TaxTMI 
TaxTMI 
2019 (3) TMI 1476
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....side are at liberty to make a mention before the roster Judge thereafter." 2.1 The facts of that matter are that ADR plastics, (the appellants herein and referred to as ADRP), ADR Agencies (hereinafter referred to as ADRA), Raj Plastics, (hereinafter referred to as Raj) were units engaged in the manufacture of 'ADR' brand household articles of plastic like buckets, tubs, mugs, cups etc. One Shri D. Gunasingh @ Pitchai is a Partner of ADRP and Raj and Managing Person of ADRA. Consequent to investigation by the Directorate General of Central Excise Intelligence (DGCEI) and searches of the factory and other premises of these three entities, including the statements recorded from Shri A. DuraiRaj, Partner of ADRP, D. Azir, partner of Raj, D.Gunasingh, Partner of ADRP and various dealers two show cause notices were issued to ADRA and Raj. Vide SCN No.162/2012 dt. 31.12.2012, it was alleged that these three entities should be treated as single financial entity constituting one single manufacturer, the manufacturer being ADRP represented by D. Gunasingh; that the said D.Gunasingh started ADRA and Raj camouflaging the true nature of their activities, to illegally avail SSI exemption and t....
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....resented by D.Gunasingh is the real manufacturer and duty is to be demanded from ADRP. (ix) The computation of aggregate clearances arrived at by clubbing the value of both accounted and unaccounted clearances from the group units is correct which works out to Rs. 1,74,97,316/- as detailed in worksheet to SCN. (x) ADRA, Raj and Gunasingh have indulged in suppression of actual production and clandestine removal of plastic articles manufactured by them without accounting raising invoices. The proposal for confiscation of unaccounted goods and raw materials seized from the premises of ADRA and Raj, are liable for confiscation under Rule 25 of the Central Excise Rules, 2002. 2.4 Based on these findings and conclusions, the adjudicating authority inter alia, ordered as under : (i) ADRP, ADRA and Raj should be treated as single financial entity constituting one single manufacturer, the manufacturer being M/s.ADR Plastics represented by Shri D. Gunasingh. (ii) The value of clearances of three units should be clubbed together to decide eligibility of small scale exemption under Notification No.8/2003 dt. 01.03.2003. (iii) Demand of Rs. 1,74,97,316/- from ADRA represented by D.G....
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....ntermingling of goods manufactured, because each unit manufactures different products. vii) Each unit has separate Electricity Service Connection, Diesel Generator for generation of power. viii) Each unit is housed in different, distinct and independently identifiable geographical location storing the raw material, production & processing of materials and finished products of each unit separately for clearance. 3.3 Further the appellants wish to submit that the capital of each of the firms are separate and there is no transfer or use of funds between the three units. Each firm has its own banking account and they generate funds by means of loans and credit facilities from Banks independently. There is no flow back of fund from one firm to the other and entire operations of the firms are done independently. Thus, the most vital element of 'financial participation' for establishing common units, is absent in the present case. As such the allegation that the appellant has pervasive financial control over the other two unit is not correct and proposal to club the clearances of the firms on the said ground is not sustainable at all. Shri Gunasingh has carried out activities in the ....
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....orded in May 2010, the value of accounted clearances made during the year 2010-11 and 2011-12 also has been doubled without any other evidence, which is also arbitrary and not tenable at all in the absence of any other evidence. 3.6 During the year 2010-11, the appellant has got registered with the department and thereafter made clearances on payment of appropriate duty. The details of such payment of duty is tabulated in Annexure E14. However, the SCN had not adjusted payment of duty of Rs. 22 lacs made by the appellant during the years 2010-11 and 2012-13, and instead has demanded duty even on such value of duty paid clearances which is not at all sustainable. 3.7 Statement of Shri R Venkatesh, Supervisor of Raj Plastics was recorded on 21.7.2010 and on 28.8.2010. In the latter statement, it has been recorded from him that estimate quotations contained the actual details of supplies made to various dealers and these sheets were prepared by him using the computer available in ADR plastics as directed by Shri D Gunasingh. (refer para 10.2 of the SCN). The Commissioner has neither examined him in terms of Section 9D nor provided opportunity to cross examine him. Further, such shee....
