TaxTMI 
TaxTMI 
2015 (2) TMI 602
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.... arisen out of Order in-Appeal No. Commr (A)/238 to 240/VDR-II/2009 dt. 29.09.2009 wherein a demand of Rs. 35,86,397/- was confirmed against M/s Shri Krishna Industries, Jambusar and equivalent amount of penalty was imposed. Further a penalty of Rs. 50,000/- was imposed upon Shri Mukesh Narottambhai Patel, Supervisor of Shri Krishna Industries, Jambusar and of Rs. 25,000/- upon Shri Hitesh H. Patel, partner of M/s Giriraj Sales Agency Morbi. The Appeal No. E/1602/2009 has arisen out of Order-in-Appeal No. Commr. (A)/241/VDR-II/2009 dt. 29.09.2009 wherein a demand of duty of Rs. 16,00,000/- was confirmed against M/s Shri Krishna Industries Jambusar. Appeal No. E/1163 of 2007 is filed by M/s Himsun Ceramics. 3. The facts arising for consideration are that M/s Shri Krishna Industries Ltd. having units at Vadu and Jambusar are engaged in the manufacture of Ceramic Fritz falling under chapter 32.07 and Sodium Silicate falling under chapter No. 28.39 of the schedule to the Central Excise Tariff Act, 1985. On the basis of investigation conducted by the officers of DGCEI, Zonal Unit, Ahmedabad, the Jambusar Unit was issued show cause notice dt. 17.11.2004 and Vadu Unit was issued show c....
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.... show cause notices were confirmed by the adjudicating authority and subsequently upheld by the Commissioner (Appeals). Hence the present appeals. 6. Learned Counsel appearing on behalf of the Appellants made the following submissions : (i) the statements of the buyers of the finished goods relied upon does not shows clandestine removal. The statements of four buyers were recorded out of which two buyers namely Shri Jagdishbhai Prabhudasbhai Patel, Director of M/s Patidar Silico Pvt. Ltd, and Dharamsingh of M/s Bhimani Ceramics in their statements has clearly stated that the goods were received on invoices which has not been contradicted by the revenue. That the remaining two buyers Shri Girishbhai Bhailalbhai Thakkar, Director of Jalaram Ceramics, and Shri Mansukhbhai, partner of M/s Maruti Silver Ceramics whose statements were relied upon in their cross examinations have denied the receipt of goods or has stated that the goods were received under cover of invoices. That apart from these four persons no other investigation at the buyers took place or even if undertaken was not stated in the SCN. He submits that apart from these buyers no investigation was made from any other....
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....only on the basis of details mentioned in invoices shown to him, he have stated that the trucks pertained to his transport company. In his cross examination also he clearly stated that he does not have any record. That only on the basis of some chittis in files seized from Vadu factory he stated that they have transported goods whereas no evidence is appearing of his transport company having transported the goods. That from his statement and cross examination it can be seen that there is no evidence of any goods stated in chittis to have been transported by M/s Shree Krishna. That even the chittis cannot be a ground for alleging any clandestine removal in absence of any enquiry from the persons who received the goods or to show that such goods were cleared without payment of duty. (iv) That similarly statement of Shri Chetan Shah, proprietor of M/s Shah Roadways was recorded on 16.10.2013 wherein he stated that the letter K in transport register stands for Shree Krishna Industries. He further stated that he does not maintain any LR or any Bills to M/s Shree Krishna. That they have given trucks for transportation but does not have any record. That no Lorry receipt or record of tr....
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....ccepts that for the year 2003 04, M/s Shree Krishna, Vadu did not operate the factory and the goods were manufactured by M/s Associated. That the goods were cleared by them under the cover of their invoice. Thus it cannot be said that any goods were cleared clandestinely by M/s Shree Krishna. As regard the goods allegedly cleared by M/s Shree Krishna, Shri Hitesh Parekh neither had any records nor any enquiry was conducted at any of the buyers and even if conducted nothing illegal was found which clearly shows that the allegation of the SCN and the impugned orders are not sustainable. Further Shri Hitesh Parekh in his cross examination himself stated that he does not know whether the material to parties was sold by Shree Krishna or Associated and whether the material was delivered or not. In such case no allegation of clandestine removal of goods by M/s Shree Krishna is proved. (viii) That the statement of the employees and Shri Sameer Parekh, proprietor of M/s Shree Krishna cannot be basis for demand as there are no corroborative evidence. The statement alone cannot be a ground and especially in view of the fact that the investigation made from the buyers of Fritz , raw m....
