Custom, Excise & Service Tax Tribunal
Century Tiles Ltd vs Ahmedabad-Iii on 6 November, 2024
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad
REGIONAL BENCH-COURT NO. 3
Excise Appeal No. 10735 of 2013- DB
(Arising out of OIO-07/COMMR/ADJ/AHD/2012 dated 27/12/2012 passed by Commissioner
of Central Excise-AHMEDABAD-III)
Century Tiles Ltd ........Appellant
Near Sabar Dairy,
Talod Road,
Himatnagar, Gujarat
VERSUS
Commissioner of C.E. & S.T.-Ahmedabad-iii ......Respondent
Custom House... Second Floor, Old High Court Road, Navrangpura, Ahmedabad, Gujarat- 380009 WITH Excise Appeal No. 10736 of 2013 - DB (Arising out of OIO-07/COMMR/ADJ/AHD/2012 dated 27/12/2012 passed by Commissioner of Central Excise-AHMEDABAD-III) Ganpatlal Dayalal Patel ........Appellant M/s. Century Tiles Ltd, Near Sabar Dairy, Talod Road, HIMATNAGAR GUJARAT VERSUS Commissioner of C.E. & S.T.-Ahmedabad-iii ......Respondent CUSTOM HOUSE... 2ND FLOOR, OPP. OLD GUJARAT HIGH COURT, NAVRANGPURA, AHMEDABAD,GUJARAT-380009 APPEARANCE:
Shri Devashish K Trivedi, Advocate appeared for the Appellant Shri Tara Praksah, Deputy Commissioner (AR) appeared for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. C L MAHAR Final Order No. 12610-12611/2024 DATE OF HEARING: 23.09.2024 DATE OF DECISION: 06.11.2024 RAMESH NAIR The present appeals have been filed by appellants against OIO No. 07/Commr (Adj)/Ahd/2012 dtd. 28.11.2012 passed by the Commissioner (Adj.) Central Excise, Ahmedabad.
1.1 The brief facts of the case are that the based on the intelligence that the manufacturers of Ceramic Glazed Tiles and Vitrified Tiles of Morbi and other parts of Gujarat, including the appellant are engaged in large -scale of 2 E/10735-10736/2013 evasion of duty by not declaring the actual MRP of their products in the Central Excise Invoices. They were declaring only a part of the actual MRP and consequently evading payment of excise duty. In the central Excise invoices, they also mis-declared the actual ex-factory price of such tiles, which was recoverable from their buyers. Search was conducted at the factory premises of appellant and other premises of the appellant and during the search several incriminating records/ documents were found and the same were withdrawn under panchanama. Also searches were conducted at the major dealers/ depot of Appellant located at various places and incriminating documents were withdrawn from there. By scrutiny of the documents withdrawn and after detailed investigation and recording statements of various persons, a detail show cause notice dtd. 30.05.2009 was issued to the Appellants asking them to pay the central excise duty of Rs. 4,24,48,496/- under proviso to Section 11A of the Central Excise Act, 1944. Penalty under Section 11AC of the Central Excise Act 1944 and Rule 25 of the Central Excise Rules 2002 has also been proposed. The SCN also proposes penal action on Shri Ganpatbhai D. Patel under Rule 26 of the Central Excise Rules, 2002. In adjudication the demands were confirmed by the adjudicating authority vide impugned order. Aggrieved, the appellants have filed the present appeals.
2. The Ld. Advocate, Shri Devashish K. Trivedi appearing for the appellants submits that as far the issue of mis- declaration of MRP prior to 01.03.2008, the same was decided in favour of assessees. He placed reliance on the case of Acme Ceramic Vs. Commissioner of Central Excise, Rajkot reported at -2014(304)ELT 542 (Tri. Ahmd.) 2.1 He also submits that said decision in the case of Acme Ceramic was consistently followed amongst other in the following cases.
(i) Suzuki Ceramics Vs. Commissioner of C.Ex. & ST., Rajkot - 2016(334)ETL 169 (Tri. Ahmd.)
