Custom, Excise & Service Tax Tribunal
Yes vs Represented By : Shri P.M. Dave, Shri ... on 10 April, 2014
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : E/3491-3493/2005, E/858/2006 & E/819,820/2007 Arising out of : OIO No. 34/Commr(Adjn)/2005 dated 21.07.2005 OIA No. 143 & 144/2007 (Ahd-I) dt. 30.03.2007 Passed by : Commissioner & Commissioner (Appeals) Central Excise, Ahmedabad For approval and signature : Hon'ble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. H.K. Thakur, Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Appellant (s) : Shri Prayank Prayagraj Aggarwal M/s. Rajesh Enterprises M/s. Shree Govind Synthetics Pvt. Limited Commissioner of Central Excise & S.T., Ahmedabad Represented by : Shri P.M. Dave, Shri Kuntal Parikh, Advocates Shri S.K. Mall, AR Respondent (s) : Commissioner of Central Excise & S.T., Ahmedabad
Represented by : Shri S.K. Mall, AR CORAM :
Hon'ble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. H.K. Thakur, Member (Technical) Date of Hearing : 04.03.2014 Date of Decision : 10.04.2014 ORDER No. A/10570-10575/2014 dated 10.04.2014 Per : Mr. H.K. Thakur;
Following appeals are being decided by this common order as the issue involved in all these appeals is same:-
Sr. No. Appeal No. Name of Appellant OIO/ OIA No. & Date
(i) E/3491/2005 Shri Prayank Prayagraj Aggarwal 147, Sunrise Park, Near Drive-in- Cinema, Ahmedabad OIO No. 34/Commr (Adjudication)/ 2005 dt 21.7.05
(ii) E/3492/2005 M/s. Rajesh Enterprises, Narol Ahmedabad OIO. 34/Commr (Adjudication)/ 2005 dt 21.7.05
(iii) E/3493/2005 M/s. Shree Govind Synthetics Pvt. Limited. 193/3 & 4, Shahwadi Ranipur, Narol, Ahmedabad OIO. 34/Commr (Adjudication)/ 2005 dt 21.7.05
(iv) E/858/2006 Commissioner of Central Excise, Ahmedabad OIO. 34/Commr (Adjudication)/ 2005 dt 21.7.05
(v) E/819/2007 M/s. Rajesh Enterprises 193/3 & 4, Shahwadi Ranipur Patia, Narol, Ahmedabad OIA No. 143 & 144/2007 (Ahd-I) dt. 30.3.2007
(vi) E/819/2007 M/s. Rajesh Enterprises 193/3 & 4, Shahwadi Ranipur Patia, Narol, Ahmedabad OIA No. 143 & 144/2007 (Ahd-I) dt. 30.3.2007
2. Appeals mentioned at Sr. No. (i) to (iii) are filed by the appellants with respect to OIO No. 34/Commissioner (Adjudication)/2005 dated 21.7.2005 passed by Commissioner (Adjudication), Ahmedabad. Appeal at Sr. No. (iv) above is filed by the Revenue also with respect to the same OIO dated 21.7.2005 for not passing any orders on the interest payable and for not confirming the duty with respect to goods confiscated by Additional Commissioner under OIO No. 36/Addl Commr/2003 dated 29.08.2003. Appeals mentioned at Sr. Nos. (v) and (vi) are filed by the appellants against OIA No. 143 & 144/2007 (Ahd-I) dated 30.03.2007 passed by Commissioner (Appeals) under which OIO No. 38/2006 dated 16.11.2006 passed by Joint Commissioner, Ahmedabad was upheld.
3. The case made by the Revenue is that appellant M/s. Rajesh Enterprises had illicitly processed and clandestinely removed Cotton Fabrics and Manmade Fabrics (MMF) during 1999-2000, 2000-2001 and 2001-2002 by machine printing but actually showing on papers as if the fabrics have been hand screen printed by one M/s. Gayatri Fabrics, which according to Revenue, was a non-existing firm at the relevant period. During the searches carried out 64 packed bales of 100% Cotton Fabrics processed at Shree Govind Synthetics, were seized from the transporter M/s. Deluxe Roadlines, Narol, Ahmedabad. Authorised representative of M/s. Shree Govind Synthetics, Shri N.C. Thakkar disclosed that the seized fabrics cleared from M/s. Shree Govind Synthetics were actually processed by M/s. Rajesh Enterprise with the aid of power and only documents were prepared to show as if the fabrics have undergone hand screen printed and exempted processes at the premises of M/s. Shree Govind Synthetics.
