TaxTMI 
TaxTMI 
2018 (11) TMI 912
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....anufacturers are engaged in the manufacture of Sponge Iron for which Iron Ore is the principal raw material. Apart from Iron Ore, Coal and Dolomite are other important raw materials which are used in the manufacture of Sponge Iron. 3. Also during the material period the Iron Ore was transported from various Iron Ore mines situated in Orissa to the Railway siding at Uslapur, Bilaspur (C.G) through Rakes. The said Iron Ore was unloaded at Uslapur Railway siding and further transported to the factory premises of five out of aforementioned six manufacturers of Sponge Iron by one M/s. Gyan Singh a transporter of Bilaspur. In the case of M/s. MSSPL, the said transportation was undertaken by one M/s. Amit Roadlines, Bilaspur 4. It is the case of the Revenue that apart from the Iron Ore which was being reflected in the statutory records by six manufacturers and utilized in the manufacture of Sponge Iron, they were also procuring huge quantity of Iron Ore from Railway Siding at Uslapur which was not reflected in their statutory records and which was being used in the manufacture of Sponge Iron which was clandestinely removed. It is their case that apart from the accounted Iron Ore, M/....
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....tion bills were not issued by the appellant/assesses, the freight charges were received in cash only. He also admitted that sometimes the bills were raised for lesser quantity than actual quantity received as per requirement of the assesses but amount was paid for actual quantity transported by them. He also elaborated and explained the purpose of maintaining of each record. 8. The premises of M/s. Amit Roadlines was also searched on 21-6-2007 and records were withdrawn as per four panchnamas dated 21-6-2007, 4-7-2007, 6-7-2007 and 20-11-2007. Statements of Shri Ajay Chobay, Manager M/s. Amit Roadlines were recorded on 21-6-2007, 8-8-2007 and 20-11-2007 wherein he explained the purport of the various records seized from their premises. 9. The South East Central Railway Authority vide their letter dated 05-03-2008 had informed that the manufacturers of Sponge Iron including the present six manufacturers had got transported Iron Ore by railway rakes and had taken delivery of the same from the Railway Siding at Uslapur, Bilaspur. The Railway Authorities provided the details regarding Iron Ore transported through Rail Rakes from various mines to Railway Siding at Uslapur along wi....
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....of input output ratio that 1.6 MT of Iron Ore could manufacture 1 MT of Sponge Iron demanded duty on Sponge Iron. The details of unaccounted quantity of Iron Ore allegedly received by all the six manufacturers and quantity of Sponge Iron allegedly manufactured out of the same can be summarized in the following chart:- No. Name of the Appellant Quantity allegedly received as per the information provided by the Railways Quantity allegedly received on the basis of the records seized from M/s Gyan Singh Total Quantity of Iron Ore Quantity of Sponge Iron allegedly manufactured out of the said quantity of Iron Ore (i) SPIPL 22015.00 MT 21128.99 MT 43144.19 MT 26965.119 MT (ii) KIPL 17431.46 MT 22745.39 MT 40176.85 MT 25111.00 MT (iii) RMIPL 15440.97 MT. Apart from the above quantity there is an allegation that 1200 MT was received on the basis of statement of Shri Manoj Jain dated 30.12.2008 Director of M/s Airen Steel (P) Ltd., 24632.48 MT 43198.92 MT 26411.98 MT (iv) ASPPL 11428.980 MT 3775.880 MT 15204.680 MT 9503MT (v) PIPL 6484.390 MT 3400.100 MT 9884.540 MT 6178 MT (vi) ....
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....ccording to him the receipt, which was suppressed and the same has been ordered to be recovered. Penalties under different Sections of Finance Act have also been imposed. Wherever the demand under the Finance Act, 1994 has been confirmed and challenged in these appeals, the same is being indicated in the charts of duty demand. The confirmation of duty demand under the Central Excise Act and Finance Act (in whichever appeal it has been demanded and challenged) is tabulated below: (i) Details of duty demanded confirmed and penalties imposed in respect of M/s. PIPL. Duty amount confirmed under Section 11A(1) of the Central Excise Act, 1944 Rs.1,22,65,337/- Under section 11A of the CE Act, 1944 Amount of Penalty imposed under Section 11AC of the Central Excise Act, 1944 Rs.1,22,65,337/- Under section 11Ac of the CE, Act 1944 Amount of penalty imposed on the Shri N. K. Bhojani, Director under Rule 26 of the Central Excise Rules, 2002 Rs.25,00,000/- Amount of penalty imposed on the Shri Manoj Sharma, G.M (Commercial) under Rule 26 of the Central Excise Rules, 2002 Rs.15,00,000/- Amount of penalty imposed on the M/s. Arora (CG) Energy and Steels Pvt. Ltd., Di....
