Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs M/S Hingora Industries Pvt.Ltd., Shri ... on 1 December, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT - I
Appeal No.E/585-588/2011-DB
Arising out of: OIO No.09/MP/DAMAN/2010, dt.29.12.2010
Passed by: Commissioner of Central Excise & Customs, Daman
For approval and signature:
Mr.M.V. Ravindran, Honble Member (Judicial)
Mr. H.K. Thakur, Honble Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
M/s Hingora Industries Pvt.Ltd., Shri J.P. Motwani, Shri L.R. Hingora, Shri A.R. Hingora
Respondent:
CCE Daman Represented by:
For Assessee: Shri J.C. Patel, Adv.
For Revenue: Dr. Jeetesh Nagori, Addl.Commissioner (AR) CORAM:
MR.M.V. RAVINDRAN, HONBLE MEMBER (JUDICIAL) MR. H.K. THAKUR, HONBLE MEMBER (TECHNICAL) Date of Hearing:05.11.2014 Date of Decision:
Order No.A/12102-12105/2014, dt.01.12.2014 Per: M.V. Ravindran
1. These appeals No. E/585/2011 to E/588/2011 have been filed by M/s. Hingora Industries Pvt. Ltd. Daman and its director Shri Jaiprakash Motwani, Shri Iqbal R. Hingora and Ayub. R. Hingora. The Appeals are directed against the same Order-in-Original No. 09/MP/DAMAN/2010, dt.29.10.2010 passed by the Commissioner, Central Excise, Daman hence all these appeals are being disposed by this common order.
2. Relevant facts that arise for consideration are that M/s Hingora Industries are engaged in the manufacture of Polyster Texturised/Crimped Yarn falling under chapter 52 of the Central Excise Tariff Act, 1952. On receipt of intelligence, the officers of DGCEI Carried out search at factory premises of M/s Hingora Industries and seized records. Search was also conducted at the alleged secret office of M/s Hingora Industries located near Price Bar, Village Dabhel, Daman. Investigations conducted and statements were recorded which culminated into issuing of show cause notice dt. 30.09.2006 alleging/ contending as under:
(i) That during investigation of the secret office, the said premises was found to be locked. The officers informed their counterparts present at the factory of M/s Hingora Industries to send some employee to the said premises. After sometime Shri K.M. Tripathi, the Plant in-charge reached the said premises who told the officers that he does not have keys to the said office. The lock had to be break open and the officers seized various documents i.e. invoice books, packing slips, challan etc. The officers also seized the five rubber stamps, partial burnt papers/ invoices and computer lying in the premises. Statement of Shri K.M. Tripathi was recorded wherein he has said to have stated that he was working with M/s Hingora Industries since last 4 months as Plant Incharge. That M/s Hingora has not undertaken job work for any party; that for manufacturing of yarn they have 7 machines of Alidhara 1100 brand which were the latest machines; that he is also the authorised signatory for excise purpose; that he signed the invoices made by Shri I.C. Pipwala, dispatch clerk of their factory; that he signed only original and duplicate copy of invoices prepared by I. C. Pipwala; that he has not signed on triplicate and extra copy.
(ii) Statement dt. 01.11.2004 of Shri I. C. Pipwala, Dispatch clerk was also recorded wherein he stated that he was working as Dispatch clerk since last 6 months. Shri Jamunadas, Dispatch head supplies challans to him as per which he did the marking and loading of goods and Shri Jamunadas was intimated and under his supervision the goods were dispatched. That Shri Jamunadas prepared the Central Excise Invoice and signed the same. Shri Jamunadas sits in the factory office and sometimes visited the office located Nr. Prince Bar; that he also visits that office occasionally just to look after the office. That Shri Jamunadas was on 10 days leave and Shri Ramprasad sits in his office and he is also on leave. He further stated that at their secret office challans/ documents relating to goods manufactured in M/s Hingora were prepared and these documents were signed by Shri Jamunadas or Shri Ramprasad.
(ii) That on scrutiny of the records seized from the factory of M/s Hingora vis-a-vis the records seized from the alleged secret office and the data retrieved from the hard disk of the computer seized from the secret office shows that M/s Hingora have used the said secret office for generating and storing their documents of illicit clearances. That the documents recovered from the secret office belong to M/s Hingora Industries, as the details mentioned in the records seized from the factory are corroborated with the details shown in the records seized from the secret office.
