TaxTMI 
TaxTMI 
2000 (10) TMI 926
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....y gate passes 397 log sheets, 14 Scrap Inward Reports, 655 Production Analysis Reports and 129 Sale Invoices which revealed that the Appellants had indulged in suppression of production and removed them clandestinely during the period from October, 1993 to August, 1997. 2.2 The Central Excise Officers visited the factory premises on 22-4-98 and recovered 64 Pink Coloured gate passes all dated 20-4-95, Six log sheets dated 20-5-94, 22-2-95, 28-2-95, 22-4-95, 24-4-95 and 17-5-95, eight Scrap Inward Reports dated 26-2-94, 27-2-94, 19-5-94, 20-5-94, 20-2-95, 21-2-95, 22-4-95 and 22-4-95, One Production Analysis report dated 20-5-94 and other Misc. documents from the room of Shri Rajiv Puri, Excise Incharge. Scrap Inward Reports indicated time, bill number, name of the party, gross weight, tare weight, net weight, vehicle number. Some of these reports were stampted with CO's name and signed by their Gate Keeper. Log Sheets indicated heat number, time of heat on/off, quantity of melting scrap and other inputs like ferro manganese, silico manganese, number of ingots and their size, details of breakdown had also been given. Production analysis Report signed by Chemist an....
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....y demanded under Section 11AB of the Act; (iii) imposing penalty under Rules 9(2), 52A, 173Q and 226 of the Central Excise Rules; (iv) confiscating plant and machinery in their factory premises under Rule 173Q; and (v) imposing penalty on Mohinder Gupta and Harish Kumar under Rule 209A of the Central Excise Rules. 2.7 The Commissioner of Central Excise, under the impugned Order confirmed the demand of Central Excise duty amounting to Rs. 2,01,87,734, imposed a penalty of equal amount on M/s. Gian Castings Ltd., demanded interest on the amount of duty confirmed and also imposed penalty of Rs. 2 lakhs each on Shri Mohinder Gupta, Managing Director and Shri Harish Kumar, Director, holding that : (i) the scrap inward reports, parallel log sheets, production analysis reports, small pink gate passes, parallel sale invoices, ingot despatch reports, etc., resumed from the factory premises and those received alongwith the information belong to the Appellants. (ii) they are capable of producing 16 to 18 heats of M.S. ingots in 24 hours and the ....
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....r their letter dated 30-11-98, they had sought cross-examination of Rajiv Puri alongwith other 71 witnesses, no cross-examination was allowed by the Adjudicating Authority; that the finding of the Commissioner that the Advocate for the Appellants had agreed that no purpose would have been served by cross-examination is not correct; that their Advocate had not given up the request for cross-examination at any time. She also mentioned that the entire case of the Department is based on the documents stolen by Rajiv Puri without even referring to the fact that a criminal case regarding the theft and forging of documents was pending against him in the Court; that Rajiv Puri had confessed his crime to Shri Naresh Kumar, President of the Municipal Council, Sarhand and this fact was recorded in the statement of Shri Naresh Kumar before the Police; that it has been held in the case of T.M. Industries v. CCE, 1993 (68) E.L.T. 807 (T) that demand on the basis of private records, the genuineness of which is under challenge is not sustainable. 3.2 She further submitted that under their letters dated 24-2-1999, they requested that the production capacity, melt rate heat time a....
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....i nor any independent witnesses was present at the time of alleged recovery; that this fact by itself casts a shadow of doubt on the Department's contention that the documents were recovered from the factory premises. She continued her arguments by submitting that all the documents, on the basis of which demand of Central Excise duty has been confirmed, apart from invoices, are unprinted i.e. the name of the Appellants is not printed on these documents as these bear only the rubber stamp of the Appellants; that these documents are of such types which are easily available in the market and might have been procured by Rajiv Puri with ulterior motive; that on the other hand all the records, being maintained by them, bear the printed name of the Appellants; that further, though the scrap inward reports indicated name of the parties which supplied the scrap to them, no inquiry had been made from those dealers about the alleged supply made to them; that these reports also reflect the vehicle number and again no enquiry has been made from the transporters at all; that the Commissioner has wrongly given his findings that the name of the sellers are not available. In support of her contenti....
