TaxTMI 
TaxTMI 
2019 (5) TMI 936
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..... No. Appellant name Amount of duty demand / confirmed Penalty imposed u/s 11AC of Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002 Penalty Imposed under Rule 26 of Central Excise Rules, 2002 1 M/s.Prince Alloys (P) Ltd. Rs. 49,05,222/- Rs. 49,05,222/- -- 2 Shri T.K. Abdul Karim -- -- Rs. 1 lakh 3 Shri Ahmed Faizal Sha -- -- Rs. 50,000/- 4 Shri C.K. Abdurahiman -- --- Rs. 50,000/- 5 M/s. Bee Path Casting Pvt. Ltd. -- -- Rs. 10,000/- 6 Shri Anub Sha -- -- Rs. 50,000/- 7 M/s. Prince TMT Steels Ltd. -- -- Rs. 10,000/- 2.1. Briefly the facts of the present case are that the respondents M/s. Prince Alloys (P) Ltd., Palakkad (main respondent)are manufacturers of MS ingots, M/s. Prince TMT Steels Ltd. are the manufacturers of TMT bars / rods and M/s. Bee Path Casting Pvt. Ltd. are manufacturers of CTD bars and MS Rods. The Preventive Unit, Calicut conducted a search of the common office and factory premises of M/s. Prince Alloys Pvt. Ltd. and their sister concern M/s. Prince Rollings (P) Ltd. and seized several documents. Some incriminating privat....
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....ut by holding that the charges of unaccounted production and clearance of 1720.674 MT of MS ingots without payment of duty has not been proved. Thereafter, the Committee of Commissioners examined the records and the order passed by the Commissioner(Appeals) and there was no consensus among the members of the Committee and the matter was referred to the Chief Commissioner who directed that the appeal be filed before the Tribunal. Hence the Revenue filed the present appeals. 3. Heard both sides and perused records. 4.1. Learned AR appearing for the Revenue has submitted that the impugned order passed by the Commissioner(Appeals) setting aside the Order-in-Original is not sustainable in law as the same has been passed without properly appreciating the documentary evidences on record and without appreciating the law and the binding judicial precedent. He further submitted that the Revenue has filed the present appeals against the impugned order mainly on the following grounds:- a. Note Books allegedly maintained by Shri Anbu, Cashier pertaining to payments made to the production contractor, maintenance contractor and maintenance supervisor and note books allegedly mainta....
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.... invariably be addressed to the officer before whom statements were made which was not done in this case. In support of this, he relied upon the decision in the case of Zaki Ishrati Vs. CCE, Kanpur [2010(255) ELT 545 (Tri. Del.) and this decision was affirmed by the High Court which is reported in 2013(291) ELT 161(All.). He also relied upon the following decisions:- i. CCE, Coimbatore Vs. Acufil Machines [2004(177) ELT 326 (Tri. Chennai)] ii. Surjeet Singh Chhabra Vs. UOI [1997(89) ELT 646 (SC)] iii. Naresh J. Sukhawani Vs. UOI [1996(83) ELT 258 (SC)] 4.3. He also submitted that the Department has recorded the statements of the employees who were related to production and clearance and also recovered private records which can be considered to arrive at a finding of clandestine removal. He further submitted that clandestine removal can only be proved by circumstantial evidence and it is not possible to establish every link in chain without any break. He also submitted that the Revenue has also relied upon the statements of the dealers to prove the clandestine removal. He also submitted that the details are recorded in the mahazar and its annexures and ....
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....Kolkata [2017(347) ELT 570 (Tri.)] iv. Paras Laminates (P) Ltd. Vs. CCE, Jaipur [2005(180) ELT 73 (Tri.)] ii. He also submitted that this fact of denial of cross-examination has been recorded by the Commissioner(Appeals) vide the impugned order that the statements were retracted immediately and even the subsequent statements were also retracted. He also submitted that it is a settled legal position that the charge of clandestine manufacture and removal of goods without payment of duty cannot be established based on the uncorroborated statement of a person. This has been held in the case of CCE&C, Surat Vs. Suresh Synthetics [2016(332) ELT 385 (SC)] . He also submitted that it is a settled proposition of law that retracted statements cannot be relied upon without corroboration of independent evidence. for this submission, he relied upon the following decisions:- a) Vinod Solanki Vs. UOI [2008(233) ELT 157 (SC)] b) KI Pavunny Vs. Asst. Collector of CE, Cochin [1997(90) ELT 241 (SC)] c) Pascoal Dias Vs. ACC(P), Goa [2003(157) ELT 132 (Bom.)] iii. He also submitted that para 3 of the show-cause notice refers to physical stock verifi....