(iii) That M/s Hingora has shown manufacture of Texturised yarn on job work basis till 07.07.04 and with effect from 08.07.04 they started their own production of texurised/Crimped Yarn. That a secret place was hired near the factory to prepare and keep the documents of the illicit clearances relating to the goods manufactured in the factory. Excess raw materials was procured by M/s Hingora which was not accounted in the statutory records, out of which texturised/Crimped yarn were manufactured and illicitly cleared on the strength of fake/parallel invoices prepared at the secret premises and the secret office was managed by the personnel of the M/s Hingora. They have also illicitly cleared the goods to various parties in the guise of job work. During the period 01.04.2004 to 07.07.2004, the goods are shown to have manufactured on job work basis for M/s Star Synthetics and from 09.07.2004 M/s Hingora have shown their own production and clearances as mentioned in the said register. During the search of the factory no documents pertaining to the job work viz. job work register, job work challans etc were found.
(iv) That on the basis of the parallel invoices recovered from the alleged secret premises, follow up action at the premises of the consignee, i.e. M/s Yogeshwar Textiles, Surat was conducted which resulted in recovery of some packing slips issued by M/s Hingora from their factory. The proprietor of M/s Yogeswar Textiles stated that the said packing slips were received inside the cartons of yarn received from M/s Hingora. The packing slips also tallied with the Packing Report Book seized from the factory premises of M/s Hingora. The proprietor of the said unit stated that they had purchased the said goods through Dalal Shri Jitendra Kapadia, however they had not made any payment as the payment would be made after seeing the Dyeing quality of the fabrics made out of such yarn. He also stated that no bill was received alongwith the goods and only the challans were received which they had given to the Tempo Driver after putting their signature.
(v) The records seized from the alleged secret office,i.e File A/8, A/9, A/10 and A/11 contained copies of daily production, receipts, stock and dispatch statements covering the period April 04 to October 04. On comparison of these data with the daily stock register maintained by M/s Hingora in the factory, it was revealed that the production and the dispatches shown in the records resumed from the secret office are not accounted for and no duty was also paid on such clearances. Further, in some cases parallel invoices of dispatches are also available. As per the Daily Finished Stock Account register maintained in the factory, during the period from 01.04.04 to 07.07.04. However no supporting documents like job work challans or job work register could be produced by M/s Hingora. As per the Daily Finished Stock Account Register maintained in the factory, during the period from 01.04.04 to 07.07.04, it was shown that the goods were manufactured on job work basis for which no duty was paid. However no supporting documents like job work challans or job work register could be produced by the Appellant to prove the job work as claimed in the statement of Shri Jayprakash Vishnudas Motwani, the Director of the firm. During the impugned period, finished goods, manufactured out of the POY, illicitly received by them were cleared to various parties as indicated in the documents seized from the alleged secret office.
(vi) that the File marked as A/8,A/9, A/10 and A/11 contains the copies of the daily production, receipts, stock and dispatch statements for the month of April 04 to Oct 04 as well as name of Parties and address, quantity of boxes, denier, lot no etc. That the verification of the daily stock register of M/s Hingora seized from the factory revealed that the production and dispatches of the goods shown in the said files marked as A/8, A/9, A/10 and A/11 are not accounted by M/s Hingora Industries and no duty was also paid on such clearances of the goods. Further in some cases the parallel invoices of dispatches are also available.
(vii) Based on the File No. A/11 containing daily dispatch reports, resumed from the alleged secret office, a work sheet A1 showing clandestine removal of Polyster texturised/Crimped yarn of 5,23,257.380 Kgs. valued at Rs.2,61,62, 869/- during the period April 04 was prepared and duty of Rs.62,79,089/- was demanded.
(viii) Similarly, on the basis of File No. A/8, allegedly containing daily reports seized from the secret office, worksheet A2 was prepared showing clandestine removal of Polyster texturised/ Crimped yarn of 14,32,792.540 Kgs. valued at Rs.7,16,39,627/- during the period May 04 to August 04 and duty of Rs.1,71,93,510/- and cess Rs.1,73,336/- was demanded.
(ix) Based on File Nos. A/2, A/9 and A/12 allegedly containing daily reports and challans of dispatch said to be seized from the secret office work sheet A3 was prepared showing clandestine removal of Polyster texturised/Crimped yarn of 3,72,735.250 Kgs. valued at Rs.1,86,36,763/- during the period September 04 is prepared and duty of Rs.4472823/- and cess Rs.89,456/- was demanded.
(x) Further, based on File Nos. A/13 and from the data retrieved from the hard disk of the computer seized from the secret office it was alleged that M/s Hingora has clandestinely removed Polyster texturised/ Crimped yarn of 3,75,126.230 Kgs. valued at Rs.1,87,56,312/- during the period October 04 and duty of Rs.45,01,515/- and cess Rs.90,030/- was demanded.
