TaxTMI 
TaxTMI 
2013 (11) TMI 626
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....ecessary for the disposal of the appeal may be stated thus: The main appellant (hereafter referred to as 'Nova'), against whom the duty has been confirmed, is registered with the central excise department and is engaged in the manufacture of Partially Oriented Yarn (POY), Fully Drawn Yarn (FDY) and Draw Twisted Yarn (DTY). The impugned order, which has been challenged in the present appeals, confirms the duty demands against Nova under the following heads: (i) Rs. 56,25,945/- leviable on 2,75,197.31 kgs of POY of 115/68 Denier, clandestinely manufactured and cleared by Nova to Gupta Synthetics Ltd (GSL), who in turn had processed the said POY on their Draw Twisting Machine, liable to be recovered from Nova under the first proviso to sub-section (1) of Section 11A of the Central Excise Act, 1944 (hereinafter referred to as 'the Act'); (ii) Rs. 3,93,20,685/-, leviable on 19,10,587.5 kgs of POY, during the period from March 2002 to August 2002, manufactured and clandestinely cleared by Nova, is liable to be recovered under the first proviso to sub-section (1) of Section 11A of the Act; (iii) Rs. 2,82,64,613/- leviable on 13,96,923 kgs of POY during ....
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....f said loose papers shows number of boxes, the weight of the yarn, the denier no, merge number, crill no and date etc. A-21 is a duplicate note book maintained by V.N Parab. The entries referred to in the said note book are 'A.P Total', 'A.P Production total' and 'A.P Production day'. The said Note book has been maintained for the purpose of reporting the daily progress made in achieving the production targets, till the end of the month on cumulative basis. A-22 is a Note Book (91 pages) maintained by V.N Parab, which contains the details of Crill No and number of Crill Positions etc. The document marked as A-23 is a note book, containing 83 pages, which are serially numbered. The entries contained therein are the details of random samples, drawn from different positions of spindles of the DT machine by the Quality control department of GSL. As per the Show Cause Notice, entries in A-19 tally with the entries in A-21, entries made in Page 13 of the loose papers, compiled as A-13, are in conformity with the entries made in A-19, entries in the Note Book (A-21) are in conformity with the entries made in A-19, entries made in A-22 pertain to illicit....
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....of document marked as A-22. Annexure B-3 is prepared on the basis of seized documents marked as A-19 to A-21. This Annexure, as per the Show Cause Notice, shows consumption of 69510.73 kgs of POY of 115/68 denier and manufacture of 65545.570 kgs of DTY of 70/68 denier during the period 1.7.2002 to 15.8.2002 by GSL. The seized quantity of 69510.73 kgs of POY of 115/68 denier has been cleared without payment of duty by Nova. A duty demand of Rs. 14,25,570/- has been demanded on the said quantity of POY. Thus a total of duty of Rs. 56,52,945/- has been demanded for the period starting from 1.6.2001 to 15.8.2002 from Nova. II. The facts narrated in the Show Cause Notice as regards the second demand of Rs. 3,93,20,685/- are as under: Diaries marked as A-296, A-297 and A-298, seized from the factory premises of Nova, form the basis of the second demand. In one of diaries, Ashok Chiripal was written and handwriting in all the three diaries was of the same person. These diaries contained details of production, captive consumption and clearance of polyester chips. There were huge variations in the entries made in the diaries when compared with the statu....
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....ineness of the said sales effected by Nova. The evidences relied upon in the Show Cause Notice are the following : (i) RTO's report indicates that the transportation as shown by Nova with regard to their clearances refer to fictitious transport vehicles. These vehicles were not capable of carrying goods as claimed by Nova. (ii) Nova had failed to provide addresses of buyers, freight payment details, copies of purchase orders, or any other documents, to verify the genuineness of sale transactions. (iii) Ashok Chiripal's diaries do not mention about any clearance of degraded chips or waste of polymers. (iv) Seized documents (File No:A-240, A-249 and A-291) from the premises of Nova contained certain torn pages, showing stock of chips, PTA, MEG, LDO, FO etc. which are raw materials for the manufacture of polyester chips. A prima facie conclusion has been drawn from the aforesaid evidence that Nova had issued bogus invoices for sale of degraded polyester chips and waste of polymers. Cenvat credit has been taken on the inputs (PTA and MEG), used in the manufacture of polyester chips. The quantity shown as waste of polymers and degraded chips ....
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....ree goods sent by Nova to EOUs under their charge. CBEC Circular 88/99-Cus dated 2.12.98 absolves the Central Excise Officers from physical verification of goods before issuance of certificates. It is alleged on the basis of the aforesaid evidences that Nova in collusion, with EOUs, procured CT-3 certificates from them and cleared the excisable goods against AR-3As but diverted the goods in the open market. The goods are alleged to have not reached the said EOUs. EOUs have never used the goods received from Nova for manufacturing export goods. EOUs, without receipt of duty free inputs, submitted the documents only to the jurisdictional Central Excise Officers and got the re-warehousing certificates issued which were sent to Nova. As duty was evaded by collusion between Nova and the aforesaid EOUs, the duty is liable to be recovered jointly and severally from Nova and the EOUs. Show Cause Notice, thus, proposed recovery of duty amount of Rs. 10,07,06,323/- jointly and severally from Nova and the EOUs. It also proposed imposition of penalty upon Nova and also on the EOUs. 6. Show Cause Notice dated 30.06.06 was contested by the following notices: (i) Nova ....
