-Tech Abrasives Ltd was also Director of M/s. Steel Abrasives Ltd. Private documents in the form of six notebooks were recovered out of which one notebook pertained to M/s Hi-Tech Abrasives Ltd. whereas notebooks no. 2 to 6 pertained to SAIL. Separate proceedings stand initiated against SAIL on the basis of Note books No.2 to 6. When officers carried out cross verification of the entries found in notebook No.1 as well as invoices on record it was observed that some entries in notebooks matched with the particulars of sale invoices issued by the assessee. It was found that there were several entries in this notebook which were not mentioned in the sale invoices. These entries pertained to clearances of finished products such as M.S. ingots, runners and risers and also scrap. Several entries pertained to receipt of sale proceeds and also clearance of such raw materials. Officers also recovered some loose papers wherein date wise particulars of raw material and finished goods cleared, numbers of trucks used for transportation and names of the suppliers were also mentioned.
6. The officers cross verified the entries in the note book No.1 recovered from the factory premises of M/s. SAIL and compared the same with the particulars of sale invoices and prepared charts listing out the entries where goods have been cleared but invoices have not been issued. Shri N.P. Tekriwal, Director was shown these charts and note books recovered. After interrogation his statement stands recorded on 7.6.2003 in which, he admitted that entries in the tabular chart were pertaining to the clearances made by the assessee without issuance of Central Excise invoice and without payment of Central Excise duty. He further admitted that they have moved raw materials without any documents between M/s Steel Abrasive Industries Ltd. and M/s Hi-Tech Abrasives Ltd. using three dumpers and one truck for transportation. He also admitted in his statement that the private records including note book No.1 and loose papers recovered by the officers were maintained by Shri Sanjay, Supervisor and were pertaining to M/s Steel Abrasive Industries as well as M/s Hi-Tech Abrasives Ltd. Further he admitted the shortages of raw material as well as finished goods during physical stock and expressed his satisfaction on the manner in which stock taking was conducted.
7. On the basis of the comparison chart prepared by the officers with the accounted clearances of the assessee, demand for duty was raised by Revenue vide Show Cause Notice dated 11.7.2007. An amount of Rs.28,19,972/- was demanded on the alleged clearances of finished goods without payment of duty; Rs.1,548,453/- was also demanded on the shortage of inputs as well as finished products noticed at the time of verification by the officers. Demands stand confirmed in the Order-in-Original dated 09.05.2008.
8. When the case was challenged before Commissioner (Appeals) he set aside the demands on the following grounds:
(i) There is not enough evidence of clandestine removal of goods.
(ii) No investigation has been conducted either with the recipient of the goods allegedly cleared clandestinely. The procurement of additional raw materials for manufacture of such finished products also has not been undertaken.
(iii) The case is based solely on the confessional statement of Shri N.P. Tekriwal, Director of the assessee. This statement is related to chart shown to him and not related to evidences i.e entries made in the note books recovered by the officers.
(iv) There are errors in the chart prepared by the Revenue. These errors are highlighted by the assessee before Commissioner (Appeals).
(v) The matter is time-barred.
9. The appeal filed by Revenue seeks to set aside the Order-in-Appeal and to reinstate the Order-in-Original of confirmation of duty. The main grounds on which the impugned order has been challenged by Revenue are as follows:-
(i) The demand has been raised based on the loose papers, kachcha papers, and private note books recovered from the possession of the assessee during the search proceedings.
(ii) Shri S.N. Sharma, authorised person of the assessee has admitted that the recovered documents were related to the date wise receipt of raw material and clearances of finished goods with and without payment of duty.
(iii) Shri N.P. Tekriwal, Director has given confessional statement dated 7.6.2003 in which he has expressed his satisfaction with the procedure of stock taking and admitted the shortages noticed in respect of raw materials as well as finished products. He has further admitted that private records recovered contained details of receipt of raw materials and finished products cleared with and without payment of duty. He has admitted the details in the tabulation chart prepared by the Revenue on the basis of the private records recovered from the factory. The statement of Shri Tekriwal has never been retracted; consequently it is a piece of evidence. They have cited the Supreme Court decision in the case of CCE Vs. Systems & Components Pvt. Ltd. [2004 (165) ELT 136 (SC)] to support their view and what is admitted need not be proved.
(iv) The demand is not time barred; but for the investigation conducted by the department, evasion of duty would not have been detected. Therefore, this is clear case of suppression of facts wherein the extended period of limitation is invocable.
10. Heard Shri G.R. Singh ld. Advocate for the appellant and heard Ms. Rinky Arora, ld. Advocate for the assessee.
11. The ld. Advocate for the assessee sought to dismiss the appeal on the following grounds:-
(i) From the records it may be seen that author of the private documents i.e. various note books recovered from the factory was Shri Sanjay Kejriwal, Supervisor. However, he has not been confronted and his statement has not been recorded. Hence, these records will not be admissible as evidence.
(ii) Quantum of shortages detected is negligible and hence on the basis of such shortages no allegation of clandestine clearance can be made.
(iii) The confessional statement of Shri N.P. Tekriwal, Director has not been corroborated with substantive evidence; consequently the same will not be admissible as evidence.
(iv) The chart prepared by the department is full of errors consequently demand cannot be confirmed on the basis of such charts.
(v) Duty paid on the goods have not been taken into consideration while arriving at the quantum of goods allegedly removed without payment of duty.