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....ical stock of goods as on 12/07/2006. Regarding the capacity of the furnace as per the Department, the capacity of induction furnace was 8 MT instead of 6 MT. This allegation regarding the capacity of the furnace was also against the sister concern M/s. Prince Rollings (P) Ltd., which has also procured the furnace simultaneously in 2005-06. This fact was considered by the Tribunal in the case of M/s. Prince Rollings (P) Ltd. and has examined this issue in its order dt. 05.10.2018 wherein the Tribunal has concluded that there is no report of any action taken by the jurisdictional Central Excise authorities against M/s. Inductotherm (India) Pvt. Ltd. for suppression of capacity and thus understandably the value of the furnace cleared by them and in the absence of any proof, one cannot conclude simply on the basis of drawings attached to the invoice. Further regarding the electricity consumption, the Revenue has not carried out any tests or trail in the factory of the assessee to determine the average electricity consumption for manufacture of one MT of MS ingots. This issue has also been examined by this Tribunal in the case of Prince Rollings (P) Ltd. in its Final Order dt. 05/10/20....
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....merits. Penalties were dropped. Further we we find that the present proceedings are based on the same facts, statements and documents recovered during investigation. Therefore it is pertinent to reproduce the findings of the Tribunal which is based on the same evidence as relied upon by the Revenue in the present appeals. 4. Heard both sides and perused the records of the case. The brief issues which require consideration in the present case are: (i) Whether the allegation of clandestine manufacture and removal of steel ingots by the appellants is sustainable? Whether the Department relied on uncorroborated statements and documents whose ownership was not established? (ii) Whether seizure and confiscation of 4.544 MT of MS ingots in the factory of M/s. Prince TMT Steels Pvt. Ltd. is maintainable? 4.1 We find that the impugned order has mainly relied upon the following: (i) 3 Note books/pads allegedly maintained by Shri V.R. Sibiraj, Chemist and 4 Note books maintained by Shri Anbu, Cashier. (ii) Statements of various persons of the company and truck drivers. (iii) Electricity consumption. (iv) Alleged suppressi....
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....oods stock, the allegation of unaccounted purchase of scrap, clandestine manufacture and removal would not sustain. Recovery of unused invoices do not call for any adverse inference. We find that the appellants had made valid points. However, though the learned Commissioner has mentioned the above in the brief facts but has not given any findings countering the same. 4.3 Moreover, we find that there are certain inherent discrepancies in the approach of the Revenue in the instant case. The impugned order has found in no uncertain terms that most of the unaccounted clearance was made to their sister concerns i.e. M/s. TMT Steels Pvt. Ltd. and M/s. Bee Path Castings Pvt Ltd. The appellants have brought to our notice that a show-cause notice 18/2007 dated 23.05.2007 to M/s. BPCPL was issued alleging that M/s. PRPL had removed 140 Ingots weighing 11.260 MT under invoice No. 409 on 11.07.2006 and that M/s. PAPL have cleared 275 Nos. of MS Ingots weighing 11.030 MT under invoice No. 362 on 11.07.2006. It is not understood as to how 275 Ingots and 140 Ingots would weigh approximately the same whereas in the mahazar dated 13.07.2006 drawn at M/s. PTSPL average weight of Ingot was t....