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....003-04 is not liable to be added to the clearance value of M/s Shree Krishna Industries, in as much as during the year 2003-04, the factory at Vadu was not run by the appellant but by M/s Associated Industries as admitted in the show cause notice itself. That it is admitted fact of the show cause notice that possession of the factory premises at Vadu, which was taken on rental basis by the appellant from M/s Associated Industries, was given back to its owners. M/s Shri Krishna had purchased raw material and given to M/s Associated Industries for manufacture on job- work basis. It is by now a well established principle of law that supplier of raw material is not a manufacturer under Section 3 of the Act. The job-worker is the manufacturer, liable for payment of duty. He places reliance upon the decision of the Tribunal in the case of KERALA ELECTRICITY BOARD v. COLLECTOR OF CENTRAL EXCISE, reported at 1990 (47) ELT 62 (Tribunal) as upheld by the Hon'ble Supreme Court as reported at 1992 (62) ELT A52 (SC). That moreover during the course of cross-examination of Shri Dharamsibhai Patel, Partner of M/s. Bhimani Ceramics, conducted on 20.1.2006 it has come out that during this year ....
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....ired 40 to 45%, Dolomite 12 to 20%, Feldspar, Calcium, Zinc. Not a single supply of such goods in excess alleged. (d) No evidence of any payments made towards excess purchase of raw material. (e) No payment of excess labour charges. (f) No evidence of any excess or disproportionate use of gas for manufacture of fritz in comparison to manufacture of goods shown by M/s Shree Krishna in their book of accounts. (g) No enquiry from buyers of fritz except three buyers whose statements and cross examination does not support the revenue s case. (h) No evidence of any amount having been received by M/s Shree Krishna of goods alleged to have been cleared without payment of duty. (xv) He submits that in view of above submissions and judgments, the demands confirmed against M/s Shree Krishna Industries as well as penalties imposed upon them and other Appellants are not sustainable and are required to be set aside. (xvi) that in case of Appeal No. E/1603 1605/2009 related to M/s Shree Krishna Industries, Jambusar and othrs the adjudicating merely on the basis of investigation made in the show cause notice and on the basis of order passed order against M/s Shree ....
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.... legally ignored. That the evidence in the form of delivery challan and invoices showed clearance effected by M/s Shree Krishna during 2003 04 and that the Appellant reliance upon the para of the show cause notice that the factory was run over by M/s Associated Industries does not hold good. 8. Heard both the parties and perused the records/written submissions. 9. On careful consideration of the facts and submission I find that the case was booked on the basis of note books mainly seized from the residence of employee of M/s Shri Krishna and the statements of some buyers, supplier of raw material and transporter as well as employee and director of the firm. I find that out of the four buyers whose statements were recorded, two of the buyers Shri Jagdish of M/s Patidar Silico and Shri Dharamsingh of M/s Bhimani Ceramics in their statements has clearly stated that the purchases were made by them from M/s Shree Krishna under the cover of invoices. Shri Dharamsingh in his cross examination dt. 20.09.2003 also stated that during the year 2003 04 the goods were purchased from M/s Shri Krishna and M/s Associated under cover of invoice. The third buyer Shri Girishbhai Bha....
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....consignments. I find that three of the consignments pertains to Vadu factory in year 2003 04 when the factory was in possession of M/s Associated. The details of remaining three consignments are appearing in files seized from residence of Mukesh Patel. However no evidence is appearing of these 3 consignments having been received in factory of M/s Shri Krishna. I also find that Shri Rishi Trehan was called for cross examination but he did not appear for cross examination and instead one Shri Uday Sheth on his behalf sent communication that his statement is correct. In such circumstances when he has not presented himself for the cross examination and except his statement there is no other evidence, I find that his statement is not sufficient evidence to hold charges of illicit receipt of raw material by M/s Shri Krishna. Even there is no evidence of receipt of such goods in the factory of M/s Shri Krishna as no evidence of transportation of goods is appearing on record. In case of other supplier M/s Sun Borax, I find from the submission of the Appellant and statement dt. 03.12.2003 of Partner, Shri Manharbhai, Partner of M/s Sun Borax, that his statement is based upon the noteb....