3.1 On the other hand all the other appellants, contested during the proceedings that no fabrics manufactured by M/s. Rajesh Enterprise was clandestinely cleared without payment of duty and that all the fabrics, for which show cause notices were issued, were hand screen printed by M/s. Gayatri Fabrics on the hand screening printing tables of M/s. Shivkarandas and have thereafter undergone exempted processes at the premises of M/s. Shree Govind Synthetics.
4. Shri P.M. Dave (Advocate) and Shri Kuntal Parikh (Advocate) appeared on behalf of the appellants. During the course of hearing and in the written submissions following arguments were made on behalf of the appellants:-
(i) That the fabrics subjected to finishing processes at Shree Govind Synthetics were not only pertaining to the hand screen printed fabrics of M/s. Gayatri Fabrics but also from other job workers like Malvika Hand Processors.
(ii) That M/s. Gayatri Fabrics was existing at the relevant time as per the cross examinations done during adjudication and also as per the investigation done by the HQ (Prev.). That the statement dated 25.04.2003, recorded by HQ (Prev.), of Shri Prayank P. Aggarwal was correct. That Shri Hukum Singh V. Shekhawat (Manager of M/s. Gayatri Fabrics) also has confirmed in his cross-examination that his statement dated 24.04.2003 taken by HQ (Prev.) is correct. That statements recorded by DGCEI earlier were under duress, threat and pressure. That there are documentary evidences on record to show that M/s. Gayatri Fabrics purchased raw materials for hand screen printing. That there are also evidences on record that merchant manufacturers got their goods processed from M/s. Gayatri Fabrics during the relevant period.
(iii) That no investigations were made with the merchant manufacturers, details of which were available with M/s. Shree Govind Synthetics to whom the orders were given, whether to M/s. Gayatri Fabrics or to M/s. Rajesh Enterprises.
(iv) That no excess stock of finished goods or excess dyes/ chemicals etc. were found to exist in the registered premises of M/s. Rajesh Enterprises during searches.
(v) That a separate paper book containing statements of Shri Prayank P. Aggarwal, Shri Hukum Singh Shekhawat, Shri Naimesh Patel (Manager of Shree Govind Synthetics) and five contractors engaged in hand processing for Gayatri Fabrics was submitted before Tribunal on 31.05.2010 (Appeal No. E/3491-3493/2005). That copies of two Panchnamas dated 24.07.2002 and 25.07.2002 made by HQ (Prev.) were also produced during the hearing. That as per these statements and Panchnamas M/s. Gayatri Fabrics was existing at the relevant time, when DGCEI investigated the case. That as per page 4 of the statement dated 25.4.2003 of Shri Prayank P. Aggarwal, M/s. Gayatri Fabrics was working up to 2001-02 and sending hand screening printed fabrics to M/s. Shree Govind Synthetics.
(vi) That nothing is recorded in the Panchnama that all fabrics processed in the factory premises of M/s. Shree Govind Synthetics were received from M/s. Rajesh Enterprises. That it is highly impractical that machine printed fabrics of M/s. Rajesh Enterprises could be brought to M/s. Shree Govind Synthetics when M/s. Rajesh Enterprises had its own machines for carrying out exempted processes done in M/s. Shree Govind Synthetics.
(vii) That there is no evidence that excess raw materials required for machine printing were procured by M/s. Rajesh Enterprises. That no evidence of any cash transactions for the fabrics alleged to be processed with the aid of power is brought on record.
(viii) That both Shri Prayank P. Aggarwal and Shri Hukum Singh Shekhawat during cross-examination have said that their statements recorded by DGCEI were under duress and can not be taken as gospel truth. That depositions made during cross examination have remained unshaken.
(ix) That the cross examination of DGCEI officers also made it clear that no investigation was made regarding extra procurement of raw materials or from those contractors who were engaged by M/s. Gayatri Fabrics for hand processing.
