TaxTMI 
TaxTMI 
2015 (10) TMI 968
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....ted a raids in the factory of the appellant, office of M/s. Gautam Enterprises in Mumbai and office of M/s. Salasar Ispat in Nashik on information that the appellant is engaged in a large scale evasion of duty on clearance of their final product clandestinely. During the course of search, no incriminating documents were found. No unaccounted raw materials or finished goods were found in the premises. All entries in the statutory records tallied with the stocks of inputs and finished product found were as per the accounts books maintained by the appellant but the department recovered three documents namely Record Nos. 23, 24 and 26 from the office premises of Gautam Enterprises in Mumbai. The claim of the appellant is that the office at Mumbai does not belong to the appellant but on the basis of records seized, certain entry was found for the period 27.06.2006 to 16.12.2006 relating to purchase of M.S. ingots by the appellants and sale of TMT/CTD bars manufactured out of such ingots and also certain purchase and sale entries made by the trading firm M/s Gautam Enterprises and M/s. Shiv Ganesh Parvati. On the basis of these records, statement of Shri Parvesh Gautam on 18.12.2006 and ....
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.... of six months in dispute, the appellant has already cleared about 2600 MTs of TMT bars on payment of duty. Therefore, it is contended that the appellant has not manufactured the quantity in dispute as the appellant has no manufacturing capacity to manufacture those goods. It is also contended that no evidence of any change in the pattern of production or in the electricity consumption or the capacity of the plant has been examined by the investigating team and it is also pleaded that there is no change in electricity pattern. No evidence was found by the investigating team regarding the use of furnace oil for the purpose of heating the furnace. For transporting the goods alleged to have been purchased and sold clandestinely, the appellants would have required over 1000 trucks during the impugned period. He further submits that during the course of search, no incriminating documents were found in the factory and office of the appellants. No excess raw material were found on verification of the stocks. It is prayed that as there was no corroborative evidence to prove that the appellants have cleared the goods clandestinely therefore, no case can be made against the appellants but th....
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....(255) ELT 496 (All). 4.1 It is also submitted that unless the exceptions carved out in Section 9D of the Central Excise Act, 1944 are clearly made out, the statements cannot be regarded as being relevant and therefore cannot form the basis of proving the truth of the facts contained in the statements unless the deponents thereof are produced for cross-examination as held by the Hon'ble Delhi High Court in the case of Basudev Garg v. CC - 2013 (294) ELT 353 (Del). 4.2 The learned Counsel further submits that installed capacity of production was fixed in the year 1998 which shows that the production capacity of the appellants plant was only 4441 M.T. per year when the factory runs for 24 hrs a day and thereafter no change in the manufacturing pattern till the investigation conducted in the factory of the appellant and they had manufactured/cleared 2600 MT of TMT bars during the impugned period. If the production capacity is taken then the production works out to 2221 MT whereas the appellant had manufactured/cleared 2600 MT on the strength of Central Excise invoices. If the quantity of clandestine removal is taken into account, the appellant should have manufactured atleast....
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....ng of ingots and the same were disclosed before the Income Tax department. It is also submitted that entries were made in the Record Nos. 23, 24 and 26 are nothing but on the purchase and the sale of the goods of these trading firms. In these circumstances, it is prayed on behalf of the appellants that the impugned order is required to be set aside. 5. The learned A.R. who appeared for the Revenue has also submitted a written submission. On the basis of these submissions, it is argued that the ingots were recorded as per the entries found in the private record seized during the course of investigation and they have admitted the supply of M.S. Ingots to the appellants. As per the Hon'ble Supreme Court judgement in the case of CCE Madras v. Systems & Components Pvt. Ltd. 2004 (165) ELT 136 (SC), what is admitted, need not be proved. He further submitted that retraction of statement recorded before the Central Excise officer cannot be discarded. To support his contention he relied on the judgments of the Hon'ble Supreme Court in the case of Surjeet Singh Chhabra vs. Union of India - 1997 (89) ELT 645 (SC) and Vinod Solanki v. UOI - 2009 (13) STR 337 (SC). 5.1 He further ....
