TaxTMI 
TaxTMI 
2018 (10) TMI 82
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....ajuri Steel Pvt. Ltd. (f) Appeal No. E/53058/2016 - Balaji Metal Company (g) Appeal No. E/53013/2016 - Yogesh Shah 2. The issue in these appeals is as to whether the appellant Anant Steel Private Limited (ASPL for short) have suppressed their production and have resorted to clandestine removal of the finished goods. Brief facts of the case are that M/s Anant Steel Pvt. Ltd. is engaged in the manufacture of MS Ingots and TMT Bars falling under Chapter 72 of the First Schedule to the Central Excise Tariff Act, 1985. A search was conducted on 05.02.2012 at the factory and office premises of ASPL as well as certain other premises on the basis of some intelligence that ASPL was involved in central excise duty evasion by resorting to suppression of actual quantum of production of MS Ingots/TMT bars and, thereafter, clandestine removal of TMT bars, under parallel set of central excise invoice. During the course of searches, various documents were recovered by the department being 178 nos. parallel invoices, private records in the form of Weighment Register, Dispatch Diary, Material Receipt Slips, Files etc. seized vide Panchnama dated 05.02.2012 and statements of vari....
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.....7 ASPL had manufactured and cleared 6104.400 MTs of TMT bars in the open market to independent buyers but showed in the statutory records as sale of MS Ingots to M/s Shreyash Enterprises, Jalna being proprietorship firm of Shri Vinayak Kangaonkar - appellant in Appeal No. E/53025/2016, under 396 central excise invoices during the period 2010-11 and 2011-12 [December 2011] and, thus, evaded central excise duty of Rs. 35,28,567/-. It was further stated in the SCN that this was done by ASPL in connivance with M/s Rajuri Steels Pvt. Ltd., Jalna - appellant in Appeal No. E/53056/2016, under a well hatched strategy to pass on the fraudulent cenvat credit to M/s Rajuri Steel Pvt. Ltd. through a Sham firm in the name and style of M/s Shreyash Enterprises. 2.8 M/s Balaji Metal Company - appellant in Appeal No. E/53058/2016 and Shri Yogesh Shah - appellant in Appeal No. E/53103/2016 and partner in M/s Balaji Metal Company had knowingly and intentionally abetted ASPL in evasion of central excise duty under the parallel invoices of M/s Balaji Metal Company. The said firm was not engaged in actual trading but was created by Shri Yogesh Shah to facilitate clandestine clearances of ASPL under....
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....inesh Rathi - Director of M/s Rajuri Steels Pvt. Ltd., under Rule 26 of the Central Excise Rules, 2002. 4. During the course of adjudicating proceedings, replies were filed by the appellants viz., ASPL, Shri Mayank Bansal, M/s Balaji Metal Co., Shri Yogesh Shah, Shri Vinayak Kangaonkar, M/s Rajuri Steels Pvt. Ltd. and Shri Dinesh Rathi. In addition, ASPL had also filed written submissions. The basic contentions raised by the appellants before the Commissioner were as under: - (a) ASPL did not have the capacity to manufacture the quantity of ingots mentioned in the weighment register. To support the same, ASPL had placed on record the Chartered Engineer's Certificate, Electricity bills showing consumption of electricity, invoices issued by Electrotherm who is the manufacturer of two furnaces installed in ASPL's factory showing the capacity, letter issued by Pollution Control Board, MP. (b) Demand on the basis of entries in private records could not be made the sole basis for sustaining the allegations of clandestine manufacture and removal and, that too, when ASPL had never directed any person/employee to maintain such private records. ASPL has brought on record....
