TaxTMI 
TaxTMI 
2017 (2) TMI 192
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....s Ltd. (for short, "STML") was reduced to Rs. 25,00,000/- and the penalty imposed on Mr Manikchand G. Sharma (a Director of STML) was reduced to Rs. 10,00,000/-. 2. Central Excise Appeal No.213 of 2007 has been filed by STML whereas Central Excise Appeal No.263 of 2007 has been filed by Mr Manikchand G. Sharma (a Director of STML). These Appeals assail the impugned order in so far as they have confirmed the demand of duty as well as imposition of penalty. Central Excise Appeal No.105 of 2010 has been filed by the Revenue in so far as the penalty was reduced not only against STML but also against Mr Manikchand G. Sharma. Since all these three Appeals assail the common impugned order dated 28th May 2007, they all are being disposed of by this common judgment. 3. As far as Central Excise Appeal No.213 of 207 is concerned, the said Appeal was admitted on 17th March, 2009 on the following substantial questions of law:- (1) Whether in the facts and circumstances, the Tribunal is right in sustaining the duty demand from the Appellant and imposition of penalty on the Appellant? (2) Whether the Appellant as buyer of the goods is liable to pay duty or the duty is payable by the m....
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.... was inter alia engaged in the manufacture of processed fabrics of wool, terry wool, polyester viscose, 100% polyester/acrylic/cotton original and ready-made garments. The Appellant has also obtained Central Excise Registration and is having a Private Bonded Warehouse, operating under the provisions of sections 58, 65 and 67 of the Customs Act, 1962. The Appellant has also executed a legal undertaking with the Development Commissioner, SEEPZ in accordance with the provisions of the Handbook of Procedures 1.4.1992 - 31.3.1997. Pursuant to the aforesaid, the Ministry of Commerce, Secretariat of Industrial Approval has granted the Appellant permission to operate as a 100% EOU and export its entire production excluding rejects not exceeding 5% for a period of ten years. The Appellant, being a 100% EOU, are allowed to import / indigenously manufactured yarn for use in manufacture of the final products. For these purposes, and the Appellant being 100% EOU, claimed exemption under Notification No.1/95-CE dated 4th January, 1995. (b) On the strength of the aforesaid Notification, during the course of their business, the Appellant procured yarn from 14 suppliers for manufacturing its fin....
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....he last is dated 30th May 2003, the details of which have been set out in paragraph 22 of the Memo of Appeal. By the aforesaid show cause notices, the Appellant and the suppliers were called upon to show cause as to why (i) the Central Excise Duty leviable on the main goods and which were allegedly diverted into the local market for purposes other than for which they were procured (i.e. for manufacture of export goods), should not be demanded and recovered jointly and severally from all of them; (ii) interest @ 24 % p.a. be not levied and recovered under section 11AB of the Central Excise Act, 1944; (iii) why mandatory penalty equal to the said duty amount not be imposed under section 11AC; (iv) why penalty should not be imposed under Rules 9(2), 173Q and 126 of the Central Excise Rules and (v) why penalty should not be imposed under section 117 of the Customs Act, 1962. (e) After giving a personal hearing to the Appellant and considering their representations / replies dated 19th February 2005, 21st February 2005, 15th March 2005 and 18th March 2005, the Commissioner of Central Excise, by his order dated 31st March 2005, inter alia (....
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.... submitted that in coming to this conclusion, the Revenue as well as the CESTAT totally ignored all the documentary evidence which clearly established that not only the yarn reached the factory of the Appellant but was in fact used for the manufacture of final products that were eventually exported. To substantiate this argument, Mr. Shroff submitted that all the statutory registers maintained by the Appellant in the usual course of business and as required by law were countersigned by the Excise Inspectors. Further, the detailed Panchanama drawn up at the time of stock verification done during the raid, showed that there was no discrepancy between the stock and the statutory registers and that all the goods shown to be in stock at the time of the raid had been exported. Mr Shroff submitted that the CESTAT accepted that the documentary evidence was in favour of the Appellant but yet ignoring the same, purported to rely upon certain oral statements that were recorded under section 14 of the Central Excise Act, 1944. 10. The further submission of Mr Shroff was that apart from the documentary evidence, the CESTAT totally ignored the statements of the Excise Inspectors recorded unde....
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....ant; (b) that they verified the receipt of duty free raw materials so received as intimated by the D3; (c) that the Appellant submitted copies of the AR-3 and Central Excise Invoices alongwith the D3 intimations; (d) that some of them had supervised the export of finished products; (e) that they had signed the D3 intimations and AR3A's; (f) that they weighed the packages at the time of verification; (g) that the goods were checked and tallied as per the documents accompanied with them; (h) that the registers were also signed by them; (i) that the Annexure II Challans (permitting removal of raw materials for job work) were signed by them; and (j) that as regards the allegation that there was no permission granted for removal of goods for jobwork, they stated that the Assistant Commissioner had reported that the Appellant's file was not traceable and that now it is only inferred that there was no such permission, but there was a practice to allow the Appellants to clear the raw materials for job work. 12. Mr Shroff submitted that these statements of the Excise Inspectors recorded und....