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....upervisor in Machines Section. Further, even as per the Show Cause Notice, V.N Parab worked with GSL for 4 years till October 2002. V.N Parab kept records during the period 1.7.2002-15.8.2002 (A/19). The period covered by the SCN is from March 2002 to 15.8.2002. There is nothing forthcoming from him (or in the Show Cause Notice) as to whether any such records had been kept by GSL for the remaining period covered by the SCN. The demand is, however, for the entire period covered by the SCN mainly on the basis of inferences re. production referred to in A/19. Such an inference based on averages is, according to Nova, legally impermissible. It is significant that V.N Parab was, while giving his statements, asked to explain A/19. It was pointed out by Nova that not a single question seeking his clarification regarding A/21 was put to V.N Parab. 8. As regards the second demand of Rs. 3,93,20,685, Nova submitted, inter alia, that the demand is based purely on conjectures and surmises without any evidence with probative value. A/296 and A/297 allegedly show Poly Chips manufactured by Nova for captive consumption. The entry for March 2002 shows 4.97 lakh Kgs (approx.), the entry for Apri....
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.... the figures contained in A/296 and A/298, claimed to have been prepared by Ashok Chiripal. Chiripal has nowhere stated that the 2 diaries showed clearances of POY only. No detail has been given as to how the department has been able to trace out MP Patel, which according to them was one of the customers of Nova. The request for his cross examination was also been denied. Ashok Chiripal has nowhere stated that the Polymer Chips were, in fact, good quality polyester chips. There is no evidence of consumption of polyester chips or polyester waste or actual production of 13,96,923 kgs of POY. There is no evidence of any customer, to whom Nova has sold POY. In the light of these facts and the absence of any evidence, it was the submission of Nova that the demand was not sustainable. 10. As regards the fourth demand of Rs. 10,07,06,623, Nova had made detailed submissions before the adjudicating authority. They had submitted, inter alia, that the department has not disputed the fact that re-warehousing certificates were issued by all the concerned EOUs in evidence of having received the consignment from Nova. Such re warehousing certificates were duly countersigned by the Central Exci....
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....ctly after following the requirements of statutory provisions, including filing of declarations, maintenance of records etc. They had received the goods against CT-3 certificates and under cover of statutory invoices and statutorily prescribed AR-3As. The fact about receipt of each individual consignment was duly notified to the Central Excise Range officer by filing D-3 declarations within 24 hours of receipt of goods in their premises. 14. On behalf of Balaji Exports, it was, inter alia, submitted before the adjudicating authority, that due intimation was given to the Range Office regarding receipt of goods. AR-3As received from Nova were produced before the department and the same is on record of the department. By way of additional submissions dated 23.1.2008, they had pointed out further discrepancies in the Show Cause Notice. 15. On behalf of Arya Fibres Pvt. Ltd, it was, inter alia, submitted before the adjudicating authority that demand is time-barred. Based on CT-3 certificates, Nova had supplied the required goods. Goods received by them from Nova have been used in the manufacture of export goods. Payments were made to Nova by cheques. 16. On behalf of Rolite Syn....
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....municated to Nova vide letter dated 10.10.2008, issued by the office of adjudicating authority. (iii) Non supply of documents: Nova in their submissions have not pointed out as to which of the documents relied upon in the Show Cause Notice has not been supplied to them. 21. On merits, the adjudicating authority has dealt with each demand separately. As regards the first demand in the Show Cause Notice, the adjudicating authority has confirmed duty demand of Rs. 56,25,945/- under the proviso to sub-section (1) of Section 11A of the Act and has held that Nova has clandestinely manufactured and cleared POY of 115/68 denier, to GSL, who in turn had processed the said POY on the Draw twisting machine. The adjudicating authority has proceeded to confirm the duty demand on the reasoning that it could be inferred from Mohan Lal Guptas statement that on an average 1560 Kgs of DTY was manufactured by GSL per day. Purchase documents produced by GSL show only two purchases of 2084.380 Kg. Balance quantity required for manufacture of DTY was procured illicitly from Nova. Mohan Lal Gupta put his dated signature on being shown VN Parabs statement. He has not stated that VN Parab's....
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....polyester chips and waste of polymers was actually consumed in the manufacture of POY, which in turn was clandestinely cleared without payment of duty. The findings of the adjudicating authority are that, since the vehicles indicated in the 9 invoices, as per the report of RTO, were incapable of carrying the goods, the only logical conclusion would be that goods shown to have been transported were not in fact transported from the factory of Nova. Clearances of degraded chips have been shown to bogus customers for the purpose of regularizing Novas account. Since Ashok Chiripal has stated that the quantities mentioned in his diaries were good quality chips, the adjudicating authority came to the conclusion that Nova did not clear degraded chips. 24. As regards the fourth and last demand, the adjudicating authority has refrained from confirming the duty demand against the EOUs and has confirmed the total duty demand of Rs. 9,77,62,573/- only against Nova under the proviso to sub-section (1) of Section 11A of the Act. Confirmation of duty demand is based mainly on the reasoning that some vehicles which have been shown by Nova for transportation of POY were incapable of transporting....
