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27. Whether the demand of CE duty on indigenous raw materials covered by Annexures E to M, Q & R and customs duty on imported raw materials covered by Annexures N, O, N1 & S to the show-cause notice recoverable from the appellant.

27.1 The show-cause notice demands a duty of over Rs.3.66 crores on PTY (raw material) as detailed in Annexure E, from the appellant under the proviso to sub-section (1) of Section 11A of the Central Excise Act read with Notification 1/95-CE and in terms of the bond executed by the EOU. The raw material was procured by STPL from M/s. Simco Chemotex Pvt. Ltd. (100% EOU) in 140 consignments over the period 1999-2000 to 2002-2003. The show-cause notice alleged that 790991.96 kgs. of PTY valued at Rs.4,80,58,404/- were procured by STPL from Simco in 140 consignments without payment of duty in terms of Notification 1/95-CE. On the basis of STPL's purchase register and the documents procured from Simco, the amount of duty was worked out to be Rs.3,66,15,026.88. Upon scrutiny of the records, the adjudicating authority found that all the CT-3s barring one, against which the raw material had been procured by STPL, and all the ARE-3s obtained from Simco were available. The ARE-3s contained the signatures of STPL's representatives and the transactions were found to have been entered in their purchase register. The signatures on the ARE-3s were identified by Shri Shivratan Saraf, director of STPL, in his statement dated 7.8.2003 as those of S.N. Indoria, Ashok Kumar Sharma and Ajay Kumar Sharma, authorised representatives of STPL, NS. Goenka, director of Simco and Chiranjilal Bubna, authorised signatory of Simco, confirmed, in their respective statements, that the goods had been despatched without payment of duty under CT-3s to STPL and further that, in most of the cases, they had received the rewarehousing certificates (RWCs) on the ARE-3s. The adjudicating authority found no evidence from STPL to dispute issue of CT-3s, receipt of the raw material mentioned in the ARE-3s of Simco. The learned Commissioner further found that, out of 140 RWCs (copies of ARE-3s sent from STPL's CE Range office, as proof of rewarehousing of the goods supplied by Simco, to the CE Range office at Simco's end), the signatures of the CE officers in 71 RWCs were forged. Such forgery was reported by the Government Examiner of Questioned Documents who had subjected the above ARE-3s to forensic examination. The Commissioner further found that STPL had not given D-3 intimation to their CE Range officer and had not made entries in Annexure 118 register (bond register) in respect of the raw materials received under the ARE-3s from Simco. In this connection, STPL claimed that they had commercial relations with Simco from 1999-2000 and had been receiving materials both for EOU purposes and for trading purposes. They claimed that all receipts of raw material for EOU purpose had been accounted. The learned Commissioner rejected this plea on a few valid grounds, viz. (a) If STPL had received duty-paid raw material from Simco for trading purposes, they should have produced the relevant invoices. Moreover, the commercial invoices recovered from Simco were found to tally with excise invoices which showed clearance without payment of duty by availing exemption under Notification 1/95-CE. (b) STPL did not claim that they had indeed paid duty on any of the consignments of yarn received from Simco. (c) There was no reference to any trading in yarn in the balance sheet for the relevant period. (d) STPL could not explain how their representatives signed on the ARE-3s if the consignments covered by these documents were duty-paid. (e) The CT-3s issued to Simco covered a large quantity (550000 kgs.) of raw material which was much more than the admitted quantity (121616.26 kgs.) and hence would include the quantities which were claimed to have been received for trading purpose.