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....garding closure and resumption of production from time to time on account of break down of furnace or repair or maintenance; that there is no substance in the Commissioner's findings (para 55 of Impugned Order) that the factory was working on Public Holidays as the goods were cleared or raw material was received on those dates; that as per the Shops and Establishment Act no person can keep his Shop or Establishment operational on Public Holidays; that merely because the goods were cleared or raw material was received it does not flow from this that the furnace was also operational. She also mentioned that merely because on Christmas Day in 1993-94-95 their unit was not closed, it does not mean that the unit was working on 25-12-96 also and therefore the findings in the impugned order that their unit was working on 25-12-96 is erroneous; that the receipt and despatches are made regularly even on days when there is no production on account of unit being closed; that if a truck comes late in the evening on the day immediately preceding a Public Holiday, it may unload the goods in the morning of next day on which the unit is otherwise closed; that customers also request for supply of g....
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.... heat of the day was started even before the last heat of the previous day was over; that as there is only one furnace, it is just not possible that the first heat can be started before the last heat is over; that the two statutory log sheets have been picked up by the Commissioner to show that heat started before the last heat was over. The Ld. Advocate submitted that there was a difference of 5 minutes whereas in the case of parallel log sheets the time difference is much more, for example in one case it is 2 hours 55 minutes. She also contended that as per parallel log sheets the same melter was present for more than one heat i.e. for as many as 24, 36, 48, 84 and even 96 hours at a stretch which is physically not possible; that the finding in the impugned order that a melter can work in more than one shift is not based on any evidence and it is based merely on conjectures and surmises; that the functions of a melter are not supervisory but are so diverse that he cannot possibly sleep once a heat is switched on, as he had to decide the mix of scrap for each heat, to check the patching and lining condition of the furnace, to check the frequency, volts and Kilowatts after every 10....
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....ring signature of Harish Kumar, Director, whereas on that day officers were present for 12 hours and had verified the production and signed the statutory log sheets. She also mentioned that closure of the factory is also borne out by the Attendance register which has been duly verified by the Labour Inspector and other Government officers like Director of Industries/Health and E.S.I. The Ld. Advocate also pointed out that the melter for 2-2-94, 4-2-94 and 5-3-94 shown in Production Analysis Report is S.S. Chhiber whereas the corresponding parallel log sheet shows that Sadhu Singh was melter for the day shift and Purshottam Singh was the melter for the night shift and contended that this also disproves the authenticity of the log sheets. 7. She mentioned that after 14-9-94, the Production Analysis Reports were prepared on plain paper on which not even appellant's stamp was affixed, name of melter was not mentioned and did not bear signature of the Chemist and were presented only to Rajiv Puri and not to M.D. or Director and as such no reliance ought to be placed on such reports; that further for 4-4-94, two production analysis reports for the night shift are annexed - one show....
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....also; that this is borne out by the fact that Department has never seized a single consignment of ingots. She also mentioned that in respect of the documents received along with informations, the investigation was carried out by the Police on the directions of the Sub-Divisional Judicial Magistrate; that all the purchasers have denied having received the goods reflected in these documents; that similar parallel sale invoices are also false and fabricated one; that the Directors were pre-authenticating the invoices in terms of Notification No. 4/94-C.E. (N.T.), dated 1-3-94 and handing them over to Shri Rajiv Puri who was excise incharge; that again no enquiry from the persons whose name and sales tax number appeared in the invoices was made. She mentioned that in para 58 of the impugned order, it is recorded that some consignments cleared as per the small pink gate passes tally with the statutory sale invoices on which duty has been paid; that this finding is erroneous inasmuch as if statutory invoices have been prepared, there would have been no necessity of preparing these pink gate passes. It was also mentioned that one Anwar Khan who worked as maintenance incharge/foreman had s....