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.... respect of M/s. SPIPL. Duty amount confirmed under Section 11A(1) of the Central Excise Act, 1944 Rs.4,36,94,231/- Amount of Penalty imposed under Section 11AC of the Central Excise Act, 1944 Rs.4,36,94,231/- Amount of Service Tax confirmed under Section 73 of the Finance Act 1994 along with interest under Section 75 of the Finance Act, 1994. Rs.59,464/- Amount of penalty imposed under Section 78 of the Finance Act, 1994 Rs.59,464/- Amount of penalty imposed @ Rs. 200/- per month under Section 76 of the Finance Act, 1994. @ Rs. 200/- per month Amount of penalty imposed on the Director under Rule 26 of the Central Excise Rules, 2002. Rs.1,00,00,000/- 15. SUBMISSIONS BY M/S. SPIPL, M/S. KIPL, M/S. RMIPL AND THEIR AUTHORISED SIGNATORY, DIRECTORS. (i) That, a preliminary objection has been raised to the effect that receipt of extra quantity of Iron Ore has been presumed merely on the basis of information supplied by the Railways and charts which have been prepared on the basis of records seized from the premises of M/s. Gyan Singh. (ii) That, the duty demand cannot be confirmed merely on the basis of the information provided by the RRs of t....
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....he case of M/s. KIPL duty has been demanded by presuming that they suppressed production of 29177.183 MT of Sponge Iron during the period 2006-07 to 2010-11 on the ground of excess consumption of electricity and low yield of Sponge Iron. On this count it is submitted that on this part of the demand there is not even an allegation that M/s. KIPL had received excess quantity of Iron Ore not to speak of Coal and Dolomite. (ix) That, the duty demand in all cases was merely based on theoretical calculations and it was submitted that duty demand cannot be made merely on the basis of theoretical calculations and higher consumption of electricity. (x) That, the Authorised Representative in the case of M/s. SPIPL and Directors in the case of M/s. RMIPL and M/s. KIPL in their respective statements had categorically stated that yield of Sponge Iron out of Iron Ore was dependent upon quality of Coal and Iron Ore. (xi) That, there was no justification for demanding Service Tax on transportation charges as none of the parties received any unaccounted quantity of Iron from M/s. Gyan Singh. (xii) That, written submissions along with case law was submitted in the form of a paper book at....
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....n the judgment of the High Court of Chhattisgarh dated 04-07-2018 in the case of M/s. Hi Tech Abrasives Limited wherein the Hon'ble High Court has strictly construed the provision of Section 9D of the Central Excise Act by holding the same as mandatory and not mere directory. That, unless the substantive provisions contained in Section 9D are complied with, the statement recorded during search and seizure operation by the Investigation Officers cannot be treated to be relevant piece of evidence on which a finding could be based by the adjudicating authority. 17. Submission on behalf of M/s MSSPL is also on the lines adopted by the other Appellants and this being not reproduced once again 18. Ld. AR submitted as under; (i) That, since the Railway is a Government of India organization any information provided by it must be held to be authentic. Therefore, merely because the said information contained in the shape of charts, it cannot be held that the respective parties did not receive the quantity of Iron Ore mentioned in their information. (ii) That, the department had seized numerous documents from M/s. Gyan Singh and M/s. Amit Roadlines. The charts prepared on the basi....
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....t, lifted by party, endorsement, name of the party receiving Iron Ore. While recording the statements from the Directors of M/s. KIPL and MSSPL and authorized signatory of SPIPL, it was explained to the Investigating Officer that the consignee and the party which lifted the material could be different. But in that case RR is to be endorsed by the consigner to the lifter. On the basis of aforesaid endorsements, railways let the lifter (other than consignee/owner of the goods) lift the Iron Ore from the Railway Siding at Uslapur, Bilaspur. Therefore, in absence of original RRs the Revenue cannot allege it could not be as to which of the Appellants had actually lifted the Iron Ore. It was, therefore, absolutely necessary that the department should have obtained original copies of RRs and examined the same to arrive at a definite conclusion regarding the party which actually lifted the Iron Ore from the endorsements carried out in the said RRs and should have examined as to whether a particular manufacturer/ Appellants had entered the said quantity in their statutory records or not. Further, no reliance can be placed on the said chart as in respect of 98 RRs out of total 156 RRs, there....
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.... by different manufacturers/ Appellants and not reflected in their statutory records. 21. Regarding the allegation and finding about the receipt of unaccounted quantity of Iron Ore on the basis of records of M/s. Gyan Singh, no basis whatsoever has been given in the show cause notice. It has merely been alleged that certain entries as shown in the chart were regarding receipt of Iron Ore by the respective parties on the basis of records seized from M/s. Gyan Singh and not accounted for in the statutory records. It has already been noted hereinabove that records of M/s. Gyan Singh have not been relied upon in the show cause notice. The Revenue merely prepared some charts on the basis of the said records and relied upon by the same as would be evident clear by perusing Annexure to the various show cause notices. There does not appears to be any possibility of receipt of extra quantity of Iron Ore on the basis of the recodes of the transporter as the said transporter was transporting the entire quantity of Iron Ore through Uslapur Railway Station. It is not the case of the Revenue that M/s. Gyan Singh was loading Iron Ore from any other place in the cases of five out of six manufac....