(x) That statement of Shri Chippa of M/s. Malavika Hand Processors, that his firm was processing 50,000/- to 60,000 LMS of fabrics per month, is not conclusive to say that it is not possible to process 34.55 Lakh Meters of fabrics on the remaining tables by M/s. Gayatri Fabrics. That it is not known whether quantity 50,000 to 60,000 LM per month stated by Shri Chippa was processed on one hand screen printing table or on all the 12 hand screen tables used by M/s. Malvika Hand Processors. That M/s. Gayatri Fabrics was also getting hand screen printing done from other contractors which was also being finished at M/s. Shree Govind Synthetics.
(xi) That in view of the following case laws a case of clandestine removal can not be based only on statements:-
(a) Commissioner of Central Excise & Customs & Service Tax, vs. Vishwa Trades Pvt. Limited [2013 (287) ELT 243 (Guj.)]
(b) Final order No. A/11207 to 11219/WZB/HAD/2013 dated 26.09.2013 (Para 40) in the case of Bajaj exports vs. CCE Ahmedabad II.
5. Shri S.K. Mall (AR) appearing on behalf of the Revenue submitted that the following proceedings were initiated against the appellants from time to time:-
S/No SCN No. & Date Period involved Issued by Proceedings of the case
(i) INV/DGCEI/BRU/21/2002 dt. 18.03.2002.
For confiscation of seized goods and to demand duty leviable thereon under Rule 173Q(1) of Central Excise Rules, 1944 read with Rule 25 of Central Excise Rules 2001 and imposition of penalty u/r 25 & 26 of Central Excise Rules, 2001 (OIO No. 36/A2003 Dt. 26.8.03) 1999-2000(25.8.1999 to 31.3.2000) and 2001-2002 (31.7.2001 to 19.09.2001) Value of seized goods : Rs. 4,54,416/- Amount of duty involved Rs. 84,277/-
DGCEI, ZU, Ahmedabad SCN adjudicated by the Additional Commissioner, Central Excise, Ahmedabad vide OIO No. 36/Addl. Commr/2003 dated 29.08.2003. Confiscated the seized fabrics and imposed penalty on M/s. Rajesh Enterprises under Rule 173Q of Central Excise Rules, 1944 read with Rule 25 of Central Excise Rules,2001 and imposed personal penalties on offenders under Rule 25 & 26 of Central Excise Rules, 2001.
(ii) DGCEI/AZU/INV/54/ 2001 dt. 26.3.2003 for demanding duty u/s 11A(1) of Central Excise Act, 1944, read with Rule 4 of Central Excise Rules,2001 and imposition of penalty under Section 11AC of Central Excise Act, 1944. (OIO No. 34/Commr(Adj) /2005 dt. 21.7.2005 1999-2000 (25.08.1999 to 31.3.2000 and 2001-02 (31.07.2001 to 19.09.2001) Amount of duty involved Rs. 86,55,334 DGCEI, ZU, Ahmedabad SCN adjudicated by Commissioner, Central Excise, Ahmedabad-1 vide OIO No. 34/ Commr(Adj)/2005 dt. 21.7.2005 confirmed duty under Section 11A(1) and imposed equal penalty on M/s. Rajesh Enterprises under Rule 25(1) of CER,2001 r/w Rule 173(Q) of CER, 1944. Also imposed penalty of Rs. 25 Lakhs each on M/s. Govind Synthetics and Shri Prayankbhai Prayagraj Agrawal. These parties have filed appeal No. E/3491 to 3493/2005.
(iii) V.52, 53, 54/15-24/ Ofence/Rajesh- Govind/ 05-06 dated 09.11.2005 amount to Rs. 19,70,132/-
Asa per Anne. C 14.11.2000 to 06.03.2001 and as per Anne D 2001-2002 i.e. from 20.09.2001 to 18.10.2001 DGCEI, ZU, Ahmedabad The case decided by the Jt. Commissioner, Central Excise Ahmd. Vide OIO No. 38/32006 dt. 16.11.2006, against which party were in appeal to Commissioner (Appeals) who vide OIA No. 143 & 144/2007 (Ahd-I) dt. 30.3.2007 confirmed the duty and penalty. M/s. Rajesh Enterprises and Govind Synthetics preferred appeal Nos. E/819-820/2007.
