Custom, Excise & Service Tax Tribunal
Msp Sponge Iron Ltd vs Commissioner-Rourkela ... on 28 February, 2020
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO.2
Excise Appeal No.77327 of 2019
(Arising out of Order-in-Appeal No.37-38/CE/RKL-GST/2019 dated 31.05.2019
passed by Commissioner(Appeals), CGST, Central Excise & Customs, Bhubaneswar.)
M/s. MSP Sponge Iron Limited
(Haldiguna, Gobardhan, Distt.Keonjhar-758013 (Odisha).)
...Appellant
VERSUS
Commissioner of CGST, C.EX & Customs, Rourkela
Commissionerate
.....Respondent
(Assistant Commissioner, Central Excise & Service Tax, Division-Keonjhar-758013 (Odisha).) APPEARANCE Shri Jitin Singhal, Advocate for the Appellant (s) Shri A.K.Biswas, Authorized Representative for the Respondent (s) CORAM: HON'BLE SHRI P.K.CHOUDHARY, MEMBER(JUDICIAL) FINAL ORDER NO. 75326/2020 DATE OF HEARING : 7 February 2020 DATE OF DECISION : 28 February 2020 P.K.CHOUDHARY :
The appellant has filed the present appeal against the impugned order-in-appeal No.37-38/CE/RKL-GST/2019 dated 31.05.2019 passed by the learned Commissioner (Appeals), Bhubaneswar.
2. Briefly stated, the facts of the case are that the appellant is engaged in the manufacture of Sponge Iron, Iron Ore Pellet and M.S. Round classifiable under Chapter 72 of the First Schedule to the Central Excise Tariff Act, 1985. The officers of DGCEI visited the factory premises of the appellant on 20.08.2013. During the course of search of the factory premises, the department found some loose computer printouts and hand written loose sheets showing data in respect of production and clearance of MS Round (TMT Bar) and 2 Excise Appeal No.77327 of 2019 Sponge Iron for the period from December, 2012 to July, 2013. Thereafter, the department recorded inculpatory statements dated 20.08.2013 and 20.09.2013 of Shri Basant Kumar Sahu, V.P. (Commercial) of the appellant under Section 14 of the Central Excise Act, 1994 (here-in-after referred to as 'the Act'). Based on the aforesaid documents recovered and the statements, a show cause notice has been issued to the appellant, demanding Cenvat duty of Rs.48,81,921/- on the allegation of suppression of production of 717.03 MT of MS Round and 605 MT of Sponge Iron and clandestinely cleared for the period December, 2012 to July, 2013. The said show cause notice was adjudicated by the learned Adjudicating Authority vide its order-in-original dated 14.02.2018, confirming Central Excise duty of Rs.48,81,921/- along with interest and equivalent penalty, which has been further affirmed by the learned Commissioner(Appeals), vide the impugned order. Hence the present appeal before the Tribunal.
3. The learned Counsel appearing for the appellant has vehemently argued that the impugned order is liable to be set aside on the following grounds :
3.1 That the statement recorded under Section 14 of the Act cannot be relied upon as evidence unless the provisions of Section 9D of the Act has been followed. The statements of Shri Basant Kumar Sahu, V.P. (Commercial) of the appellant was recorded on 20.08.2013 and 20.09.2013, under the provisions of Section 14 of the Act. However, the learned Adjudicating Authority has not followed the provisions of Section 9D of the Act, therefore, the said statements cannot be relied upon as an evidence and have to be eschewed from evidence. It is further submitted that the statements dated 20.08.2013 and 20.09.2013, have been recorded under threat and duress. He has relied upon the judgement of Hi-Tech Abrasives Ltd. Vs. CCE&C, Raipur, 2018 (362) ELT 961 (Chhattisgarh), wherein the Hon'ble High Court of Chhattisgarh held that statements recorded under 3 Excise Appeal No.77327 of 2019 Section 14 of the Act cannot be relied upon as evidence without following the rigour of Section 9D of the Act. It has been further held that the provisions of Section 9D is mandatory in nature.