(ii) Commissioner of Central Excise, Rajkot Vs. Citizen Ceramic - 2016(339)ELT 105 (Tri. -Ahmd)
(iii) Commissioner of Central Excise, Rajkot Vs. Pengvin Ceramics - 2016(335)ELT 774 (Tri. Ahmd.)
(iv) Ocean Ceramics Vs. Commissioner of Central Excise, Rajkot -
Final Order No. 12088-12113/2024 dtd. 23.09.2024. 3 E/10735-10736/2013 2.2 As regard the alleged clandestine clearance, he submits that a perusal of show cause notice as well as impugned order would show that the entire demand is based on assumption and presumption. There is absolutely no corroboration. There is no investigation even in regard to the production capacity of the unit.
2.3 He also submits that nobody has even tried to investigate whether the quantity of alleged clandestine clearance could have been manufactured by the appellant over and above the quantity which is manufactured and cleared under invoice. There is absolutely no investigation at the end of supplier of raw material of ceramic tiles, in order to find out whether for the purpose of manufacturing alleged clandestinely cleared Ceramic Tiles, whether raw material is surreptitiously procured. No statements of raw materials suppliers are recorded.
2.4 He further submits that nobody has found any cash flow back received by the appellant against clandestinely cleared tiles without invoice. Nobody has found anything about transportation of Ceramic Tiles Without invoice. There is only a general investigation. The statements of transporter, angadia, dealer etc. are only in regard to alleged under valuation by suppressing MRP. However there is nothing in these statements to support alleged clandestine clearance. He placed reliance on the following judgments.
(i) Sakeen Alloys Pvt. Ltd. Vs. CCE Ahmedabad - 2013(296)ELT 392 (Tri. Ahmd.)
(ii) Commissioner of Central Excise Vs. Sakeen Alloys Pvt. Ltd. - 2014(308) ELT 655 (Guj.)
(iii) Vishwa Traders Pvt. Ltd. Vs. Commissioner of C.Ex. Vadodara- 2012(278)ELT 362(Tri. Ahmd.)
(iv) Commissioner of C,Ex. Vs. Vishwa Traders Pvt. Ltd. - 2013(287)ELT 243(Guj.)
(v) Commissioner Vs. Vishwa Traders Pvt. Ltd. -2014(303)ELT A24(SC)
(vi) Commissioner of Central Excise Vs. Kuber Tobacco Products Pvt.
Ltd. &Anr CEAC 40/2012 dtd. 11.03.2024.
2.5 He argued that although statements of various persons were recorded, cross examination of the same is not afforded. Hence the statements of 4 E/10735-10736/2013 witnesses would lose its credibility as the adjudicating authority fails to grant cross-examination. He placed reliance on the following judgments.
(i) Andman Timber Industries Vs. Commr. Of C.Ex., 2015(324)ELT 641 (SC)
(ii) JeenBhavani International Vs. Commissioner of Customs, NahvaSheva -III (2023) 6 Centax 11 (Tri. Bom)
(iii) Commr. Of C.Ex., Ahmedabad -II Vs. Gujarat Cypromet Ltd. - 2017(345)ELT 520 (Guj)
(iv) J&K Cigarattes Ltd. Vs CCE - 2009(242)ELT 189 (Del.)
(v) CCE Vs. Govind Mills Ltd. -2013(294)ELT 361 (All) 2.6 He further argued that the statements of Director of the appellant was retracted by way of affidavit before Notary Public. Same was informed to the Adjudicating authority. Without prejudice to the same, even otherwise, it is settled law that the statement alone in absence of the corroborative evidence cannot be made a basis of confirming allegation of clandestine clearance. He placed reliance on the following judgments.