2.1 In view of above allegations/ contentions duty amounting to Rs.3,24,46,937/- alonwith Education Cess amounting to Rs.3,52,822/- was demanded from M/s Hingora Industries alongwith interest. It was also proposed to impose penalty under the provisions of the section 11AC along with Rule 25 and to appropriate the amount of Rs.25 Lacs already deposited by M/s Hingora Industries against the said demand. Directors of M/s Hingora Industries namely Shri Jayprakash Vishnudas Motwani, Shri Iqbal R. Hingora and Shri Ayub R. Hingora. were also held responsible and it was proposed to impose penalty upon them under Rule 26 of the Central Excise Rules, 2002. Vide ex-parte Order-in-Original dt.19.11.2007 the Commissioner on the ground of non appearance and non filing of reply by the Appellants confirmed the demands against the Appellant and imposed penalties. The Appellants filed appeal before Tribunal and the Tribunal vide Order No.A/122-125/WZB/AHD/2010 dt.06.01.2010 remanded back to the case to the Commissioner.
3. The Appellants requested for cross examination of Shri Indravardhan Champaklal and Shri K.M. Tripathi whose statements were relied upon for making allegations against the Appellant. The Appellant were informed by the office of the Commissioner that their request for cross examination has not been acceded to. The Appellants thereafter appeared for the personal hearing and made submissions in their support.
4. The Commissioner, Central Excise, Daman vide order dt. 09/MP/DAMAN/2010 dt.29.12.2010 confirmed the duty demand of Rs.3,24,46,937/- and ed. Cess of Rs.3,52,822/- against the Appellant and also imposed equivalent penalty. Personal penalty of Rs.30 lakhs each was imposed upon director Shri Jayprakash Vishnudas Motwani, Shri Iqbal. R. Hingora and Shri Ayub R. Hingora.
5. Heard both the parties and perused the records.
6. Shri J.C Patel appearing on behalf of the appellants made the following submissions during the course of hearing as well as through the written submissions made in these proceedings :-
(i) That the demand is based on Annexure A -1 to A3 of the SCN, which is summarized in Annexure A of SCN. All these work sheets have been prepared on the basis of documents seized from the alleged secret office of the Appellant. It is denied that Appellant maintained any secret office.
(ii) That the entire proceedings based on the only premise that the documents/computer recovered from the premises near Prince Bar, village Dhabel, Daman belong to M/s Hingora. This is only a speculative surmise which is not supported by any cogent and clear evidence. According to the show cause notice and the impugned order, the so called one room premises located near prince bar belonged to one Shri Bhagu Bhai R. Patel. However it can be seen in his statement dated 25.02.2005 that Shri Bhagu Bhai had never taken the name of any person related with M/s Hingora or any of their director/ employee as the person to whom he had rented out the premises.
(iii) That as mentioned and accepted in para 3.2 of the show cause notice itself, it was only on the instance of the raiding party that a person from the factory was sent to this alleged secret office, and this particular person, Shri K.M. Tripathi, who was the authorised signatory of the Appellant was not even having the keys to open this premises. The officers broke open the locked premise and recovered some documents on the basis of which it was simply conjectured that it was the secret office of M/s Hingora.
(iv) That the officers could neither come across any goods i.e. Texturised yarn or the parallel invoices used for the removals, at Yogeshwar Textiles. Further the Proprietor of M/s Yogeshwar Textiles in his statement dt.04.11.2004 has mentioned that he purchased the goods through dalals only and he had not made any payment to M/s Hingora Industries. It is also confirmed by him that the goods in question were received through challans and not through any invoices. This clearly means that the alleged use of parallel invoices was not involved with the goods said to be received by M/s Yogeshwar Textiles. Had the parallel invoices were been used, as contended in the impugned order, these invoices would have been available with the buyer. As far as the recovery of packing slips is concerned, whatever small quantity of goods that might have been purchased from the market, i.e. from the dalals, it is bound to have packing slips prepared in the factory but the parallel invoices cannot be linked with these few packing slips. the so called clandestine clearances as available in parallel invoice books A/17 to A/24 is linked to a few packing slips recovered from M/s Yogeshwar Textiles who has not even made a single payment for these purchases. That is a well established legal principle that without ample proof regarding procurement of raw materials, use of production facilities, transportation of, raw materials into the factory and finished goods out of the factory, and financial flow of these transactions, the allegation of clandestine procurement, production and removal cannot sustain. Such serious allegations cannot be substantiated by mere recovery of some documents, that too from entirely different premises which do not have even a remotest connection with the Appellant.
(v) that the sale data of the Appellant and stock statement on computer recovered from alleged secret office do not depict any name or even symbol to suggest that these were prepared for the Appellant company. None of the Appellant employee/director or any person connected with them was found to be incharge of this place. Even the owner of this place who has rented this place did not point out that M/s Hingora or their employee or any person connected with them has taken these premises on rent.
That the recovery of the alleged production/ clearances data records and rubber stamps is an attempt to implicate the Appellants in alleged act of Central Excise violations. That if five rubber stamps bearing Appellants name was found from the alleged secret office premises, it cannot be an evidence of clandestine removal of goods by Appellant.