They relied upon these following case laws:-
(i) CCE, Bangalore Vs. Pragathi Concrete Products (P) Ltd. [2015 (322) ELR 819 (SC)]
(ii) Blue Star Ltd. Vs. Union of India [2015 (322) ELT 820 (SC)]
(iii) CCEST, Vs. Triveni Engineering & Industries Ltd. [2015 (317) ELT 408 (All.)]
(iv) CCE, Nagpur Vs. Hyundai Unitech Electrical Transmission Ltd. [2015 (323) ELT 220 (SC)]
(v) Caprihans India Ltd. Vs. CCE, Surat [2015 (324) ELT 8 (SC)]
(vi) Aswani & Co. Vs. CCE, Delhi-I [2015 (327) ELT 81 (Tri.-Del.)]
12. I have carefully perused the case records as well as the submissions made by ld. DR as well as ld. Advocate appearing for the respondent. The case originated with the verifications undertaken by the departmental officers on 6.6.2003 during their visit to the factory. The verification of stock of raw materials as well as finished products resulted in shortages detected in the stock of raw materials as well as finished products. The manner of stock taking was to the satisfaction of Shri N.P. Tekriwal, Director who was present throughout the proceedings. The shortages also stand admitted by Shri N.P. Tekriwal and the duty due on raw materials as well as the finished product found short stand already paid by them to the extent of Rs.1,58,453/-.
13. Several loose sheets as well as six private note books have been recovered by the officers from the premises of M/s. SAIL. The entire demand is based on the entries found in the note book as well as on the confessional statement of the Director. Out of the notebooks recovered, the notebook No. 1 relates to entries of receipt of raw materials as well as clearance of finished products of M/s Hi-Tech Abrasives Ltd. It is on record that the departmental officers have compared entries found in the note book No.1 with the invoices on record for clearance of finished products. Charts have been prepared by listing all those clearances which have been made without issuing invoices; such charts have been show to the Director Shri Tekriwal. After considering the chart as well as private note book in his statement, the Director dated 7.6.2003 has admitted that the notebooks contained details of clearances of raw material and finished products - both on payment of duty and otherwise and also receipt of unaccounted raw materials. He further admitted the clearances listed out in the charts as having been made without payment of duty. Duty demand raised in the Show Cause Notice and confirmed the order in original are on the basis of these charts which stand seen and admitted by the Director. It is also on record that the confessional statement of Shri Tekriwal has never been retracted.
14. On careful consideration of the facts and circumstances as outlined above, I find that the statement of Director is the basis for the demand. The statement is inculpatory and is specific. The Director clearly admitted that the documents/private records recovered by the officers contained details of procurement of raw materials as well as clearance of finished goods with and without payment of duty. This fact is further strengthened by the observation that many entries in the private documents are covered by the invoices issued by the assessee on which duty stands paid. The Director has clearly admitted the truth of the charts as well as clandestine clearance of goods covered by the entries in the private notebooks which are not covered by the invoices. Such statement is admissible as evidence as has been held by the Apex Court in the case of Systems & Components Pvt. Ltd. (supra). The activities of clandestine nature is required to be proved by sufficient positive evidence. However, the facts presented in each individual case are required to be scrutinized and examined independently. The department in this case has relied upon the confessional statement of the Director which is also supported by the mentioned entries in the private records. There is no averment that the statement has been taken under duress. The assessee also does not appear to have asked for cross-examination during the process of adjudication.
15. In view of the foregoing, I find that the Commissioner (Appeals) has erred in taking the view that there is not enough evidence of clandestine removal of goods. Even though the statement of Shri Sanjay Kejriwal, who is said to be the author of the private records recovered has not been recorded, it stands admitted by Shri Tekriwal, Director about the truth of the contents of the private notebooks. Consequently, I find no reason to disallow this piece of evidence.
16. The evidence of clandestine clearance has been brought on record only as a result of investigation undertaken by the department. The evidences unearthed by the department are not statutory documents and would have gone undetected but for the investigation. Therefore this is a clear case of suppression of facts from the department and certainly the extended period of limitation is invocable in this case and hence the demand cannot be held to be time barred.
17. The assessee in his counter has pointed out some instances in which the calculation of demand is not proper. They have argued that from the private notebooks, while calculating the demand, accounted clearances have not been deducted. In the grounds of appeal filed by Revenue, it is argued that Commissioner (Appeals) could have remanded the matter for correction of such errors.
18. In the facts and circumstances of the present case, I find that the Commissioner (Appeals) order setting aside the demand is not proper. The demand is based on evidence which stands admitted by Director based on private records recovered from the assesses factory. There is nothing on record to the effect that statements relied upon have been extracted under duress. The Director also has voluntarily stated that he is satisfied with the manner of stock taking and search.
19. The case laws relied upon by the assessee are dealing with cases wherein demands have been dropped on various grounds. But every case of suppression of facts has to be evaluated on its own. In this case, demand is on the basis of private records seized in search and which have been admitted by the Director himself as pertaining to clandestine clearances. I also find that duty also stands demanded only on those clearances which are not covered by invoices.
20. In line with above discussions, I set aside the impugned order and allow the appeal filed by Revenue.
(Pronounced in Open Court on 07.10.2016) (V. Padmanabhan) Member (Technical) SSK -2- -2-