(i) Godhavat Pan Masala Products Ltd. Vs. Commissioner of C.Ex. Pune
-2004(175)ELT 182 (Tri. Mumbai)
(ii) RadheshyamKanoria Vs. Commissioner of Central Excise. Thane -II
-2006(197)ELT 130 (Tri. -Mumbai)
(iii) Pioneer Industries Vs. Commissioner of Central Excise, Mumbai -II
-2006(193)ELT 506 (Tri. Mumbai)
(iv) Chandan Tobacco Company Vs. Commissioner of Central Excise, Vapi -2014(311)ELT 593 (Tri. Ahmd) 2.7 He further submits that the DGCEI has claimed that they have found from the branch offices of Appellant two sets of ledger accounts pertaining to various dealers viz. (a) Official and (b) Unofficial. In addition to the same, they also claim to have found various documents in form of „estimate‟ being maintained alongwith the Central Excise Invoices. The said invoices contained details of MRP, design grade, etc. The estimates were only having the ex-factory price of the tiles. In all those cases where estimates were found but no corresponding invoices were found, it is assumed that the same was for clandestine clearances. It is important to note that there is no corroboration in between the so-called unofficial ledger and the estimate without corroborative invoices. Further, there is no corroboration with any material found from the end of the respective dealers. As such there is no
5 E/10735-10736/2013 investigation even in that direction. So, what remains is only uncorroborated challans/ estimates and unofficial ledger account claimed to have been retrieved from the computer. The said documents are not reliable because the provisions of Section 36B of the Central Excise Act is not followed by department. He placed reliance on the following documents.
(i) Commissioner of Customs, Lucknow Vs. Sanjay Soni -2022(381)ELT 509 (Tri.-All)
(ii) Anvar P.V. Vs. P.K. Basheer -2017(352)ELT 416 (SC)
(iii) J.P. IsconPvt. Ltd. Vs. Commr. Of Central Excise, Ahmedabad -I -
2022(63) GSTL 64 (Tri. Ahmd)
(iv) S.N. Agrotech Vs. Commissioner of Customs, New Delhi - 2018(361)ELT 761 (Tri. Del.)
3. On other hand, Shri Tara Prakash, Ld. Deputy Commissioner (AR) for the revenue has reiterated the findings recorded in the impugned order, to support the adjudged demands confirmed in the impugned order, against the appellants.
4. We have carefully considered the detailed submissions made by both sides and perused the records.
4.1 We find that the issue of mis-declaration of MRP and/or alteration of MRP post removal of the goods prior to 01.03.2008, was already decided in favour of various assessees. The undisputed facts are that the appellants are manufacturer of ceramic/vitrified tiles and the said tiles are covered under the provisions of Section4A of Central Excise Act, 1944 (hereinafter referred to as „the Act‟) and are discharging excise duty on the basis of MRP declared on the boxes cleared from their factory premises. It is also undisputed that the appellant assessees are selling their final product ex-factory.
4.2 We find that the entire case of the Revenue as adjudicated by the Ld. Commissioner confirming the demand based upon the evidences such as the statements of various dealers who had stated that the tiles which are manufactured and cleared by the appellant are sold at a price more than the MRP declared on such tiles; statements of various shroffs/angadiyas who had stated that the appellants were handed over an amount in cash which were collected from various dealers and that the appellant-assessee have increased their prices of the final product. The issue involved in this case is regarding the demand of differential Central Excise duty under the provisions 6 E/10735-10736/2013 of Section4A of Central Excise Act, 1944 as it applies to the period in question. We find that the issue has been decided by larger Bench of this Tribunal vide order No.01-23/2024 dt. 23.01.2024 in the case of Ocean Ceramics Ltd. and subsequently on the answer given by the larger bench the division bench in the case of Ocean Ceramics& others vide final order No. 12088-12113/2024 dtd. 23.09.2024 finally decided the issue of MRP in the favour of the assessees. We do not find any reason to deviate from such a view already taken. Vide aforesaid final order this Tribunal observed as under:
"3. The orders impugned in the instant case were similar in the case to the orders impugned in the cases decided in the decision of Acme Ceramics (supra). When the matter came up before this bench, the aforesaid decision of Tribunal in the case of Acme Ceramics was doubted and the matter was referred to the Larger Bench on the following grounds:
"9 In view of above this matter may be placed before the Hon‟ble President for constitution of a larger bench to examine the following questions of law
1) In the facts and circumstances of the case and in view of the contrary precedent decisions of tribunal in the cases of ACME (Supra) and in case of SCHNEIDER ELECTRICAL INDIA (P) LTD (Supra), is it permissible to ascertain RSP for the purpose of assessment under Section 4A of CEA, 1944, in respect of clearances made prior to issue of notification 13/2008-CE(NT) dated 1-3-2008 ?