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.... (a) Indroyal Furniture Co Pvt Ltd - 2019 (1) TMI 770 CESTAT Chennai (b) Agni Steeels Pvt. Ltd. - 2019 (2) TMI 934 CESTAT Chennai (c) Popoular Paints & Chemicals - 2018 (8) TMI CESTAT New Delhi 3.10 Entire proceedings of alleged clandestine manufacture and clearance as well as clubbing of clearance has been made mainly based on evidences recovered from third parties such as raw material suppliers, job workers, buyers, etc and statements recorded from such third parties and based on the contents of pen drives seized from the opposite unit and statements recorded from Shri D Gunasingh and other partners/employees of the above three concerns. 3.11 The appellant wish to place reliance on the following decisions : a) SreeNirmal Spinners - 2014 (300) ELT 469 CESTAT Chennai b) Balsara Hygeine Products Ltd - 2012 (278) ELT 526 - Revenue appeal was dismissed by Hon'ble Apex Court as reported in 2015 (321) ELT A146. c) Electro Mechanical Engg Corporation - 2008 (229) ELT 321 SC d) Renu Tandon 1993 (66) ELT 375 Raj e) Vizag Poly Packaging Industries - 2017 (347) ELT 506 f) Poly Printers - 2002 (139) ELT 295 - Revenue appeal dismissed by Hon'ble Apex Court as reported in 2003 (151) E....
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.... two pen drives maintained by her and seized by the officers from ADR Plastics on 09.03.2010. She has made entries in the said two pen drives on the basis of the details given to her by Shri D.Gunasingh. She has also prepared the sale bills only on the basis of the details given to her by Shri.D.Gunasingh". 4.4 Shri D.Gunasingh in his further statement dated 26.09.2012 (Marked as Sl.No.32 of annexure-C to the SCN No.162/2012 dated 31.12.2012 - Pages 50 to 52 of the SCN), he had accepted that "the sales details contained in the pen drives I & J seized related to sales made from all their units, i.e., ADR Plastics, ADR Agencies and Raj Plastics. But they have not maintained any accounts to show how much cleared from each unit". 4.5 Shri D.Gunasingh in his statement dated 09.03.2010 and Smt.P.Amsavalli, their Computer Operator vide her statement dated 30.08.2010 have admitted the above facts. The notice did not dispute the veracity of the pen drives which were being used by them to record and maintain their day-to-day business transactions, while deposing further statements on 30.08.2010 and 26.09.2012 also. They have raised objections on the veracity of the pen drives only be....
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....r Group Companies as under : Description Bill amount in Rs. Actual Amount in Rs. 5 Lr Bucket (1 dozen) 102 246 9 Lr Bucket 8 28 10 Lr Bucket 12 35 25 Lr Drum 30 97 iv) Shri T.KamalRaj, Proprietor of M/s.Kamal Plastics Store, Coimbatore had admitted, in his statement dated 11.05.2010 (marked as Sl.No.19 of Annexure-C to the SCN - Page 34 of the SCN) that " He used to inform Shri SelvaRaj of ADR Plastics about their requirements of plastics articles and the goods will be received through Vinayaga Parcel Service; that they used to get the bills from ADR Plastics or ADR Agencies or Raj Plastics by couriers; that however, most of the times the description of goods in the bills received from ADR Group concerns will be different from that of the goods actually received by them and the bill value will be only half the value of the goods received by them; that he used to pay the amounts mentioned in the bill and amounts over the bills towards the receipt of the said articles to Shri SelvaRaj by cash". v) Shri A.Paramasivam, Proprietor of M/s.P.S.Metal, Nagercoil (marked as Sl.No.19 of Annexure-C to the SCN - Page 36 of the SCN) that "he used to receive Bills for less quanti....
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....in respect of the goods received to Shri Gunasingh based on the details contained in the Estimate Quotation he used to bring with him after making entry on the same about the payments made to him". ix) Shri A.Joseph, Manager of M/s.Annai Plastics, Tirunelveli, in his statement dated 30.07.2010 (Marked as Sl.No.25 of Annexure-C of the SCN - Page 40 of the SCN) had confessed that "he admits the receipt of the goods as mentioned in the Chits from ADR Plastics; Shri Gunasingh would send the goods as per the orders and send the bills of ADR Plastics, ADR Agencies and Raj Plastics. These bills would show less quantity and reduced value. Sometimes the goods are sent without bills; Shri Gunasingh would personally bring the chits titled 'Estimate Quotation' showing the actual quantity of the goods supplied and the actual values thereof, while coming for collection". x) Shri M.Mohammed Raffic, Proprietor of M/s.Bismi Stores, Madurai had also admitted in his statement dated 13.08.2010 (Marked as Sl.No.27 of Annexure-C of the SCN - Page 42 of the SCN) that "Shri Gunasingh would send the goods as per the orders and send the bills of ADR Plastics, ADR Agencies and Raj Plastics. These bills wo....