It is submitted that, similar view has been taken by the Hon'ble High Courts and the Larger Bench of the Tribunal as mentioned below:-
i. Ambika International Vs. UOI, 2018 (364) ELT 90 (P&H) ii. G-Tech Industries Vs UOI, 2016 (339) ELT 209 (P&H).
iii. Final Order No. 62244-62245 of 2018 dated 23.04.18 in the case of Bhupinder Steel Pvt. Ltd. Vs. CCE, Delhi-IV, in Appeal No. E/2328/09 and E/2617/09 (Tri-LB) iv. CCE, Delhi-I Vs. Kuber Tobacco India Ltd, 2016 (338) ELT 113 (Tri-Del.) 3.2 He further submitted that, the allegation of clandestine manufacture and removal in the present case is based on the
(a)computer generated sheets and (b)loose papers, is wrong appreciation of evidence inasmuch the aforesaid alleged documents cannot be relied upon as evidence. It is submitted that there is no indication in the orders passed by the authorities below that the appellant was maintaining computerized records of their production and clearance of goods and whether any other computerized sheets were traced out in the files withdrawn. It is further submitted that there is no compliance of Section 36B of the Act as held by Hon'ble Supreme Court in the case of Anwar P.V. Vs. P.K. Baseer, MANU/SC/0834/2014 and further followed by the Tribunal in the case of Popular Paints vide Final order dated 06.08.18. It is further submitted that the learned Commissioner (Appeals) erred in relying upon Section 36A of the Act, which is not applicable to the facts of the present case. It is also submitted that it is a well settled law that alleged private records cannot be relied upon as evidence without any corroborative evidence.4
Excise Appeal No.77327 of 2019 3.3 It was further argued that, during the course of search at the factory premises of the appellant, the department has not found any shortage or excess of any raw material or finished goods.
3.4 It is submitted that the huge demand has been confirmed merely on the basis of alleged private records, without adducing any other corroborative evidence.
3.5 It is further submitted that, merely deposit of money at the time of investigation would not amount to acceptance of allegations of clandestine manufacture and removal as alleged by the department. It is well settled law that, payment of money at the time of investigation would be treated as a deposit under protest. The appellant would like to place reliance on the following judgements to support its contention:-
i. Bayshore Glass Trading Pvt. Ltd. Vs CC, Kolkata, 2002 (148) ELT 1243 (Tri-Kol.) ii. CCE, Lucknow Vs Eveready Industries India Ltd., 2017 (357) ELT 11 (All.) iii. CC, New Delhi Vs Ganesh Trading Co., 2013 (297) ELT 547 (Tri) 3.6 The learned Advocate further submitted that it is well settled law that, burden to prove allegation of clandestine manufacture and removal is heavily on the department and has to be discharged by producing clinching evidence on record. However, in the present case, as submitted above, the department has miserably failed to adduce evidence on record, in order to prove the allegation of clandestine manufacture and removal of goods.
3.7 It is submitted that, if the duty demand is not sustainable, then the interest and penalty are liable to be set aside on this ground alone.
4. The learned Authorized Representative appearing for the Revenue, reiterated the findings in the impugned order and submitted 5 Excise Appeal No.77327 of 2019 that the impugned order passed by the learned Commissioner (Appeals) is a well-reasoned order and requires no interference.
5. I have heard the both parties at length and perused the material on record.
6. I find that the search has taken place at the premises of the appellant on 20.08.2013 and during the course of search, the department has found some loose computer printouts and hand written loose sheets showing data in respect of production and clearance of MS Round (TMT Bar) and Sponge Iron for the period from December, 2012 to July, 2013. Thereafter, the department recorded the statements of Shri Basant Kumar Sahu, V.P. (Commercial) of the appellant under Section 14 of the Act. I find that the case of the department mainly based on the documents recovered, (the authenticity of the same has been disputed by the appellant) and the statement of Shri Basant Kumar Sahu, which has also been disputed by the appellant.