2) If yes, can it be done by using best judgment method, based upon material available and in a manner consistent with principles and provisions of Section 4A of the Central Excise Act, 1944, including the principles and provisions incorporated in the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 ?"
Subsequently, while deciding the application filed for rectification of mistake in the order dated 10.01.2019 of division bench, division bench of Ahmedabad Tribunal referred the following additional questions to be decided by Larger Bench.
"3. Subsequently, while deciding an application filed for rectification of mistake in the aforesaid order dated 10.01.2019 of the Division Bench, a Division Bench of the Ahemdabad Bench of the Tribunal referred the following additional issue to be decided by the Larger Bench:
7 E/10735-10736/2013 "(3) In the facts and circumstances of the case, if the evidence establishes that the RSP was manipulated fraudulently at the behest of the appellant by any other person, can the liability of duty be fastened on the appellants."
The aforesaid questions were answered in the following manner by the Larger Bench vide Interim order No. 1-23 of 2024 dated 23.01.2024:
"90. The reference made by the Division Bench to the Larger Bench of the Tribunal is, accordingly, answered in the following manner:
(i) It is not permissible to ascertain the retail sale price of goods removed from the place of manufacture, without declaring the retail sale price of such goods on the packages or declaring a retail sale price which is not the retail sale price or tampering with, obliterating or altering the retail sale price declared on the package of such goods after their removal from the place of manufacture, in respect of clearances made prior to 01.03.2008, on which datethe Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 came into force;
(ii) In view of the answer to the first question, there is no necessity of answering the second question; and
(iii) It is not necessary to answer the third question as both learned counsel for the appellant and the learned special counsel appearing for the department have stated that this question may not be answered by the Larger Bench.
91. The papers may now be placed before the Division Bench of the Tribunal for deciding the appeal."
It is apparent that the interim order removes the doubts raised by this bench with respect to the decision in case of Acme Ceramics (surpa). Consequently, the earlier decision of Tribunal in the case of Acme Ceramics becomes a binding precedent decision that needs to be followed in the instant case. The findings of the precedent decisions are also recorded in para 2 above. Consequently, following the decision in case of Acme Ceramics the matters are disposed of in identical terms as prescribed in para 18 of the said decision. 8 E/10735-10736/2013
4. In sum, the demand for the period prior to 01.03.2008 are set aside as also the penalty imposed on the manufacturer assessee and other individuals. For the period post 01.03.2008, the demands are set aside and matters remanded back to the adjudicating authority to reconsider the same, in light of above findings."
4.3 Accordingly, following the ratio laid down in this Tribunal‟s larger bench judgment in the case of Ocean Ceramics Ltd. and this Tribunal‟s Final Order dated 23-9-2024, we set aside the demand related to alleged undervaluation.
4.4 As regard the demand of Rs. 19,36.539/- we find that in the present case it was alleged that Appellant had manufactured and cleared 96646boxes of ceramics tiles of various size and grades clandestinely by not issuing any central excise invoices. Thus, Central Excise duty amounting to Rs.19,36,539/- as worked out in the enclosed Annexure -D1 of SCN is recoverable from appellant. The said demand is on the basis of the details available in the estimates/debit memos recovered from Appellant‟s Mumbai and Delhi office and statements recorded by the investigating officers. We noticed that in the said matter appellant requested for cross-examination of witnesses which was rejected by the Ld. Adjudicating authority. Further the director of Appellant‟s company has also retracted his statement by filing affidavits. It was on records that Appellant have raised the dispute on statements of witness recorded during the course of investigation byinvestigating officers. Therefore the said statement cannot be relied upon as admissible evidence in terms of the provisions of Section 9D of the Act. The provisions of Section 9D which are reproduced as under:-
"9D. Relevancy of statements under certain circumstances. -
(1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, -
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under 9 E/10735-10736/2013 the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
(2) The provision of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court."
