TaxTMI 
TaxTMI 
TaxTMI 
2014 (8) TMI 18
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Directorate General of Central Excise Intelligence (DGCEI), Mumbai Zone received an information that JBMI is indulging in sale of clandestine manufacture and removal of excisable goods under the cover of fake / fabricated sale documents of JBMC. A search was carried out on 25.04.2007 in the factory premises of JBMI, JBMC and JBMI depot at Bhivandi, Thane. Premises of some important buyers and transporters in relation to the appellants were also searched. During the course of search at the factory premises of JBMI, Surat, one bound book of delivery challans / proforma invoices of trading firm JBMC was recovered from the factory premises of JBMI, Surat. Shri Ramesh R. Kothari partner of JBMI identified the said challan book to be of JBMC and lying in the factory premises of JBMI. Two challans / proforma invoices bearing sr. no. 2 & 3 both dtd. 23.04.2007 were found to have been used for removal of copper rods manufactured by JBMI. Another challan bearing sr. no. 2, dt. 20.04.2007 of JBMC was also found to be used for sale of Foundry Ash from the same challan book, which was in addition to the challan bearing the same no. dt. 23.04.2007. After doing detailed investigation and r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of metals, including tin, lead, nickel. It was argued by the Ld. Advocate that it is presumed by the adjudicating authority that JBMC had sold the entire quantity of more than 400 MT scrap to some other persons over a period of 4 / 5 years and JBMI has procured equal quantity of copper material from elsewhere to manufacture copper articles for which demand has been issued. He made the bench go through Panchnama dt. 25.04.2007 drawn at the factory premises of JBMI do drive home the point that during the course of Panchnama physical stocks of raw materials, semi finished goods and finished goods were taken under by the officers of DGCEI but the physical stocks were found to be as per statutory records. It was thus argued by the Ld. Advocate that if their was clandestine manufacture and clearance of copper articles then there would have been some shortages / excess in the raw material and finished goods in the factory premises of JBMI. 6. Ld. Advocate appearing on behalf of the appellants also argued that the case of the revenue is totally based upon the surmises, presumptions and statements of third parties. That no cross examination of the witnesses was allowed to the appellants ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Kothari, Partner of JBMI in his statement dt. 01.05.2007 had admitted duty liability with respect to challan nos.2 and 3 both dtd. 23.04.2007 of JBMC found in the factory premises of JBMI. It was his case that another challan no.2, dt. 20.04.2007 with respect to Foundry Ash of the JBMI was also be for clearing Foundry Ash generated in the factory premises of JBMI. Ld. A.R. also emphasized that as per the statement of the suppliers of waste and scrap to JBMC it was not possible to retrieve copper articles like copper bars, copper rods and copper strips. It was also his case that in a small premises of JBMC it is not possible to segregate the waste and scrap of different articles and that during the relevant period the payment made to the labour was found to be nil when appellant claimed the segregation of waste and scrap to have been done by employing labourers and that such labourers were being paid through cash. Ld. A.R., therefore, strongly defended the order passed by the adjudicating authority. 9. Heard both sides and perused the case records. In these proceedings, a case of clandestine manufacture and clearance of copper articles has been made against JBMI on the grounds tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ain challans of JBMC in the factory premises of JBMI and the opinion / statements of third parties can create a strong presumption that appellants were indulging in the clandestine manufacture and clearance of excisable goods. However, creation of a strong suspicion does not establish the charge of clandestine manufacture and clearance of excisable goods. It has been held by the Hon'ble Supreme Court in the case of State of Kerela Vs. M.M. Mathew & Anr. [(1978) 4 SCC 65] that a strong suspecion from strange coincidences and grave doubts cannot take the place of the legal evidence. That to establish the charges of clandestine manufacture and clearances, it is essential to substantiate the case by adducing satisfactory proof to the effect that appellants have actually committed an offence. In the absence of any such corroborative evidences and indications mentioned above, it cannot be held that JBMI has undertaken clandestine manufacture and clearance of excisable goods. In the case of Commissioner of Central Excise, Customs and Service Tax Vs. Vishwa Traders P. Ltd. [2013 (287) ELT 243 (Guj.)], the jurisdictional Hon'ble High Court of Gujarat held as follows in paragraphs 7 and 8: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed for manufacture of Frit without recording in books of accounts, we are unable to accept the contentions of the ld. AR appearing for the Revenue and the findings of the adjudicating authority, that there was clandestine manufacture and clearance of the finished goods. The investigation has not proceeded further to bring on record unaccounted purchases of all the raw materials required for manufacturing of Frit. 16. In the absence of any tangible evidence which would indicate that there was clandestine manufacture and clearance of the goods from the factory premises of M/s. VTPL, in the peculiar facts and circumstances of this case, we hold that the impugned order which confirms the demand on the appellant M/s. VTPL and imposes penalty on them is not sustainable and is liable to be set aside and we do so. 8. From the aforesaid findings of the Tribunal, it is clear that the appellant has not made any clandestine manufacture, which he has removed clandestinely and on which the duty was payable. 11. In the present appeals also there is no such evidence on record that appellant JBMI procured ext....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 not even permitted to be cross-examined, as in the present case, without one or more of the evidences referred to above being present. In fact, this Bench has considered some of the case-law on the subject in Centurian Laboratories v CCE, Vadodara, 2013 (293) ELT 689. It would appear that the decision, though rendered on 3.5.2013, was reported in the issue of the ELT dated 29.7.2013, when the present case was being argued before us, perhaps, not available to the parties. However, we have, in that decision, applied the law, as laid down in the earlier cases, some of which now have been placed before us. The crux of the decision is that reliance on private/internal records maintained for internal control cannot be the sole basis for demand. There should be corroborative evidence by way of statements of p....