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.... Polyester Chips/Polymer Waste? (v) Whether the duty demand of Rs. 9,77,62,573/- has been rightly confirmed against Nova, alleging diversion of EOU clearances effected by them? 29. Apart from the aforesaid issues, there are some legal issues which we would be considering while dealing with the factual aspects of the case. On the preliminary issue of violation of principles of natural justice, we find that the Adjudicating Authority has rejected the request for cross-examination on the reasoning that no justifiable and tangible reasons have been furnished by Nova while requesting for cross examination. In this regard, the ld. Senior Advocate has referred to the communications made by Nova requesting for cross examination of the witnesses. 30. As early as on 28.07.2006, Nova requested for cross examination of witnesses to examine the reliability and veracity of the evidences brought on record. By subsequent letter dated 09.09.2008, Nova had raised the issue of need and relevance of cross examination in cases like the present at the initial stage and cited several judgements in support thereof, starting with State of Kerala v K.T Shaduli Yusuff Grocery Dealer (AIR 1977 ....
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....oss examination is not relevant. Cross examination has no relevance in the face of evidence available on record and the request was accordingly rejected. The statements of representatives of EOUs have been corroborated by other documentary evidence and are admissible as evidence under the law and cross examination of such persons cannot be permitted. To similar effect is the reason for rejection of cross examination in the case of transporters, since their statements have been recorded under Section 14 of the Act. The decisions cited in the submission made by Nova have been held to be not applicable since the facts and circumstances of those cases did not appear to be relevant to the facts of the present case. However, there is no discussion of any case referred to by Nova or to the facts and circumstances of those cases or even the dicta laid down in those decisions. On the contrary, the order relies upon the decision in the case of Collector v D Bhoormul (1983) 13 ELT 1546, K. Balan v GOI, (1982) 10 ELT 386 (Mad.), UOI v GTC Industries Ltd, 2003 (153) ELT 244 (SC) and Shivom Ply-N-Wood Pvt Ltd v CCE, 2004 (177) ELT 1150, and Liyakat Shah v CCE, 2000 (120) ELT 556, the last 2 deci....
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....ely upon the statement of any such persons, the Adjudicating Authority should give an opportunity of cross examination to the appellant. In Lakshman Exports Ltd v CCE, 2002 (143) ELT 21 (SC), the Hon'ble Supreme Court had held that where an assessee had specifically asked to be allowed to cross examine the representatives of two concerns to establish that goods in question had been accounted for in their books of accounts and the appropriate amount of Central Excise duty had been paid, the logic of such request is clear from what is stated therein. In Basudev Garg v CC, New Delhi, 2013 (294) ELT 353, the Hon'ble Delhi High Court relied upon the earlier decision in J & K Cigarettes v CCE, 2011 (22) STR 225 (Del.), and held that, insofar as general propositions are concerned, there can be no denying that when any statement is used against the assessee, an opportunity of cross examining the persons who made those statements ought to be given to the assessee. Reliance is placed on the decisions of the Hon'ble Supreme Court in Swadeshi Polytex (supra) and Lakshman Exports Ltd (supra) and to the earlier decisions of the Hon'ble Delhi High Court in J &K Cigarettes ca....
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....udicating Authority may refuse cross examination for justifiable reasons. According to the ld. Senior Advocate, these judgements relied upon in the letter of 10.10.2008 are not, therefore, decisions which can justify the order passed in the present case rejecting Novas request for cross examination of the witnesses on whose statements reliance has been placed. We agree with the aforesaid submissions of the ld. Senior Advocate that the decisions cited by the adjudicating authority on this aspect are clearly distinguishable. They do not lay down the proposition that cross-examination is not a right, but only that it would depend on the facts of each case. During the hearing held before this Tribunal, and while replying to the submissions on this issue made before us by the ld. Senior Advocate, the learned Special Counsel for the department made reference to the recent decision of the Hon'ble Supreme Court in Telestar Travels Pvt Ltd v Special Director Enforcement, 2013 (289) ELT 3 (SC) as supporting the order rejecting cross-examination. In the said case, the Adjudicating Authority had relied upon the statements of two persons and communication received from Indian High Commission i....
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.... principles of Evidence Act, be found fault with. It was, therefore, held that no prejudice was caused to the appellant nor was demonstrated by the appellant before the Hon'ble Supreme Court or before the Courts below. We agree with the submissions of the ld.Senior Advocate that the said decision of the Hon'ble Supreme Court does not support the proposition that rejection of request for cross examination of witnesses whose statements have been relied upon, does not amount to violation of principles of natural justice. On the other hand, the observations extracted above demonstrate to the contrary. As far as the facts before the Hon'ble Supreme Court were concerned, production of the documents being in the nature of production of documents under Section 139 of the Evidence Act, their cross examination was prohibited by the said Section itself. In the present case, witnesses who have given the statements are not persons who were asked to produce documents under Section 139 of the Evidence Act. Their statements were recorded as witnesses. This decision, therefore, does not help the contention put forward by the learned Special Counsel. For the above reasons, we hold that there has bee....