(vi) That the show cause notice and the impugned order relies upon the statement of Shri Tripathi, Plant Incharge and Shri I.C.Pipwala, Dispatch Clerk. However when the Appellant sought cross examination the same was denied on the ground that the same may be the compromised parties being employee of M/s Hingora and therefore in absence of opportunity of cross examination of Shri Tripathi and Shri I.C.Pipwala their statements cannot be relied upon. That Shri I.C.Pipwala in his statement has named Shri Jamunadas as the person who prepared the Central Excise Invoice and signed the same and also visits the office located near Prince Bar and that Shri Ramprasad also sits in the office. However no statements of both these persons were recorded which clearly shows that there was no evidence of M/s Hingora to be owner of the alleged secret office or having been cleared the goods under the cover of parallel invoices said to have been seized from the said office. That in such view of fact the allegations of the show cause notice that the secret office belong to M/s Hingora and was used to store the records data of clandestine production and removal does not sustain as the same is not supported by any evidence.
(vii) That only on the basis that some of the details of production were found to be matching with the details of production at factory, the same cannot be a ground to allege that the goods were cleared clandestinely from the factory.
(viii) That if the summon issued to M/s Star Synthetics were returned undelivered, it does not mean that M/s Hingora did not undertake job work activity for the said concern as the department could have very well undertaken investigation at the end of M/s Star Synthetics. Even the alleged non maintenance of job work data could have easily been verified from the records of M/s Star Synthetics for whom they had undertaken the job work. However the investigation officers did not investigated the same on the ground that the unit was closed.
(ix) That from the production capacity of machines installed in the factory the quantity of goods alleged to have been cleared clandestinely cleared cannot be manufactured as shown in their reply and appeal. That as per panchnama dated 1.11.2004 only 7 nos. of machines were installed in the Appellants factory. From the said machines even as per the actual capacity of the machine, the quantity of goods capable of being manufactured is far less than the alleged quantity of clandestine manufacture and removal. The production capacity is only 3581 MT Approx. As against this, the Appellant manufactured total quantity of texturised yarn is 3799 MT Approx., which is more or less equal or near to the capacity of installed machineries. The variation whatsoever is due to averaging of 80 & 90 deniers. However no findings were given by the Commissioner on this aspect.
(x) That there are no evidences of such a huge clandestine production and removal of excisable goods, or procurement of raw materials and its consumption. That not even a single supplier of the alleged purchases could be identified or interrogated. Not even a single transport document or statement of any of the transporter involved in transportation of alleged clandestinely cleared goods was recorded or found. Not even a single payment detail of clandestinely procured raw material used for manufacture of clandestine cleared goods was found. That inspite of the alleged clandestine dispatch records and alleged parallel invoices containing names of parties was available, no investigation was undertaken or even if undertaken no such buyer has been named to have received the goods. Not a single consignment of goods alleged to be have been cleared clandestinely by the Appellant was seized from buyers. No confessional statement of director or production/ dispatch person evidencing removal of goods without payment of duty is on record.
(xi) That the entire case of the revenue is based on the presumption that the Appellant Company operated a secret office which is not substantiated by any corroborative evidence at all. The owner of the said secret office never ever connected the said office with the Appellant. The person who has allegedly rented the space for the alleged secret office of the Appellant has no where stated that any of the person from the Appellant company had taken on rent the space from him or that he had any reason to believe that the secret office pertains to the Appellant. The employee who had to visit the said secret office, on the instance of the officers at the time of the raid, was not having even the keys of the office and therefore the lock had to be broken open.
(xii) The computer said to be recovered from the secret office is not connected to the Appellant Company except that some documents with the name of the Appellant is stored in it in a haphazard manner.
(xiii) There is not even a single transporter identified who had transported such raw materials to the factory of production. There is no evidence of any excessive power consumption which is naturally needed for such large scale production. There is no record of recruitment of workers or staff required for such production and payment records of the salary and wages paid to them. There are no receipts of any cash or kind on account of clandestine clearance and sale of goods. No records/ documents have been seized from any party to show that the goods have been clandestinely cleared to such parties.
7. The Ld. DR supports the order of the Commissioner. He would submit that the employee Shri Tripathi and Shri I.C.Pipwala being employee are not third party and hence their cross examination was not required. That the director of the Appellant Shri Jaiprakash Motwani did not co-operate during investigation; that the alleged secret office was taken by the Appellant on rent to store the documents related to clandestine production and removal of goods; that at the secret office the parallel invoices and records relating to production were found. It was submitted some of the lot numbers of the goods manufactured were found to be tallying with the data found at secret office. He takes us through the contents of the statements as well as in show cause notice to show that the goods were clandestinely removed from the factory of M/s Hingora.