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....do this job; that after 15 days the lining of the furnace is done which take nearly 20 hours. If all these are taken into consideration, 250 ingots at most can be produced in a day whereas parallel log sheets show production of more than 400 ingots per day which is not possible at all; that even the manual of M/s. Inductotherm establishes that it is not possible to produce so many ingots or to have as high a melt rate as has been alleged by the Department; that further, melt rate as given by M/s. Inductotherm is under optimum conditions which are never available; that the melt rate goes down on account of various factors such as heavy and good scrap, proper charge i.e. order in which various types of scrap is loaded in the furnace and due to very high temperature of the furnace, it is not possible to have a continuous process of loading inputs in the furnace, patching heat take at least 1 hr longer than the other heats, fluctuation of voltage, unskilled labourer, taking 15 to 20 minutes time after every heat for pouring, slagging and deslagging etc. She further mentioned that the log sheets showing melt rate as 3480 kg/hrs was not signed by anybody; that Central Excise Officers rec....
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....ue to be comparable with that at the material time. She said that in Para 82 of the impugned order, it is mentioned that during October, 93 to April, 95, the production as per RG-1 ranged from 300 to 500 M.T. whereas during May, 1995 to March, 1997, the production ranged from 450 to 800 MT; that this is on account of the fact that they started production only in October, 1993 and it is a well known fact that a newly set up unit takes atleast one year to reach the stage of full production; that further with the increase in production, their power consumption has also increased. 11. Finally, the ld. Advocate mentioned that there was mistake in arriving at the quantity cleared and shown in RG1; that quantity reflected in RG is 7594.725 MT and not 5393.790 and accordingly the demand of 2200.935 MT deserves to be dropped; that further the weight of ingots allegedly cleared on pink gate passes has been taken erroneously in the chart annexed as Annexure "D" to the notice which is 55.07 MT more; that again in the said Annexure 'D' to the notice there is a totalling mistake to the extent of 2091.50 M.T.; that on 19-9-94 and 26-6-94, production was shown twice in Annexure 'C' as produc....
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....oods has been mentioned as steel ingots/MS ingots etc. and Department had not taken the gate passes which indicated the description of the goods other than steel ingots into consideration; that in respect of scrap inward reports also the Commissioner has given his findings, after examining those reports, that the name of the suppliers were indicated as Anish (John), Baldev (Direct), Kulwant Singh (Chetan), Luxmi Enterprises (Vicky), etc. and, therefore, he found it that it was not feasible to cause enquiry from said suppliers and accordingly the Appellants cannot claim any benefit for want of inquiry from the suppliers of the raw materials, when there is evidence of record to prove the charges levied in the show cause notice; that further Sampuran Singh had admitted in his statement dated 22-4-98 that he used to look after the receipt of the raw material and used to enter in records. Regarding log sheets not been signed by any of the Director, the Ld. SDR mentioned that the Commissioner has given his findings that it is not necessary that all the documents maintained by the unit must be signed by the Director; that even the statutory log sheets did not bear signature of the Directo....
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....le in respect of the Appellants, showing details of the fault rectifications from time to time and melt rates of iron and steel; that the affidavits given by Shri Arun Sharma is nothing but an after thought at the instance of the Appellants. Finally the ld. SDR mentioned that the Appellants have taken a period of 4 months in filing FIR which is abnormal delay; that once documents has been signed by the Managing Director these have to be believed. 14. In reply the Ld. Advocate mentioned that the sale invoices were authenticated by the Appellants as per the requirements of the law; that Annexure 59 to the show cause notice contains full address of some of the purchasers; that the Department at least should have made enquiry from these purchasers; that the excess production is two and half times of their normal production which is not possible; that no evidence of payment receipt, from their purchaser has been produced by the Department at all; that at the time of search, there was neither excess stock of finished goods nor any excess raw materials; that it is wrong to say that visits of the officer were meager as in 4 years period the officers has visited their factory 91....