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....tter fully and examine the entire case on merits as well. 37. It is the submission of the ld. Senior Advocate that the impugned order is, per se, apart from being violative of principles of natural justice, on merits, in the facts of the present case, contrary to a long line of decisions of Courts and of this Tribunal in the matter of how clandestine manufacture and clearance of goods has to be established by Revenue. He submits that the law, in this regard, has been repeatedly laid down by this Tribunal in a long line of cases, some which have also been affirmed by different High Courts, and one of them, by the Hon'ble Supreme Court.. The issue of clandestine manufacture and clearance of goods arises, according to the ld.Senior Advocate, in the case of first three demands confirmed in the impugned order and has some relevance to the fourth demand as well. He, therefore, submitted that we may hear the submissions of both the parties on the said issue and, thereafter, apply the principles to facts relating to each demand. 38. In a Note submitted by the learned Senior advocate for Nova at the hearing on 29.07.2013, on clandestine clearance and how they are to be established, he....
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....appellant [CCE, Meerut v Moon Beverages Ltd., 2002 (150) ELT 976, Kabra Enterprises & others v CCE, 1999 (109) ELT 571, Kothari Products Ltd and others v CCE, Kanpur, 2003 (159) ELT 1187, CCE v Raman Ispat, 2000 (121) ELT 46]. This Tribunal cited and followed the earlier decision in the Moon Beverages Ltd case (supra) to the following effect: "it is well settled that the charge of clandestine removal cannot be established on the basis of one single factor which in this case, is the figures of sales reflected in the computerised sheets recovered by the Department from M/s. PEL. Without obtaining evidence such as evidence of other inputs required for manufacture of finished product namely Sugar, Carbon-di-Oxide being purchased and utilised in the manufacture of the final product during the period in dispute is required. There is no such evidence in the present case. There is also no evidence regarding higher electricity consumption. There is also no evidence of receipt of extra sale of goods clandestinely manufactured or removed." Dropping of the demand was upheld. This was despite documents having been recovered and statements of officials of the assessee that clan....
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.... confirmed on the basis of recovery of exercise Note Books and certain balance sheets maintained by the assessee and in the absence of any corroborative evidence. In fact, in a tabulated form this Tribunal dealt with the judgements which were referred to, to support the plea that demands cannot be confirmed which contained the reason for this Tribunal coming to the conclusion that, in the absence of any corroborative evidence, of a tangible nature, clandestine removal cannot be established. This Tribunal relied on the tabulated list of citations furnished by the Counsel that unless there is clinching evidence on the nature of purchase of raw material, use of electricity, sale and mode of flow back of funds, demands cannot be confirmed solely on the basis of Note Books maintained by some workers. (vi) In Hilton Tobacco v CCE, 2005 (178) ELT 378, certain private documents maintained in the factory were seized under which it appeared that the appellant had not accounted for raw material procured by him. This Tribunal held that a inference cannot be based on certain private documents only when there is no corroborative evidence recorded. Investigation had not found out at leas....
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....s rejected by the Adjudicating Authority only on the ground that the assessee had not given any reason and justification for their cross examination. This Tribunal held that this approach of the Adjudicating Authority is inconsistent with the law of evidence. On a careful perusal of the entire records of the case, the Tribunal found that there was nothing on record as to unrecorded purchases or consumption of other various raw materials in the manufacture of finished products. There was no statement of suppliers of raw material, except in respect of one of the raw materials. His cross examination has also been rejected. In the absence of any other tangible evidence to show that other major raw materials had been procured without recording the same in books of accounts, this Tribunal did not accept the contention of the revenue that finished goods had been clandestinely manufactured and cleared. After referring to several earlier decisions of the Tribunal on the subject, the Tribunal held that the charge of clandestine manufacture was not established. This decision was taken by the Commissioner of Central Excise in appeal before the Hon'ble High Court of Gujarat which was dismissed ....
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....ce of the removal of the goods alleged to have been manufactured and cleared without payment of duty. The charge of clandestine removal must be based on tangible evidence and not on inferences involving unwarranted assumptions. This very principle of law had been applied by the Tribunal in a number of cases and out of those, few are, Amba Cement and Chemicals v. CCE - 2000 (115) E.L.T. 502 (Tribunal) = 2000 (90) ECR 265, Gurpreet Rubber Industries v. CCE - 1996 (82) E.L.T. 347 and Madhu Foods Products v. CCE - 1995 (76) E.L.T. 197. 10. For want of any legal, tangible and concrete evidence, the duty demand of Rs. 4,64,56,058/- as confirmed by the learned Commissioner along with equal amount of penalty and interest, against the company appellant No. 1, cannot be legally sustained and is set aside. Being aggrieved by the order, the revenue carried it in appeal to the Hon'ble Supreme Court and the same was dismissed as reported in 2003 (157) ELT A315 (SC). The ratio of the decision clearly indicated that in the case of clandestine removal it was for the revenue to substantiate the allegation of clandestine removal. (ix) In Radha Madhav Corporation Ltd v CCE, ....
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....facture and clearance. Where such ingredients exist, a contention that a case need not be proved with mathematical precision may become relevant. The decision in D. Bhoormull would not, therefore, be of help to the revenue in cases where there is no evidence at all satisfying the tests laid down by this Tribunal in the long line of cases referred to earlier. In support of the submission regarding preponderance of probability being tested to determine the issue the learned Special Counsel had referred to 3 decisions. Gulabchand Silk Mills Pvt Ltd v CCE, 2005 (184) ELT 263, Umiya Chem v CCE, 2008 (7) LCX 0602 2009 (239) ELT 571 and Ureka Polymers v CCE, 2001 (127) ELT 618. These decisions, according to the ld. Senior Advocate, are not contrary to the decisions cited by him for Nova. In the case of Gulabchand v CCE, the vehicle was intercepted carrying non duty paid goods. Unaccounted duty paid goods were found in the dealers premises and they gave statements to the effect that the goods were supplied with bills and without bills. This was not a case where there was no evidence of clandestine manufacture and clearancee. In the Umiya Chem (supra) during the course of search, shortage o....