4.5 The above Section deals expressly with the circumstances in which a statement recorded before a gazetted officer of Central Excise (under Section 14 of the Act) can be treated as relevant for the purposes of proving the truth of the contents thereof. Reliance is placed on the ruling of the Hon‟ble Punjab & Haryana High Court in the case of Jindal Drugs (Infra),2016 (340) E.L.T. 67 (P & H) wherein the Hon‟ble High Court laid down the detailed procedure, inter alia, providing for cross-examination of the witness of the Revenue by the Adjudicating Authority and thereafter, if the Adjudicating Authority is satisfied that the statement of the witness is admissible in evidence than the Adjudicating Authority is obligated to offer such witnesses for cross-examination by the other side/assessee. Such view has also been affirmed by the Hon‟ble Supreme Court in the case of Andaman Timber (Infra) - 2015 (324) E.L.T. 641 (S.C.) = 2017 (50) S.T.R. 93 (S.C.).
4.6 Statements recorded during investigation in the present matter, whose makers are not examination-in-chief before the adjudicating authority, would have to be eschewed from evidence, and it will not be permissible for Ld. Adjudicating Authority to rely on the said evidences. Therefore, we hold that none of the said statements were admissible evidence in the present case.
4.7 We also find that the demand is also not sustainable only on the basis of such estimates/ debit memos recovered by the revenue from the Mumbai and Delhi office without corroborative evidences. In cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following :
10 E/10735-10736/2013
(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,;
(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. 4.8 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. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of estimates/ debit memos maintained. In the present matter the statements were not recoded of any buyer whose name is mentioned in said alleged estimates/debit memos. In the present matter there is no proof that Appellant has used 100% of its capacity for production of Tiles. Except for these private records, there is no substantial material to show that such a huge quantity of Tiles has been cleared to customers without payment of duty. There is no proof of purchase of raw materials for such huge quantity of Tiles. No evidence has been led by the Revenue to show that Appellant had actually produced alleged qty. of tiles supplied by them clandestinely. There is no evidence of transportation of tiles from factory. Undoubtedly, huge quantities of raw material would be 11 E/10735-10736/2013 required for manufacturing such a huge quantity of alleged cleared qty, of tiles. No evidence has been brought either in the SCN or in the Adjudication Order to show that raw materials have been purchased by Appellant for manufacture of such a huge quantity of Tiles. There is no proof of any extra payment receipts in the present case. In the absence of these evidences the charge of clandestine removal cannot be sustainable only on the basis of some loose paper/ document/estimates/ debit memos recovered by the revenue from the office premises of appellant. In this context we also find support from the following judgments.
(i) In CCE v. LaxmiEngg. Works [2001 (134) E.L.T. 811 (Tri.-
Delhi)], during the search of factory premises, slips showing sale of different types of electric fans were recovered and seized. There was nothing on record to show if on physical verification of stock any excess raw material or finished goods were found lying in the factory premises. In the absence of any corroborative evidence, merely on the basis of the slips allegedly recovered from the factory premises which did not even contain names of the customers or any other details regarding receipt of raw material or manufacture and clearance of electric fans by the respondent, Tribunal held that duty liability as demanded could not be fastened. In the reference application filed by the Commissioner against the said order of Tribunal, the Hon‟ble High Court of Punjab & Haryana held that even if some record recovered during the raid and was corroborated by some supportable evidence holding that there was admission of clandestine production and removal of goods, it is necessary to have some positive evidence of clandestine production and removal of goods. The question of law preferred whether in the light of the private record discovered during the raid, the Tribunal was right in holding that there was no positive evidence of clandestine production and removal of goods was answered against the Revenue and in favour of the assessee.
(ii) In T.G.L Poshak Corp. v. CCE [2002 (140) E.L.T. 187], Tribunal considered the issue as to whether the demands can 12 E/10735-10736/2013 be confirmed on the basis of recovery of exercise note books and certain balance sheets maintained by the assessee and in the absence of any corroborative evidence. In fact, in a tabulated form Tribunal dealt with the judgments which were referred to, to support the plea that demands cannot be confirmed which contained the reason for this Tribunal coming to the conclusion that, in the absence of any corroborative evidence, of a tangible nature, clandestine removal cannot be established. Tribunal relied on the tabulated list of citations furnished by the Counsel that unless there is clinching evidence on the nature of purchase of raw material, use of electricity, sale and mode of flow back of funds, demands cannot be confirmed solely on the basis of note books maintained by some workers.
