AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (4) TMI 502
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....nal (for short 'the CESTAT Tribunal'), Ahmedabad, dated 21st September, 2017 in the Appeal No. E/607,608/2008. 4. On 19th April, 2018, a Co-ordinate Bench of this Court passed the following order: "Counsel for the appellant submitted that before the Central Excise, Customs & Service Tax Appellate Tribunal, the appellant had raised several grounds of facts and law. The Tribunal, however, dealt with only one of the issues; namely, of ascertaining the production capacity of the machinery. Though several other legal issues arose out of the order in original passed by the Commissioner after the remand made by the Tribunal, the Tribunal did not examine these issues though argued before it. Notice for final disposal, returnable on 20th June 2018." 5. Both the tax appeals are admitted for the consideration of the following substantial questions of law : "(i) Whether or not the Hon'ble Tribunal erred in law in not considering remand order of the Tribunal and confirming the demand beyond the scope of remand proceedings? (ii) Whether or not the Hon'ble Tribunal erred in law in not considering production capacity on the basis of certificate of....
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....apacity of the machine which was installed in the factory premises. The appellant pointed out that the figure of production arrived at by the Department was three to seven times more than the actual capacity of the machine. At the relevant point of time, the appellants adduced evidence with regard to the manufacturing/production capacity of the machine. It was pointed out that the capacity of the machine was not more than 448 kgs per day in a span of 24 hours. 11. Ultimately, upon final adjudication, the Commissioner came to the conclusion that the appellants were guilty of clandestine removal of the goods manufactured by them in their factory premises without the payment of the requisite excise duty. An order came to be passed by the Commissioner for recovery of a particular amount with penalty. 12. The appellants, being dissatisfied by the order passed by the Commissioner, went in appeal before the CESTAT Tribunal. The Tribunal partly allowed the appeal preferred by the appellants by remitting the entire matter to the Commissioner for de novo proceedings. While remitting the matter to the Commissioner, the Tribunal observed as under: "(a)The appellants had produced....
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....reconsidered along with material, if any, available on consumption of other raw material used e.g. Oils used in Draw Texturising and electricity consumption. Trial runs could be ordered & conducted on the machines to determine optimum production capacities, as provided for under Rule 173E of the Central Excise Rule 1944, which were applicable and available for the period under dispute. Mere entries on the private records cannot be conclusive evidence of unaccounted production. (d) The reliance of the Ld.Advocate for the appellants, on the decision in case of George Varghese {1992 (60) ELT 361 (Ker} is well founded to arrive at an order of Remand since there is a failure on part of the Revenue to advert to proper material/relevant evidence to arrive at actual production & unaccounted clearance thereafter with liability to penalty, if any. (e) Since we are ordering a Remand for redetermination of the production, we do not arrive at any findings on other issues, keeping them for both sides in the Denovo proceedings." 13. Thus, what weighed with the Tribunal in the first round of the litigation was the argument of the appellants with regard to the production capaci....
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....as M/s.Trinetra Texturisers is closed since long and the machine is not in working condition. I find that in absence of the machine in question, the re-determination of production capacity is not possible. Moreover, after 14 years the exercise of gathering records of raw materials, oil and electricity consumption, etc. is also not possible as the unit is closed since long. I find that, the assessee's request for running trial production on any machine will be beyond the scope of CESTAT's directions, because production capacity of the particular machine has to be re-determined which the assessee possessed at the material time. Further, there cannot be a fixed norm for earning production of texturised yarn, the production may differ from machine to machine. It is pertinent to mention that as per Rule 173E of the Central Excise Rules, 1944, the determination of normal production of the factory was not done at the material time and now when the said machine is not in working condition, the same cannot be carried out. I find that the noticee advocating, production capacity of their machine to counter the packing slips and other private records seized during panchnama dated 05.04.95 is a....
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.... M/s. Trinetra Texturusers (P) Ltd., Karanj, Dist. Surat, shall pay a redemption fine of Rs. 1,49,000/- (Rupees one lakh forty nine thousand only) under section 34 of the Central Excise Act, 1944 on the provisionally released goods in lieu of confiscation. This redemption fine stands appropriated from the Bank Guarantee of Rs. 1,49,000/- (Rupees one lakh forty nine thousand only) already furnished by them at the time of provisional released of the goods. 02. I confirm Central Excise duty amounting to Rs. 3,44,711.86 (BED Rs. 2,99,749.62 + Addl/ Duty Rs. 44,962.24) leviable on seized goods which were provisionally released and subsequently cleared by the factory on payment of duty due thereon, under the provisions of Rule 9(2) of the Central Excise Rules, 1944. 03. I determine Central Excise duty amounting to Rs. 66,87,285/-(Rs. 58,15,030/- BED + Rs. 8,72,255/- Addl. Duty) leviable on the illicit production and clearance of texturised yarn weighing 92,302.078 Kgs. valued at Rs. 96,91,717/- (as detailed in Appendix-I to IV of Show Cause Notice) under Rule 9(2) of Central Excise Rules, 1944 read with Section 11A(2) of Central Excise Act, 1944. M/s. Trinetra Texturuse....
