TaxTMI 
TaxTMI 
2017 (11) TMI 815
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.... (herein after referred to as SPRT). From the evidence recovered, it appeared that the appellants were engaged in the purchase of cotton which were not properly accounted and the same were manufactured as cotton yarn and removed clandestinely in the guise of hank yarn as against cheese yarn without payment of appropriate duty in the following manner:- (a) That the appellant cleared cheese yarn to M/s. MMM Traders, M/s. MMM & Co. Vellakovil and M/s. Nanda Textiles, Erode in the guise of hank yarn as evidenced by the statement of partner/proprietor of MMM & Co, MMM Trader and Nanda Textiles wherein they had deposed that they have received only cheese yarn from the appellant; (b) Appellant had accounted their cheese yarn in the guise of sale of hank yarn to various parties, on verification were found to be non-operative and were not having any business transaction with the appellant. Thus, appellant was able to account the sale proceeds from the clandestine clearance of cheese yarn as if they had cleared hank yarn; (c) Appellant had purchased cotton yarn, the raw material, without account from M/s. Kumar & Co, Tiruppur and M/s. Srivari Cotton Traders, Dindigul which was noted ....
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....d therefore the allegation that the appellant cleared cheese yarn in the guise of hank yarn is not sustainable. (f) The evidences submitted by the appellant in the form of AR3A was not considered by the original authority and these evidences placed by the appellant was brushed aside by both the authorities below by merely stating that AR3A were not mentioned in the show cause notice and that those documents mentioned in the show cause notice are not available. (g) That these findings of the authorities below are factually wrong. The sample copies of AR3A countersigned by the departmental officers were placed before the authorities below by the appellant. (h) The entire demand of duty is based on third party private records and documents as well as statements recorded from third parties which are not corroborated by independent evidence. (i) With regard to the allegation that appellant cleared cheese yarn to M/s. MMM & Co, MMM Traders and M/s. Nanda Textiles, it is submitted that the entire proposal is based only on the statements recorded from the buyers to the effect that what was received by them was only cheese yarn and that appellant has raised the bills for hank yarn.....
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.... the impugned order. During the search operations conducted on 7.11.2001, the officers seized incriminating documents. Thereafter, statements were recorded. Shri V.N. Thirumoorthy, is the yarn broker who has helped the appellants clear the cheese yarn in the guise of hank yarn. A slip was seized on7.11.201 from the house of Shri K. Maheswaran, which reflected the details of unaccounted production. Further, that appellants do not have reeling machine for producing hank yarn. Diaries for the year 2000 and 2001 recovered from M/s. SPRT also showed the details of clandestine clearances. A file named income expenditure maintained by Shri Thirumoorthy showed the clearances made by appellants to SPRT, for the period 31.12.2000 to 29.8.2001. It also contained the details of amount received by Shri Moorthy from SPRT as commission. He has deposed that for sale of cheese yarn no invoices were raised by appellants. In the diary, sale of 10s of OE cotton yarn on cheese was written. On verifying the accounts of appellant, it was found that only 8 invoices were raised for sale of cheese yarn. The quantum of such unaccounted purchases made by SPRT and cleared by appellants made during the period 2....
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....ng fictitious sale of the same. Hank yarn being exempt from duty, appellants had cleared cheese yarn by raising invoices in the name of such parties for clandestine clearance of cheese yarn without payment of excise duty. Thus, the appellants had also accounted their cheese sales in the guise of hank yarn. That the evidences clearly established clandestine clearance of goods and that therefore the confirmation of demand, interest and penalties is just and proper. 4. Heard both sides and perused records carefully. 5. The main evidence relied upon by the department is a slip recovered from the residence of the Managing Director shri K. Maheshwaran, the diaries recovered from M/s. SPRT, the income-expenditure file recovered from Shri ThiruThirumoorthy, the yarn broker and statements of various persons. The allegations raised are that during the period the appellants (i) cleared cheese yarn in the guise of hank yarn and thus evaded payment of duty; (ii) clandestinely cleared cheese yarn without payment of duty and (iii) accounted the clandestinely cleared cheese yarn as hank yarn. One of the main piece of evidence relied upon is the diaries recovered from M/s. SPRT who was buyer of y....
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....a slip cannot be the basis for demanding duty alleging clandestine removal for the period 1.11.1998 to 29.8.2001. The department has proceeded to quantify the demand based on the entries in such slip. Needless to say that diaries and income-expenditure slips are third party documents. None of the entries made in such diaries are corroborated. The fact that M/s. SPRT could have purchased the alleged cotton yarn from any other parties cannot be ruled out. The income expenditure statement maintained by the broker Shri Thiru Thirumoorthy is his personal accounts of income expenditure and this cannot be an authentic document so as to form the basis of demand of duty alleging clandestine removal against the appellant. Thus, the major part of the remaining evidence in this case is the statement obtained from various persons. In cross-examination, Shri Thirumoorthy has stated that he purchased hank yarn as well as cheese yarn from appellants. The ld. Counsel has strongly argued that the statements cannot be taken as evidence unless they are tested by way of examination of the persons as provided under section 9D of Central Excise Act. The said position has been considered by the Hon'ble Hi....