7 I find that the statement recorded under Section 14 of the Central Excise Act cannot be relied upon as an evidence unless the learned Adjudicating Authority follow the procedure prescribed under Section 9D of the Act. In the present case, admittedly no process has been followed. I further find that the Hon'ble Chhattisgarh High Court in the case of Hi-Tech Abrasives Ltd. Vs. CCE&C, Raipur, 2018 (362) ELT 961 (Chhattisgarh) (supra) has held that the Section 9D is mandatory in nature. Therefore, by following the ratio as laid down by the Hon'ble High Court, I find that the statement cannot be relied as an evidence and has to be eschewed from evidence. The Hon'ble High Court held :-
"9.5 Undoubtedly, the proceedings are quasi criminal in nature because it results in imposition of not only of duty but also of penalty 6 Excise Appeal No.77327 of 2019 and in many cases, it may also lead to prosecution. The provisions contained in Section 9D, therefore, has to be construed strictly and held as mandatory and not mere directory. Therefore, unless the substantive provisions contained in Section 9D are complied with, the statement recorded during search and seizure operation by the Investigation Officers cannot be treated to be relevant piece of evidence on which a finding could be based by the adjudicating authority. A rational, logical and fair interpretation of procedure clearly spells out that before the statement is treated relevant and admissible under the law, the person is not only required to be present in the proceedings before the adjudicating authority but the adjudicating authority is obliged under the law to examine him and form an opinion that having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice. Therefore, we would say that even mere recording of statement is not enough but it has to be fully conscious application of mind by the adjudicating authority that the statement is required to be admitted in the interest of justice. The rigor of this provision, therefore, could not be done away with by the adjudicating authority, if at all, it was inclined to take into consideration the statement recorded earlier during investigation by the Investigation officers. Indeed, without examination of the person as required under Section 9D and opinion formed as mandated under the law, the statement recorded by the Investigation Officer would not constitute the relevant and admissible evidence/material at all and has to be ignored. We have no hesitation to hold that the adjudicating officer as well as Customs, Excise and Service Tax Appellate Tribunal committed illegality in placing reliance upon the statement of Director Narayan Prasad Tekriwal which was recorded during investigation when his examination before the adjudicating authority in the proceedings instituted upon show cause notice was not recorded nor formation of an opinion that it requires to be admitted in the interest of justice.In taking this view, we find support from the decision in the case of Ambica International v. UOI rendered by the High Court of Punjab and Haryana.
XXX XXXXXX 7 Excise Appeal No.77327 of 2019 Accordingly, on the first and second question of law, we hold that the statement of the Director could not be treated as relevant piece of evidence nor could be relied upon without compliance of Section 9D of the Act. The two questions of law accordingly, stand answered in that manner"
8. I further find that the private documents recovered at the premises remains unrebutted by the department. I also find that the allegation of clandestine manufacture and removal in the present case is based on the (a) computer generated sheets and (b) loose papers which cannot be relied upon as evidence, inasmuch there is no indication in the orders passed by the authorities below that the appellant was maintaining computerised records of their production and clearance of goods and whether any other computerised sheets were traced out in the files withdrawn. I find that there is no compliance of Section 36B of the Act as held by Hon'ble Supreme Court in the case of Anwar P.V. Vs. P.K. Baseer, MANU/SC/0834/2014 and further followed by this Tribunal in the case of Popular Paints vide Final order dated 06.08.18. I further find that the learned Commissioner (Appeals) erred in relying upon Section 36A of the Act, which is not applicable to the facts of the present case. I further find that the alleged private records cannot be relied upon as evidence without any corroborative evidence. I find that the Hon'ble Chhattisgarh High Court in the case of Hi-Tech Abrasives Ltd. Vs. CCE&C, Raipur, 2018 (362) ELT 961 (Chhattisgarh), has held that:-
"12.2 We have gone through the detailed order passed by the adjudicating authority and we find that so far as the demand of challenge in the present case is concerned it rested only on two materials. One was the so called statement of the Director which the adjudicating authority and the Customs, Excise and Service Tax Appellate Tribunal received in advance as admission of clandestine removal by the Director of the appellant/Company and the other was the notebook which contained certain entries, which according to the 8 Excise Appeal No.77327 of 2019 adjudicating authority constitute relevant material to draw inference of clandestine removal by the avoidance of payment of duty. Once we have held that the statement of the Director could not be admitted as relevant piece of evidence, there is no question of there being any admission on the statement of the Director of the company. Then the only other material left is unverified private document in the form of certain entries made in the note book, seized during search operations. In view of what has been held by the Delhi High Court, with which we are in complete agreement and that the Tribunal has also taken a consistent view in this respect that without recording the statement of the author, the contents of private document would not constitute material, we are left with no legally admissible evidence on record to draw inference of clandestine removal. The inference regarding clandestine removal ought to be outcome of a detailed investigation and consideration of other relevant incriminating material which could be based on the stock of raw material, finished products, use of consumption of electricity, employment of labour and many other relevant material as noticed in the decisions reported in 2014 (309) E.L.T. 411 and 2017 (345) E.L.T. 187 rendered by the High Court of Allahabad and High Court of Jharkhand, respectively."
