TaxTMI 
TaxTMI 
2016 (4) TMI 143
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....y fabrics and processing in their factory returned MMF(P) to the principal. During the period 16.12.1999 to 31.03.2001, the assessee was paying duty as per determination of Annual Capacity of Production (in short ACP) under Rule 96 ZQ of the erstwhile Central Excise Rules, 1944 readwith Section 3A of the Central Excise Act, 1944. On 01.04.2001, Section 3A of the Act, 1944 was omitted on independent processors, and the assessee started to pay duty under Section 3 of the Act, 1944. On 26.11.2001, a team of Central Excise officers headed by the Superintendent, Central Excise, HPIU-IV, Surat-I visited the factory premises of the Assessee and conducted preventive checks in the presence of two independent Panchas and Shri Sandeep Arunkumar Khaitan, Director of the assessee company. The officers verified the physical stock of finished goods, Man Made Fabrics (Processed) and found the same tallied with the recorded balance of MMF (P) as entered in the Daily Stock Register (RG-1 Register). However, 4,82,220 L. Mtrs. Grey fabrics (accounted for in Lot Register) was not found either as such or at any stage of processing in the Mills. The Central Excise Officers recovered various records and d....
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....he stocks. The demand of duty of Rs. 1,81,38,719.00 on 56,68,349.8 L.Mtrs alleged clandestine removal of processed fabrics, is on the basis of rough scribbling papers recovered from the factory of the assessee company, which has no relation to the receipt of the grey fabrics, manufacture and clearance of the MMF(P). He further submits no statement of the writer of the rough scribbling was recorded. It is submitted that the Central Excise Officers attempted to corroborate these rough scribbling termed as L.R. Challans, with the statements of the transporters and the statement dt.22.05.2006 of Shri Sandeep Khaitan. He drew the attention of the relevant portion of the statements of the employees of the transporters as reproduced in the Show Cause Notice. The employees of the transporter merely stated that process of issuing the transport documents. There is no admission by the transporters of delivery of the grey fabrics on the basis of the said rough scribbling. 5. The main argument of the Learned Advocate in respect of demand of Rs. 1,81,38,79.00 and Rs. 17,72,360.00 (i.e. total Rs. 1,99,11,979.00) on 62,22,212.25 L.Mtrs. is that just few months before the visit of the Central Ex....
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....T. 136 (Tri.-Del.) (f) Vikram Cement Ltd. Vs Commissioner of Central Excise 2012 (286) E.L.T. 615 (Tri.- Del.) Commissioner vs Vikram Cement Ltd. 2014 (303) E.L.T. A82 (All.) (g) Suntrek aluminium P. Ltd vs Commissioner of Central Excise 2013 (288) E.L.T. 500 (Guj.) (h) Commissioner of Central Excise vs CMCM (India) 2010 (255) E.L.T. 224 (Guj.) 6. He further submits that the Adjudicating Authority relied upon the statement of the Directors, which are uncorroborative nature and contrary to the records and documents, retracted immediately, and therefore, such statements have no evidentiary value. He strongly relied upon the decision of the Tribunal in the case of Tejwal Dyestuff Industries vs Commissioner of Central Excise, 2007 (216) E.L.T. 310 (T), upheld by the Hon'ble Gujarat High Court as reported in 2009 (234) E.L.T. 242 (Guj). The learned Advocate also submits that the demand is barred by limitation. He has also submitted Written Notes and compilation of case laws. The learned Advocate submits that the penalty imposed on the buyers cannot be sustained as there is no material available to impose penalty on them. 7. On the other hand, the Learned....
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....earlier statement. He also submits that the Director of the assessee company had not given the buyers name and the name of writer of the slips recovered from the factory. He also relied upon the decision of the Tribunal in the case of M/s. Krishna Screen Art vs. Commissioner of Central Excise, Ahmedabad-I 2014-TIOL-650-CESTAT-AHM. He further submits since the buyers arranged the transport of the finished goods, the Department could not collect the evidence regarding supply of the finished goods. 9. Heard both the sides and perused the records. 10. The main contention of the learned Advocate on behalf of the Appellants is that they were having 2 Stenter machines of different make with 4 chambers each (i.e. total 8 chambers). They were working under Compounded Levy Scheme under Rule 96ZQ of the erstwhile Central Excise Act, 1944 upto 28.02.2001. With effect from 01.03.2001, Section 3A of the Act, 1944 was omitted for levy of Central Excise duty on the basis of Annual Capacity of Production (in short ACP). Notification No.19/2000-CE, dt.01.03.2000, issued in exercise of powers conferred by Section 3A(3) of the Act, 1944, in supersession of the earlier Notification No.36/98-CE,....