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.... (v) Shri Sandeep Changan (vi) Shri Abu Asad (vii) Shri Sandeep Sharma (viii) Shri Ram Pal Sharma (ix) Shri Deepesh Mahapatra (x) Shri Manoj Huddar (f) The other appellant Shri Mayank Bansal, Director of ASPL denied any clandestine activities in ASPL and further submitted that he had never admitted any clandestine manufacture and clearance of TMT bars, etc. Other remaining appellants had also denied their involvement in the clandestine activities as referred to in the SCN. Other remaining appellants had also denied their involvement in any illegal activities referred in the SCN and had also made request for cross-examination of the persons whose statements were relied upon against them in the SCN. 5. The Principal Commissioner being the adjudicating authority, adjudicated the SCN vide the Order-in-Original dated 26.08.2016 by upholding the allegations against appellants and, consequently confirming the central excise duty demand of Rs. 9,72,00,165/- against ASPL along with interest and imposed following penalties on the appellants: - ASPL - Rs. 9,72,00,165/- u/s 11AC Sh. Mayank Bansal - Rs. 60,00,000/- u....
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.... We have perused the allegations made in the SCN and the findings recorded by the Commissioner in the adjudication order and observe that the entire case of the department is based on the private records seized from the factory premises of ASPL as well as the statements of various persons recorded during the course of investigation. 9. Shri Rupesh Kumar, learned counsel for ASPL, while referring from the reply and written submissions in the adjudication proceedings, had strenuously argued that both the seized documents as well as the statements have wrongly been relied upon to make out a false case against ASPL. He submitted, while referring to the seized documents, that the same are unrelated and do not belong to ASPL, as ASPL did not even have the capacity to manufacture the quantity shown to have been allegedly cleared in the seized documents, as well as electricity consumption data placed on record before the Ld. Commissioner. It was also submitted that ASPL was not aware about the existence of the said documents and, it had never instructed any person to maintain any such private record. He further submitted that all the clearances of MS Ingots and TMT bars were duly reflec....
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....tion. Some of the parties whose names were mentioned in the private records submitted their ledger accounts to the department during the course of investigation, copies of which were filed by ASPL in the adjudicating proceedings. The Ld. Commissioner has totally overlooked this vital aspect while confirming the demand based on entries reflected in the said private records and, instead recorded a perverse finding contrary to records by holding that the charges of clandestine removal have been corroborated by various evidences placed on record in the form of statement of transporter, broker, supplier, seller party etc. who in their respective statements had admitted/corroborated clandestine removal, which, in our opinion, has vitiated the entire proceedings. 10. Another issue raised by the counsel for ASPL is that the Commissioner ought not to have relied upon the statements of various persons including employees referred to in the SCN until and unless the veracity of the same is permitted to be tested by way of grant of cross-examination of the said persons even though ASPL had given justifiable reasons for the same coupled with the fact that some of them had retracted their stat....
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....015 (324) ELT 641 (SC.). 11. Now we will deal with the arguments of both sides vis a vis the OiO passed by the Commissioner on the basis of demand based on respective private records. One of such private record is 'weighment register' which was seized from factory premises of ASPL. As per the SCN, the entries reflected therein pertained to manufacture and captive consumption of MS Ingots by ASPL, to further manufacture TMT Bars. As per the SCN, the entries reflected in the weighment register regarding manufacture of and clearance of MS Ingots were not shown in the statutory records by ASPL and the same were cleared captively by ASPL without payment of central excise duty and/or used in the manufacture of TMT bars which were cleared clandestinely without payment of duty. To support the said allegation reliance has been placed by the department on the statements of Mithilesh Singh-Kanta clerk in ASPL, dated 05.01.12, who is stated to be one of the authors of weighment register. Relying upon the entries recorded in the weighment register, it was alleged in the SCN and affirmed by the Commissioner that ASPL had manufactured on an average 113.275 MTs of MS Ingots per day. The learned....