8. We find that the entire case of the Revenue in these cases has started from the visit of factory premises and office alleged to be secret office of M/s Hingora. It is an undisputed fact that the evidences relied upon by the department for confirmation of demand against the Appellant M/s. Hingora Industries are various files showing dispatches and data retrieved from the computer at such secret office. The said records and data said to have been containing the production details such as lot no., item grade, inward and outwards details of the goods at various dates as well as parties to whom the goods were cleared. It is also undisputed that statement of only two employees of M/s Hingora i.e Shri Tripathi, Plant Incharge and Shri I.C. Pipwala, Disptach clerk were recorded indicating the clearances of finished goods without payment of duty. We find that at the first instance the Appellant request for cross examination should have been allowed. It was especially so in the face of the facts that Shri I.C.Pipwala in his statement had named Shri Jamunadas and Shri Ramprasad as the persons visiting the secret office and allegedly undertaking activities of clearance of goods. The cross examination should not have been denied on the ground that the said persons being employee of M/s Hingora could have been compromising parties. We find that this approach of the adjudicating authority is inconsistent with the settled law of evidence. It is undisputed that the persons who had given inculpatory statements were only employees of the assessee. The veracity of the statements could be ascertained only during the cross examination, by confronting the persons. The veracity of the statements needs to be always checked and cross checked before relying upon such statement. M/s. Hingora were well within their rights to ask for cross examination of these employees to bring on record that the statements tendered by these employees could not be relied upon for making allegation against the Appellants. In our considered opinion, due to non-granting of the cross examination of above said persons, no reliance can be placed upon these statements and thus the statement of these persons cannot stand test of the law. Our views are based upon the judgment of Honble Apex Court in the case of Shalimar Rubber Industries v. Collr. of C.E., Cochin - 2002 (246) E.L.T. 248 (S.C.), wherein their Lordship held no reliance can be placed on the oral statement of the raw material suppliers as he is not subjected to any examination and cross examination during adjudication.
9. As regard documents recovered from the alleged secret office we find that these records were not recovered from regular business premises. Some of these records related to production were said to be tallying with the records seized from the factory. However in the show cause notice there is nothing stated that the details of goods found were tallying with the details of the clearances on payment of duty or otherwise and to whom. We find that the entire case of the revenue is based upon the dispatch details found from the files and data recovered from the secret office. However except these evidences there is virtually no other evidence to reflect upon the clandestine production and removal by M/s Hingora. There is no author of such records and in absence of such verification, the records cannot be relied upon as held in the case of M/s Kuber Tobacco 2013 (290) ELT 545 (Tri.). Similar view has been taken by the Tribunal in the case of CCE Ludhiana Vs B.T. Alloys 2013 (297), ELT 387 (Tri-Del), Shirley Dyers Vs CCE Jallandhar 2013 (293) ELT 234 (Tri-Del), T.G.L. Poshak Corpn. Vs CCE Hyderabad 2002 (140) ELT 187 (Tri-Che.).
10. It is well settled law that allegation of clandestine removal is required to be arrived at on the basis of sufficient and positive evidence and the onus to prove such allegation is on the revenue. We find that though the officers visited one of the parties M/s Yogeshwar Textiles who have been alleged to have been received the clandestinely cleared goods, however except some packing slips, no other evidence has been adduced. The officers did not question any person of M/s Hingora in this context. We also find that during the visit to M/s Yogeshwar textiles except the packing slips the officers neither come across any Texturised yarn nor any parallel invoices used for the removals. Even the Proprietor of M/s Yogeshwar Textiles in his statement has stated that the goods were purchased through dalal Shri Jitendra Kapadia and had not made any payment to M/s Hingora Industries. It was confirmed by him that the goods in question were received through challans and not through any invoices. The officers also did not question Shri Jitendra Kapadia as to from where he has received the goods. Clearly it is an uncorroborated piece of evidence which cannot be relied upon to substantiate the charges of clandestine removal against the Appellant.
11. It is also contention of the revenue that during search of the factory premises of M/s Hingora Industries, no records of job work was found and the summon issued to M/s Star Synthetics for whom the job work of goods were undertaken by M/s Hingora were returned undelivered as the factory was found to be closed. However we find that this cannot be a ground to allege clandestine manufacture and removal as the officers could have easily undertook investigation at M/s Star Synthetics. Except stating a reason of an undelivered summon, the officers did not bother to investigate the actual position. When it is the charge of the revenue that the Appellant did not undertake any job work activity and instead indulged in clandestine removal in that case they should have investigated M/s Star Synthetics or the parties to whom the goods were allegedly cleared clandestinely, which was not done. Only on the ground that the job work record was not found at the factory of M/s Hingora, the same cannot be a ground to demand duty as no investigation was undertaken regarding the delivery of the goods produced by M/s Hingora. This was most crucial aspect which needed to be determined and in absence of delivery of goods elsewhere or any evidences in this behalf, duty demand cannot be fasten upon M/s Hingora Industries.
