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4. The Ld. Advocate representing for the both the appellants explained the investigation proceedings initiated against the appellants and drew attention of the Bench to para-9 of the Tribunals order dated 09.08.2002. She submits that the appellants are the manufacturers of acid slurry and Zinc sulphate and availed SSI exemption during the relevant period. The raw materials required for the manufacture of the final products are LAB and Oleum. She submits that the entire case has been made out by the department based on the alleged receipt of one raw material LAB from M/s. TN Petro Products Ltd. (TNPL) through and M/s. Southern Warehousing Corporation (SWC), who is the sole selling agent of TNPL for sale of LAB. She further submits that the entire demand was confirmed by the adjudicating authority purely on the assumption and presumption of clandestine manufacture and removal of acid slurry. No evidence of procurement and receipt of raw materials or clearance of final products produced by the department. She drew attention of the Bench to para-33 of OIO and countered the findings that there is no documentary evidence of purchase of LAB by the appellant from various fictitious firms. The department failed to submit any evidence of receipt of the quantity of LAB. The only evidence relied by the department is that payment of Rs. 11,00,000/- by M/s. Fintex Chemicals to TNPL through SWC. The department failed to establish any link to the above payment to the appellants transactions. She drew attention to the statement of Shri A.R. Shanmugasundaram and submits that he never admitted any clandestine removal except the payment made to three persons Shri Kuppusamy, Shri. Srinivasaragavan, Shri. Ramasamy, employees of SWC. She drew attention to para-46 of OIO and submits that the department has not come out with any evidence of purchase of second row material oleym. The adjudicating authority has not accepted their submission. She referred to para-47 and 49 of the OIO. She further submits that they dont have storage capacity of tanks to store such a huge quantity of LAB nor they have that much capacity to manufacture the final products, acid slurry.

8. On the procurement of LAB and payments made by the appellants, he submits that the appellants made payments both in cash and in cheques and DDs to SWC. They made payments for procurement of LAB through different agencies M/s. Prakash Traders, M/s. Fintex Chemicals, M/s. Thiru Vengadam Agencies, and M/s. Gomes Agency. All these firms were floated by the appellants. He further submits that SWC records relied by the department for supply of LAB through various fictitious names is not rebutted by the appellants. Statement of Shri Suresh, Accountant of SWC confirming supply of LAB in fictitious names. The appellant also not rebutted the payment of Rs. 11.00 lakhs to SWC. He further submits that the statement of Shri Ravindra, Branch Manager of SWC in his letter dated 15.03.94 admitted that R. M. Arumugam, was the sole representative for collection of sale proceeds of the appellant and he was also the proprietor of M/s. Prakash Traders. It was also established that the payments made through cheques to the three persons of SWC on different occasions and they in turn encashed the cheques and remitted the same in the SWC account towards receipt of LAB from TNPL. He further submits that the role of Fintex Chemicals and Prakash Traders, where the appellants used to accommodate sale proceeds and make payment to TNPL. Documents recovered from SWC merely show sale of LAB to non existing firms. He further submits that the appellants used their own transport for transportation of LAB and the they used their own tanker for this purpose. The invoices shown supply of LAB to non-existing firms. It is also confirmed that independent transporter M/s. Tulsi Transport, delivered LAB to the appellant under the TNPL invoices raised in the name of non-existing firms.

12. On a rejoinder, the Ld. Counsel advanced her arguments and submits that regarding payment of Rs. 11.00 lakhs by Fintex Chemicals to TNPL for procurement of LAB, the department not established any clear link with the appellants. She relied on the letter dated 03.04.1995 at page-86 of Volume-I, where they sought the details of invoices from TNPL for the LAB supplied to the appellants. The department failed to produce any evidence to the said letter. The department failed to bring out evidences from TNPL for delivery of LAB in respect of invoices to the appellants and also to others. He further submits that mere receipt of LAB does not lead to manufacture of acid slurry. She also submits that the statement of Shri Natarajan, at page-63 in Volume-2 where nowhere he has stated or indicated the appellants name. She also submits that reply to the SCN dated 11.09.95 at page95 in Volume-I and also the cross examination of TNPL at page71 in Volume-II and reply to SCN at page97 sub-paras e,f,g & h. In their reply at para-IX a & b, they have clearly explained that the fictitious firms were created by SWC to show the sale of LAB, which is not done by the appellants. She submits that the Department conveniently omitted TNPL and there were not made the noticee to the SCN only. SWC was made a noticee in the SCN only for penalty and the adjudicating authority dropped the proceedings against SWC. She drew the attention of the Bench to the reply at page 84 of volume-II, where the statement of Shri K.R. Ramamoorthy of SWC has clearly admitted that the fictitious names were created by the managing partner of SWC for their own purpose. The statement of Suresh Kumar confirmed that they have shown fictitious tanker for supply of LAB. Regarding, manufacturing capacity and storage facility, she submits that quantity alleged by the department is beyond the storage capacity. If every ton of acid slurry is manufactured, 0.770 of spent Acid (by-product) emerges and it requires huge capacity to store inside LAB, which is highly corrosive acid. She also submits that similar investigations and adjudication proceedings initiated against other manufacturers on the identical issue of receipt of LAB and in the case of Kavitha Chemicals the adjudicating authority had dropped the proceedings in his denovo order.

The Tribunal in the above order relied various Apex Courts and High Courts decisions, where the Courts are repeatedly held that mere statements and private records cannot be relied for establishing the clandestine removal without material evidence corroborating the statements.

17. In the present case, in spite of clear directions by the Tribunal by giving an opportuinity to the adjudicating authority to bring out all the evidences including the electricity consumption, adjudicating authority failed to bring out any material evidence in support of supply of LAB by SWC to the appellants, no evidence for such a huge amount of manufacturing activity, or no evidence of any payments for sale of finished goods clandestinely removed and no evidence on removal of spent acid. We also find that no attempt has been made to obtain the documents and records from TNPL, which is crucial for sale of LAB instead the LA had only relied on the statements and records of SWC who is a sole selling agent of TNPL.