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....ods. She has substantially proved her point also as the factual position mentioned by her has not been effectively rebutted. For example the Ld. Advocate has contended that the parallel log sheets existed even for days on which unit was closed on account of public holidays or on account of mechanical failure. In support she has referred to Form IV Register (Annexure 43) which clearly shows that the furnace was closed on 24-10-1993 on account of Dussehra festival but there exists a parallel log sheet; similarly though 26-1-94 was Republic Day, a parallel log sheet is available for that day also; further attendence register also contains the details of holidays. The Appellants have also enclosed extracts from Inspection Book signed by Labour Inspector (Annexure 52) in which it is mentioned that no violation was found in respect of Payment Wages Act, National and Festival Holidays Act and Pb. L. W. Fund Act. The Commissioner has not accepted the argument by mentioning that the factory was not completely closed on those dates because they had either cleared the excisable goods from the factory premises or received the raw materials on such dates. Receipt of raw material or clearance of....
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....ended that as per parallel log sheet, 2nd heat was out at 11.15 Hrs, and 526 pieces of ingots were manufactured in 17 heats on 21-2-94, the officer found the stock of finished goods in order (650 pieces weighing 57.165 MT) where as per Department's calculation stock on that date was 422.135 M.T.; the officer also verified other records and found them in order but as per the Scrap Inward Report unaccounted scrap was received during the visit time of the officers. 16. In respect of Small Pink Gate Passes on the basis of which demand of excise duty has been confirmed, one of the main contention of the Ld. Advocate for the Appellants is that no statement of any purchasers has been recorded. The Commissioner has given his findings that in absence of complete & proper name and address, no enquiry could be caused and in view of clandestine nature of the transaction even buyers would not keep any record. It is not denied by the Ld. Commissioner that names were mentioned in the pink gate passes and Department should have made efforts to locate at least some of the buyers of the goods, particularly when the Appellants made a list of such persons/factories available to the Department an....
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....loys, refractories, etc. Reliance has been placed on the decision in the case of Corona Cosmetics & Chemicals P. Ltd. v. CCE, 1991 (55) E.L.T. 118 (Tribunal) wherein it was held that "some more evidence is required regarding consumption of raw material or sale of such goods alleged to have been produced in excess by the Appellants. Obviously such evidence is lacking. In the circumstances, we cannot hold that the production shown in the private records has not been included at all by the Appellants in their RG 1 and has thus been clandestinely removed." Reliance has also been placed on the decision in Kashmir Vanaspati v. CCE, 1989 (39) E.L.T. 655 wherein the Tribunal held that note book maintained by labourers is not a dependable record to establish clandestine removal of goods unless the same is supported by other evidence, such as raw material consumed, goods actually manufactured, packed and cleared. It is apparent from these decisions that to prove the charge of production and clearance of goods in excess of the statutory records, there should be evidence regarding purchase of raw materials, manufacture and sale. In the present matters, the Department has not even brought....
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....n is 1000 Kwh (1061, 992.34 and 1074 Kwh). The Appellants have also mentioned that officers verified heat time, production capacity and power consumption during their visit to factory on 16-5-95 to 20-5-95 and remained in factory 10 to 12 hours. The certificates given by Chartered Engineer cannot be brushed aside. The Appellate Tribunal in the case of Calicut Rubber Co. v. CCE, Cochin, held that mere utilisation and consumption of high electricity cannot by itself be considered as production of tread rubber. The Tribunal, further, held that available figures of sulphur and all other inputs should have been taken into consideration along with the units of electricity consumed to come to conclusion that so much quantity of tread rubber had been manufactured by the Appellants therein. The Tribunal held as under :- "The department has necessarily to point out from the records about the inputs, electricity consumed and the appellants having the wherewithal like manpower, machinery and all other necessary ingredients to manufacture so much quantity of tread rubber." The learned Advocate has rightly pointed out that no such material has been brought on record by the Department in the pr....