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....dentified parties; (e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of buyers with some details of illicit manufacture and clearance; (h) proof of actual transportation of goods, cleared without payment of duty; (i) links between the documents recovered during the search and activities being carried on in the factory of production; etc. Needless to say, a precise enumeration of all situations in which one could hold with activity that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of note books or diaries privately maintained or on mere statements of some persons, may even be responsible officials of the manufacture or even of its Directors/partners who are no....
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.... aside in that case by this Tribunal. 42. We may now proceed to deals with the four demands of duty in the present case: I. The first duty demand of Rs. 56,52,945/- is mainly based on documents seized from the premises of GSL i.e. A-19, A-20, A-21, A-22 and A-23. Other than these documents, the evidence is V N Parab's statement and Mohan Bhai Gupta's statement. The seized documents as per the stand of the Revenue are note books maintained by Parab. The allegation with regard to the present demand is that Nova had clandestinely cleared POY to GSL. According to the Revenue the entries made in A-19, A-20, A-21, A-22 and A-23 pertain to clandestine procurement of POY of 115/68 denier from Nova and clandestine production of DTY by GSL by processing the same. The ld. Senior Advocate has submitted that the entries made therein by V N Parab are totally vague, in as much as there is nothing therein to show that they pertains to clandestine procurement of POY and clandestine clearance of DTY. The learned Senior Advocate has also pointed out that there are discrepancies in the seized documents relied upon by the Revenue. He has further pointed out that A-21 does not even r....
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....ntrary is proved against such person, the Court shall presume the truth of the contents of such document. Therefore, the truth of contents of such documents can be presumed only where the person from whose custody or control the document has been seized is being proceeded at all, whether solely or jointly tried with some other person. In the present case, V.N Parab has not been proceeded against solely or jointly with some other person. In the present case, admittedly the documents were recovered from the premises of GSL. The said documents were produced by Parab who is no way connected with Nova. No presumption could therefore be drawn against Nova. There has, therefore, to be independent corroboration of the facts alleged in the Show Cause Notice, apart from documents. The learned Senior Advocate has relied upon the decision of the Hon'ble Supreme Court in the case of State of Kerala v M M Mathew (1978) 4 SCC 65. He drew attention to the relevant para of the said judgement: It is now well settled that strong suspicion, strange coincidences and grave doubts cannot take place of legal proof. To establish the charges against the respondents, it was, in our judgement, essent....
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....ained orally. After summarizing the facts as stated by the Adjudicating authority, by way of what has been stated in the Show Cause Notice, the ld. Special Counsel has submitted that, except for saying that investigations did not touch on purchase of raw materials and payments therefor, Nova did not come forward with any satisfactory explanation in respect of the facts stated in the Show Cause Notice, and the statements referred to therein. In this view of the matter, he submits that the present demand has been confirmed by the Adjudicating Authority for valid reasons and cannot be faulted. We have considered the submissions of both parties. We find that no evidence has been produced by the Revenue to show that Nova has effected sale of such huge quantities of (2,75,197.31 kgs) POY to GSL. There is no tangible evidence of GSL having actually produced all the DTY or Twisted Yarn from out of non-duty paid POY supplied by Nova. No transporters documents have been seized or produced by the Department to show transport and sale of such huge quantities of POY from Nova to GSL or, even for that matter, from GSL to the buyers of DTY produced by GSL. No evidence has been forthcomin....
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....e Hon'ble Supreme Court emphatically declared in the Oudh Sugar Mills case (supra). We are of the view that there is no tangible evidence produced by the department to establish that Nova has clandestinely manufactured and cleared POY on which the present demand has been made. We, therefore, set aside the demand of Rs. 56,52,945/- as being illegal and unjustified. II. The second demand of Rs. 3,93,20,685/- is based on Ashok Chiripal's diary, his statement and statements made by some of the employees of Nova. According to the Show Cause Notice, the diaries refer to production, captive consumption and clearance of Polyester Chips by Nova. Figures showed wide variations with statutory records. The chips are further used in the manufacture of POY by Nova. As regards this demand, the allegation is that Nova had suppressed the actual production, captive consumption and clearance of Polyester Chips and has not recorded for the entire production of Polyester Chips in the statutory records. Excess Polyester Chips have been captively consumed by Nova for further manufacture of POY which was further clandestinely cleared by them. According to the Revenue, the diaries were maintained ....