12. We also find that the Appellant in his reply to the show cause notice as well as in the appeal memo had clearly shown the production capacity of the machines found during the panchnama and pleaded that their records clearly shows that the goods produced from the machines as per their production capacity was fully accounted for in their records. We find that the revenue has not been able to controvert this submission and thus we find that the Appellant submission regarding non production of clandestine cleared goods has lot of credence. Our view is also based upon the Tribunal observation in the case of M/s Kuber Tobacco Prod. Ltd Vs CCE Delhi 2013 (290) ELT 545 (Tri-Del), wherein it was held that it was burden of the department to establish capacity of machines and to prove that the clandestine production took place.
13. We are also conscious of the fact that the alleged dispatch details and the parallel invoices said to be found from the secret office contained the name of the parties to whom the goods were cleared as well as other details. However no evidence is appearing on record that the officers investigated such recipients, inspite of their details appearing in all such alleged clearance records. In such case, it has to be held that the said evidence is uncorroborated. We find that following judgments cited by the Appellant are clearly applicable in such facts:
(i) In the case of M/s Pan Parag India Ltd Vs CCE, Kanpur - 2013 (291) ELT 81 (Tri. - Del.), the Tribunal in Paragraph No.55 observed as under:
Demand of duty of Rs.1,03,26,220.00 along with imposition of penalty stands made on the basis of allegedly recovered photocopies of the invoices from the appellants factory during the course of search on 18.10.2002. Though the appellants have strongly contended that such photocopies were not recovered from their place but were planted and signatures of their representatives were taken on the same forcibly by the officers. But without dealing with said submission, we find that the entire demand is solely based upon these photocopies. As discussed, clandestine removal allegations cannot be fastened against the manufacturer based upon recovery of photocopies of invoices from their premises. The same required material corroboration by an independent evidence. Their being none in the present case, we are of the view that confirmation of duty of demand cannot stand. We also note that the buyers names were available in the invoices and in fact, inquiries were conducted at their end, all the buyers denied having received any goods on the strength of the said invoices. In fact, we note that the Commissioner has himself observed that the demand is being confirmed on the basis of circumstantial evidence. Inasmuch as there is no evidence on record showing any clandestine removal under the cover of the said invoices and in the light of the precedent decisions as discussed (supra), we are of the view that the said duty confirmation cannot be upheld. Accordingly, we set aside the same along with setting aside of penalty.
(ii) Further in the case of CCE, Bhopal Vs. L.B. & Sons - 2011 (274) ELT 271 (Tri-Del), the coordinate bench in Para 6 held as under:
It has not been shown that the investigating officers have specifically identified the person in whose custody (cupboard from which) the said invoice was recovered. It has also not been shown that investigating officers have taken any efforts to question the buyers mentioned in the said invoices. Under these circumstances, the Commissioner (Appeals) accepted the version of the respondent that Invoice No. 7, dt.24.12.2001 was a commercial invoice and not excise invoice. In the absence of investigation, mere finding of the original authority that need for issue of commercial invoice is not disclosed, is not sufficient to fasten duty liability holding that there was clandestine removal. There is no material revealed in the grounds of appeal which can upset the finding of the fact by the Commissioner (Appeals).
(iii) In the case of CCE, Ludhiana Vs Nand Mangal Steels Ltd - 2008 (226) ELT 701 (P&H), the Honble High Court in Para 4 held as under:
We have heard learned counsel for the appellant. However, we are not inclined to accept the submissions made by the counsel for the appellant/revenue. As in the present case, the department has failed to produce any material corroborating the parallel invoices etc. and the statement of the assessee which was relied upon by the department was retracted on the very next day. It is also note worthy that the photo copy of the invoices provided by the informer to the department were not supported by any material and during the search by the officers of the department in the factory, office, residential premises of the Director and the authorized signatory, no incriminating documents were found. Therefore, the demand of duty on the basis of the said invoices in the present case is not sustainable. It is also not disputed that the respondent has also reversed the CENVAT credit on the shortage of inputs detected during the stock verification and therefore, demand of duty and imposition of penalty was rightly quashed by the Tribunal. Thus, we find no ground to interfere in the finding of fact recorded by the Tribunal and in our view no substantial question of law was arisen in the order of the Tribunal.
