TaxTMI 
TaxTMI 
2017 (5) TMI 616
X X X X Extracts X X X X
X X X X Extracts X X X X
....re, both finished was found and excess of 5.030 MT of MS Wire mesh also found. The goods were seized, the statement of Shri S. Vasudev Rao was recorded on the next day. The statement of Shri Kailash Aggarwal, Director/appellant No.2 was recorded. On the basis of investigation, various statements were recorded and show cause notice was issued on 4.4.2008 wherein the appellant was asked to show cause as to why the duty on shortage of raw material and finished goods should not be demanded from them, the demand for default in payment of duty, cash amount seized should not be confiscated and seized quantity of wire mesh was found in excess should not be confiscated, and mandatory penalty under section 11AC read with Rule 25 should not by imposed. On the same investigation another show cause notice was issued no 30.03.2009 was issued to the appellants on the following grounds: (a) Central Excise duty collectively amounting to Rs. 57,01,796/- +Rs.1,14,036/- (Ed.Cess) + Rs. 57,019/- (Sec.High Ed Cess) on the clandestinely removed 669.985 MT HB wire and 669.96 MT Binding/MS Wire, during the period 1.6.2007 to 8.10.2007 should not be recovered under section 11A of the Central Excise Act, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....puted the amount of Rs. 38,87,713/- which was confirmed as per show cause notice dated 4.4.2007 and discharged their duty liability with a delay is not in dispute. He submits that the dispute in the show cause notice is that when the said show cause notice is not legally maintainable as the show cause notice has been issued by invoking the extended period of limitation which cannot be issue on the same evidence on which the first show cause notice issued on 4.4.2008, therefore, the second show cause is not maintainable in light of the decision of Nizam Sugar Factory-2006 (197) ELT 465 (SC). Therefore, the impugned show cause notice is barred by limitation. 5. On merits, with regard to the shortage of raw materials although there was shortage, there was no admission of alleged clandestine removal of other raw materials or the finished goods. It is his submission that the stock taking was not feasible and correctly made. As the stock taking made hurriedly and while stock taking, certain raw materials and finished product and missed to take into account the raw material during the period 1.10.2007 to 9.10.2007 of 211.000 Mt and 256.690 MT raw material was purchased and sold in tran....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e is further processed and made t 18-20 gauge, the same is known as MS/Binding wire. The wire of gauge 6 is the thickest wire of 5 gauge and 20 is the thinnest. These would always be a mismatch of production slips vis-a-vis RG-1 register as the wire of one gauge can be a raw material for HB wire of another thinner gauges such as 8,10 or 12 gauge. The appellant No.1 applied multiple operations on a wire of a particular gauge. In the production slip, the appellant would record the production of a particular gauge but if the said wire of a particular gauge is converted into another gauge, the same will again figure in the production slip. But in the RG-1 register, the wire of only a particular gauge which is being sold or cleared from the factory was being recorded. The chart-1 would reveal that on a particular day there was huge minus balance as high as 44.410 MT and 35.800 etc. The real position would have emerged if the department would have analysed the total raw material which was received by the appellant in particular financial year and there from how much the quantum of production achieved. The production slips of 70 days cannot represent the clearance effected by the appellan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rial from M/s.R.R.Ispat, Raipur, M/s.Godwari Power & Steel, Raipur and M/s.Hira Steel, Raipur and the entire quantity of raw material was purchased on the strength of central excise invoices. It would mean that even during the investigation the department failed to bring any evidence on record that the appellant No.1 had procured any extra material from the raw material suppliers without payment of duty or without invoice. The said register does not show the entire quantity which the appellant had cleared on payment of duty. It was stated that while preparing chart-2 the department had listed all the clearances which were made by the appellant in their RG-1 register and the appellant cleared the total quantity of 3327.90 of finished goods on payment of duty during the period 1.6.2007 to 8.10.2007 whereas the register in question contained a quantity of 1021.880 MT of finished goods. The larger quantity of 2305.15 MT was not found entered in M-8 register meaning thereby that the register cannot be relied upon on this account. 11. He further submits that no evidence at all has been brought on record that the appellant had received unaccounted raw material, used more electricity, e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is not disputing the factum of manufacture of finished goods shown in RG-1 register from the raw material which were issued for production and factum of payment of duty on the said quantity of finished goods. The department did not explain in the show cause notice as to how the appellant could manufacture the finished goods if they have not received wire rods to the extent of 2172.67 MT during the period January 2007 to September, 2007. To support this, he relied on the decision of Hon'ble Gujarat High Court in the case of Narendra Impex-2011 (265) ELT 332 (Guj.). 