TaxTMI 
TaxTMI 
2017 (7) TMI 1027
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....2017 E/MISC/70121/2017 E/70231/2017 E/MISC/70122/2017 E/70232/2017 E/MISC/70123/2017 E/70233/2017 E/MISC/70124/2017 E/70234/2017 E/MISC/70125/2017 E/70235/2017 E/MISC/70126/2017 E/70236/2017 E/MISC/70127/2017 E/70237/2017 E/MISC/70128/2017 E/70238/2017 E/MISC/70129/2017 E/70239/2017 E/MISC/70130/2017 E/70240/2017 E/MISC/70131/2017 E/70241/2017 E/70127/2017 S G Gupta, New Empire Plastic, A K International, Sgm Paper Product, Kumar Sons Industries, Guideman Tape Industries, Wadhumal & Sons, Eastern Rainwear, Zeeshan Enterprises, Jayanti Cottex, Batra Rexine Co, Siddharth Brothers, J R Bhatia & Co, Mobil India Marketing Co, Modern Enterprises, Ram Bhagat Ashok Kumar, J S Seat Maker, Bajaj Plastic, Mayur Plastic, Rosla Waterproof Works, Popular Stores Mumbai, Brahmputra Enterprises, Techno Trade, Nidhi Elastomer India Pvt Ltd, Agarwal Cloth Stores, Gulshan Agencies, Chowdhary International Limited, Raja Plastic House, Chowdhary Waterproof Works, Mukesh Raj Gobind Lal, P J International, Shakti Enterprises Versus CCE & ST Noida ORDER Per : Anil Choudhary These appeals are arising out of Order-in-Original No. 46-47/COMMSSIONER/NOIDA-II/2016-17 dated 3....
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....RENCE (IN KGS) VALUE (IN RS.) 1. PVC Resin 708575 709332 757 71158 2. Titanium Dioxide (Tio2) 51025 51034 9 1504 3. CPO 11000 13000 2000 182400 4. DBP 4200 4620 420 40530 5. NPPX 18900 20000 1100 97075 6. Epoxy 5400 5600 200 18000 7. ADCL 1150 1175 25 5875 Total 139060 4. In the second show cause notice dated 26 April, 2013, it was alleged that on the basis of intelligence that RMG Polyvinyl India Limited (RPIL for short) is engaged in clandestine removal of goods and also undervaluation of the goods the department conducted search on 12/13 April, 2012 at the factory premises located at industrial area Sikandrabad, District Bulandshahar (U.P.). The search was conducted in presence of Shri. S.G. Gupta, Executive Director and Dwarika Dhish Sharma, Store Manager as well as two independent witnesses. The Panchnama was drawn on 13/14 April 2012. As per the Panchnama the search started at 18:00 hours, on 13.04.2012. At the time of search Shri S.G. Gupta who was present in the factory cooperated with the search te....
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....tated in the Panchnama. Thus on the reasonable belief that the afore detained excisable goods, found in excess, were liable to confiscation, they seized the same under Section 110 of the Customs Act, 1962 as made applicable to the Central Excise matters. The excisable goods so seized were handed over to Shri D.D. Sharma for its safe custody under the Supurdnama and instructed him not to disposed off. It is further mentioned in the Panchnama that the statement of Shri D.D. Sharma and Shri S.G. Gupta were recorded before the Superintendent(AE), Central Excise Noida including replies of certain questions/queries put by the officers. The seized goods were released on 20 September, 2012 on furnishing of bond with security. 6. On scrutiny of the seized private ledgers in Sr. No. 90 and 91 to the Panchnama it was noticed that the said ledgers were properly indexed. Accounts were opened in different names. However, the names were written in abbreviated form namely viz. PJ, MR, or Mulak Raj, Bajaj Plastic, Batra, JRB, WM, Mobile India, Dalmia etc. The Ledger at Sr. No. 91 pertains to the year 2010-11 and Ledger at Sr. No. 90 pertains to the year 2011-12. The accounts of particular party ....
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....pad No. 93. Cash entries were also shown. When details shown in writing pad were prima facie compared with the same number of statutory invoice, it was noticed that the other details are tallied except the rate & value which is much higher than the statutory invoice. It appeared that this difference in value was charged by RPIL from the buyer in cash. These entries indicated that RPIL was under-invoicing their goods. The value of goods shown in statutory invoices was much below the value shown in writing pad. It appeared to Revenue that the entries mentioned in the said records i.e. private ledger 91 and 90 were the transactions related to the clandestine removal of finished goods. RPIL prima facie removed the goods over and above the statutory invoiced quantity and payment of this excess quantity, received in cash and the same was recorded in these resumed private ledgers. It also appeared in some instances that RPIL was clearing their clandestinely manufactured goods on parallel invoices. On the basis of preliminary scrutiny of records resumed, follow up searches were conducted at different places namely:- (a) RPIL- accounts office at Ansal Plaza, Vaishali, Ghaziabad, (b) M....
