TaxTMI 
TaxTMI 
2009 (3) TMI 837
X X X X Extracts X X X X
X X X X Extracts X X X X
..../639/2005 M/s. United Chemical Industries No. 14/2005 dt. 11-4-2005 Since all the above said appeals are raising a common issue and are in respect of investigations conducted simultaneously, they are being disposed off together. 2. The relevant facts that arise for consideration are appellant-company herein are manufacturers of HDPE/PP, woven fabrics, sacks. The appellant-company availed Cenvat credit of the duty paid on HDPE/PP granules purchased from various manufacturers like M/s. GAIL; M/s. Reliance Industries Ltd; M/s. HPCL etc. The officers of the DGCEI visited their factory and carried out various investigations. First show cause notice dated 4-7-2003 was issued directing one of the appellant-company herein to show cause as to why the 323 bags of plastic granules seized in the godown of M/s. Mahalakshmi Plastics be not confiscated. Further, investigations were carried out by the authorities and statements of various persons like the officers, directors of the company and also the suppliers of raw materials were recorded. Investigations culminated in issuance of show cause notices which summarises the contraventions, main allegation being, that the appellants had con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) each on Sri Vimal Sipani, Managing Director and Sri. J.K. Surana, Executive Director of the Company in terms of Rule 209A of the erstwhile CER, 1944/Rule 26 of the erstwhile Central Excise (No. 2) Rules, 2001/Rule 26 of the CER, 2002. 5. I order for confiscation of 323 bags of plastic granules valued at Rs. 3,39,150/- seized at the premises of M/s. Mahalakshmi Plastics, Erode in terms of Rule 13 of Cenvat Credit Rules, 2002. As the goods have already been released provisionally, I impose fine of Rs. 5,000/- (Rupees Five Thousand only) in terms of Section 34 of the CEA, 1944. 6. I impose penalty of Rs. 20,000/- (Rupees Twenty Thousand only) on M/s. Mahalakshmi Plastics, No. 64A, East Kongalamman Koil Street, Erode - 638 001, Tamil Nadu in terms of Rule 26 of the CER, 2002. 7. I order for payment of interest under Section 11AB of the CEA Act, 1944. (ii) Order-in-Original No. 14/2005 dt. 11-4-2005 : 1. I confirm and demand CENVAT credit/Central Excise Duty of Rs. 16,82,397/- (Rupees Sixteen lakhs Eighty Two Thousa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e premises of M/s. Nahata Products, No 38/2, Avalahalli, Timber Yard Layout, Mysore Road Cross, Bangalore - 560 026 under Rule 13 of Cenvat Credit Rules, 2002 with an option to redeem the goods on payment of redemption fine of Rs. 25,000/- (Rupees Twenty Five Thousand only)." 8. I order payment of interest under Section 11AB of the CEX Act, 1944. The appellants are in appeal against the above orders of the Adjudicating Authority. 3. The learned counsel appearing for all the appellants would submit that the entire adjudication order has proceeded on an assumption that the declared wastage of the appellant is more than the industrial norms of the wastage in respect of such products. It was submitted that the quantity of wastage as shown in the show cause notices and in the impugned order is not correct, since the Adjudicating Authority has not considered certain quantity of waste fabrics which was captively consumed for the purpose of packing of finished products. It was the submission that CBEC Circular dated 29-8-2000 clearly clarifies that Cenvat credit is admissible on the inputs used in the manufacture of packing materials which are th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nts. 3.4 On the confiscation of the goods, it is his submission that the 323 bags of plastic granules seized at the premises of M/s. Mahalakshmi Plastics, are incorrect. He submits that the said bags which were confiscated were never purchased by the appellant M/s. Kleene Packs Ltd. In the absence of any evidence to show that the said purchases were made by appellant i.e. M/s. Kleene Packs, there is no reason for confiscating the same. It was also submitted that the said plastic granules could have been of some other party as has been indicated in the statement of Shri Shivanna of M/s. Shiva Transport Company. In view of the above submissions, he prayed for setting aside the impugned orders. 4. The learned SDR on the other hand would submit that the Adjudicating Authority has given detailed findings on each and every allegation refuted by the appellant. He would submit that the wastage shown in the records of the appellants is far more in excess than the industrial norms. It is his submission that the manufacturers of plastic granules have categorically stated that the granules purchased from them would be required for manufacture of final products i.e., HDPE sacks and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on the charge of diversion of inputs, we find that similar/identical issue was before this very Bench in the case of Sipani Fibres (supra). We find that the facts of this case are identical to that was before the Bench in that case. We may reproduce the ratio of the case which went in favour of the assessee. "6. We have gone through the records of the case carefully. There are two Show Cause Notices. One Show Cause Notice relates to the seizure of cash and proposes confiscation of the same on the ground that they are the sale proceeds of the granules on which Cenvat credit was availed by the appellants. After detailed investigation, another Show Cause Notice dated 19-7-2004 has been issued. This Show Cause Notice proposes demand of Rs. 50,05,465/- being the Cenvat credit irregularly availed by the appellant on the plastic granules diverted by them during the period between July 1999 to March 2003. Annexure-D to the Show Cause Notice indicates how the above amount has been arrived at. In order to appreciate the contention of the department we are reproducing the said Annexure-D to the Show Cause Notice below :- ANNEXURE 'D' WORKSHEET SHOWING THE CENVAT CREDIT IRREGULARLY AVA....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le 105041 382304 299894 21154 6.1 A perusal of the Annexure-D clearly indicates that the Department has not accepted the waste declared by the appellant. For example, for the year 1999-2000, the appellant has claimed for use in packing a waste of 1,72,805 Kgs. According to the Department, the actual usage of wastage for packing is 67,764 Kgs. The difference between the above figures comes to 1,05,041 Kgs. Revenue holds that this represents the raw material diverted for local sale. There is also an indication that the packing material required is at the rate of 15 mtrs per roll per bale as per statement of Shri Aravind Acharya. It was pointed out by the appellant that the statement has been retracted. Even though the Commissioner has recorded that the retracted statements have no evidentiary value, in confirming the demand as per Annexure-D, he has contradicted himself. After making an assumption that 1,05,041 Kgs. of granules were diverted in the year 1999-2000, the duty has been arrived at after taking the value of the granules per kg. Thus, the entire demand is based on theoretical calculation. Similarly, for the years 2000-2001, 2001-2002 and 2002-2003, the same method....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ance of fabrics in the disguise of waste, we observe that no direct material or evidence has been brought on record by the Revenue in support of the charge. It is well settled law that duty cannot be demanded merely on the basis of assumptions and presumptions. It has been held by the Supreme Court in Oudh Sugar Mills that the findings on the strength of a show cause notice, issued on the basis of average production is "without any tangible evidence and is based on inference involving unwarranted assumptions." The Supreme Court has further held therein that "the finding is thus vitiated by an error of law." In the present matters the demand has been computed on the basis of wastage reflected in the Daily Production Reports available for a limited period i.e. November, 2000 to 18-3-2001, and the duty has been confirmed for the period from 1-4-97 to 18-3-2001. The Appellants' contention that these reports did not reflect the waste which had arisen after tape/fabric production has not been rebutted by Revenue. Further no material has been brought on account as to whom the good quality goods, said to be removed in the disguise of waste, were cleared. Moreover, we find substantial force....