Custom, Excise & Service Tax Tribunal
M/S Shiv Shakti Ingots Pvt Ltd vs Commissioners Of Central Excise on 16 October, 2015
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
West Zonal Bench, Ahmedabad
-ooOoo-
Appeal No. : E/31,32/2011
[ Arising out of OIA-SKSS/246-247/VAPI/2010 dtd 28.10.2010 passed by
Commissioners of Central Excise, Customs and Service Tax (Appeals) -VAPI ]
1. M/s Shiv Shakti Ingots Pvt Ltd
2. Shri Manish Ramavtar Agarwal - Appellant(s)
Vs
Commissioners of Central Excise,
Customs and Service Tax-VAPI - Respondent (s)
Represented by :
For Assessee : Shri Wllingdon Christian, Advocate For Revenue : Shri L Patra, Authorised Representative For approval and signature :
Mr. P.K. Das, Hon'ble Member (Judicial) 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? No 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 CORAM :
Mr. P.K. Das, Hon'ble Member (Judicial) Date of Hearing / Decision : 16/10/2015 ORDER No. A/11636-11637/2015 dtd 16/10/2015 Per : Mr.P.K. Das, These appeals are arising out of a common order and therefore, both are taken-up together for disposal.
2. The relevant facts of the case, in brief, are that M/s Shiv Shakti Ingots Pvt Ltd (the Appellant Company) was engaged in the manufacture of MS Ingots and CTD Bars. On 28.7.2007 the Central Excise officers searched the premises of one M/s Vishnu Steels, engaged in the manufacture of steel products, who was purchasing the materials from the Appellant Company. The Central Excise Officers recovered documents from the premises of M/s Vishnu Steel and also recorded various statements. As per the follow-up action, the statement of one broker viz., Shri Shivgopal Damani was recorded. Thereafter, a statement of M/s Manish R Agarwal, Director of the Appellant Company (Appellant No.2) was recorded on 14.5.2009.
3. A show cause notice dtd 4.9.2009 was issued to the Appellant Company proposing demand of duty of Rs 10,03,314/- alongwith interest and to impose penalty on the appellant company and separate penalty on the Director of the Appellant Company. The Adjudicating Authority confirmed the demand of duty of Rs 10,03,314/- alongwith interest and imposed penalty of equal amount of duty on the Appellant Company. Further, penalty of Rs 6,00,000/- was imposed on Shri Manish R Agarwal, Director of the Appellant Company(Appellant No 2 herein). By the impugned order, the Commissioner (Appeals) rejected the appeals of both the appellants.
4. The Learned Advocate on behalf of the appellant submits that the entire case was made out on the basis of the statements of the buyer and one broker and the documents recovered from their premises. He further submits that no search was conducted at the appellants premises. It is further submitted that the only one statement of the Appellant No 2 was recorded which was retracted within a few months in reply to the show cause notice. The appellant categorically requested for cross examination of the buyer and the broker, which was rejected. He submitted the written notes alongwith case laws before the Bench during the course of hearing.
5. The Learned Authorised Representative on behalf of the Revenue reiterates the findings of the Commissioner (Appeals). He submits that the Director of the Appellant Company had seen the statement of buyer and broker and accepted the contents of the statements, which was retracted in reply to the show cause notice, which cannot be accepted. It is also submitted that the appellant had not countered the statements of the buyer and the broker. Regarding the rejection of the cross examination, the Learned Authorised Representative relied upon decision of the Tribunal. He submits that the Director of the Appellant Company had accepted the clandestine removal and there is no requirement of the cross examination of the buyer and broker. He further submitted evidentiary value of the documents cannot be lost in absence of cross examination.
6. After hearing both the sides and on perusal of the records, I find from the impugned order that the clandestine clearances of the goods of the Appellant Company is based on the documentary evidence seized from the premises of the buyer M/s Vishnu Steel and the statements from Shri S Damani, the broker. The statement of the buyer is corroborative with the records maintained by the buyer in their factory. The Central Excise officers seized a note book from the premises of the buyer maintained by their accountant. They have also seized daily reports from the premises of the buyer. The entire demand of duty was calculated on the basis of the seized records recovered from the premises of the buyer.
7. The Commissioner (Appeals) observed that Appellant No 2, in his statement dtd 14.5.2009 accepted the statement of the buyer and broker. The appellant in their reply to show cause notice dtd 3.10.2009 retracted the statements. It is observed by the Commissioner (Appeals) that the retraction of the statements under duress of the Appellant No 2, is a brain child of the Learned Advocate and not Shri Manish R Agarwal. The appellant requested cross examination of the buyer and the broker in their reply to show cause notice. The Adjudicating Authority rejected the prayer for cross examination, as the exercise would be futile as the Appellant No 2 in his statement accepted the statements of the buyer and broker. It is seen that the retraction of the statement of the Appellant No 2 was rejected on the ground that it is a brain child of the Learned Advocate and not Shri Manish R Agarwal. It is difficult to accept the findings of the Commissioner (Appeals) for the reason that the allegation against the Learned Advocate is without any inquiry and merely on the basis of assumption and presumption. In my considered view, the retraction of the statement cannot be brushed aside, only alleging to the Learned Advocate, unless it is based on some evidence. In any event, the reply to the show cause notice was submitted by the Learned Advocate on behalf of the appellant and therefore, it cannot be said that it is a brain child of the Learned Advocate. Hence, the findings of the Commissioner (Appeals) regarding the rejection of the retraction of the statement cannot be accepted.