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....he records recovered from the office premises of M/s Gautam Enterprises as claimed by the appellants are not in the handwriting of the appellants but in the handwriting of Shri R.L. Gautam but unfortunately no statement of Shri R.L. Gautam was recorded during the course of investigation to prove contrary to the claim of the appellants. 6.1 We further find that the statements of certain ingots supplier and broker were recorded. Out of 31 persons whose statement sought to have been relied upon in the show-cause notice, the adjudicating authority granted cross examination of only 5 persons and out of which only four persons appeared and all the four have denied the charges that they purchased goods without Central Excise invoices and have stated that no activity has been dealt with the appellant without any Central Excise documents. Revenue has not proved any contrary to these evidence with support of any documents on record. 6.2 Further, we observed that the department has alleged that the appellant has purchased 7474.305 MT of ingots and received in their factory. As the factory of the appellant is located in Dindori, Nasik and the ingots manufacturers situated at Sinnar, Nasi....
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....g (supra) wherein the Hon'ble High Court of Delhi has observed as under:- "14. The Division Bench also observed that though it cannot be denied that the right of cross-examination in any quasi judicial proceeding is a valuable right given to the accused/Noticee, as these proceedings may have adverse consequences to the accused, at the same time, under certain circumstances, this right of cross-examination can be taken away. The court also observed that such circumstances have to be exceptional and that those circumstances have been stipulated in Section 9D of the Central Excise Act, 1944. The circumstances referred to in Section 9D, as also in Section 138B, included circumstances where the person who had given a statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay and expense which, under the circumstances of the case, the Court considers unreasonable. It is clear that unless such circumstances exist, the Noticee would have a right to crossexamine the persons whose statements are being relied upon even in quasijudicial proceedings. The Di....
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.... particular case by filing statutory appeal, which provides for judicial review." 6.7 Further we find that the principle laid down by the Hon'ble Delhi High Court in the case of J & K Cigarette Ltd. (supra) and Basudev Garg (supra) has not been followed. Therefore, we hold that principles of natural justice have been violated by the adjudicating authority. In the circumstances, the statements recorded during the course of investigation cannot be relied on to prove the charge of clandestine removal of the goods by the appellants in this case. 6.8 We further find that the appellants have contended in reply to the show-cause notice as well as before the adjudicating authority that their production capacity was fixed in the year 1998 under the scheme of compounded levy and the production capacity was fixed @ 4441 MT per year and thereafter there is no change in pattern of production. The capacity was fixed for 24 hrs of working by the appellant in their factory. In these circumstances, when the production capacity has not been increased as claimed by the appellant and has not disproved by the adjudicating authority in the adjudication order, moreover, the electricity consumpt....
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....ed above, such huge quantity cannot be produced in the factory of the appellant. We also find that the appellant, in alternate, has claimed that entries pertains in private records are of trading activities which has not been discarded by the revenue but the appellants have produced some evidence for these trading activities by way of IT Returns and Balance Sheets. We also note that the Central Excise duty payable on the manufacture of the goods, as the goods in question can't be produced by the appellant, the demand of excise duty is not sustainable. 6.10 The case laws relied on by the learned A.R. are not concerned to the facts of this case as the appellants have retracted the statements recorded on the first available opportunity. In the case of Shri Surjeet Singh Chobbra (supra), the corroborative evidence was available. The circumstantial evidences go in favour of the appellants. 7. With these observations, we find that when the department has failed to prove the manufacturing of excess quantity of alleged clandestine removal by the appellant therefore Central Excise duty cannot be demanded. Moreover, when the claim of the appellant is that these activities pertain t....