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....s on alleged clandestine removal of goods on the basis of scribbling papers, job cards and statements of transporters. It is submitted that during the relevant period of 6 months, the appellant manufactured and cleared about 41 lakhs Sq.Mtrs on payment of duty as evident from the monthly return out of capacity of 48 L.Mtrs. Hence, the allegation of clandestine manufacture and clearance of about 62 lakhs Sq.Mtrs in addition to about 41 lakhs Sq.Mtrs are beyond the manufacturing capacity of 8 chambers. 13. The matter was heard by us on several dates. The Adjudicating authority observed that the plea regarding not having capacity of production is also of not much use to them in the light of recovery of documents from their premises. By Interim Order No. 573-576/2015 dated 13.11.2015, the Tribunal directed to the Learned Authorised Representative for the Revenue to take instructions from the Commissionerate as to how the demand of duty on huge quantity of MMF(P) for 6 months was raised on alleged clandestine removal of goods, appears to be contrary to the Annual Capacity of Production as determined by the Commissioner, which was applicable just before few months. The Learned Authori....
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....ellants factory to the extent of demand made by the Department. The demand was raised for the period June 1998 to August 1998 and in December 1998. The Commissioner of Central Excise determined the Annual Capacity of Production under Section 3A of the Act, 1944 was less than the quantity as determined in the Show Cause Notice. The relevant portion in the case of Galaxy Indo Fab Ltd (supra) are reproduced below:- "9. Perusal of records apparently disclose that the appellants had specifically raised the point relating to the impossibility of production capacity from the appellants factory to the extent of demand made by the Department. However, the adjudicating authority seems to have totally ignored the said specific ground of defence that the installed capacity could not permit production of huge quantity of processed fabrics as has been calculated by the Department. The records clearly disclose that as per the Department the total quantity of processed PB fabrics during the period from 1-6-1998 to 16-11-1998 was 7794848 mtrs. against the declared quantity of 1207490 mtrs. in the records maintained by the appellants. Curiously, the competent authority had under its order d....
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....nts such calculations are not corroborated by any cogent and independent material on record. The statements of the employees were stated to have been received under coercion and duress. During the investigation no material could be gathered to justify the allegation of any clandestine removal of the goods for the period prior to the said investigation. No inquiry of whatsoever nature was made with any of the transporters or the suppliers of the raw-materials or the purchasers and/or transporters of the clandestinely removed materials. Not a single piece of clandestinely removed product could be apprehended. No verification of the capacity of the total production of the factory was ascertained and/or verified. Not even an attempt in that regard was ever made. No records regarding the electricity consumption were either checked or even perused. No records regarding the staffing pattern and the labour employment was ever gathered. No measurements of the space available for stocks or for stocking the raw-materials and the final product was verified. No account books and bank records of the appellants were checked to ascertain about the flow back of money particularly in relation to the....
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.... material available that no machinery was changed. But, in the present case, the officers visited the assesses factory on 26.11.2001 just after few months of withdrawal of compounded levy scheme. It is evident from the Panchnama dt.26.11.2001, as quoted above that there was no change of machineries. Hence, the decision as relied upon by the Learned Authorised Representative cannot be applicable in this case. 16. The Adjudicating authority proceeded on the basis of rough scribbling recovered from the factory premises of the assessee. The Learned Authorised Representative heavily relied upon the statements of employees of the transporters. Shri Rajiv Sharma, Manager of M/s Kanhaia Cargo, Surat, in his statement dated 26.05.2006 stated that each LR is prepared in four copies (i) consignee copy (ii) consignor copy (iii) Lorry copy (iv) office copy. He confirmed that grey fabrics covered under LR were delivered from their godown situated at Saroli, Surat to the person who produced copy of LR/letter pad. On being further asked, he stated that such consignee copy of LR/Letter pad/bond were not available with them. Similarly, Shri Harandra D. Kotwala Accountant of M/s. South Gujarat Tra....
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.... making fuller investigation, thinking that the confessional statements are made and not retracted, was already done. The Revenue Officers have not even cared to investigate into the types of final products manufactured by the appellants despite detailed declarations which were on record with them, which showed that all these inputs, particularly LAB and Soda Ash were being used by them for their final products. Some of these declarations which are on record as Annexure "A" (Collectively) show that at least for seven final products, LAB and Soda Ash were used as inputs, besides other inputs enumerated in the description of inputs in the declarations dated 22-2-1999, 3-4-2000, 12-4-2000, and 12-6-2000. It is not disputed that the returns were regularly filed and the fact that these inputs were used for the final products was mentioned from the very inception in the declarations made and the returns filed by the assessee before the Revenue authorities. The copies of monthly returns filed under Rule 7 of the Cenvat Credit Rules, 2001, which are on record, show the use of these inputs in the final products manufactured by the assessee. The receipt of these inputs in the factory premise....