(iv) V.52-55/15-26/Offence/ Rajesh-Sh. Govind/ 2005-06 dated 01.12.05, amounting to Rs. 5,72,000/-
20.6.2002 to 18.7.2002 Jt. Commissioner Central Excise Ahmedabad-1 Appellant paid the duty amount of Rs. 5,72,000/- vide TR 6 challan No. 10/2002-2003 dt. 01.8.02. Appellant went to in Settlement Commission, Mumbai against he SCN. They have settled the duty of Rs. 5,72,000/- which is paid and asked for interest @ 10% on duty and imposed penalty of Rs. 50,000/-
5.1. Learned AR argued that case at Sr. No. (i) above was not pursued by the appellant and that case at Sr. No. (iv) above was settled by the appellants by approaching the Settlement Commission. That it is clear from the periods involved above and facts on record that both M/s. Gayatri Fabrics and M/s. Shivkaran Das Govindram never existed simultaneously at the same point of time and the same hand screen printing tables were either registered in the name of M/s. Gayatri Fabrics or M/s. Shivkarandas Govindram. That as per the statements of Shri Haroon Chippa owner of M/s. Malvika Fabrics and statement of Shri Hukumsingh Shekhawat, POA holder of M/s. Shivkarandas Govindram that a total of 26 hand printing tables were owned by M/s. Shivkarandas Govindram out of which 14 were rented out to M/s. Malvika Fabrics and balance 12 belonged to M/s. Shivkarandas Govindram. That even Hukumsingh Shekhawat POA holder of M/s. Gayatri Fabrics also stated at the relevant time that M/s. Gayatri Fabrics has not started any activities but was thinking of taking over the premises of M/s. Shivkarandas Govindram. That Prayank Agarwal of M/s. Rajesh Enterprise also admitted that goods seized on 21.09.2001 at the transporter M/s. Deluxe Roadlines Pvt. Limited, premises was actually processed at M/s. Rajesh Enterprise. That the statements of various persons recorded during the investigation have not been retracted by the appellants till the time of cross examination. That as per the statement of Shri Haroon Yusuf Chippa also only 50,000/- LMT of fabrics can be printed on 14 Hand screen printing tables in a month and that large quantities of fabrics, claimed to have been hand screen printing, can only be processed with the aid of power at the premises of M/s. Rajesh Enterprise. That settling the case for the period 20.6.2002 to 18.7.2002 before the Settlement Commission clearly indicate the modus operandi adopted by the appellants for clandestine manufacture and clearance of finished goods by M/s. Rajesh Enterprise in the guise of hand screen printing. On the issue of quantification of duty and quantity of fabrics shown to be hand screen printed by M/s. Gayatri Fabrics, while countering the argument of learned advocate of the appellants, AR argued that the quantity of fabrics processed has been taken from the records maintained by M/s. Shree Govind Synthetics as quantity shown against the name of M/s. Gayatri Fabrics which did not existed at the relevant time. That the investigation done by HQ (Prev.) for a subsequent period can not be relied upon for the investigation conducted by DGCEI for the earlier period as per Apex Courts judgment in the case of GTC Industries Limited vs. CCE, New Delhi [1997 (94) ELT 9 (SC)].
5.2. Learned AR relied upon the following case laws in support of his arguments that evidences gathered by the investigation are sufficient to establish the preponderances of probability of offence committed:-
(a) 2005 (184) ELT 13 (Bom) Manibhandra Processors vs. Addl. Commissioner of Central Excise.
(b) 1996 (86) ELT 136 (SC) Naresh J. Sukhwani vs. UOI
(c) 2004 (165) ELT 136 (SC) - Commissioner of Central Excise, Madras vs. Systems & Components Pvt. Limited.
(d) 1997 (94) ELT 9 (SC) GTC Industries Limited vs. CCE, New Delhi
(e) 2010 (257) ELT 289 (Tri. Del.) Devi Dass Garg vs. CCE, Delhi
(f) 1994 (70) ELT 305 (Tri.) - Siemens Limited vs. CCE, Calcutta
(g) 1983 (13) ELT 1546 (SC) CC, Madras & Ors vs. D. Bhoormull
(h) 2011-TIOL-76-SC-CX CCE, Mumbai vs. Kalvert Food India Pvt. Limited
(i) 1983 (13) ELT 1486 (SC) Kanungo & Co. vs. CCE, Calcuta & Ors
(j) 1997 (89) ELT 646 (SC) Surjeet Singh Chhabra vs. UOI
(k) 2010 (250) ELT 94 (Tri. Mum.) Twenty First Century Wire Rods Limited vs. CCE & Cus. Goa.