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.... determine the allged removal of goods on the basis of evidence available on records. Since the appellant could not make available the machines for trial run, the Ld.Commissioner proceeded with the evidences available on record and confirmed the demand accordingly as directed by this Tribunal. The Ld.Commissioner recoreded its findings as follows: "The notice vide their defence submission dated 13.12.2007 has requested deputing any officer at any factory having same machine to verify the production capacity. During personal hearing they showed their inability to run the same machine i.e., HIMSON Scragg Draw Texturising Machine, Model SDS-3, with 144 Spindles, as the said machine is in junked condition and could not run. He requested for conducting a trial run at any factory having machine as M/s Trinetra Texturisers is closed since long and the machine is not in working condition. I find that in absence of the machine in question, the redetermination of production capacity is not possible. Moreover, after 14 years in the exercise of gathering records of raw materials, oil and electricity consumption etc., is also not possible as the unit is closed since long. I find that, ....
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....und of the litigation, the remand was on the very same issue and, therefore, there was no question of taking the view that it would be a futile exercise. 21. In such circumstances referred to above, the appellants, being dissatisfied with the impugned order passed by the Tribunal, are here before this Court with the present Appeals. Submissions on behalf of the appellants: 22. Mr.Deven Parikh, the learned senior counsel appearing for the appellants, vehemently submitted that the impugned order passed by the Tribunal is erroneous, and on the face of it, not tenable in law. 23. Mr.Parikh, further submitted that the impugned order, in fact, runs contrary to the order passed by the Tribunal in the first round of the litigation. The impugned order completely dilutes the idea with which the matter was remanded by the Tribunal to the Commissioner, in the first round of the litigation. 24. Mr.Parikh, submitted that when the appellants put forward a positive case that the allegations of clandestine removal of goods are not sustainable in view of the production capacity of the machine installed, then the burden shifted upon the Department to establish that the production capac....
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....e and the Commissioner also failed to consider this aspect of the matter in its true perspective, more particularly, the Rule 173(E) of the Rules referred to above. 27. In the last, Mr.Parikh submitted that taking the entire case put up by the Department against his client at its worst, the order of penalty could not have been passed merely relying upon the entries made in the Registers (Non-Statutory Registers) or on the basis of few statements of the Directors recorded by the Department. In other words, Mr.Parikh concluded his submissions saying that once the issue of production capacity goes in favour of the appellants, the other issues would pale into insignificance. 28. In such circumstances referred to above, Mr.Parikh prays that there being merit in the Appeals, those be allowed and the impugned order be quashed and set aside. Submission on behalf of the revenue: 29. Mr.Nirzar Desai, the learned standing counsel appearing for the Department, has vehemently opposed both these Appeals. Mr.Desai would submit that no error, not to speak of any error of law, could be said to have been committed by the Tribunal in passing the impugned order. 30. According to Mr.Desai, ....
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.... the factory premises where such machines are manufactured. To this extent, Mr.Desai, the learned standing counsel appearing for the Revenue, also agrees. However, in the peculiar facts and circumstances of the case, we, as a Court of law, are not inclined because we are quite disturbed with the approach of the Department in this particular litigation. 37. It is expected of the Department to know the position of law. When the position of law is abundantly clear that such examination of the machine can be undertaken at some other place, the Department should have agreed to do so. Having not done so, the Department now cannot take shelter of the order passed by the Tribunal, which is not tenable in law. 38. By now, this litigation is almost two decades old. It will be too much for this Court to once again remand the matter for the very same exercise, which could have been undertaken a decade back. 39. In such circumstances, we decline to accept the vociferous submission of the learned standing counsel appearing for the Revenue that the appellants should not be permitted to have an undue advantage as the same would lead to a huge loss to the Revenue. 40. We shall now look ....
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....ey were concerned with the clearance, transport, etc. of the goods clandestinely and thus attracted penalty under Rule 209A. Similarly, S/Shri Hari Mohan Maheshwari, Jai Kumar and Sanjay Gupta and Pankaj Kumar were concerned with the transport, storing, removing and clearance of the goods, therefore, the attracted the penalties. Since they were only employees, therefore lower penalties have been confirmed on them. Similarly S/Shri Chaman Lal and Promod Kumar Jain, partners of M/s. SPH were concerned with the receipt of the goods which they had reason to believe that they were liable to confiscation and, therefore attracted the provisions of Rule 209A." 41. The aforesaid decision of the Tribunal came to be affirmed by the Hon'ble Supreme Court. The Hon'ble Supreme Court's decision, affirming the Tribunal's order is reported in 2002 (139) E.L.T.A85 (S.C.). 42. Our attention has also been drawn to the decision of a Co-ordinate Bench of this Court in the case of Shivam Casting Versus Commissioner of Central Excise reported in 2018 (359) E.L.T. 16 (Guj.), wherein, this Court has observed as under: "1. The assessee is in appeal against the CESTAT dated 16.05.2017 raising f....