8.1 I further find that the Hon'ble High Court of Allahabad in the case of Continental Cement Company Vs Union of India, 2014 (309) ELT 411 (All.), has held that the department is required to adduce clinching evidence of the nature of purchase of raw material, use of electricity, sale of final products, payment, realization of sale proceeds, mode and flow back of funds. The relevant extract of the judgment is reproduced here for ready reference:-
"12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back 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, 9 Excise Appeal No.77327 of 2019 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."
I further find that admittedly, in the present case, no such investigation has been conducted by the department qua purchase of raw material, use of electricity, sale of final products, payment, realization of sale proceeds, mode and flow back of funds. Similar view has been taken by the following judgements of the Hon'ble High Courts and this Tribunal, which have been affirmed by the Hon'ble High Courts and Supreme Court:-
i. CCE, Chandigarh-I Vs. Laxmi Engineering Works, 2010 (254) ELT 205 (P&H) ii. Flevel International Vs CCE, 2016 (332) ELT 416 (Del.) iii. CCE, Ahmedabad-I Vs. Gopi Synthetics Pvt. Ltd., 2014 (310) ELT 299 (Guj.) iv. Vikram Cement (P) Ltd. Vs CCE, Kanpur, 2012 (286) ELT 615 (Tri-Del.) affirmed by the Hon'ble High Court of Allahabad in the case of CCE Vs Vikram Cement (P) Ltd., 2014 (303) ELT A82 (All.) 10 Excise Appeal No.77327 of 2019 v. Sakeen Alloys Pvt. Ltd. Vs CCE, Ahmedabad, 2014 (296) ELT 292 (Tri-Del.), affirmed by the Hon'ble High Court of Gujarat in the case of CCE Vs Sakeen Alloys Pvt. Ltd., 2014 (308) ELT 655 (Guj) and further affirmed by the Hon'ble Apex Court in the case of CCE Vs Sakeen Alloys Pvt. Ltd., 2016 (319) ELT A117 (SC).
9. I further find that merely deposit of money at the time of investigation would not amount to acceptance of allegations of clandestine manufacture and removal as alleged by the department. It is well settled law that, payment of money at the time of investigation would be treated as a deposit under protest, which is held in following judgements:-
i. Bayshore Glass Trading Pvt. Ltd. Vs CC, Kolkata, 2002 (148) ELT 1243 (Tri-Kol.) ii. CCE, Lucknow Vs Eveready Industries India Ltd., 2017 (357) ELT 11 (All.) iii. CC, New Delhi Vs Ganesh Trading Co., 2013 (297) ELT 547 (Tri)
10. I further find that burden to prove allegation of clandestine manufacture and removal is heavily on the department and has to be discharged by producing clinching evidence on record, which has not been discharged by the department in the present case.
11. In the light of the above discussions, the impugned order cannot be sustained and is accordingly set aside. The appeal filed by the appellant is allowed with consequential relief as per law.
(Order pronounced in the open court on 28 February 2020.) SD/ (P.K.CHOUDHARY) MEMBER (JUDICIAL) sm