8. The entire case was made out on the basis of the documents recovered from the premises of the buyer. There is no iota evidence that the documents recovered from the premises of are corroborating with any material of the appellant company. It is third party corroborative evidence, which cannot be accepted. I find force in the submission of the Learned Advocate that no search was conducted at the premises of the appellant company. It is well settled that the charge of clandestine removal cannot be proved merely on the basis of the documents recovered from the outsider without any corroboration of evidence at the premises of the assessee. It is also noted that the case was made out on the basis of statements of the buyer and the documents recovered from their premises and in this situation, the cross examination of the buyer and the broker are necessary to establish the truth. The Tribunal in the case of Arya Fibres Pvt Ltd vs CCE 2014(311)ELT.529 (T) held that clandestine manufacture and removal, Reliance on private records seized from buyers premises not to be the sole basis for demand especially when corroborative evidence like purchase of extra raw material, actual removal of clandestine goods, receipt of sale proceeds, etc. not produced. The Honble Delhi High Court in the case of Flevel International Vs CCE vide judgment dtd 17.9.2015 in CEAC 6/2013 approved the decision of the Tribunal in the case of Aarya Fibre Pvt Ltd (supra) as under:
55. Mr. Hari Shanker, learned Senior counsel for the Appellant, has also drawn the attention of the Court to a decision of the CESTAT in Arya Fibres Pvt. Ltd. V. CCE, Ahmedabad-II 2014 (311) ELT 529 (Tri.-Ahmd.) where the entire law concerning clandestine removal has been discussed and the legal position has been summarized as under:
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 actives being carried on in the factory of production; etc.
56. In the present case, there is no attempt made by the Department to substantiate the allegation of manufacture of as many as 606 ACs by the Appellant. No evidence has been produced to show that the basic raw materials required for manufacturing such a large number of ACs was procured by the Appellant.
57. For all of the aforementioned reasons, the Court is satisfied that the impugned majority order of the CESTAT on the issue of clandestine removal of 606 ACs by the Appellant without payment of duty suffers from serious errors and, therefore, cannot be sustained in law.
58. The Court is not inclined to consider the plea of the Respondent that the matter should be remanded for a fresh consideration by the CESTAT. In the first place, it must be remembered that the search operation in this case took place way back in 1992. The long drawn process of adjudication over a period of 12 Years was followed by the judicial review process for another 10 years. Sending the case back to the CESTAT for a fresh determination would prolong the case interminably. The question of now producing persons whose statements were recorded 23 years after the event for cross-examination is impractical and not feasible. Secondly, no fresh material has to be brought on record to warrant a re-look. The Court is satisfied that the existing material is insufficient to sustain the adjudication order of the CCE on the issue.
9. In the case of Shalini Steel Pvt Ltd vs CCE 2010(258) ELT. 54 (T) upheld by the Honble Andhra Pradesh High Court as reported in 2015(317)ELT.A123 (AP) it has been held that the statement of the broker and documents recovered from the him had no evidentiary value to establish clandestine removal. The Learned Advocate relied upon the various case laws as regards the charge of clandestine removal cannot be established merely on the confessional statement of the Director of the appellant company. In the present case, the Director retracted the statement, which was not accepted by the Commissioner (Appeals) as a brain child of the Learned Advocate.
10. The Honble Gujarat High Court in the case of CCE,C&ST,Daman Vs Nissan Thermoware Pvt Ltd 2011(266)ELT.45 (Guj) in the identical situation dismissed the appeal filed by the Revenue. In that case, the Director admitted the shortage of material used in the manufacture of goods and clandestinely removed without payment of duty. It has been observed that there is no evidence to indicate clandestine manufacture and removal of goods except shortage of raw material and statement of the Director of the Appellant Company and the Tribunal rightly given the benefit to the assessee. In the case of CCE vs Saakeen Alloys Pvt Ltd 2014(308)ELT.655 (Guj.) the Honble Gujarat High Court held that confessional statement cannot form the foundation for levying excise duty.
11. The Learned Authorised Representative for the Revenue submitted that the documents recovered from the premises of the buyer are corroborating the statement of the Appellant No 2. But, it is undisputed fact, no material recovered from the premises of the appellant company. The cross examination of the buyer and broker are not allowed and therefore, the contention of the Learned Authorised Representative cannot be accepted. The Learned Authorised Representative strongly relied upon the decision of the Tribunal in the case of Shalini Steel Pvt Ltd Vs CCE, Hyderabad 2010(258)ELT.545 (T). In that case, the Central Excise officers recovered various documents from the premises of assessee, which was not seriously disputed by the assessee. In this contest, the Tribunal observed that the value of documents could not be lost in absence of cross examination of the employee. The said case law could not be applicable in the present case.
12. In view of the above discussions, I find that the impugned order cannot be sustained and it is set aside. Accordingly, both the appeals filed by the appellants are allowed.
(Dictated and pronounced in the Court)
(P.K. Das) Member (Judicial)
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