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....achcha record was also opened under a Panchnama, RUD-38. The sales record in the said kachcha records Private Ledgers No. 90 and 91 as well as the writing pads 92 and 93 appeared to be actual sales. It appeared that RPIL was evading duty in organized manner. For this purpose they had proper network of dealers/buyers. The said dealers/buyers were purchasing goods from RPIL. It appeared that RPIL was clearing the goods over and above the quantity mentioned in statutory invoices against cash and the cash so collected was accounted for in the kachcha records/private ledgers. The firms appearing in the said private ledger viz. Bajaj Plastic, Mulak Raj, Batra etc. appear to be their actual buyers/dealers. Though, the invoices show the name of others, which appear to be fictitious/bogus/dummy buyers. It appeared that RPIL was manipulating the statutory invoices to facilitate the actual buyers, namely Bajaj Plastics, Mulak Raj, Batra etc. As the description of goods and quantity was not mentioned in the said private ledgers, the only comparison was possible with value of the goods cleared and the corresponding bill numbers. The date shown in these private ledgers, was the date of its entri....
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....r name and some of the invoices in different name. For example, at page 15 of ledger No. 90 in M/s Mobile India Marketing CCF account, invoices shown in this account when compared with statutory invoices, it was found that all the statutory invoices issued in the name of M/s Mobile India Marketing Company, Mallapuram. However, when invoices shown in Mobile India Marketing Sheeting account mentioned at page 21-22 of ledger No. 90, were compared with statutory invoices, it was found that the same were issued in different names. However, in both accounts the value of goods shown in statutory invoices was much below the value shown in private ledgers. The next category is that category of buyers in which M/s J.S Seat, Delhi is categorised. The invoice numbers shown in private ledger in the account of M/s J.S Seat were compared with the same number of statutory invoices and it was noticed that the said invoices were issued in their name only but the value shown in the invoices was much below the value shown in the private ledger. For example at page no. 30 of ledger No. 91 in J.S Seats account, on 27.07.2011, a bill No. 1409 for a value of Rs. 1,11,496/- is entered. On comparison with t....
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....erprises, Darya Ganj, Delhi on 05 February, 2013, whereas their names appeared in different account holders in the private ledger, which proves that the name of these two firm were being used to clear the clandestine goods against cash. It also appeared that RPIL was clearing their clandestine goods on parallel invoices also. For example, invoice No. 2369 is appearing in Bajaj Plastic account at page 59 of private ledger 91 against date, 16 October, 2010 and the same invoice no.2369 also appearing in the account of Mulak Raj and Sons at page 79 in the same private ledger against date 19 October, 2010. Similarly, invoice number 3018 is appearing in Bajaj Plastics account at page 69 of private ledger 91, on 15 December, 2010 and same invoice number appearing in the account of Mulak Raj and Sons at page 87 in the same private ledger, on 14 December, 2010. Examples indicated clandestine removal on the part of RPIL. RPIL also use the number of actual invoices issued in the name of M/s Premier Polyfilm Limited, Sahibabad, Ghaziabad and M/s Indian Oil Corporation Limited, to clear the goods clandestinely. For example invoice no. 2052 is mentioned against date 19 September, 2011 in t....
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.... of finished goods was due to procedural mistake; -that the excess in stock of finished goods was due to line rejection, which was not entered or transferred in stock register; -that excess/shortage in stock of raw material was due to receipts and consumption not considered during stock taking. 10. On being asked why these explanations were not given on the date of search, he stated that due to long working hours, he could not co-ordinate with all the company staff at the relevant time. It appeared to the Revenue that the explanation was not tenable as each and every aspects were considered during the physical stock taking and duly mentioned in the Annexure to the Panchnama dated 13/14 April, 2012. It further appeared to the Revenue that the excess/shortage in stock of finished goods and raw material indicated towards clandestine removal of goods, to evade Central Excise Duty. It was also noticed that in some accounts, some receipts were shown against Cheque/RTGS/DD in the private ledgers. In some entries, cheque numbers were also mentioned. Efforts were made to trace out the cheque numbers/RTGS/DD in the bank statement in January 2010 to April 2012 submitted by RPIL. Only....