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....destine sale of M.S. Inngots to SSIPL in cash. Further Shri Harish Kumar Gandhi on 09.01.07, Shri Vijay Mittal on 10.01.07, Shri Ramesh Chandak on 10.01.07, Shri Naresh Oza on 11.01.07, Shri Rajeshwar Goya on 16.01.07, Shri Ajay Baheti on 22.01.07 confirmed the said transactions regarding the clandestine sale of M.S. Ingots to SSIPL in cash and without bills. Then the manufacturers of M.S. Ingots, who had supplied the Ingots through the brokers, namely Shri Amit Burakia (Bhagwati Steel Cast Ltd.) vide his statement on 22.01.07, Shri Suresh Mittal (M/s. Ishu Super Steel Pvt. Ltd.) on 23.01.07, Shri Mohit Satbir Sarlia (M/s. Silver Ispat Pvt. Ltd.) on 23.01.07, Shri Jayprakash Mittal (M/s. Silver Ispat Pvt. Ltd.) on 16.01.07 and Shri Stbir Sarlia (M/s Sarlia Steel Pvt. Ltd.) on 23.01.07 also corroborated the transactions of clandestine sale. Mr. Manek Shah of MITC Rolling Mills in his statement dated 23.07.2007 identified the entries in Record No. 23 regarding sale of ingots without bills and without payment of duty to SSIPL through broker Shri Harish Gandhi. Finally the customers whose names appears on the seized records and who had purchased the TMT bars from SSIPL namely Shri Arvi....
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....the name of supplier (wherein the words Salasar has been scored out and Praveen has been written) quantity of goods, rate per Kg. of goods, value of goods and payment details. With reference to this records Shri Faruk Shaikh confessed that the clearances effected by the manufacturers of TMT bars as recorded in the two collection books covering the period 2005-06 and 2006-07 were clandestine in nature. The sample pages are shown below to understand the nature and extent of clandestine activities The sample pages of the seized records depicted above reveal the intricate details of clandestine receipt, production and clearance of goods by SSIPL. 12.4 The above records indicate that the explanation of the persons involved were commensurate with the contents of the said documents. The details mentioned in the records have been deposed by the said persons in their statements to be true. The acts of SSIPL have been corroborated by documents resumed from other persons who were connected with the transactions such as the supplier of raw material or the purchaser of the finished goods. Simply because some of the persons retracted their submissions will not nullify and abrogate the subm....
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....ring the period in dispute. This is shown in the table below:- Sr.No. Month and Year Production quantity declared by appellant in ER-1 return Quantity alleged to have been cleared clandestinely based on Annexure II(a), II(b) and II(c) to Show Cause Notice Total quantity ought to have been declared in ER-1 Returns as production 1 July, 2005 173.120 31.110 204.23 2 Sept.2005 245.360 39.485 284.845 3 Oct.2005 223.160 18.925 242.085 4 Nov.2005 195.250 16.935 212.185 5 Jan.2006 Not available 61.240 6 Feb.2006 Not available 21.085 7 April, 2006 219.580 21.940 241.520 8 May, 2006 366.410 40.785 407.195 9 June, 2006 273.120 18.975 292.095 10 July, 2006 364.020 895.865 1259.885 11 Aug, 2006 372.850 1074.425 1447.275 12 Sept, 2006 349.495 1580.750 1930.245 13 Oct, 2006 401.050 1751.555 2152.605 14 Nov,2006 534.920 1437.180 1972.100 15 Dec, 2006 511.210 686.755 1197.965 The above table shows that the variation in production between the mont....
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....ed on 06.10.2009 for cross-examination. After the cross-examination held on 06.10.2009, the appellant vide their letter dtd. 30.10.2009 informed that they would file reply within 10 days. Shri Singh filed reply in the matter vide his letter dtd. 30.10.2009. Shri Singh filed another reply vide his letter dtd. 18.11.2009. The case was finally heard on 18.11.2009. Shri Singh appeared on the said date. Thus no fresh cross-examination was requested by Shri Singh. 14.1 From the above it is clear that adequate opportunity for cross-examination was given. In any case, the evidence is based on private records seized which have been corroborated by the persons involved. 15. Regarding on 4 th piece of evidence, it has been very strongly argued by the learned Counsel that the private Note Books recovered from the premises of Gautam Enterprises was not written in hand writing of any of the Directors viz. Shri Prevesh Gautam and Pravin Gautam and it is in the hand writing of Shri R.L Gautam, their father. Further he contended that a number of entries had not been taken into consideration as they were not applicable to the appellants. The plea is that the entire quantity of 7447 M.T. is pur....