(iii) In Hilton Tobacco v. CCE [2005 (183) E.L.T. 378], certain private documents maintained in the factory were seized under which it appeared that the appellant had not accounted for raw material procured by him. Tribunal held that an inference cannot be based on certain private documents only when there is no corroborative evidence recorded. Investigation had not found out at least a few buyers who had received the goods cleared clandestinely. There was no evidence of excessive consumption of electricity. When the unit was visited there was no unaccounted stock of raw material. Charges were based purely on theoretical working out based on private document which are not statutory. Relying upon the earlier decision of the Tribunal, it was decided that clandestine removal cannot be sustained. The source of procurement of raw material had not been established, buyers of finished goods had not been contacted and receipt of sale proceed had not been proved. There was, therefore, no corroborative evidence in support of the Revenue‟s case.
(iv) In Vishwa Traders Pvt. Ltd. v. CCE [2012 (278) E.L.T. 362], the appellant had submitted that the Adjudicating Authority has passed the order on conjectures and surmises. It was 13 E/10735-10736/2013 submitted that documents recovered from the premises of the employees and third parties are not official records. Their cross examination had also been denied by the Adjudicating Authority. Serious charge of clandestine removal cannot be sustained on the basis of documents recovered from outside the premises of the assessee. It was submitted that despite large scale investigation including visits to the premises of raw material suppliers, there was nothing brought on record to show that the appellant had purchased raw materials without recording the same in their books of accounts. The submission of the appellant was that demand cannot be upheld on clandestine removal on the basis of documents along with statements unless there is tangible, independent, corroborative proof like financial flow back, actual manufacture and clearance, excess purchase of raw material, electricity consumption, statement of workers, actual transportation of the goods, and statement of purchasers. It was contended on behalf of the Revenue that the case was based on parallel invoices recovered from the residential premises of the factory manager and accountant. Lorry receipts indicated that there was no movement and even if there was any movement they were not clandestine clearances. The Managing Director of the company had even stated that they were making clandestine clearance of the finished products without recording the same in their books of account. The request for cross examination of some of the persons whose statements were relied upon was rejected by the Adjudicating Authority only on the ground that the assessee had not given any reason and justification for their cross examination. Tribunal held that this approach of the Adjudicating Authority is inconsistent with the law of evidence. On a careful perusal of the entire records of the case, the Tribunal found that there was nothing on record as to unrecorded purchases or consumption of other various raw materials in the manufacture of finished products. There was no statement of suppliers of raw material, except in respect of one of the raw materials. His cross examination has also been rejected. In the absence of any other tangible evidence to 14 E/10735-10736/2013 show that other major raw materials had been procured without recording the same in books of accounts, this Tribunal did not accept the contention of the Revenue that finished goods had been clandestinely manufactured and cleared. After referring to several earlier decisions of the Tribunal on the subject, the Tribunal held that the charge of clandestine manufacture was not established. This decision was taken by the Commissioner of Central Excise in appeal before the Hon‟ble High Court of Gujarat which was dismissed by the Hon‟ble High Court [2013 (287) E.L.T. 243 (Guj.)]. The Hon‟ble High Court quoted with approval paragraph Nos. 12, 13 & 16 of the order of the Tribunal which were extracted, stating that from findings of the Tribunal, it is clear that the appellant had not made any clandestine manufacture which he had removed clandestinely and on which duty was payable.
In view of the above judgments facts of which are similar to that of the present case, the demand of Central Excise duty of Rs. 19,36,539/- on the basis of estimates/debit memos is not sustainable and we set aside the same.