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....e name of some of such buyers/dealers, despite the admission of these buyers/dealers that they had trade link with RPIL and accounts were maintained in their name in the private ledger maintained by Shri S.G. Gupta, Executive Director of RPIL. Accordingly, the SCN proposed penalty on Shri S.G. Gupta, Shri Arvind Goenka and 32 others under Rule 26 alleging collusion in dealing/receiving clandestinely cleared goods from RPIL. 11. The SCN was adjudicated upon and the proposed demand was confirmed by the learned Commissioner vide the impugned order in original. Following are the findings of the learned Commissioner :- 11.1 It is observed that RPIL and all the co-noticees requested for cross examination of Shri S.G. Gupta, Executive Director of the appellant RPIL, which was allowed and cross examination was conducted on 6 September, 2016. The proceedings of cross examination were recorded. Thereafter appellant RPIL submitted an addditional reply on 16 September, 2016. Crux of the cross examination is as follows:- (a) There was no entry in the private ledger Nos. 90, 91, 92 and 93 where goods were cleared without issue of invoices. (b) In his statement dated 12.02.2013, 18....
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....pendent witnesses, thus the documents fall under the ambit of Section 36 A ibid. It is further observed that from the said records, that all the names were used in abbreviated form for example PJ, MR, Bajaj Plastics, Batra, JRB, WM, Mobile India, Dalmia etc. Repeating the allegations as noticed hereinabove in the SCN, reliance was placed on the same. Further reference was made to the statement of Shri S.G. Gupta dated 12 February, 2013, 18 March, 2013, and reference were also made to the statement of other persons including Shri Arvind Goenka-Director of RPIL who has stated that he is responsible for overall management of the company and heads of the department report to him. On being asked about the cash receipts which were not accounted for in the companys account book, he stated that as per his knowledge Shri S.G. Gupta had already explained it. Learned Commissioner further observed that from the examination of the private ledgers as well as the writing pads, RPIL was adopting a well mannered practice to evade the duty by way of clandestine removal as well as under invoicing. In some cases RPIL was issuing invoices. The buyers as mentioned in the private ledgers and writing pads....
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....September, 2012, issued by the Additional Commissioner, after accepting the security bond, secured with a bank guarantee. He further, observed that as goods found in excess were already released, also held that the redemption fine is imposable in lieu of the confiscation under Section 34 of the Central Excise Act, 1944 and as RPIL had already submitted Bank Guarantee, he ordered to appropriate the bank guarantee against the redemption fine. It is further observed that the appellant have violated Rule 14 of CCR, 2004, Rule 10 of CER, 2002 and accordingly, duty is recoverable on the finished goods and Cenvatable Raw Material which were found short at the time of inspection. Learned Commissioner has placed reliance on the ruling in the case of CCE, Lucknow v/s Kumar Industries reported at 2010 (261) E.L.T 546 (Tribunal Delhi) and also ruling of Bombay High Court in the case of Kirloskar Brothers v/s Union of India reported at 1988 (34) E.L.T 30 (Bombay), has held that mere non-recording of production in RG-1 Register would attract confiscation and penalty and in this regard mens rea is not required to be proved. In the present case the presence of mens rea to evade duty intentionally,....
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....PIL was issuing invoice of lower price and the entries in the private records were on higher price. The said contention was considered to be afterthought. 15. Further, reference made also to the admission by Shri S.G. Gupta in statement dated 18 March, 2013 and 10 April, 2013. Learned Commissioner took notice of the cross examination of Shri S.G. Gupta and summarised the main points as under:- Shri Pradeep Jain and Shri Amit Awasthi advocates appeared on behalf of M/s RMG and the main answers are given by Shri Gupta are as below: - I was working under Shri Arvind Goenka. - Shri Goenka was looking after both the companies as director i.e. M/s RMG and M/s Premier Polyfilm. I was looking after sales on the directions of Shri Goenka for both the companies. - I was not maintaining excise records for any of the firm. - I was keeping records related to sales of both the firms in diaries. - The private records/diaries were recovered by preventive branch on 13/14.04.2012 from my briefcase. - In reply to question whether any other documents were recovered by officers, he replied I dont know. - Some buyers were common for both the firms. I used to keep records party....