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....arat High Court reported in 2015 (322) ELT 283 (Guj.), CCE, Mumbai v Air Carrying Corp (I) Pvt. LTd. - 2009 (248) ELT 175 (Bom), Aditya Cement & Ors v CCE, Jaipur - MANU/CE/1016/2017 and Synthetic & Chemicals Ltd. v CCE - 1997 (89) ELT 793 (T). 12. We find merits in the submissions made by the learned counsel for ASPL that the demand of excise duty, confirmed on the basis of entries reflected in weighment register, without rejecting the evidences placed on record by ASPL regarding the capacity of production of the two furnaces installed in its factory, is not sustainable. ASPL had purchased the said two furnaces from M/s Electrotherm on 22.12.01 and 05.01.02 and, as per the invoices the capacity of the said two furnaces were 4MT each. ASPL had got the capacity of one of the furnaces enhanced to 7MT/day, as per invoice dated 03.09.11 of the manufacturer M/s Electrotherm. The entries recorded in the weighment register is for the period 01.02.2011 to 05.01.2012. Thus, for the entire period covered in the weighment register except four months, ASPL had the two furnaces of production capacity of 4MT/day each. Taking into consideration power constraints as well as the fact that the fu....
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....The Tribunal, in the case of Fact Paper Mills Ltd. v CCE, Bhavnagar - 2014 (314) ELT 449 (T), while dealing with the allegation of clandestine manufacture and removal under similar circumstance, had set aside demand by holding that the allegation of clandestine manufacture in not sustainable when the assessee did not even have the capacity to manufacture the quantity of excisable goods alleged to be cleared clandestinely. It was observed by the Tribunal as under: - "10. We find that in Volume No. I Page 538, there is a certificate given by one of the chartered engineers which is dated 1-12-2004, which indicates about the production capacity of machines installed by the main appellant. On perusal of the said certificate, we find that the said chartered engineer has specifically stated that the machine installed in the factory premises of the main appellant even if it is run on three continuous processed plants, the production of finished goods that could be achieved is 20 MTPD of a particular basic weight range of 200 GMS to 600 GMS. On perusal of the said certificate, we find that the quantity of production which is sought to be allegedly manufactured by the appellant and ....
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.... 113.15 MT from the two furnaces, the same would clearly mean that some days the production could be more than 113.15 MT and other days it could be less. During the course of hearing appellant have demonstrated that as per the said weighment register on some days the prduction of ingots has been shown to be more than 200 MT, going upto 248MT as well, which is not possible even going by the case of the department. For this reason also, the demand of duty on the basis of weighment register is not sustainable. 14. The central excise duty has also been confirmed on TMT bars manufactured out of 9872.260 MTs of MS Billets/MS Ingots which, as per the allegation in SCN (and upheld by the Commissioner) were procured by ASPL clandestinely from various suppliers of Indore, Bhopal and Aurangabad, without recording the same in their input registers. For the said purpose, the learned DR appearing for the department has placed reliance on File No. 09 seized from the factory premises of ASPL and explained by Shri Rampal Sharma (employee) in his statement recorded during investigation. He submitted that the entries reflected in the said file contained the details of parties from whom ASPL had pu....
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....athi has also not supported the case of the department and, in his said statement, upon being asked as to whether he had arranged for supply of 7692.835 MTs of Ingots/Billets to ASPL, he replied in negative by stating that his job was merely to arrange for the goods and did not know whether the arrangement between seller and buyers was on bill or without bill. He further stated that he had not received any commission on 7692.835 MTs of Ingots which clearly establishes that he had not supplied the said quantity, as otherwise, he would have insisted upon payment of commission on the said quantity. The Commissioner has recorded a perverse finding, that investigation with the transporters have corroborated the allegations. We find that there is not even a single statement of the transporters referred to or relied upon in the SCN. Further the finding recorded by the Commissioner regarding payment made by ASPL to persons/firms named is also not correct, as during the entire investigation department has not found any unexplained or unaccounted cash. 16. For the purpose of corroborating the allegation that ASPL had manufactured MS Ingots as reflected in weighment register as well as pur....