4.9 We also find that Ld. Commissioner has confirmed the demand of Rs. 17,05,961/-on the ground that the details mentioned in "Unofficial ledger"
seized from the Mumbai and Delhi office of Appellant indicate the actual business transaction carried out by Appellant. All official transactions mentioned in these unofficial ledger accounts match with corresponding entries appearing in the official ledger maintained by the appellant. However, in this regard we observed that there was no inquiry made by Revenue regarding the transportations of the goods, alleged production and sale of the goods and realization of sale proceed thereof and even though the name of customers mentioned in the said alleged ledger no investigation was carried out by the department at the end of customers. For demand of such Central Excise duty, Revenue has not produced any corroborative evidence about the excess production of final product nor produced any evidence in respect of procurement of excess raw material. There is no evidence on record about the dispatch of excess quantity of goods through the transporters. Further, no enquiry initiated against the customers and 15 E/10735-10736/2013 the consumption of power was also not taken into consideration. We note that Hon‟ble Allahabad High Court in the case of Continental Cement Co.2014 (309) E.L.T. 411 (All. (supra) in paras 12 & 13 has held as follows:-
"12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestineremovals, the mode and flowback of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects :
(i) To find out the excess production details.
(ii) To find out whether the excess raw materials have been purchased.
(iii) To find out the dispatch particulars from the regular transporters.
(iv) To find out the realization of sale proceeds.
(v) To find out finished product receipt details from regular dealers/buyers.
(vi) To find out the excess power consumptions.
13. Thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department."
4.10 The recovery of said "unofficial ledger" by department does not establish actual clearances of goods by the appellant. No evidence of actual clearance has been brought on record by Revenue. Further, as held by Hon‟ble Allahabad High Court that clinching evidence of the nature of purchase of raw material, use of electricity, sale of final products, clandestine removal and the more flow back of funds are required to be established in the case of clandestine removal. Such aspects have not been investigated into and therefore, the ruling by Hon‟ble Allahabad High Court in the case of Continental Cement Co. (supra) are applicable in the present 16 E/10735-10736/2013 case. We, therefore, hold that manufacture of such quantity of goods on which Central Excise duty of Rs. 17,05,961was demanded is not established.
4.11 Without prejudice, we also find that alleged clandestine clearance are completely based on the estimates/ debit memos/ challans retrieved from two computer CDs and also unofficial ledger maintained in computer. The allegation on the basis of said computerized evidences is not reliable evidence. The procedure contemplated in Section 36B of the Central Excise Act was not followed by the department in the present matter. Section36B of the Act, for ready reference, is reproduced below :
"36B. Admissibility of micro films, facsimile copies of documents and computer printouts as documents and as evidence. -- (1) Notwithstanding anything contained in any other law for the time being in force, --
(a) a micro film of a document or the reproduction of the image or images embodied in such micro film (whether enlarged or not); or
(b) a facsimile copy of a document; or
(c) a statement contained in a document and included in a printed material produced by a computer(hereinafter referred to as a "computer printout"), if the conditions mentioned in sub-
section (2) and the other provisions contained in this section are satisfied in relation to the statement and the computer in question, shall be deemed to be also a document for the purposes of this Act and the rules made thereunder and shall be admissible in any proceedings thereunder, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.
(2) The conditions referred to in sub-section (1) in respect of a computer printout shall be the following, namely :--
(a) the computer printout containing the statement was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer;
17 E/10735-10736/2013
(b) during the said period, there was regular supply to the computer in the ordinary course of the said activities, information of the kind contained in the statement or of the kind from which the information so contained is derived;
(c) throughout the material part of the said period, the computer was operating properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of period was not such as to affect the production of the document or the accuracy of the contents; and
(d) the information contained in the statement reproduces or is derived from information supplied to the computer in the ordinary course of the said activities."
4.12 There is nothing to indicate compliance with the strict stipulations contained in sub-sections (1) and (2) of Section36B of the Act in the present case. Therefore in our view no demand is sustainable on this ground also.
5. As a result of entire above discussion and finding, order under challenge is hereby set aside. Appeals are allowed with consequential relief, if any, as per law .
(Pronounced in the open court on 06.11.2024) (RAMESH NAIR) MEMBER (JUDICIAL) (C L MAHAR) MEMBER (TECHNICAL) Bharvi