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....cerned the plea of the appellant that during the audit conducted by the officers from time to time, no objection was raised during the earlier audit(s) conducted by the Department. Learned Commissioner observed that scope of audit of any manufacturing units remains limited to the checking of fairness and correctness of the records of the unit. Since RPIL had resorted to a methodology where most of the transactions remained unrecorded from the stage of procurement of raw materials till the realization of sales proceeds of the manufactured products, therefore, it was not possible for any Audit Team to know about the quantum of evasion. It is further observed that RPIL were manufacturing and removing all goods without mentioning in the stock record. The learned Commissioner has further placed reliance on the ruling in the case of D. Bhoormull v/s CC Madras 1983 (13) E.L.T. 1546 wherein it is provided that revenue is not required to prove its case with mathematical precision, but sufficient facts giving to preponderance of probability, in such cases Revenue is exempted from proving its case with mathematical reason as in the facts any person would believe the conclusion as probable. Fu....
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....s) 5. 8 M/s Siddharth Brothers, Hyderabad 18.89 Lakhs 4,00,000/- (Four Lakhs) 6. 9 M/s Nidhi Elastomer India Pvt. Ltd., Himachal Pradesh 7.14 Lakhs 2,00,000/- (Two Lakhs) 7. 10 M/s Nagpal Rexine Traders, New Delhi 5.19 Lakhs 2,00,000/- (Two Lakhs) 8. 11 M/s Mobile India Marketing, Kerala 4.56 Lakhs 2,00,000/- (Two Lakhs) 9. 12 M/s Zeasant Enterprises, Sitapur 1.05 Lakhs 1,00,000/- (One Lakhs) 10. 13 M/s J.S. Seat Maker, 4723, Delhi 0.43 Lakhs 40,000/- (Forty Thousand) 11. 14 M/s Eastern Rain Water, Mumbai-28 0.14 Lakhs 10,000/- (Ten Thousand) 12. 15 M/s Empire Plastic, Bombay-3 0.69 Lakhs 50,000/- (Fifty Thousand) 13. 16 M/s SGM Paper Products, Gurgoan (Haryana) 0.56 Lakhs 50,000/- (Fifty Thousand) 14. 17 M/s A K International, Kolkata 0.32 Lakhs 25,000/- (Twenty Five Thousand) 15. 18 M/s Guideman Tape Industries, Delhi 1.74 Lakhs 1,00,000/- (One Lakhs) 16. 19 M/s Rosla Water Works, Kolkata 1.45 Lakhs 1,00,000/- (One Lakh) 17. 20 M/s J.R. Bhatia & Company, Delhi 19.73 Lakhs 4,00,000/- (Four....
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.... my private records, which were maintained by me. I had business relation with some of the dealers of PVC Sheeting, other than factory (RPIL). These records were being maintained to settle or to pay their incentive/commission etc, by me. Q.20. During scrutiny of said ledgers, it is noticed that name appearing in some of the invoices mentioned in the ledger account is different from the name of account holder. For example Invoice No. 3499 dated 06 January, 2011 is issued in the name of M/s Indian Oil Corporation Ltd., Dimapaur but it is figured in the ledger account of M/s PJ at page No. 5 of ledger 90. Please explain. Ans: All invoices appearing in a ledger account do not pertain to RPIL, Sikandrabad. Some of the invoices appearing in the ledger are of other companies/units. Q.21. Name of the said other companies appearing in the said ledgers and writing pads. Ans: The other company whose invoice are entered in the said book, is M/s Premier Polyfil, Sahibabad. Q.22. Why the said entries are figuring in the said books and how the same were communicated and on whose directions it were made? Ans: As I have already replied that these entries are of M/s Premier Polyfil....
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....the said records are private records and were being maintained by him. The said records pertain to clandestine removal of goods made from factory. Do you agree with his admittance. Ans: I have seen the said private ledgers(2 Nos.) and writing pads(2 Nos.). I do not agree with the admittance of Shri S.G. Gupta. However, I agree that these are private records. As I learned, he himself is involved in some kind of personal trading/commission activities for which company is taking action. Q.11. There are cash and cheque entries in the said record. Further some invoice numbers and cheque numbers are also mentioned in the said kachcha records. Some of cheque numbers mentioned in the said records are also reflecting in your bank statement. For example, in the ledger account of M/s Dalmia, at page no. 41, in resumed ledger No. 90, there is a cheque No. 618402. Shri Gupta in his statement stated that Dalmia stands for M/s Siddharth Brothers, Hyderabad. The same cheque number is also mentioned in your bank statement on 3 November, 2011 for Rs. 5 lakhs. Please explain. Ans: We are selling goods to M/s Siddharth Brothers, Hyderabad who is also known as Dalmia in trade. The cheque was g....