(l) 2008 (227) ELT 287 (Tri. Del.) CCE, Ludhiana vs. Surya Ispat Udyog.
6. Heard both sides and perused the case records. In these proceedings the case of the Revenue is that appellant Rajesh Enterprises had clandestinely manufactured and cleared fabrics by machine printing in their factory premises but on paper the activities were shown as if these fabrics were hand screen printed at one M/s. Gayatri Fabrics which according to Revenue was a non-existing firm at the relevant time. Revenue has relied upon the seizure of goods at the factory premises of M/s. Shree Govind Synthetics (where exempted processes were done) and at the office premises of M/s. Deluxe Roadlines who were the transporters of the fabrics. Appellants have argued that M/s. Gayatri Fabrics was in fact existing at the relevant time as per the investigation done by the HQ Preventive of the jurisdictional Central Excise Commissionerate which has not been taken into account by the Adjudicating authority. It is the case of the appellants that no investigation was made with the merchant manufacturers who got the hand screening printing done when the entire details and addresses were available with Shree Govind Synthetics. It is also contested that there is no evidence on record that M/s. Rajesh Enterprise procured excess raw materials required for processing of fabrics etc. and that during investigation no discrepancies were found either in the raw material stock or the finished goods stock. The case of the Revenue is primarily based on the statements of Shri Hukumsingh Shekhawat, power of attorney holder of M/s. Gayatri Fabrics, Shri Prayank P. Aggarwal of M/s. Rajesh Enterprise and Shri Haroon Yusuf Chippa of M/s. Malvika Fabrics and also that these statements were only retracted during the course of adjudication of the case made by DGCEI. It is observed from Para 19.11, 19.13 and 19.15 of the impugned OIO dated 21.7.2005 passed by the Adjudicating authority that though cross-examination took place in April-May 2005 before the Adjudicating authority but in his statement dated 25.4.2003, i.e. two years before the cross-examination of Shri Prayank P. Agarwal it was stated on page 4 of Shri Prayank P. Agarwal that M/s. Gayatri Fabrics (hand processing unit) was operating till 2001-02 and was sending hand screen printed fabrics to M/s. Shree Govind Synthetics for carrying out process of padding, clandestinely and open stentering. It can not be the case of the Revenue that the statements of various persons recorded by the HQ (Prev.) for the subsequent period were recorded only to help the appellants for the earlier period. Further, the cross examination of the three persons stated in paras 19.11, 19.12, 19.13 and 19.15 of OIO dated 21.07.2005 is relevant and it reproduced below:-
19.11. In this regard, they draw attention to the cross-examination of Shri Prayank Agarwal on 26.4.2005 wherein he deposed as under:
Q-2 Is it also right that local preventive offices have also recorded statements for the same subject matter of processing by Gayatri Fabrics?
Ans. Yes. My statements were recorded by the local preventive officers also, and the Superintendent was Shri J.V. Patel.
Q-3. I am showing you a statement of 04 pages recorded on 25.04.03. Was this statement recorded by the local preventive officer Shri Patel?
Ans. Yes. This statement was recorded by Shri J.V. Patel on 25.4.2003 and this statement is right.
Q-4. The facts recorded in the statement dated 25.4.03 are correct or the facts recorded in three statements by DGCEI officers are correct.
Ans. The statement recorded by the local preventive staff is correct and the statements recorded by DGCEI officers are not correct in fact.
Q-5. Why did you sign three statements to DGCEI officers if they have not recorded correct facts?
Ans. There was threat of arrest to me right from 2001 when the investigation by DGCEI commenced till the last statement of mine was recorded in the year 2003.
19.12. Shri Prayank Agarwal has also stated during cross examination that he had to sign statement prepared by the DGCEI officers as he was the only son, his father had expired and therefore, he was under a lot of tension during investigation by the DGCEI officers.
19.13. Shri Hukumsingh Shekhawat was also cross-examined on 26.4.2005 and he has also deposed as follows:
Q-2. Is correct that your statement was also recorded by local preventive officers during this period for the same case?
Ans. Yes.