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....duced chart showing such clearances, but in his cross examination denied having made any sale without invoices to M/s Shri Krishna. I therefore find that the statements are not corroborated with any evidence. These suppliers have not produced their records or it is not forthcoming from the investigation as to how the entire transaction took place and the use of the inputs in manufacture. I also find that almost all the suppliers are of Boric Acid which constitutes only 10% to 12% of Ceramic Fritz whereas the other raw material which are required in larger quantity like Quartz which is 45%, Dolomite 12 to 20%, Feldspar, Calcium and Zinc, no evidence is appearing which can show that the other raw materials were also consigned to Appellant or were appearing in the seized documents. 11. I also find that the show cause notice has relied upon the investigation and statements of two transporters. The Statement Shri Sunderbhai Chotalal Shah, Partner of M/s Shree Siddheshwari Roadlines has been relied upon. However I find that neither he owns any trucks nor he has any records. Only on the basis of some chithis seized from Vadu factory he stated that the transportation took place wh....
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....ctured from M/s Associated and cleared the same. In such case the statement of Shri Hitesh parekh not supported by any evidence cannot be made a ground for holding charges of clandestine removal by M/s Shri Krishna. 13. I find that in the present case except the alleged receipt of Borax Acid which is one of the material required for manufacturing of Fritz, there is no evidence appearing in the seized records or otherwise that the Appellant has received any other raw material clandestinely. Even no transportation of any of the other raw material required for manufacture of fritz is appearing nor alleged in show cause notice. The allegation of the clandestine removal needs to be established by showing receipt of major raw materials, atleast of some quantity, use of excess raw material, input output ratio, transportation of raw materials, use of such goods in manufacture of finished goods, excess utilization of power, fuel, transportation of finished goods, investigation at the buyer s end, receipt of money etc. However I find that none of the above factors are taken into consideration during the investigation, which leads me to the conclusion that charges of clandesti....
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....gh Court of Gujarat as reported in 2013 (287) E.L.T. 243 (Guj.). 15. The Hon ble High Court of Patna in case of COMMISSIONER OF CENTRAL EXCISE Versus BRIMS PRODUCTS 2011 (271) E.L.T. 184 (Pat.) has held "In our opinion, since the charge was for clandestine manufacture and surreptitious removal of finished final product, the same is required to be proved beyond doubt by the Revenue. One has to keep in mind that, though being the main ingredient, betel-nut is not the only raw material which is used in manufacture of Pan Masala. That apart, since the investigation has been carried only at the transporters end, no presumption could be drawn with regard to manufacture and removal of the final product. Presumptions and assumptions cannot take place of positive legal evidence, which are required for proving the charge. Even if, it is assumed that some raw materials were received at the factory of the respondent during the said period, the same cannot become conclusive proof of production and clandestine sale to different parties. Due to lack of positive evidence, benefit of doubt will always go in favour of the assesse." 16. In the case of Dhanvilas (Madras) Snuff Co....
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....premises of M/s Shri Krishna and residence of its employee. However even if such documents were recovered, it is necessary to have corroboration by evidence of production and removal of goods. I find that in the present case the production of finished goods, its removal and investigation at the end of the buyers does not support the allegations. I am therefore of the view that the charges of clandestine removal of goods cannot be established. In case of M/s LAXMI ENGINEERING WORKS VS. CCE, CHANDIGARH I 2010 (254) ELT 205 (P&H) the Hon ble High Court held - "After hearing the learned counsel for the revenue, we are of the considered view that even if some record recovered during the raid and corroborated by some supportable evidence holding that there was an attempt of clandestine production and removal of goods, then it is necessary to have the same positive evidence of clandestine production and removal of goods." 19. I further find that the statement of employees of M/s Shri Krishna and the proprietor Shri Sameer Parekh has been relied upon to allege the clandestine removal. It is alleged that they have authenticated the seized records/ note book and accepted th....