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....ral Excise Act, 1944 is admissible as evidence. Admissibility of a statement in evidence does not make it a confession. In this connection, he has referred to the decision of the Hon'ble Supreme Court in Veera Ibrahim v State of Maharashtra (1976) 1 SCC 302, that Section 24 of the Evidence Act requires certain facts to be established. The statement in question should be a 'confession'. Firstly, such confession should have been made by the accused. Other ingredients of S.24 are not relevant in the context of the present case. It is important to note that the statement in order to amount to 'confession' must admit the offence or at any rate substantially all the facts which constitute the offence. Admission of incriminating facts howsoever great, is not by itself a 'confession'. In the present case, the so-called confession has not been made by a person charged with any offence. Ashok Chiripal has not been charged with any offence which is in violation of the law in the present case. No show cause notice has been issued to him. The question of his statement being regarded as 'confession' does not, therefore, arise, because confession, by its very nature, has to be made by a p....
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....PTA (raw materials) were being purchased by them from Reliance Industries Ltd, a major supplier of the same, in respect of which proper records are maintained by them as well as Nova, and it was presumptuous for the Department even to contend that they were purchased from Reliance Industries Ltd. without any payment being recorded or in cash. Apparently, the investigating authorities never verified this from Reliance Industries Ltd and the impugned order records a mere finding that the statement that Nova purchases the raw materials from Reliance Industries Ltd is 'factually incorrect' without giving any reason for arriving at the said finding. It was, therefore, the submission of the ld. Senior Advocate for Nova that the diaries and statements relied upon by the Revenue do not prove the case of clandestine manufacture and clearance of POY by Nova, which has to be established in accordance with law laid down by the Tribunal in the long line of decisions, referred to by him while dealing with the earlier demand. In reply to the submissions made on behalf of Nova, the ld. Senior Special Counsel for the Revenue filed written submissions on 30.7.13 and explained the same. The ....
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....ependent corroboration, which is lacking in the present case. The long line of decisions referred to and relied upon by the ld. Senior advocate for Nova have laid down the parameters for a charge of clandestine manufacture and clearance to be established, which have not been satisfied in the present case. We need to say nothing more. The present demand of Rs. 3,93,20,685/- is, therefore, unjustified and deserves to be set aside. Accordingly, we do so. III. The third demand of duty of Rs. 2,82,64,613/- is on Degraded Chips/Polymer Waste arising in the factory of Nova during the course of manufacture of POY. The allegations are essentially based on a report of the Regional Transport Officer (RTO) showing that the vehicles shown as transporting degraded chips are incapable of carrying the goods, that full addresses of buyers had not been given, and no payments have been made to transporters. It was alleged that no clearances of degraded Polyester Chips/Polymer Waste took place, and they were consumed captively to manufacture POY which was cleared clandestinely. Reliance has been placed upon the statement of Pankaj Patel, Accounts Assistant and H K Jha. Again Ashok Chiripal's ....
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....hat they were POY of good quality. Ashok Chiripal's statement, therefore, would not substantiate the case of the revenue. The primary evidence which is required to establish clandestine removal is absent in the present case as explained in the decision of the Tribunal referred to earlier, is absent in the present case. It is further stated in the written submission filed by the ld. Senior Advocate that the RTO's Report relied upon by the Department dealt only with 9 consignments out of 130 (79090 gms out of 1396923 kgs) in which, as the Director of Nova pointed out in his statement, there could have been a human error, since the Vehicle Nos were written down as given by its Driver. It was also stated by Nova that details of identity of the customers and addresses were all given on the invoices. In fact, one of the customers had even been summoned by the investigating officers, who stated that he did not know Nova. Further, in the 9 consignments referred to by the RTO, addresses were indicated in the invoices. Though the vehicle numbers were wrong, the Department made no efforts to verify from the addressee customers as to whether they received the goods or not. There i....
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....en placed in the impugned order to the decision of the Tribunal in the Viraj Alloys Ltd case, 2004 (177) ELT 892, we have gone through the same. We agree with the submission of the ld. Senior Advocate for Nova that the said decision is distinguishable for the reason that the said decision was in a case where R.57G of the erstwhile Central Excise Rules had prescribed the particulars which an Invoice under Rule 52A should contain. Correct registration No. of the vehicle was a mandatory prescription. In the present case, no such mandatory provision has been pointed out to us. Further, the decision cited by Revenue confirmed the duty demand in respect of the invoices where the mandatory provision was found to been violated in as much as 99 vehicles were found to have been incapable of carrying the goods. In the present case, there were 9 vehicles out of 130 but the entire duty in respect of all the 130 vehicles has been confirmed. In any event, this being a case of clandestine clearance, evidence thereof cannot be the mere incapacity of 9 vehicles (inferred from only the Vehicle No. indicated) out of 130 to carry the goods. Corroborative evidence of actual manufacture of POY and cleara....
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....in respect of goods consigned to EOUs as well as payment in respect of the goods from the EOUs were also submitted by the dealers. Enquiries with the Central Excise authorities, according to the Show Cause Notice, made it clear that they never verified duty-free input sent by Nova to EOUs under their charge because of CBEC Circular 88/98-Cus dated 2.12.1998. Certificates were issued on the basis of documents without any physical verification. In respect of EOUs located in the State of Gujarat, transportation of goods were, in some cases, made in incapable vehicles. Demands were, therefore, made jointly and severally from Nova and different EOUs. In the case of some EOUs, the Show Cause Notice alleged that they did not have the machinery to manufacture the goods from POY sold by Nova to them and export them. The Adjudicating Authority confirmed the demand holding, inter alia, that the Show Cause Notice, as alleged by Nova, was not defective in demanding duty jointly and severally from Nova and the EOUs. He relied upon the definition of the term 'manufacture' under Section 2(f) of the Act and usage of the word 'person' in Section 11A thereof. In all the cases of EOUs, the demands hav....