Q-3. I am showing you a copy of statement recorded on 24.4.2003. Is it right that this statement was also recorded by local preventive officers and you had put your signature on all the three pages of this statement?
Ans. Yes, I have given this statement and signed the same. (A copy of the statement is taken on record).
Q-7. In the statement recorded on 13.03.2003 by Sr. I.O., DGCEI, you have stated that M/s. Gayatri Fabrics was not having any activities but in your statement recorded on 24.04.2003 you have stated that Gayatri Fabrics was engaged in hand processing of fabrics. Which is the correct statement i.e. whether statement recorded on 24.4.2003 or 13.03.2003?
Ans. The statement dated 13.03.03 was recorded was recorded under threat and coercion. However, I have neither reiterated this statement nor I have made any representation to any senior officer or to any other court. Because they were not trusting anybody and the whole atmosphere was also of fear and threats. 19.15. In this regard, Shri Y.A. Daulti, Sr. Intelligence Officer, DGCEI who has conducted investigation of this case was also cross-examined on 02.5.2005 when he deposed as follows:
Q-5 The demand in this case is for more than 40 Lakh meters of fabric. Have you inquired how much quantity of chemicals, dyes, water and electricity were required for processing such a huge quantity of fabrics?
Ans. No. I have not enquired.
Q-6 Did you check up the ledger or cash book or bank statements of Rajesh Enterprise for knowing the money received by them from their customers?
Ans. I do not remember.
Q-7 Can you check up and reply whether the above documents were examined and any investigation was undertaken by you about these documents?
Ans. These documents were not considered necessary for the case.
Q-8. You have recorded statement of the above four persons. Can you confirm from their statements recorded by you that not a single question was asked to any of them about the procurement of materials for processing by Rajesh Enterprises and about the processing charges received by M/s. Rajesh Enterprises.
Ans. Yes. I have not asked such question.
Q-9. Have you contacted any of the customers to whom the processed fabrics were delivered?
Ans. No. Q-10 Do you confirm that there is no evidence from any of the customers that they had sent grey fabrics to M/s. Rajesh Enterprise or to M/s. Gayatri Processsors for processing the fabrics?
Ans. Yes. There is no such investigation. 6.1 From the above facts the fairness of the statements recorded by the officers of the DGCEIduring the investigations are questionable and it can not be inferred that M/s. Gaytri Fabrics was not existing at the relevant time in the light of the conflicting statements. It is not coming out from the records as to at which stage the copies of written statements recorded during first investigation were given to the concerned persons, whether immediately on recording or along with the show cause notice. In the case of latter situation the only time when the evidences could be countered by the appellant was during adjudication proceedings. Further, it is not conclusively proved by the Revenue that quantity of hand screen printed fabrics shown against M/s. Gayatri Fabrics, as per the records maintained by M/s. Shree Govind Synthetics, were not printed on behalf of M/s. Gayatri Fabrics. It is not clear whether 50,000 to 60,000 L/M of fabrics per month was opined by Haroon Chippa of M/s. Malvika Hand Processors was from one Hand Screen printing table or all the tables available with that unit. In addition to that there are evidences on record to the effect that M/s. Gayatri Fabrics has also entered into contracts with five other contractors who were doing printing of fabrics for M/s. Gayatri Fabrics which were also sent for further processing to M/s. Shree Govind Synthetics. In such circumstances only statements can not be made as the basis for establishing a case of clandestine manufacture and clearance of goods against the appellants.