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....lty and accordingly the impugned order is fit to be set aside. 20. The learned counsel further points out that the so called statements recorded on the date of the search, of Shri Dwarika Dish Sharma, Store Manager, Shri S.G. Gupta the Executive Director have not been brought on record which shows that revenue has relied on the evidences, not on record, and this also vitiates the impugned order. The learned counsel draws our attention towards the List of RUD in SCN, where no mention is made regarding any statement of Shri Dwarika Dish Sharma and Shri S.G. Gupta said to be recorded on the date of search. 21. The learned counsel further refers to the statement of the customers/buyers whose name appeared in the ledger, from whom inquiry was made. In their statement, they had stated that there was no clandestine dealing and or receipt of goods clandestinely from the appellant RPIL. Further they have not paid any amount in cash to the appellant RPIL. Some of the customers have denied any transaction with the appellant RPIL during the period in dispute. Further, some of the customers in their reply to notice had categorically stated that they were having dealing with Premier Polyfi....
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....e Central Excise Act, 1944, before the learned Settlement Commission. The Hon'ble High Court observed that the contention of the Revenue that the respondent herein specifically admitted the charges as per the show cause notice and duty liability, considering the value as cum-duty-price and accepted the liability of the payment of duty. It was held that the same has no substance. Considering Sub-Section (2) of Section 32L of the Act, in a case where an order is passed by the Settlement Commission under Sub-Section (2) of Section 32L and thereafter adjudicating authority is required to adjudicate the case, the Central Excise Officer shall be entitled to use all the materials and other information produced by the assessee before the Settlement Commission or the result of inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it as if such materials, information, inquiry and evidence have been produced before such Central Excise Officer or held or recorded by him in the course of the proceedings before him, on fair reading of Section 32L of the Act, whatever is admitted by the assessee while submitting the application before the Settlemen....
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....ure the same in a clandestine manner. Further for manufacture of final product, they require number of raw materials like resin, plasticizes, stabilizes, pigment etc. and no discrepancy in recording of same was found in records of company. No evidence of purchase of a single kg of raw material in cash was found. Further, not even a single unaccounted rupee was found in cash. Further removal of such quantity of goods, at least about 700 trucks were required. Similar number of trucks were required for procurement of raw material. There was no evidence of hiring even a single truck for movement of so called clandestine goods. No discrepancy was found in the records resumed from factory gate, recording movements of goods. It was also submitted that number of raw materials were required to manufacture final product and there was not even a single evidence to show contrary. It was emphasized by the Counsel that all inputs of appellant being cenvatable and the value addition at their end being around 10%, there was no incentive to evade duty. Further, there is no case made out by the Revenue that the appellant had acquired raw materials clandestinely or from some other source which was no....
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....nder the Customs Act where provisions are different from the provision of Central Excise Act, 1944. Under the said Customs Act any person found with goods prima facie of foreign origin, is supposed to prove the licit custody or possession of such goods, otherwise they are presumed to be smuggled. Whereas under the provisions of Central Excise Act it is for the Revenue to establish its case and/or allegation of clandestine removal. Under the facts and circumstances of the present case the Revenue has been unable to do so. Thus, the ruling in the case of D. Bhoormull is not applicable under the facts and circumstances of the case and same is held distinguishable. The learned counsel also urges that in drawing the conclusion that, wherever cheque recorded in the private record was not found in the banks statement of the appellant RPIL, the same was considered as receipts on account of clandestine clearance. It is urged that this is wholly erroneous in view of the statement of Shri S.G. Gupta who has categorically stated that said records were in respect of more than one party, which in fact were mainly of Premier Polyfilm Ltd. It was emphasized by the Counsel that in no circumstances ....
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....ns recorded in the said diary/private ledgers as attributable to appellant RPIL. Further, Shri. S.G. Gupta has categorically stated that no clearance have been made by RPIL without issuance of invoice. Further, during entire investigation or even till the adjudication, no person other than Shri S.G. Gupta had admitted the case of clandestine removal or under valuation by RPIL. 30. Under the circumstance and to confirm allegations of clandestine removal and undervaluation, without giving any evidence for procurement of raw materials, man power required, electricity consumption, movement of goods and the production capacity, the conclusion drawn in the impugned order is wholly erroneous that the goods were clandestinely manufacture, removed and undervalued. Further, the allegations are not corroborated because during the search, no unaccounted cash was recovered. There is no evidence produced to establish that there has been flow back of any funds to establish under valuation and therefore under valuation is also not established in the present case. Therefore, while setting aside the demand of duty raised on account of clandestine removal or under valuation, we also set aside the ....