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....cate submitted that the manufactured product in the present case is POY which, admittedly, is manufactured by Nova and not by the EOUs. There is no manufacturing activity attributable to the EOUs insofar the manufacture of POY is concerned. Though the Adjudicating Authority has relied upon the definition of the term 'manufacture' in Section 2(f) of the Act, the learned Senior Advocate submits that the Adjudicating Authority has misinterpreted the inclusive part in the definition of the term 'manufacturer' appearing in the said Section 2(f) to mean that there could be more than one manufacturer in some cases. The learned Senior Advocate submits that the Adjudicating Authority has erred in coming to the above conclusion. Nova had relied on the decisions of this Tribunal in Famous Textiles v CCE, 2005 (190) ELT 361 and in the case of Shree Arvindh Steels, 2007 (216) ELT 232. Though they directly dealt with the issue, the Adjudicating Authority held that the ratio of the decisions is not 'strictly' binding, since Famous Textiles decision was in a stay application under Section 35F of the Act and not a final order under Section 35 thereof. The decision in Arvindh Steels Ltd is the subje....
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.... in charge of Nova directly from Central Excise and Customs officers in charge of all the EOU customers. These have been shown as received in the in-bond register of the EOUs and payments have also been made by the EOUs to Nova by cheques/drafts. According to the Adjudicating Authority, physical verification of receipt of POY by the EOU was not necessary because of the Board Circular. The Delivery Challans are the conclusive document. The DC did not contain the signature of the authorized person or of the recipient. Therefore, there was no delivery at Malegaon/Dhulia. At the same time Delivery Challan is relied upon by the learned Adjudicating Authority to say the goods were delivered at or around Surat since the reverse side contained the names (not signatures) of Nova's brokers at Surat. From this it is presumed that the goods were sold in local market in or around Surat. There is no reference anywhere as to when they were sold in Surat, by which broker to which buyer. Significantly, enquiries were made with the brokers but it was found that no incriminating documents were available with them because the enquiries were twenty days after the search at Nova and the brokers anticipa....
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....ith that seen physically and ensured that proper entries were made in the records maintained in this regard by the concerned EOUs. So far as indigenous duty free goods duty-free goods/consignments are concerned, all the works relating to re-warehousing were based on documents. The EOUs were filing D-3 intimation, along with copies of AR-3As and invoices covering the consignments etc., with the Range. Since the physical supervision of EOUs had been dispensed with in terms of the CBEC circular No:88/98-cus dated 2.12.98, issued from F.No.473/9/98-LC, all re-warehousing procedures, other than those in respect of imported duty free consignments, were being monitored on the basis of records/documents maintained both by the EOUs as well as those maintained at the Range level. As and when the EOU were filing the D-3 intimation, the necessary records were called for with regard to in-bonding of such duty free goods, and based on the entries made therein and so far as it relates to other documents so submitted by the EOU to the Range under their signatures/certification, the Central Excise officer was signing the re-warehousing certificates on that basis viz., record/document basis only. At....
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....e recorded in a proper register. Therefore, even assuming that physical verification has been dispensed with, responsibility of departmental officers to ensure checking the correctness of raw material, quantity used, finished goods produced etc. and maintenance or proper records is prescribed under the said circular and not dispensed with. Therefore, in the light of the CT-3s, AR-3As, D-3 and re-warehousing certificates having been issued in present case, by the parties, the ld. Senior Advocate submits a mere mention of the broker's name on the backside of Delivery Challans cannot have any significance or impact, particularly when D-3 intimation is a document which acknowledges the receipt of goods by the EOUs and is duly signed by the EOU. It was also the contention of the ld. Senior advocate that all EOU customers who were interrogated during the investigation have confirmed when their statements were recorded under Section 14 of the Act, that they have received the consignments of yarn from Nova which were warehoused in their premises and were used for further manufacturing purpose. The Adjudicating Authority has rejected these statements only on the ground that EOU customers ha....
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....ssions have not been considered/appreciated by the Adjudicating Authority. It was, therefore, submitted by the ld. Senior Advocate that the confirmation of the present demand in the impugned order is totally devoid of any factual basis and is legally untenable. On the merits of the present demand, the learned Special Counsel for the revenue has, as stated earlier, analyzed the evidence in a tabulated form in the written submission filed by him on 30.7.2013. He submitted that, in view of the reasons given in the tabulated form in column 4 under the head reasons, on the basis of complying with the principle of preponderance of probability and the weight of documentary and circumstantial evidence, it has been correctly held by the respondent that the allegation in respect of the seven EOUs (outside Gujarat) has been proved. He has also emphasized the fact that none of the aforesaid 7 EOUs participated in the adjudication proceedings. The learned Special Counsel has, while summing up his submissions, justified the order passed by the Adjudicating Authority in the present demand since, as per the report of the RTO, a number of vehicles shown to have been used to transport duty ....