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....ter. • The goods were then exported. The Excise Officer signed the Export Register. • There were audits conducted, both prior to and during investigation, which showed that there was no discrepancy in the stock whatsoever. • The receipt and issue registers were all signed by the Excise Inspectors. • The entire stock of raw materials was physically tallied and verified by the anti-evasion wing. 14. Looking to all these facts, Mr Shroff submitted that considering all the statutory documents alongwith the statements recorded of the Central Excise Inspectors, clearly established that there was no evasion of duty whatsoever. The Appellant received the raw materials, converted it into fabrics and thereafter completed their export obligation. Furthermore, Mr Shroff submitted that during the investigation and raids, the Department conducted a complete and thorough stock taking of the Appellant's factory between 17th July 1998 to 8th August 1998. During the stock taking, each and every package of fabric in the Appellant's 20,000 sq.ft. storage area was weighed, verified and recorded in the annexures to the Panchanama. No ....
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....merit. 16. Lastly, Mr Shroff submitted that it is well settled that documentary evidence has to prevail over oral statements, especially when they are inconsistent with the documentary evidence. In this regard Mr Shroff relied upon the following decisions:- • R.P. Industries v/s Collector, reported in (82) ELT 129(T); • Raj Petroleum Products v/s CCE 2005, reported in (192) ELT 806 (T); • Satosh Tobacco v/s CCE, reported in 2014 (311) ELT 465(T); • CCE v/s Vishnu Co. Pvt. Ltd., reported in 2016(332) ELT 793(Del). 17. Mr Shroff submitted that all these decisions, and which were binding on the CESTAT, were ignored by them and instead it relied upon the shoddy oral evidence produced by the Department viz. the statements of the suppliers and other persons, which at the highest, only establish that the raw materials were supplied upto Bhiwandi. The fact that the raw materials were supplied by the suppliers' transporters upto Bhiwandi was not a fact that was disputed by the Appellant. It was the Appellant's case that these raw materials were thereafter transported from Bhiwandi to the Appellant's factory by thei....
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....gation from the Appellant's premises did not co-relate to the amount of PTY and PV yarn procured by the Appellant. 19. Looking to this, Mr Bangur submitted that the Commissioner held that the raw material was never supplied under CT-3 Certificate and never used in the manufacture of exported products and accordingly, duty of Rs. 5,26,56,632/- on the Appellant was confirmed and equal penalty was also levied under section 11AC of the Central Excise Act, 1944. Further, the Commissioner also levied a penalty of Rs. 50,00,000/- each, on Shri Vinod Deora, Shri Suresh Deora and Shri Manik Sharma respectively, under Rule 209A. All the aforesaid persons preferred an Appeal to the CESTAT. The CESTAT vide its order dated 28th May, 2007 considered all the facts tendered by the Appellant as well as the Revenue and confirmed the duty amount of Rs. 5,26,56,632/-. However, it reduced the mandatory penalty to Rs. 25,00,000/- and further reduced the penalty imposed on Shri Manik Sharma to Rs. 10,00,000/-. As far as the penalty imposed on Shri Vinod Deora and Shri Suresh Deora is concerned, the same was set aside. It is in these circumstances that STML as well as Shri Manik Sharma have filed A....
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....e same tested. The Commissioner therefore concluded that in retrospect it was apparent that if testing was done, the same might have given some early clues to the fraudulent activities of M/s STML. The Commissioner finally concluded that the Re-warehousing Certificates and the signatures in various records were obtained by recourse to fraud and therefore, cannot come to the aid of M/s STML. These findings of the Commissioner have been considered by the CESTAT and have in principle, been upheld, according to Mr Bangur. Reading the order of the CESTAT as a whole, Mr Bangur submitted that the same cannot be termed as perverse and/or suffering from any error of law apparent on the face of the record which would require our interference in appellate jurisdiction. The order of the CESTAT is a reasoned one and after considering all the facts and circumstances of the case, was the submission of Mr Bangur. Consequently, the Appeals filed by STML and Mr Manik Sharma have not merit and ought to be dismissed with costs was the concluding argument on behalf of the Revenue. 21. In support of his submissions, Mr Bangur relied upon the following decisions:- (1) Sneh Enterprises v/s Commissio....