6.2. Arguing the case for the appellants it was also emphasised by the learned Advocate that certain para-meters fixed by this very Bench in Para 40 of the order dated 26.09.2013 in the case of Balaji Exports vs. CCE, Ahmedabad-III (supra) are required to be fulfilled. The relevant Para 40 is reproduced below:-
40. After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following:-
(i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions;
(ii) Evidence in support thereof should be of:
(a) raw materials, in excess of that contained as per the statutory records;
(b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty;
(c) discovery of such finished goods outside the factory;
(d) instances of sale of such goods to identified parties;
(e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him;
(f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty;
(g) statements of buyers with some details of illicit manufacture and clearance;
(h) proof of actual transportation of goods, cleared without payment of duty;
(i) links between the documents recovered during the search and activities being carried on in the factory of production; etc. Needless to say, a precise enumeration of all situations in which one could hold with activity that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of note books or diaries privately maintained or on mere statements of some persons, may even be responsible officials of the manufacture or even of its Directors/ Partners who are not even permitted to be cross-examined, as in the present case, without one or more of the evidences referred to above being present. In fact, this Bench has considered some of the case-law on the subject in Centurian Laboratories vs. CCE, Vadodara, 20013 (293) ELT 689. It would appear that the decision, though rendered on 03.5.2013, was reported in the issue of ELT dated 29.7.2013, when the present case was being argued before us, perhaps, not available to the parties. However, we have, in that decision, applied the law, as laid down in the earlier cases, some of which now have been placed before us. The crux of the decision is that reliance on private/ internal records maintained for internal control cannot be the sole basis for demand. There should be corroborative evidence by way of statements of purchasers, distributors or dealers, record of unaccounted raw material purchased or consumed and not merely the recording the confessional statements. A co-ordinate Bench of this Tribunal has, in another decision, reported in the ELT issue of 5.8.2013 (after hearings in the present appeals were concluded), once again reiterated the same principles, after considering the entire case-law on the subject [Hindustan Machines vs. CCE, 2013 (294) ELT 43]. Members of Bench having hearing initially differed, the matter was referred to a third Member, who held that clandestine manufacture and clearances were not established by the Revenue. We are not going into it in detail, since the learned Counsels on either side may not have had the opportunity of examining the decision in the light of the facts of the present case. Suffice it to say that the said decision has also tabulated the entire case-law, including most of the decisions cited before us now, considered them, and come to the above conclusion. In yet another decision of a co-ordinate Bench of the Tribunal [Pan Parag India v CCE, 2013 (291) ELT 81], it has been held that the theory of preponderance of probability would be applicable only when there are strong evidences heading only to one and only one conclusion of clandestine activities. The said theory, cannot be adopted in cases of weak evidences of a doubtful nature. Where to manufacture huge quantities of final products the assessee require all the raw materials, there should be some evidence of huge quantities of raw materials being purchased. The demand was set aside in that case by this Tribunal. 6.3. It is amply clear from the cross-examination of the investigating officer in Para 19.15 of the OIO dated 21.07.2005 that no investigations were done with respect to purchase of raw materials by M/s. Rajesh Enterprise, cash amounts received for clandestine removals or the customers to whom the processed fabrics were delivered. There is also no indication in the Panchnamas and searches that any shortage/ excess of raw materials or finished fabrics were found at the registered factory premises of M/s. Rajesh Enterprise. In view of the above observations and the law laid down by various judicial pronouncements, including the judgment of jurisdictional High Court in the case of Commissioner of Central Excise, Customs & Service Tax vs. Vishwa Traders Pvt. Limited [2013 (287) ELT 243 (Guj.)], even if certain suspicion was raised by the statements recorded by the investigation made by the officers of DGCEI but the same are not sufficient to hold clandestine manufacturing and clearance of excisable goods by the appellants. Accordingly, appeals filed by the appellants are required to be allowed.
7. Appeal No. E/858/2006 is filed by the Revenue on the grounds that Adjudicating authority, under the impugned OIO No. 34/Commissioner (Adjudication)/2005 dated 21.07.2005, has not decided the issue of demand of duty of Rs. 54,354/- on the seized goods paid by the assessee and its appropriation. It was also the case of the Revenue in this appeal that Commissioner has erred in not ordering levy and recovery of interest on the confirmed duty demand of Rs. 85,55,334/-. So far as demand of duty of Rs. 54,354/- paid and its appropriation is concerned, it is observed that the same has already been done as per Para 31(1) of the OIO No. 36/ Additional Commissioner Commissioner/2003 dated 29.08.2003/ 01.09.2003 available in appeal No. E/858/06. Regarding charging of interest on duty demand of Rs. 85,55,334/-, it is relevant that when on merits this duty is held to be not sustainable, there is no point in confirming the interest on that amount. Appeal filed by the Revenue is thus required to be rejected.
8. In view of the above observations appeals filed by the appellants are allowed and appeal filed by the Revenue is rejected.
(Order pronounced in the Court on 10.04.2014) (M.V. Ravindran) (H.K. Thakur) Member (Judicial) Member (Technical) .KL 2