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....s to the contractors was found to be as follows and as discussed in para 128/142 of the Order-in-Original. Month Production Payment to Production contractor (@175/MT) Payment to Management contractors (@42/MT) March 2006 1588 2,77,900 1,32,762 (66696 on account of M/s. PAPL) April 2006 1115 1,95,125 46,830 May 2006 1176 2,05,800 -- M/s. PRPL and the amounts shown to have been received by him were quite different from above and as under: Month Amount April 2006 50,000 May 2006 78,000 June 2006 79,000 July 2006 60,000 The adjudicating authority has dropped the proceedings. Here also it is evident that the Department is not relying on the same set of records in two different proceedings thereby putting a question mark on the evidentiary value of the documents. 4.7 We find that Shri C.K. Abdurahiman, General Manager, Shri Anub Sha, Director, Prince TMT, Shri Sibiraj, Chemist and Sh. Anbu, Cashier have retracted their statements. They were again called for statements and their statements were recorded confirming the original statements. However, during the cross examination they have....
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....rs electricity consumption as an additional evidence for the clandestine manufacture and clearance by the appellants. The learned Commissioner finds that the average power consumption from March to June 2006 between accounted/unaccounted production works out to 988.652 and 697.132 respectively. A variation of 290 units is on account of unrecorded production. The Commissioner relied upon a statement of Shri Ahmed Fazal Sha that the average power consumption was around 700 to 750 units. Ld. Counsel for the appellants submitted that the Commercial Taxes Department has issued a demand notice alleging that 800 units were required for 1 MT of ingot. The Appellate Tribunal of VAT directed the officers to determine power consumption practically. On a direction given by Kerala High Court in Writ Petition C. No. 2371/13(V) concluded on the basis of study got conducted that 1103.64 units were required for 1 MT ingot. Accordingly, the adjudicating authority has dropped the proceedings. In view of the above, evidentiary value of electricity consumption, appears not strong. 4.9 The impugned order alleges that the appellants have suppressed the capacity of the plant to be 6 MT whereas it....
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....lowing: (i). There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii). Evidence in support thereof should be of: (a). Raw materials, in excess of that contained as per the statutory records; (b). Instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty. (c). Discovery of such finished goods outside the factory (d). Instances of sales of such goods to identified parties. (e). Receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f). Use of electricity for in excess of what is necessary for manufacture of goods otherwise manufactured and validity cleared on payment of duty (g). Statements of buyers with some details of illicit manufacture and clearance; (h). Proof of actual transportation of goods, cleared without payment of duty (i). Links between the document recovered during the search and activities being carried on in the factory of production; etc......... 9. ....
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....even one more unit than sister concerns are found during investigation or mentioned in the SCN and findings. The only discussion was about unaccounted purchase of 167 MT of scrap for the period 5-7-2006 to 11-7-2006. The appellants contended that since they have not availed the Cenvat credit they have not accounted for the same. Moreover, they have submitted that during the period January - July 2006 they have imported/indigenously procured about 6,473 MT of scrap. The impugned order did not take these submissions in to account. Purchase of any other raw material was not established. Electricity consumption was not established as discussed above. Statements of the drivers indicated that they have transported goods to their sister concerns and that they were given papers in an envelope which they showed to officers of whenever it was checked. Therefore, it cannot be alleged that all clearances were clandestine. Clearances to units other than sister concerns, if any, were not established. There was no investigation or record or findings in the impugned order about financial transactions. Under these conditions, allegation of clandestine removal only on the basis of production, allege....
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....ged to have been maintained by Shri Sibiraj, Chemist (ii). Production records alleged to have been maintained by Shri Anbu Cashier about payments to production contractor (iii). Consumption of electricity and (iv). Capacity of furnace. All other aspects were either not investigated or investigated perfunctorily. Out of these four, first two were negated by the department itself while issuing SCNs to the sister concerns i.e. M/s PTSPL, M/s BCPL and Shri Aftab. We also find that as per discussion above, they are not otherwise corroborated. The third one was nullified by the sample run conducted by VAT department on the directions of Hon'ble High Court of Keralan. The fourth one was not investigated to thoroughly establish as discussed above. In view of the above, we are inclined to accept the submissions of the appellants on the facts of the case and go by the case law submitted by them. 6.2. Further we find that it is well settled legal position that the allegation of manufacture and clandestine removal of goods without payment of duty being a serious charge, the burden of proof is on the Revenue. The charge must be proved by producing cogent / positive material evidence of p....