AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (6) TMI 642
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....jay Kumar Gupta, Rs. 9 lakhs from the residence of Shri Ajay Kumar Gupta, Director of the appellant Company, Rs. 1.5 lakhs from the residence of Shri Puesh Kumar Gupta, Director of DSL and Rs. 4 lakhs from the residence of Shri Vipul Kumar Gupta total amounting to Rs. 61.5 lakh was detained vide panchnama dated 16.07.2008. The Officers of DGCEI recorded various statements, and on the basis of statements issued a show cause notice dated 15.07.2009 requiring them to show cause as to why a demand of Rs. 245.67Crores Approx should not be demanded on account of receipt of excess quantity of 414473 Kg. of Kattha from their suppliers and utilized in the manufacture of finished goods. Appellant filed written reply dated 18.04.2011, 29.07.2011 and 28.07.2016 denying all the allegations and stating that there was complete absence of application of mind and appellant had reconciled all the figures; that there was no corroborative evidence of receipt of all the other raw materials, manufacture of the finished goods in a clandestine manner and transportation of the same; no buyers of the said goods were identified and such a huge amount of cash generated in the process was never recovered. Besi....
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....e manufacture of suppressed production of their final products, which were cleared clandestinely without payment of duty. Full explanation has been offered even on the merit of receipt of catechu in their various replies, clarifications during the hearing and cross examination, but the factual and legal submissions have been ignored completely, resulting mis-carriage of justice in passing the impugned order. 3.1.1 Duplication of demand:-Show cause Notice itself is contradictory as on the one side it assumes that purchase data of catechu as provided by the appellant to the investigating officer during investigation as per its books of accounts is true and complete and on the other side it also assumes that purchase of catechu recorded in the seized 166 loose sheets, is true and complete and accordingly demand has been raised assuming both the records as true and complete. Further, assuming the purchase data provided by the appellant as true and , a quantity of 3,27,922 kg (1,36,430 kg in para 3.3 of SCN and 1,91,492 kg in para 7.7 of SCN) has been alleged as excess purchase and calculated a duty demand of Rs. 188,97,12,671.00 (as per data in para-7.7 of SCN). Similarly assuming the....
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....t Ld. Adjudicating Authority ignored the submissions. 3.2 That the impugned order-in-original has been passed mechanically without considering the submissions made and outcome of the cross examination. Even when evidence has come on record and documents have been tallied in respect of alleged shortages/excesses before the adjudicating authority himself, however, the adjudication authority has ignored the evidences. 3.3 The Order-in-Original is a non-speaking order in as much as the submissions and explanations made before the authority has not been considered, and order was passed with a biased mind with an intention to confirm the demand. 3.4 The impugned order relies only upon DGCEI investigation, and evidences produced have been ignored and hence the impugned order is liable to be set aside- That the order in original places huge reliance only on the investigation conducted by DGCEI, documents relied upon in the notice and cash recovered. Such reliance placed on materials in the show cause notice is highly inadequate and the contra arguments in the replies filed has been ignored completely or has not been dealt with properly. It is evident from the SCN itself that there is du....
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....of the final products. ii. That reliance has been placed on both the records of the appellant i.e. the seized records are not true and complete. iii. That certain papers recovered from the residence of their director Late Shri. S.N. Gupta was written by him, which only he was aware of in the matter of his own writings. But he was not questioned at all about the loose sheets by the investigating officer, whereas he was alive for some time (many days) during the investigation. However, appellant through their own efforts in absence of benefit of knowledge from Late S N Gupta, has been able to fully explain the matter, but erroneously ignored by Commissioner. iv. That show cause notice is based on presumptions and assumptions. It is full of inaccuracies and consequently resulting in erroneous demand. v. That while calculating the alleged excess quantity of catechu certain mistakes on the part of investigation officer are apparent from the SCN itself such as artithmatical error in comparison of data, not considering sales return as shown by suppliers in their statement of supplies, which were provided to the DGCEI by them, goods in transit as on 31 march on closing of the finan....
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....d by the Revenue, hence impugned order is against the principles of law laid down by Hon'ble Supreme Court, various High Courts and CESTAT in various judgements. Quantity of catechu received by appellant having been fully explained but was ignored in the order. That it is well settled principle of law that the authorities must prove its case of alleged clandestine removal by adducing proper evidence by way of procurement of raw material and manufacture of finished goods and the cash generated in the process, in clearance of clandestinely produced material. No such evidence has been led or discussed in the order. There is no evidence of procurement in excess of other raw materials required in alleged clandestine manufacture and clearance of the final products. Huge quantities of other raw materials and packing materials would be required in addition. Matching capacity of plants for production of final products in alleged quantities. No evidence has been adduced in the instant case with regard to any transaction, monetary or otherwise, in alleged clandestinely removed goods. Similarly, there is no evidence of transportation, sale of finished goods, buyers of such goods, cash generate....
