TaxTMI 
TaxTMI 
2018 (6) TMI 642
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of Shri Subhash Chand Gupta uncle of Shri Ajay 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 gener....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from their suppliers and utilised the same in the 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 p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....verified by respective suppliers during cross examination, but 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 deal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....That the SCN is based only on a single raw material, which comprises only 8 to 9% 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....08,67,75,435 .00 in para 7.7 of SCN has also been raised relying on such purchases data of all the 35 catechu suppliers. 3.9 No other corroborative material evidence adduced 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... if the authorities did not conduct investigation properly. Department had full liberty to investigate in the matter which they have failed to carry out. In fact the department did not even 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 eviden....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of Oudh Sugar Mills. 2003 (152) ELT 131-KALVERT FOODS INDIA PVT LTD V/S CCE MUMBAI 2000 (126) ELT 1079-DEEPAK TANDON V/S CCE BHUBANESHWAR 2000 (121) ELT 650- BECO INDUSTRIES V/S CCE JAMSHEDPUR 2001 (130) ELT 228- CCE PATNA V/S UNIVERSAL POLYTHELENE INDUSTRIES 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 qu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....destine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects : (i) To find out the excess production details. (ii) To find out whether the excess raw 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tial write down of their duty liability was never brought up by the concerned person of the applicant at any stage of investigation. After issue of SCN, the appellant is resorting to any possible method, howsoever irrelevant and unsubstantiated, to reduce the massive duty liability. 4.7 On recovery of Cash from residence of Shri Ajay Kr. Gupta, Director, DSL- His version that this amount was to be utilized for payment of freight and labour dues does 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion of penalty, interest and personal penalty. Against the said Order-in-Original, the party's present appeal is fit to be dismissed. 5. Having considered the rival submissions and on perusal of records, we find that the learned Commissioner in the impugned order has not taken into consideration explanations given by the appellant in respect of discrepancies in the quantity of catechu presumed to have been procured and used by the appellant and various short supplies, 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....