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....ase MS ingots and no quantity of TMT bars were cleared under the said 139 parallel invoices. In this view of the matter we are not going into the issue raised by ASPL that the parallel invoices were prepared only for the purpose of enhancing bank credit limit even though we observe that out of 178 parallel invoices, 174 parallel invoices were issued upto the financial year ending March 2011. 17. The SCN has also tried to corroborate the allegation of clandestine manufacture and removal of MS Ingots and TMT bars, as reflected in the weighment register and File No. 9, by placing reliance on File Nos. 1 and 2 seized from the residence of Shri Deepesh Mahapatra (employee) as well as File Nos. 7 and 8 seized from the diggy of two scooters. We find that the SCN has tried to corroborate one private record with another private record, without establishing the authenticity of the said private records. The learned counsel for ASPL is correct in pointing out that even though the seized documents contained named persons, still, nothing is on record to show as to whether any inquiry was conducted from the said named persons to corroborate the allegation of clandestine removal against ASPL. I....
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.... absence of cross-examination, no reliance could have been placed on the statement of Shri Rampal Sharma as the same is hit by Section 9D of the Act and as held by Hon'ble Allahabad High Court in the case of CCE v Kurele Pan Products Pvt. Ltd. - 2014 (307) ELT 42 (All), CCE, Meerut-I v Parmarth Iron Pvt. Ltd. - 2010 (260) ELT 514 (T), Basudev Garg v CC - 2013 (294) ELT 353 (Del.). 19. Now coming to the central excise demand of Rs. 42,00,203/- confirmed against ASPL on TMT bars, alleged in the SCN to have been cleared on 39 parallel invoices pertaining to the period Dec.'10 to Jan.'11 which as per the Commissioner was duly corroborated by the entries recorded in the 'executive/dispatch diary' resumed from the residential premises of Shri Deepesh Mahapatra. We have seen the said parallel invoices vis a vis the 'executive/dispatch diary'. Strangely, the names stated in the invoices are different from the names recorded in the said executive/dispatch diary. The simple way available to the department to discharge the onus was to inquire from the persons/firms named in the parallel invoices as well as executive/dispatch diary. However, we find that no such inquiry was conducted from a....
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....asis of the entries reflected in the 'executive diary' seized from the office premise of ASPL as well as two statements dated 31.03.2012 and 0605.2013 of Shri Manoj Huddar who was working as accountant in the office of ASPL during the period February 2010 to December 2011. We find that ASPL has, since the beginning, taken the stand that it had not authorized or directed any of its employee to maintain any kind of private record or to indulge into any illegal activities. We find that the said executive diary was prepared in the handwriting of Shri Manoj Huddar who was removed from employment by ASPL due to mis-conduct. However, there were contradictions in his two statements in as much as in the first statement he stated that the diary was written by him on the basis of information provided by one Titu from the factory, whereas, in the second statement he stated that the diary was written by him on the basis of information received from employees of M/s Balaji Metal Co. Ltd. Further, the said diary contained exhaustive information in the form of name of the brokers, name of the buyers, telephone numbers, still nothing has been brought on record, not any investigation was conducted i....
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....terprises, who in turn had sold the same to M/s Rajuri Steel Pvt. Ltd. and all these entries were duly reflected in their books of accounts and consideration was paid through cheque and there is no evidence regarding receipt of any amount other than the cheque amount, merely because the vehicle nos. were wrongly mentioned in some of the invoices or the non-matching of seal of the check post on the invoices, the same cannot form the basis to demand duty from ASPL or imposition of penalty on Shri Vinayak Kangaonkar, M/s Rajuri Steel Pvt. Ltd. and Shri Dinesh Rathi, by treating the same as sale of TMT bars instead of ingots especially when there is no evidence on record regarding manufacture and clearance of TMTs by ASPL. 23. The Hon'ble High Court of Madhya Pradesh has held in the case of Union of India v M.S.S. Food Products Ltd. - 2011 (264) ELT 165 (MP) that under the Central Excise Act, 1944, excise duty is leviable on manufacture and production of excisable goods and the same is payable at the time of removal. Therefore, to establish the charge of clandestine removal of excisable goods, it is necessary to establish that the excisable goods were produced or manufactured by the....