13. We further find that the owner of the place Shri Bhagu R. Patel who has rented the alleged secret office premises at monthly rent of Rs.700/- did not name any person from M/s Hingora to whom he has rented the said premises. The show cause notice has failed to show that the said place was rented out to M/s Hingora Industries; except one single entry of factory expenses of Rs.700/- to Mr. Jamuna no evidence has been brought on record to allege that the Appellants has taken said premises on rent. In view of such facts we hold that it cannot be said that the Appellant had taken said premises on rent or were the owners of the said premises.
14. We also find that the revenue has not established the case of clandestine removal by corroborative evidence except the records and data from the alleged secret office. No evidences of removal of excisable goods, or procurement of raw materials and its consumption were brought on record. Not a single buyer of the goods who alleged to have received the goods nor any transporter involved in transportation of such goods was found or investigated. Not even a single payment detail of clandestinely procured raw material used for manufacture of clandestine cleared goods was found. No investigation was undertaken to ascertain if the alleged buyers has received such goods. The officers could not find a single consignment of goods alleged to be having been cleared without payment of duty by M/s Hingora Industries. It is well settled legal position that without corroborative evidences in the form of procurement of raw materials, use of production facilities, transportation of, raw materials into the factory and finished goods out of the factory, and financial flow of these transactions, the allegation of clandestine procurement, production and removal cannot sustain. Such serious allegations cannot be substantiated by mere recovery of some documents, that too from entirely different premises which do not have even a remotest connection with the Appellant. Our views are based upon following judgments of co-ordinate benches:
(i) In the case of T.G.L. Poshak Corpn. Vs CCE Hyderabad - 2002 (140) ELT 187 (Tri-Che.), the Tribunal has recorded as under:
Para 6 - We have carefully considered the submission and perused the impugned order. Insofar as the assessees appeal is concerned, we notice from the extracted portion of the Commissioners order that Revenue is solely relying on the exercise note books mainly balance steets. The Tribunal in large number of cases which have already been noted above in the tabulated list of citations furnished by the Counsel has held that unless there is clinching evidence on the nature of purchase of raw materials, use of electricity, sale, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of note books maintained by some workers. The facts in the case of Aswin Vanaspati Industries would be identical to the facts herein as in that case also the allegation was with regard to removal of Vanaspati based on the inputs maintained. The Tribunal went in great detail and have clearly laid down that unless department produces evidence, which should be clinching, in the nature of purchase of inputs and sale of the final product demands cannot be confirmed based on some note books. A similar view was expressed by the Tribunal in the other judgments noted supra. The citations placed would directly apply to the facts of this case. Hence, following the ratio of the cited judgments, the assessees appeal is allowed.
(ii) Further in the case of M/s K. Rajagopal Vs CCE, Madurai - 2002 (142) ELT 128 (Tri-Che.), even in case of Private notebook retrieved from the premises of the asseesee, the tribunal observed as under :
6.?We have perused the order of the Commissioner which is extracted supra. On a careful reading of the said order, we have to observe that the said finding recorded is totally based on presumptions and assumptions. In all clandestine removals, it has been now well laid that the crux of the issue in respect of clandestine removal is that Revenue cannot proceed solely on the basis of a seized private notebook maintained by a worker unless the entries are corroborated by various other pieces of evidences in as much as that Revenue has to show that appellants have purchased the inputs from market and utilised the same and that the same has been sold to particular persons through invoices or otherwise and the money has flowed back as capital. In this particular case, admittedly the only piece of evidence is a notebook seized from the premises of the appellant. It was brought to the notice of the seizing officers that it was maintained by the Accountant who was very much present during the time of investigation. It was the duty of the investigating officers to have sought explanation from the said Accountant with regard to the entries made therein. Non-examination of the Accountant has rendered the document inadmissible in evidence. The findings recorded in Para 16 that the Accountant is now not available and his whereabouts could not be traced is not acceptable for the reason that at the time of the raid and the seizure of the notebook, the said Accountant was very much present. Be that as it may, the Revenue is required to show that appellants have purchased raw materials valued more than Rs. 1.09 crores. It is the specific plea of the appellants that the inputs are supplied under licence under the Explosives Act and they are required to purchase only through governmental sources. This was explained by the Managing Partner when he was examined by the Investigating officers. Therefore, at the time of investigation, it was the duty of the said officers to have contacted the supplier of Governmental agency and examined them and should have seen through their records as to whether the appellants have purchased such huge quantities of inputs for manufacture of the fireworks. The said non-examination of the supplier of raw material which is controlled and a licensed commodity is fatal to this case and it can be easily concurred that Revenue has not proved the case with regard to the purchase of raw materials for manufacture of final product.