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....the stock and the statutory registers. As rightly submitted by Mr Shroff, the matter does not rest here. Apart from the voluminous documentary evidence which clearly indicated, at least prima facie, that the raw materials were in fact received at the factory premises of the Appellant and which fact is even recorded in the impugned order, there have been statements that have been recorded of the Excise Inspectors under section 14 of the Act who have categorically stated that they have verified the raw materials received in the factory, that some goods were sent for job work as per standing practice, that the fabrics were exported and that all the statutory registers were duly signed by them. In this regard, it would be apposite to refer to some of the statements of the concerned Excise Inspectors and which have been produced before us. The first is the statement of Shri G.B. Moholkar, Inspector, Central Excise, Mumbai - II recorded on 17th September, 2001:- "Q.2 What work you were required to do in connection with M/s Santogen Textile Mills Ltd 100% EOU? When was this unit licensed? Ans. The unit M/s Santogen Textile Mills Ltd., a 100% EOU was licensed somewhere in November....
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....hown to me. I am producing the said list (3 pages)." 24. Thereafter, a further statement of the said Shri Moholkar was recorded on 20th September, 2001 wherein he stated as under:- "Q.1 Please confirm whether signatures appearing on D3 intimations AR3A's as per list produced by you, are your own signatures? Ans. Yes the signatures appearing on D3 intimations and AR3A's are my own signatures. Q.2 At the time of verification did you take weighting of all packages received by M/s Santogen Textile Mills Ltd. 100% EOU from their suppliers? Ans. Yes I have weighed the packages received by M/s Santogen Textile Mills Ltd. 100% EOU at the time of verification of the same. Q.3 Did you check the Denier of yarn received by M/s STML and tallied with receipt documents? Ans. The goods received were checked and tallied as per the documents accompanied with them." 25. A further statement was again recorded of the said Shri Moholkar on 21st September, 2001 wherein he stated as under:- "Q.3 In respect of goods said to have been checked and verified by you covered under D3 nos.60/31.3.97, 59/27.3.97, 61/17.4.97, 60/23.4.97, 64/30.4.97, 65/2.5.97 & 63/24.4.97, ....
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.... Ans. I have gone through the said register. I have put my signature on page 1 thereof. I have allowed clearance of yarn to sub contractors as mentioned in the said register vide challan nos.35 to 61 and 68 to 70. I have put my signature in the said register against relevant entries. Q. You have allowed clearance of yarn for job work as permitted by Ac division vide letter no.C.Ex/Santogen/EOU/95-96 dt. 22.1.96. Pl. state whether you have seen this permission letter? Pl. also produce a copy thereof. Ans. I have not seen such a letter. A copy is not available with me. I allowed the clearance as per practice followed by the earlier officers." 28. Lastly, the statement of Shri Sanjay Raghunath Shinde, Central Excise Inspector, posted in Range VII, Powai Division, Mumbai II was recorded under section 14 of the Act on 6th January, 1999. In his evidence, Shri Shinde has stated as under:- "On being specifically asked regarding issue of the material outside the factory premises for weaving, I want to state that M/s Santogen Textile Mills Ltd. (100% EOU) are sending the yarn for weaving to M/s Santogen Silk Mills Ltd. and M/s Deora Silk Mills Ltd., MIDC, Murbad. For th....
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....e said goods from the supplier to Bhiwandi. All this clearly establishes that the allegation of diversion was not based on any concrete material but rather only on suspicion and without any real basis. In light of this oral and documentary evidence, we find that the allegation / contention of the Department that the raw materials bought by the Appellant from 14 suppliers was diverted and never brought to the Appellant's factory, cannot be sustained. 30. It appears that the conclusion arrived at by the CESTAT is solely on two factors: (i) on the basis of a statement of the estranged brother of one of the Directors of the Appellant who stated that his firm never carried out any job work for the Appellant; and (ii) on the basis of the statements recorded of the transporters of the 14 suppliers who stated that they had transported the raw material only upto Bhiwandi. We find that the heavy reliance placed on these statements, and ignoring everything else, is wholly incorrect and erroneous for more than one reason. Firstly, it is not in dispute and in fact even admitted by the Appellant that the transporters of the suppliers had transported the raw materials only ....
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...., and looking to the totality of the facts of the case, we have no hesitation in setting aside the impugned order. 32. Lastly we must state that considering the view that we have taken, we feel that no useful purpose will be served in individually dealing with the decisions cited by Mr Bangur. They are wholly inapplicable to the facts before us. None of these decisions lay down any law which would enable the CESTAT or the authorities below to ignore documentary evidence and only rely upon the oral statements made by the transporters of the 14 suppliers as well as the estranged brother of one of the Directors of the Appellant. 33. In light of above discussion, the questions of law as framed for our consideration are answered in the following CENTRAL EXCISE APPEAL NO.213 OF 2007 [Filed by STML] Sr.No Questions Answers 1 Whether in the facts and circumstances, the Tribunal is right in sustaining the duty demand from the Appellant and imposition of penalty on the Appellant? In the negative and in favour of the Appellant and against the Revenue. 2 Whether the Appellant as buyer of the goods is liable to pay duty or the duty is payable by the manuf....