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....duct was taken only at the time of despatch. This is why ONCBS, which was a product, which was not yet tested and the real weight of which was yet to be ascertained, was not entered in RG-1 Register. Since the explanation of the assessee was plausible, the confiscation of the excess goods cannot be sustained." 17. The other aspect in respect of demand of duty on about 62 lakhs L.Mtrs that the appellant received grey fabrics from the principles for job work. It is presumed by theoretical input output calculation that the appellant processed the grey fabrics and cleared clandestinely. The Central Excise Officers merely proceeded on the basis of the statement and had not examined the other aspects namely electricity consumption, use of the other raw materials. It is noticed that the Central Excise Officers obtained the statements of employees of various transporters and none of them placed iota of evidence of supply of grey fabrics and delivery of the finished goods. The Tribunal in the case of M/s. Mahavir Metal Industries (supra) observed the allegation of clandestine removal cannot be sustained in the absence of evidence of clandestine manufacturing. The statements were uncorrob....
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....Tribunal upon appreciation of the evidence on record, it is apparent that except for the shortage in raw material viz., HD which was disputed by the assessee and the statement of the Director, there was no other evidence on record to indicate clandestine manufacture and removal of final products. On behalf of the revenue, except for placing reliance upon the statement of the Director recorded during the course of the search proceedings, no evidence has been pointed out which corroborates the fact of clandestine manufacture and removal of final products. In the circumstances, on the basis of the material available on record, it is not possible to state that the Tribunal has committed any legal error in giving benefit of doubt to the assessee." 18. In view of the foregoing and there being no concrete evidence (as agreed by both the Members) of clandestine removal of the goods, the appeals are required to be allowed as held by Honble Member (Judicial). I have concurred with her views." 18. The Hon'ble Gujarat High Court in the case of Commissioner of Central Excise, Ahmedabad-I Vs Gopi Synthics Pvt. Ltd. 2014 (302) E.L.T. 299 (Guj.) dismissed the appeal filed by the Reven....
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.... The above evidence is not relevant and credible material evidence, sufficient to establish the case against the appellant company even applying the test of preponderance of probability and requires too many assumptions and presumptions to uphold the allegation of clandestine removal and undervaluation. 60.6 It would be necessary to analyze whether the evidences, other than the oral evidences, are credible for being used as corroborative evidence. The Hon'ble Supreme Court in case of Sitaram Sao v. State of Jharkhand - (2007) 12 SCC 630, pithily encapsulated the idea of "corroborative" evidence, in the following words : "34. The word "corroboration" means not mere evidence tending to confirm other evidence. In DPP v. Hester - (1972) 3 All ER 10.16, Lord Morris said : "The purpose of corroboration is not to give validity or credence to evidence which is deficient or suspect or incredible but only to confirm and support that which as evidence is sufficient and satisfactory and credible; and corroborative evidence will only fill its role if it itself is completely credible" There can be, therefore, no "corroboration" of evidence, which is itself unw....
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....vidence and is not correct view and is liable to be set aside." 19. In the case of Suzuki Synthics Pvt. Ltd. (supra) the demand was raised on the basis of chits recovered from finished goods Department from the clerk table, the Tribunal held as under:- "9. As per the settled law on the issue, clandestine removal is required to be established by production of tangible and positive evidences. As such, the chits in question were required to be corroborated by other evidence indicating clandestine activity on the part of the appellant. As already observed, neither of the statements accepted any clandestine removal. Further, the appellants have strongly contended that the payments made to folding clerk by way of cheques also matches with the RG-1 register entries. The electricity consumption has not been shown to be on the higher side. No buyers of the fabrics have been identified and their statements recorded. My learned brother has discussed the various decisions produced before us by learned advocate and has distinguished the same. However, I find that such distinction is on the basis of minor factual differences. In fact, the demand raised on the basis of notebook, etc.,....
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....ed to and discussed in the show cause. Therefore, it was the sole statement of the Director Sandip bhai which was uncorroborated, and which was taken as base for the action against the appellant, when no evidentiary value could have been attached in light of what is stated above. Moreover, the confessional statement was retracted within reasonable time. Therefore also, the said confession could not have been used as a piece of evidence and there was no basis for inference and conclusion about clandestine removal of goods thereof." 22. In view of the above discussion and in the facts and circumstances of the case, the demand of duty of Rs. 1,99,11,979.00 on 62,22,212.00 L.Mtrs cannot be sustained. But, we find force in the submission of the Learned Authorised Representative for the Revenue in respect of demand of duty of Rs. 14,65,949.00 on 4,82,220.00 L. Mtrs of grey fabrics. It is seen that there was shortage of 4,82,220,00 L. Mtrs of grey fabrics during the physical stock verification. The appellants failed to give a proper reason. Thus, the demand of duty on the shortage of the raw material is justified. The Learned Authorised Representative cited various decisions on this is....