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.... the factory premises of M/s. SSIPL and the entire quantity of M.S. Ingots was used in the production of M.S. Bars and the resultant production of M.S. Bars were sold in cash by M/s. SSIPL. 15.2 In view of the above it is clear that the seized records at S. No.23, 24 and 26 (2 Note Books containing entries of transactions and one Note Book containing bills and receipts of payments) reflected the clandestine transactions done by Shri Pravesh Gautam and Shri Pravin Gautam. Shri Pravesh Gautam had confessed to the Panchas that the said premises was used as office premises for SSIPL and M/s. Gautam Enterprises (his father R.L. Gautam being Proprietor). In the face of all the private records seized, the appellants have not succeeded in their belated pleas as they have not explained the various entires which indicate clandestine production and removal. 15.3 It has been argued by appellants as to how more than 1,000 trucks which would have been required to transport the alleged production, could have been used without any other incriminating evidence. I find that 1000 trucks used in six months would only mean 5 to 6 trucks every day which is easily possible. Lack of evidence regardi....
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...., payment details, accounts of purchase of purchasers and sellers etc. which they failed to do satisfactorily. 16.2 It was held by the Hon'ble Supreme Court in the case of CCE Madras vs. System Components P. Ltd. - 2004 (165) ELT 136 (SC) that what is admitted need be proved. The department is not required to prove its case with mathematical precision to establish clandestine removal as held by the Hon'ble Supreme Court in the case of Collector and ors. vs. D. Bhoormull - 1983 (13) ELT 1546 (SC). The Hon'ble Supreme Court also held that "If t he Collector had given the fullest opportunity to accused to establish the alleged acquisition of the goods in the normal course of business. In doing so, he was not throwing the burden of proving what the Department had to establish, on Bhoormull. He was simply giving him a fair opportunity of rebutting the first and the foremost presumption that arose out of the tell-tale circumstances in which the goods were found, regarding their being smuggled goods, by disclosing facts within his special knowledge". In the present case, evidences in the form of diaries recovered are corroborated by the confessional statements of various....
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....ons whose statements have been relied on to hold that the charge of clandestine removal is in violation of principle of natural justice. Or Member (Technical) is correct in holding that adequate opportunity was given and further cross-examination was not requested especially on last date of hearing by the advocate and relying on case of Surjit Singh Chhabra (supra). (Prononuced in Court in 28.01.2015) ORDER NO.M/4569/15/EB Appeal Nos.E/483 to 485/10-Mum Date of Hearing: 15.6.2015. 6.7.2015 & 10.7.2015 For the Appellants : Shri D B Shroff, Senior Adv., Shri Ashok Kumar Singh & Ms Mahi Lalka, Advs. For the Respondent : Shri V K Agrawal, Additional Commissioner (AR) Per P K Jain 19. The brief facts of the case are already elaborated by both the Member (Judicial) and Member (Technical) in the order recorded by them and, therefore, I am repeating the same for sake of brevity. The case was heard in detail on 15.6.2015, 6.7.2015 and 10.7.2015, wherein the learned senior advocate and learned advocate for the appellants explained the facts in detail. The learned AR also reiterated and explained in detail the various points made in the order-in-original as also ....
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....terature. 20.2 I have given considerable thought to the issue. There are many plants and machines where the capacity is determined or stated by the manufacturer of such plant/machine. In respect of such plant and machinery, usually the capacity claimed by the manufacturer of such plant will be the actual production capacity of the goods. However, this is not true in the present case. The capacity claimed by the appellant is not as per the original manufacturer of plant. The appellant has not produced any catalogue, literature or correspondence with the original manufacturer which would indicate the production capacity of the plant. Similarly, no authentic literature on subject is produced to support the production capacity. As far as the determination of annual production capacity as per the compounded levy scheme which was introduced in 1998 and abandoned after 2-3 years, not much credence can be given. First of all, compounded levy scheme is introduced generally for evasion prone commodities. Further, rules for determining the annual production capacity are framed in such a way that the trade/manufacturer have no cause of grievance and generally the capacity determination is d....