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....ed that while considering the fact that so called production indicated in relevant document is not the production of final product or production and were marketable or is cleared without support of document. While making such observation and while determining the clearance of final product in Annexure X1, the department has also overlooked the production capacity of the company. A certificate issued by Chartered Engineer dated 8.4.2006, wherein certified that Noticee has installed Cupola Furace and after considering the various parameters, the Furnace could work for 15 days a month and the total production capacity per day could be assessed at 2000 to 2750 Kg. per day. Considering the observation of the Chartered Engineer, and average estimated production of 2500 kg., the total production of the Noticee, per year could come to only 4,50,000/- and for the period under consideration could come to only 10,50,000/kg. whereas the department has worked out 29,42,722 kg which is almost three times of the capacity worked out by the chartered engineer. 3.6.2 In this regard, I find that no manufacturing unit can manufacture the goods beyond their capacity. Since, installed capacity ....
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.... with the direction to get the Chartered Engineers Certificate verified and if necessary could independently assess through experts, verification of purchase documents, brochures/pamphlets issued by the manufactures of the machines, etc., the production capacity of the installed machinery. Since the matter is very old it is expected that de novo proceeding would be completed within a period of three months from the date of communication of this order. The Respondent is directed to cooperate in the matter. The Revenues appeal is allowed by way of remand. Cross-Objection filed by the Respondent is also disposed of accordingly. "This judgement the assessee has challenged in the present appeal. 3. Learned counsel Mr. Sheth for the assessee submitted that the Tribunal committed an error in remanding the proceedings enabling the department to controvert the contents of the Chartered Engineer's certificate produced by the assessee. After a long gap of time it will not be possible for the assessee to produce further material in support of its stand that the annual production capacity of the unit could not have exceeded Rs. 10.50 lakh kilograms whereas the department had worked out....
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....o evidence of illicit clearance available despite holding that there are suspicion of illicit clearance and the Department proved the entire modus of illicit clearance on sample basis ?" {b} Whether the Customs, Excise & Service Tax AppellateTribunal, while passing Order No. A/108171820/ WZB/AHD/2013 dated 15.07.2013, was correct in holding that evidences collected by Departments are admissible evidences only for one offence while the same set of evidences only for one offence while the same set of evidence are insufficient to establish another offence ?" {c} Whether the Customs, Excise & Service Tax Appellate Tribunal, while passing Order No. A/108171820/ WZB/ AHD/2013 dated 15.07.2013, was correct in admitting the evidences for the past clearance and ignore the evidences for the remaining clearances ?" {d} Whether the Customs, Excise & Service Tax Appellate Tribunal, while passing Order No. A/108171820/ WZB/ AHD/2013 dated 15.07.2013, was correct in holding that the statement has been retracted even though the same person has admitted the depositions made in the retracted statements in his statement recored subsequent to the retraction ?" 3. We....
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....der, setaside the demand of Rs. 1.85 Crores confirming the duty demand of Rs. 8.25 lakhs as also the penalties under Section 11 (c) of the Central Excise Act. Therefore, the present appeals raising aforementioned questions of law. 7. As can be noted from the decision of the Tribunal, it has extensively dealt with the entire factual matrix presented before it. The Tribunal rightly concluded that in the case of clandestine removal of excisable goods, there needs to be positive evidences for establishing the evasion, though contended by the Revenue. In absence of any material reflecting the purchase of excessive raw material, shortage of finished goods, excess consumption of power like electricity, seizure of cash, etc., the Tribunal noted and held that there was nothing to bank upon except the bare confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time of their recording. The Tribunal also noted the fact that the requisite opportunity of cross examination was also not made available so as to bring to the fore the true picture and therefore, it concluded against the Rev....
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..../factory premises of the appellant, excess consumption of power like electricity, any seizure of cash during the investigation when huge transactions are made in cash. In the present case also, it is observed, from the annexures to the show cause notice dated 1-5-2009 issued to the appellants, that there were huge amounts are being undertaken in clandestine removal activities, it is very likely that some cash would have been seized. There is not a single instance where either seizure of cash is made or any clandestinely removed goods are seized or raw materials/finished goods were found either short or in excess in the factory premises of the appellant or at any other place. As per the Panchnama drawn at the factory premises it is shown that there was no excess/shortage of the raw materials or finished goods found. The documentary evidences collected from the business premises of M/s.Sunrise Enterprise and the statements recorded by investigation, can at the most raise a reasonable doubt that some clandestine removal activities are undertaken by the appellant. However, such a suspicion or doubt has to be strengthened by positive evidences which seem to be lacking in this case. Any ....