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....f Billty books and challans resumed from transporter but the records resumed from M/s. Bharat Freight Carriers were not relied upon for issue of show cause notice. In such a case the demand of duty was set aside. The Tribunal further held that the entire demand on the basis of information given by Railway Authorities that 40553 bags of gutkha were clandestinely removed was not established. The findings given in this judgment is fully applicable to the facts of the present case in as much as even in the present case the department has not relied upon the copies of RRs and records of the transporters. 23. The next issue is to be decided is as to whether the RRs and records of the transporters are sufficient to saddle a manufacturer/Appellant with a huge duty liability on the allegation of clandestine removal. In the under noted cases it has been held that the records of the transporters are third party record and duty cannot be demanded merely on the basis of records seized from the transporters: (i) CCE, Delhi-1 Vs. Vishnu & Co. Pvt. Ltd. - 2016 (332) ELT 793 (Del.) (ii) Commissioner Vs. Motobhai Iron and Steel Industries - 2015 (316) ELT 374 (Guj). (iii) CCE Vs. Brims P....
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....rised signatory whose statements were recorded were confronted with the statements of Sh. Dilip Kumar Markam. In any event, the averments of Sh. Dilip Kumar Markam were rebutted by Sh. Gyan Singh in his cross examination conducted by M/s. RMIPL. Hence the statement of Sh. Dilip Kumar Markam cannot be seen in isolation. If Sh. Gyan Singh was receiving all the freight through cheques the question of receipt of unaccounted iron ore by any of the manufacturers could not arise. Similarly, in the case of M/s. Amit Roadlines only charts prepared on the basis of records seized from their premises were relied upon in the show cause notice. No evidence was brought on record that M/s. SPIPL had received any quantity of unaccounted Iron Ore. 25. We find that with respect to M/s. KIPL and M/s. ASPPL the allegations were also leveled that they suppressed production other than based upon RRs and records of the transporters. In respect of M/s. KIPL there was an allegation that they manufactured production of 29177.183 MT of Sponge Iron during the period 2006-07 to 2010-11 on the ground that they had consumed higher electricity during the said period. In respect of M/s. ASPPL similar allegation ....
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....ulted in under utilization of their installed capacity. The parties/Appellants have also made similar submissions before the Principal Commissioner, the Adjudicating Authority. These submissions have neither been rebutted or controverted by the Adjudicating Authority nor by the learned ARs, who appeared on behalf of the Revenue. Without proper scientific norms adopted by the Revenue to find out the actual yield of Sponge Iron and quantum of consumption of electricity such conclusion in fallacious. Further, some of the parties/ Appellants in their initial statements itself submitted that they were receiving poor quality of coal and Iron Ore. Nothing was bought on record in the show cause notices in rebuttal of these averments which were made by the manufacturers. 26.2 There are plethora of judgments wherein it has been held that duty cannot be demanded on theoretical calculation. It has been held that in order to prove clandestine removal the department has to bring on record independent and corroborative evidence. Some of the judgments are below mentioned: (i) Punalur Paper Mills Ltd. Vs. Collector of Central Excise & Customs, Cochin reported at 2009 (244) ELT 204 (Tri. - Ban....
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....Roadlines in the case of M/s. MSSPL but there is not even any evidence in any of the show cause notices and there is no finding at all by the Adjudicating Authority that all the six manufacturers had received proportionate quantity of two other major raw materials i.e. Coal and Dolomite. The requirement of Coal is almost in the same quantity as that of Iron Ore. The department has not brought any evidence that all the six manufactures had received proportionate quantity of Coal and Dolomite which is required in very huge quantity in order to manufacture Sponge Iron. The counsel for M/s. SPIPL, M/s. KIPL and M/s. RMIP relied upon the following judgments wherein it has been held that unless there is evidence to prove receipt of unaccounted extra procurement of all the raw materials in proportionate quantity the allegation of clandestine removal cannot be sustained. It has also been held in these judgments that cases of clandestine removal cannot be made out merely on the basis of receipt of one raw material when in order to manufacture final product several other raw materials are also required: (i) Vishwa Traders Pvt. Ltd. Vs. Commissioner of Central Excise, Vadodara, reported at....
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.... party in clandestine manner. There is not even a single case where any clandestinely removed Sponge Iron was intercepted in transit, though the duty demand pertains to fairly a long period of time. There was not even a single effort made by the investigating officers to find out as to whom such a huge quantity of Sponge Iron was sold by the six manufacturers. It has already been noted hereinabove that the allegation of clandestine removal is very serious charge and the same cannot be simply upheld on assumptions and presumptions. The department must bring on record independent and corroborative evidence. In the present set of case the following parameters are completely missing: (a) No evidence of manufacture of such a huge quantity of Sponge Iron. (b) No evidence of unaccounted extra procurement of other two major raw materials i.e. Coal and Dolomite corresponding to the quantity of Iron Ore alleged to have been procured, which is essential for manufacture of Sponge Iron allegedly manufactured and cleared by the six manufacturers. (c) No evidence of payment of any labour charges for production of alleged clandestinely manufactured and removed Sponge Iron. (d) No evide....