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....edger Accounts is justifiable and the determination of the actual value of clearances of accounted sales from unit of the group is in order. That the impugned order calls for no interference. 6. Heard both sides and have gone through the facts. 7.1 In writ petitions filed by Raj, D.Gunasingh and ADRA before the Hon'ble High Court of madras (Madurai) Bench, the Hon'ble High Court in their order dt. 31.01.2019 referred to supra noted that ADR Plastics has filed regular statutory appeal before CESTAT Chennai numbered as E/40595/2015 and took the view that the Court should have the benefit of the order passed by the CESTAT Chennai in the said appeal and directed for disposal of the said appeal on merits and in accordance with law on or before 31.03.2019. 7.2 The issue that comes up for decision in this appeal is whether the clubbing of clearances of ADRA and Raj with ADRP (appellants herein) treating all the three units as single financial entity constituting one manufacturer, that being ADR Plastics, represented by D.Gunasingh, consequential confirmation of demand of Rs. 1,74,97,3016/- with interest and imposition of penalty on this appellant can be legally sustained or otherwise. ....
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....of Raj Plastics. Hence the mandatory requirements of Section 36B ibid have been clearly followed in the breach. It is also pertinent to note that although pen drives and CPU were seized on 09.03.2010, the data therein was admittedly copied / printed out only on 20/21.05.2010, i.e after more than two months. The statement of Ms.Amsavalli, Computer Operator of Raj Plastics was recorded after a further gap of three months, on 30.08.2010. It also emerges that the said Ms.Amsavalli had joined Raj Plastics less than a month before the seizure of the pen drives, namely, on 14.02.2010. In the circumstances, we find that Ld. Advocate is correct in his assertion that the requirement of Section 36B have not been complied with; so also, the evidence of a newly joined employee (Ms. Amsavalli) cannot be relied upon. 7.6 This Tribunal has echoed the sanctity of Section 36B in the decisions of Ind Royal Furniture Co. Pvt. Ltd. and Agni Steels Pvt. Ltd. (supra) relied upon by Advocate. In Agni Steels (supra), this Bench had held as under : "15. From an overall analysis of the investigation, the requirements of Section 36B as also the finding in the above case, we find that it is manifest on the I....
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....any files opened with unauthenticated software in the remand proceedings. In the denovo proceedings, the Commissioner has therefore excluded the evidence obtained from the filed opened with unauthenticated software. As seen above, in the impugned order it is discussed in detail the reason for dropping duty demand of Rs. 7,60,79,469/-. Therefore, we do not find any merit in the appeal filed by the department in E/401/2009 requesting to interfere with the dropping of the said demand of duty." 7.7 In the circumstances, we are of the considered opinion that the printouts taken from the pen drives cannot be said to have passed the strict proceduralities mandated in Section 9B ibid and hence cannot be treated as admissible evidence. 7.8 We find that in their reply dt. 19.05.2014 of ADR Plastics and reply dt. 17.11.2014 to the SCN, the appellants had given a list of 14 persons for cross examination namely, K. Ganesh, Proprietor of Karthik Plastics, Suresh, Proprietor, AST Industries, G. Ganesan Proprietor, Raga Stores, S.Nagoor Pitchai, Proprietor, Bhanu Stores, G. Kaliappan, manager, Sri Srinivasa Stores, M. SelvaRaj, Madurai, A. Paramasivam, Proprietor, P.S. Metals, B. Narayanan, Prop....
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....aw sustenance from a slew of decisions of various higher appellate forums. For example Vijaya Samundeshwari Textiles (P) Ltd. and others - 2017 (11) TMI 815- CESTAT Chennai, where this very Bench, relying upon the judgment of the Hon'ble High Court of Delhi in the case of J.K Cigarettes - 2009 (242) ELT 189 (Del.), held that in the absence of examination of witnesses of the cross examination, the statements are inadmissible evidence and the demand of duty based on such statements alone is unsustainable. We are therefore of the considered opinion that the denial of request for cross examination by the adjudicating authority will only serve to vitiate the entire proceedings particularly when the purported corroborative documentary evidence in the form of printouts from pen drive have been held to be as failing the test of Section 36B ibid. 7.10 It is interesting to note that statements of S/Shri Kaliappan and Kamal Raj were recorded in 2010 where they have deposed about the transactions for subsequent years which is 2010-11 and 2011-12. It is not understood how the said witnesses could have knowledge about the transactions for 2010-11 and 2011-12 in the year 2010 itself. The departm....
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....ck between them. On the other hand, as has been consistently argued by the appellants right from the reply to SCN, each of these entities have separate bank accounts, separate registration under the Factories Act, ESI Act, PF Act and Sales Tax Act. separate Income tax Permanent Account Number (PAN) and separate employees, without any deputation of employees between them, no interdependent between the units in respect of plant and machinery. There is no charge of intermingling of goods manufactured since each units manufactured different products. Each unit have separate electricity service connection, and capital of each firm is separate. Nothing has been brought on record during investigation or brought forth in adjudication to disprove or demolish the above averments of the appellant. This being so, only for the reason that D.Gunasingh is a common factor in all the three units or assists in decisions thereof, this alone cannot be a reason for holding that appellant has ‚persuasive financial control over other two units‛ and that therefore the clearances of the appellants need to be clubbed with ADRA and Raj. 8.4 A number of higher appellate forums have consistently s....