13. With regard to disallowance of credit of Rs. 1,34,67,629/-, he submits that the demand is based upon register No.3 and on the basis of chart-4 to the show cause notice the appellant sold a quantity of 3510.508 MT of wire rods which is their raw material without reversing the credit. It is the contention of the appellant that the quantity of wire rods to the extent of 3510.508 MT which had been purportedly cleared by the appellant as such, they never took any credit. The Revenue has not verified. The appellant has not availed the credit on these goods and the same has been cleared as such, therefore, the question of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(d) the credit of Rs. 1,34,67,629/-, sought to be denied on clearances of raw materials as such without reversing the credit. 17. We also find on the same investigation and after completion of enquiry, a show cause notice dated 4.4.2008 was issued to the appellant to demand duty on the basis of alleged shortage and non payment of duty and cash recovered during the course of investigation. Thereafter, subsequent show cause notice dated 30.3.2008 was issued to the appellant. We find that the facts of the case in the knowledge of the department at the time of issuance of show cause notice on 4.4.2008 and no new facts revealed. Therefore, in the light of the decision of the Nizam Sugar Factory (supra), wherein the Hon'ble Apex Court has observed as under: 9. Allegation of suppression of facts against the appellant cannot be sustained. When the first SCN was issued all the relevant facts were in the knowledge of the authorities. Later on, while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. We agree with the view take....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Revenue to prove that the shortages were due to reason of clandestine removal of the goods. To that effect, no evidence has been brought on by the Revenue. Moreover, the learned AR relied on the decision of Hon'ble High Court of Allahabad High Court in the case of Sarin v. Sarin (supra) wherein the facts of the case were that during the course of investigation, the shortages of material was found as well as unaccounted cash was also found in the premises of assessee. In these circumstances, when the assessee fails to explain the reason of shortage as well as unaccounted cash, the Hon'ble High Court arrived at a decision that shortages are due to the reason of clandestine removal. He also relied on the decision of Bajrang Petrochemicals Ltd. wherein the observation of the Hon'ble High Court is that there was huge shortage of finished goods while during taking stock. It is not the case of the stock taking of finished goods. It is a case of inputs. In these circumstances, I hold that decision relied upon by the learned AR are of no help to the Revenue Further in the case of Nissan Thermoware P. Ltd. (supra), the Hon'ble High Court of Gujarat has observed that when the raw material ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....from the factory was being recorded. If the same is taken into consideration, the demand is not sustainable on the basis of difference between production slips and RG-1 register. Moreover, it has not been coming out form the facts of the case that for manufacturing these quantities from where the raw material procured, how much electricity used and how the payment of these goods have been received, how the goods have been transported, therefore, in the absence of any corroborative evidence the demand sought to be confirmed on the bass of assumption and presumption is not sustainable. Moreover, the explanation given by the appellant, the processing of the goods has not been examined by the adjudicating authority, therefore, in view of the decision of this Tribunal in the case of in the case of R.A. Castings Pvt.Ltd. (supra) wherein this Tribunal has observed as under: 22. The clandestine manufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to : (i) Receipt of raw material inside the factory premises, and non-accountal thereof in the statutory records; (ii) Utilization of such ra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....voking the extended period of limitation. 24. In view of above observation, we hold that the demand of Rs. 58,72,851/- is not sustainable. 25. With regard to the credit of Rs. 83,09,894/-, the allegation of the department is that although the goods have been entered in RG-1 register and they did not find mention in the private records, therefore, it is alleged the appellants have diverted the quantities of goods without reversal of the credit. We find that the goods entered in RG-1 register have been used by the appellant on payment of duty and the department has not given any positive evidence to show that the quantities have been diverted by the appellants, from where inputs have been received for manufacture of such huge quantity on the goods cleared on payment of duty. The department has not given any corroborative evidence. Moreover, we find that the allegation of the department is that there is diversion of the goods 2172.67 MT of wire rods which is without any evidence only on the bass of that, these goods were not mentioned in the private records, But how the appellant has cleared their finished goods without using raw material. Therefore, the duty is not sustainable ....