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....ed the entire demand. Reliance was placed on the decision of the Tribunal in the Viraj Alloys & Stees (supra). He also cited 3 decisions in the matter of preponderance of probability which, according to him, proved the case in favour of the revenue in the instant case. We have considered the submissions of both the parties on the merits of the demand. It is true as pointed out by the ld. Senior Advocate for Nova that the impugned order itself states that re-warehousing certificates for the entire quantity of yarn were received by the Central Excise Officers In-charge of all the EOU customers. These have also been shown as received in the in-bond register of the EOUs and payments have also been made by the EOUs to Nova by cheques/drafts. These have not been disputed by the ld. Special Counsel for the Revenue. CT-3 certificates, AR3As and D-3 declarations are all mandatory prescriptions under the Central Excise Rules in respect of transactions occurring between manufacturers and EOUs. The Adjudicating Authority, while passing the impugned order, has in the light of the statements of Inspectors in-charge of EOUs that physical supervision of receipt of goods by the EOUs had be....
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.... and non-maintenance of the accounts shall be viewed seriously and should also reflect on the supervisory role of the officers who have been assigned to supervise the said units. Such accounts should be scrutinised once in every month by the officer who have been posted on cost recovery basis or other officers assigned to the unit. (iii) Movement of non-duty paid goods:- The movement of goods without payment of duty has been allowed from the EOU to another EOU or to STP/ EHTP units and for exports. The officer in-charge of the sending EOU and receiving units shall watch such movements as there are reports of misuse of this facility. The rewarehousing certificate on transfer of the goods from one EOU to another shall be obtained by post and shall be cross-checked occasionally with the Superintendent in-charge of the next unit to see whether the goods have been actually received in the unit or not. In case of non-receipt of rewarehousing certificate and similarly proof of export from the proper officer, within 90/180 days, the duty shall be demanded from the sending unit immediately. (iv) Audit of the unit:- The presently sanctioned Cost Recovery O....
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....of the receipt of the goods in the EOU and matters relating thereto, that are dispensed with. The Circular does not absolve the departmental authorities from (on the other hand, it prescribes it) the responsibility for periodic check of the factory as well as the EOUs to ensure that the records maintained for the purpose are proper and true, apparently because the manufacturers and EOUs enter into transactions which involve duty-free clearances under liberalized procedures. It is important to note that the impugned order takes into consideration the fact that, in compliance of the Board Circular, officers were not verifying physical receipt of goods in the EOUs. It would be incongruous to presume that the departmental officers did not carry out, in the present case, the periodic checks which have been prescribed under the latter part of the Board Circular. A Board Circular is binding in its entirety and not in parts. If their duty is to inspect the units on periodic basis to verify the correctness of the records, their failure to do so would amount to a non-compliance with the Circular. The relevancy of statutory records cannot, therefore be minimized by the department itself and p....
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....ure was any different. It cannot, therefore, be said that the presence of names of the dealer on the reverse side of the Delivery Challans would mean that the goods were delivered to the dealer in or around Surat. It is clear and an admitted fact as seen from what has been extracted above that all transactions between Nova and EOUs were through dealers and the name of the dealer on the reverse of the Challan was to identify the dealer who was connected to the particular EOU. To conclude that the name of the dealer on the reverse of the challan is only to direct that the goods should be sold in or around Surat in the domestic market by the named dealer is too presumptuous and not backed by any evidence to support it. Secondly, if the intention of Nova was that the goods should be delivered to dealers at Surat, in such a case, at least in some of the Delivery Challans, it would be reasonable to expect that the dealer to whom the goods were delivered would have signed in token of having received the goods, whether it be for onward sale in Surat itself or on behalf of the EOU. We are not in a position to appreciate the inaction on the part of the Investigating Authority to get any clar....
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....ey had received the goods and paid for the same. One of them had even produced evidence of the POY having been sent for job work and having exported the finished product thereafter, and the consequent de-bonding of the unit. Another important consideration which has a vital bearing on the justifiability of the present demand is the fact that, even though there had been statements of transporters that the goods were unloaded at Surat, there has not been, any evidence of any such unloading having taken place. Since there is not even an iota of evidence as to where in Surat the goods were unloaded or as to who took delivery of the same (this should have been known to the transporter) and to whom the goods had been sold, the present demand has no factual basis to sustain itself. The demand itself is been made in respect of 43,53,933.42Kgs as pointed out by Nova in their reply to Show Cause Notice, and covers the period (FY-2001-02 & 2002-03). No evidence of any sort (not even a single instance) showing actual sale of goods in the domestic market has come on record. The textile industry being one of the predominant industries in Surat, it is difficult for us to conceive that clandestine....
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....out any concrete evidence on any of the aspects referred to by us above. In dealing with cases like the present involving allegations of clandestine sales in the domestic market by the EOUs or even by manufacturers under the guise of sending the goods to EOUs, one has to keep in mind the need for clinching evidence of violation of the provisions of the Act and the Rules made thereunder. A conclusion cannot be arrived at on the basis of inferences which are, in turn, based on statements which are not supported by actual facts in existence or found. As far as the present demand is concerned, the allegations against Nova are based on some vehicles mentioned in the invoice being not capable of being used, the goods mentioned in the invoices not having been received by the EOUs, and the incapacity of some of the EOUs for utilizing the goods. From our discussion above, it would be clear that none of these grounds is substantiated by concrete or credible evidence. Mere reliance on the statements not corroborated by tangible evidence cannot be the basis for confirmation of a demand of high demand as in the present case. On the basis of the aforesaid findings, we are constrained to set asid....