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....en make a visit to the factory nor did the Commissioner or Principal Commissioner directed any officers to verify the relevant facts by making a visit to the factory, even after repeated requests of the appellant to verify the process loss of raw catechu in the factory premises of the appellant. 3.15 That the entire demand is based on single raw material i.e. catechu which comprises only 8 to 9% ratio in the appellant's final products; Pan Masala, Gutkha and Mouth Freshner. The SCN was issued on the basis of purchases and consumption of catechu only without any investigation of other ingredients required in the different final products manufactured by DSL. The Final products of the appellant cannot be manufactured by one raw material i.e. catechu and in support of alleged demand, there was no other evidence /support relied in the show cause notice. Besides procurement of Raw Materials, there must be matching evidence of labour employed, electricity consumed, plant capacity and other evidence in order to establish charge of clandestine manufacture and removal. 3.16 Ld. Adjudicating Authority failed to appreciate that the allegation of clandestine manufacture and removal is not s....
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....STRIES That the impugned order in original number 45/Pr. Comm./Noida-1/2016-17 dated 28.-2.2017 passed by the principal commissioner, central excise Commissionerate Noida-1, deserves to be set aside and the appeal deserves to be allowed in full with consequential relief. 3.17 During the course of hearing the learned Counsel has submitted that the allegations in the show cause notice were that the appellant had manufactured 5922902.880Kg of Pan Masala, Pan Masala containing Tobacco, Mouth freshener and Meethy Mazz, out of the said alleged unaccounted quantity of catechu which in the opinion of revenue was not reconciled as compare to the data of purchase of Catechu. Revenue did not account for the processing loss on account of lose of moisture and other things, resulting in reduced quantity of catechu available for use in the manufacture of final product. Revenue presumed that the entire quantity of catechu was used as such without any processing. Learned Counsel further submitted that following raw materials were required for manufacture of additional 5922902.880Kg of Pan masala, pan masala containing tobacco, mouth freshener and meethy mazza. S. No. Description of Raw Materia....
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....materials have been purchased. (iii) To find out the dispatch particulars from the regular transporters. (iv) To find out the realization of sale proceeds. (v) To find out finished product receipt details from regular dealers/buyers. (vi) To find out the excess power consumptions. 13. Thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department." He has further submitted that Hon'ble Allahabad High Court has ruled in the case of Commissioner of Central Excise, Meerut-I Vs R.A. Castings Pvt. Ltd. reported at 2011 (269) ELT 377 (All) that under Rule 173E of erstwhile Central Excise Rules, 1944 there was mandatory requirement of fixation of norm for consumption to notify the same and arrived at manufacture on the basis of such consumption. He has submitted that there was no norm fixed for calculation of goods manufactured by use of catechu as raw material. Therefore, the quantity of final product alleged to have been manufactured by the appellant has not been arrived at on the basis of any principles laid down in the law. He has further submitted that challenging the abo....
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....s not stand the test of reasonability in as much as the payment under these heads are made by contractor and not by the company; 4.8 On recovery of Cash from residence of Shri Subhash Chand Gupta- did not turn up as he was abroad. The claim of Shri Subhash Chand Gupta that the amount of Rs. 47 lakhs had been taken on loan from M/s Mansa Trading Company and M/s Surya Kiran Trading Company respectively, was not established. 4.9 On recovery of Cash from residence of Shri Vipul Gupta:- no tenable submission and an afterthought. 4.10 In case of clandestine manufacture and removal, it would be futile to expect that all the documents duly authenticated by the evaders shall be up for grabs by law enforcing agencies. 4.11 In view of the facts and circumstances of the case, evasion of duty has been planned and carried out by four persons of M/s DSL i.e. Sri Subhash Chand Gupta, Shri Ajay Kumar Gupta, Shri Puesh Kumar Gupta and Shri Vipul Kumar Gupta and the factories owned and controlled by them. Shri Ajay Kumar Gupta in his statement dated 09.06.2009 had undertaken to locate and contact the elusive sixteen suppliers of catechu and to produce them before the DGCEI. In another statement d....
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....lies, wrong postings of figures and processing losses to arrived at actual quantity of catechu used by the appellant for manufacture of their final product. We also find that appellant had submitted that various other raw materials were required for manufacture of final products such as pan masala, pan masala containing tobacco, mouth freshener and meethy mazza for which no evidence was produced by revenue in the show cause notice nor the original authority has given any reasonable finding for such absence of evidence. We further find that Hon'ble High Court of Allahabad in the relied upon case of M/s Continental Cement Company (supra) has held that clandestine removal is a serious charge against the manufacture and the same is required to be discharged by revenue by production of sufficient and tangible evidence. It further pointed out that revenue is required to prove about the excess raw material purchased, dispatch particulars from the regular transporters, realization of sale proceeds of finished products, and to find out receipt of finished products by the buyers. In the whole proceedings we do not find any evidence produced by revenue in respect of procurement of other raw m....