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....ing activity. 21. The second point referred to me is as under:- "2. Whether Member (Judicial) is correct in holding that the evidence on the basis of which the demand has been confirmed against the appellant are not sufficient to hold that the appellant has removed that goods clandestinely. Or The evidence collected by the Investigating team during the course of investigation are sufficient to prove the charge of clandestine removal as held by Member (technical)." 21.1 Details of various evidences which are available have been discussed in detail by Member (Technical) and also by Member (Judicial) to some extent. It is seen that in the present case there are two portions. The first portion is purchase of MS ingots by the appellant without bills from various manufacturers of MS ingots and the second part is the production of MS bars from such ingots and selling the same clandestinely. As far as the first part is concerned, the quantity of MS ingots which has been clandestinely purchased by the appellant is based upon the record Nos. 23, 24 and 26 recovered from office of the appellant in Mumbai. This office was a combined office of the appellant and ....
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....over a period of more than one year and after most of the statements, Shri Pravesh Gautam as also Shri Pravin Gautam have sent their retractions but in the subsequent statement has accepted the correctness of the earlier statement. Further, I find that in majority of the statements all that was done was explaining the contents of the Records or correctness of the tabulation made by the Revenue based upon these Records. These are factual matters based upon documents. If there is any incorrectness in these, the same could have been pointed out either during investigation or at the time of original adjudication. No such thing was done even before this Tribunal. No such infirmity has been pointed out. In view of this position, retractions of statement of Shri Pravesh Gautam and Shri Pravin Gautam are required to be totally ignored. 21.2 I also note that clandestine purchase of MS ingots was not from one source but from number of sources and at times through brokers. Suppliers of MS ingots as also brokers had confirmed the correctness of the information indicated in the diaries recovered from the appellant's office in Mumbai. It is also noted that majority of the supplier of MS i....
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....tion has to be ignored for the simple reason that the diaries indicated clearances of both types vis. With bill and without bill and Shri Faruk Shaikh at no point of time has produced the bills corresponding to the clearances which were shown as without bills in the diary. Similarly, even the appellant has not shown invoices corresponding to the entries which are shown in the diaries as without bills. The records of the appellant have entries corresponding to the entries which are shown as with bills. Under these circumstances, in my considered view, all the MS bars which are shown as cleared without bills from the appellant's unit, were in reality cleared from the appellant's unit without payment of duty and the duty on the same is required to be confirmed. The quantity indicated for 2005-06 is 188.78 MT. During 2006-07 upto June, the same is 81.700 MT and from July to December 2006, the quantity is 352.770 MT. Duty, interest and penalties for clandestine clearance for these clearances is required to be computed. The second part of the demand is based upon the statement of various buyers of the appellant company as detailed in para 5.5 of the impugned order. I find that th....
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....ch goods purchased. It is also seen that there are no indications of corresponding entries in record No. 23, 24 and 26. Overall, it would be seen that the records recovered from the appellant's office in Mumbai did indicate the clandestine sale of MS bars. However, the Revenue has failed to precisely correlate or arrive at the quantity so cleared. As mentioned earlier, there are correlations in respect of few of the buyers and in my considered view, as far as these clearances are concerned, since these are based upon documentary evidence along with the statements and the documentary evidence has been recovered from the appellant's own office and the appellant has admitted the details in these records, the same are required to be confirmed and the appellant is liable to pay duty, interest and consequential penalty on the same. These will be required to be recomputed by original authority. Personal penalties will also be required to be proportionately redetermined including the clearance through Shri Farukh Shaikh. However, in respect of the remaining quantity, as the statements had not specified the quantity or value purchased and the Revenue has not been able to find out th....
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....of 5 persons which were agreed by the adjudicating authority. I have also seen that after everything was over, in the final written submissions again the advocate for the appellant asked for cross-examination. To my mind, this is not proper on the part of advocate. When the final submissions are made and the final hearing is over, to write for further cross-examination is not appropriate. The least the advocate should have done is to insist during the hearing itself. In any case the whole case is based upon the records which were mainly recovered from the appellant's office and were explained by the director of the appellant company. The details written in the documents were very precise which includes dates, supplier's name, broker's name, exact quantity, rate etc. In most of the statements, all that was done was to explain or confirm the details already indicated in the document and the case of the Revenue is based upon such document. Even if we ignore the statements, the only conclusion from the documents particularly regarding procurement of clandestinely cleared goods will be what has been proposed by the Revenue. Only in respect of some of the buyers of MS bars, t....