7.?It is seen that the appellants have also brought to the notice of the Revenue that fireworks are required to be insured mandatorily while removing the same and various authorities are required to be informed and permission obtained. Revenue has not examined this point in the correct perspective. The danger of removal and penal consequence of non-insurance is a serious matter and the Commissioner ought to have relied on same evidence to show as to how they could manufacture and remove such controlled explosive commodity without proper protection and insurance. Merely to give finding that such clandestine removal is done secretly and stealthily and they do not follow the law is not acceptable in the peculiar facts and circumstances of this case. There is no other corroborative evidence with regard to the sale and purchase by particular persons and there is no evidence of removal through any transporter and the transporters have not been examined and statements recorded. Each link in the aspect of production and clandestine removal is required to be proved and since this has not been done, the demands are required to be set aside for lack of evidence in the matter. It has been laid down by the Tribunal, as in the case of Kashmir Vanaspati- 1989 (39) ELT 655. That a private notebook cannot be a conclusive piece of evidence to prove clandestine removal. Large number of judgments have been rendered by this bench and the matter has been analyzed carefully and the Tribunal has laid down that proof is required to be produced by the department for clandestine removal as in the case of Krishna Bottlers - 1999 (32) RLT 845. The above citations also deals with each of the factors required to be proved and it has been laid down very conclusively in the cited judgments that the scribe of the notebook is required to be examined and details of the notebook is required to be proved as in the case of CCE v. Raman Ispat (P) Ltd., CCE Mumbai Vs. Mira Silk Mills, CCE Patna v. Universal Polythene Industires, CCE Chandigarh vs. Indian Hume Pipes Co., Deepak Tandon vs. CCE Bhubaneswar, Shree Bhallabh Glass Works vs. CCE Ahmedabad, etc. (all supra).
8.?In view of the Revenue not having proved any evidence of the manufacture or removal without payment of duty in this case except the seized notebook which entries has not been proved including the scribe not having been examined, therefore applying the ratio of all the judgments noted supra, the impugned order is set aside and the appeals are allowed.
(iii) Further in the case of M/s Dhanavilas (Madras) Snuff Co. - 2003 (153) E.L.T. 437 (Tri-Chennai), we find that in Para 6, the Tribunal has recorded as under:
6..Revenue ought to have produced the evidence of purchase of raw material, manufacture and clearance of goods clandestinely by examining the workers and also those who have received the goods without payment of duty. In view of lack of evidence, the Commissioner has rightly dropped the proceedings with regard to the charge pertaining to clandestine removal. However, he has upheld the charge pertaining to certain other charges and has confirmed duty and penalties
(iv) Further in the case of S.T. Texturisers - 2006 (200) ELT 234, this Bench, in respect of clandestine removal, very clearly held as under :
6.?Considering the above arguments of the appellant in the light of the various decisions of the Tribunal, it is seen that it has been consistently held by the Tribunal that entries in rough register cannot be made the sole basis for arriving at finding of clandestine manufacture. Reference in this regard be made to the Tribunal decision in the case of Essvee Polymers (P) Ltd. [2004 (165) E.L.T. 291 (Tri. - Chennai)], Krishna Bottlers (Vijayawada) Pvt. Ltd. v. Commissioner of Central Excise, Gantur [1999 (32) RLT 845 (CEGAT)], Ganga Rubber Industries v. Collector of Central Excise [1989 (39) E.L.T. 650 (Tribunal)]. The ratio of all the above decisions is that the allegations of clandestine manufacture and removal being quasi criminal in nature are required to established beyond doubt by producing evidence in the shape of procurement of raw materials, shortage, excess use of electricity, flow back of funds and purchase of final products by customers etc. Admittedly no such evidence has been produced on record by the Revenue, the evidentiary value of the statements relied upon by the Revenue already stands discussed by me in the proceedings paragraph. The said statements having been made under Section 108 of the Customs Act, 1962 are not comparable to the confession recorded under Section 164 of CRPC before Magistrate, and as such are required to be corroborated, by evidence of removal without payment of duty. As already discussed the said statements are devoid of probative value and cannot be considered to be supportive of charges of clandestine removal.
15. It is a settled law that for bringing the charges of clandestine removal the evidences decided by various case laws as above. However in the present case in absence of any tangible evidence which would indicate that there was clandestine manufacture and clearance of the goods by M/s Hingora Industries we hold that the charges of clandestine removal against M/s Hingora Industries are not sustainable. Thus, in the peculiar facts and circumstances of this case, we hold that the impugned order which confirms the demand against M/s Hingora Industries and imposes penalty on them is not sustainable and is liable to be set aside and we do so.
16. Since we have held that there is no sustainable demand, consequential penalties on various other appellants, who are in appeal before us, would also automatically be set aside.
17. As we have disposed the appeals on merits of the evidences on record, we are not recording any findings on various other submissions made by both sides.
18. Accordingly, all the appeals are allowed with consequential relief, if any.
(Pronounced in Court on ______________________) (H.K. Thakur) (M.V. Ravindran) Member (Technical) Member (Judicial) cbb ??
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