TaxTMI 
TaxTMI 
2022 (4) TMI 757
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.... factory was visited by the officers on 12.06.2003, who conducted various checks and verifications. As a result, shortage of 52436.500 kg. raw material was detected. Shri Altaf Aman Bagad Partner of the appellant unit, confessed that short found goods stand cleared by them without payment of duty to M/s Mukesh Textiles, Surat and M/s LT Textiles, Surat on cash basis. The officers seized records/ documents and 10 kachha delivery challans. Statement of Shri Salim Abdulla Naviwala, Supervisor of Appellant's firm was also recorded.In follow-up investigation, premises of M/s L T Textiles, Surat and M/s Mukesh Textiles, Surat were searched. 1.2 On the basis of scrutiny of documents seized under panchnama dated12.06.2003, it was revealed that Appellant had cleared 3,04,463.50 L. Mts of "Polyester Grey Fabrics" during the period from 05.05.2003 to 14.05.2003 to M/s Uma Textiles Processors (100% EOU), without payment of duty against the CT-3 as deemed export. Statement of Chandresh Kishan Bhai Dhandha, Proprietor of M/s Uma Textiles Processors was recorded wherein he stated that they had received "Polyester Grey Fabrics from the Appellant against the CT-3 and they never received "Knitted....
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....,094/- forgone on procurement of 30,421.920 Kgs. of imported Viscose Yarn under Section 72(1) read with proviso to Section 28(1) of the Customs Act, 1962. (vi) Demand of Customs duty amounting to Rs. 1,08,733/- forgone on procurement of 1676.58 Kgs. of imported PTY under Section 72(1) read with proviso to Section 28(1) of the Customs Act, 1962. (vii) Demand of Central Excise Duty equal to the aggregate of Customs Duties amounting to Rs. 37,72,323/- forgone on the procurement of 1,04,910.10 Kgs. of Polyester Texturised Yarn under proviso to Section 11A(1) of Central Excise Act, 1944 read with Notification No. 22/03-CE dated 31.03.2003 (viii) Interest at the appropriate rate, in respect of the Custom Duty mentioned at (ii),(iii),(v) and (vi) mentioned above under Section 72 read with Section 28AB of the Customs Act, 1962 (ix) Interest at the appropriate rate, in respect of the Central Excise Duty mentioned at (i),(iv) and (vii) mentioned above under Section 11AB of the Central Excise Act, 1944. (x) Confiscation of 7,905.350 Kgs of Indugenous Polyester Texturised Yarn valued at Rs. 5,05,943/- and 3,04,463.50 L Mtrs of Polyester Knitte....
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..... 2.1 He submits that the Hon'ble Tribunal while remanding the matter to the Commissioner by Order dated 07.07.2015 clearly held that the Appellant had by letter dated 10.12.2007 informed the department of change of address. The Show Cause Notice dated 31.03.2008 being subsequent to the intimation of change address given on 10.12.2007, ought to have been served on the Appellant at the said changed Address in the manner provided under Section 37C(1) (a) of the Central Excise Act 1944 (Section 153 (1)(a) of Customs Act 1962). The Notice could not have been served under Section 37 C(1) (b) by allegedly pasting on the factory gate. Since the Show Cause Notice was not served at the changed address as provided in Section 37C(1) (a) of the Central Excise Act 1944 (Section 153(1) (a) of Customs Act 1962)., within the normal period of limitation of one year nor the extended period of limitation of Five years, the duty demands are barred by time and on this ground itself, the entire impugned Order-In-Original is liable to be set aside. He placed reliance on the decision of the Hon'ble Bombay High Court in the case of DharampalLachand Chug Vs CCE - 2015(323) ELT 753 (Bom), Benu Prabhakar V....
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....d Grey Fabrics were illicitly cleared in domestic market and to adjust the stock, Polyester Grey Fabrics were purchased from market and supplied against the CT-3 to Uma Textile Processors. There is no evidence of any buyer in the domestic market to whom clearance was made of 3,04,463.50 L. Mtrs of Polyester Knitted Grey Fabrics, no evidence of any transportation of the same, no evidence of any payment received from any buyer in the domestic market. Similarly, there is no evidence of purchase of the said quantity of Polyester Grey Fabrics by the Appellant from the market. Thirdly, the reliance placed on the statement dated 26.06.2003 of proprietor of Uma Textiles Processors that what was received by them was not Knitted Grey Fabrics is untenable in law since he has not been examined in the adjudication proceeding under Section 9D of the Central Excise Act 1944 and thereby the Appellants have been denied the opportunity of cross- examining him. In the circumstances, Central Excise Duty demand on 3,04,463.50 L. Mtrs of Polyester Knitted Grey Fabrics and Customs duty demand on imported raw materials and Central Excise Duty on indigenous raw material used in manufacture of said 3,04,463....
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....cisions of the Tribunal laying down that such admission of shortages without there being any admission of clandestine removal, cannot be considered to be conclusive evidence to establish the guilt of the assessee. Burden of proof is on the Revenue and is required to be discharged effectively. Clandestine removal cannot be presumed merely because there was shortages of the stock or on the basis of statement of person only. In Majority decision in the case of Tejal Dyestuff Industries as reported in 2007 (216) E.L.T. 310 (Tri) Tribunal held that the Revenue cannot make its case on the basis of statement alone in the absence of any independent evidence to corroborate the same. The said decision was confirmed by Hon'ble High Court of Gujarat as reported in 2009 (234) E.L.T. 242 (Guj.), when the appeal filed by the Revenue was dismissed. Further, Tribunal in the case of CCE v. Luxmi Engineering Works as reported in 2001 (134) E.L.T. 811 (Tri.-Del.), has held that there being no corroborating evidence in the form of receipt of raw materials or sale of final products to each buyers, the allegations of clandestine removal cannot be upheld. The said decision was upheld by Hon'ble High Court....
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.... the appellant) in the office of the Department. To that effect, Shri Dinesh Kumar filed an affidavit on 1st August, 2006 that the statement has been typed by the officers of the Department themselves not by him and that said affidavit has not been controverted. Further, the cross-examination of Shri Ashwani Kapoor, Inspector on 3rd August, 2006 explaining that wastage on each stage of production have not been considered by the Adjudicating Authority. Moreover, the Knitwear Club, Ludhiana which is an independent body have also stated in their letter dated 19 May, 2005 that in normal course, there is a wastage of around 40% same has also not been considered by the Adjudicating Authority but without bringing any corroborative evidence apart from statement of Shri Baldev Singh demand has been confirmed. Such a situation has been dealt by this Tribunal in the case of KlenePaks Ltd. v. CCE, Bangalore-I (supra), wherein the facts of the case are as under :- "2. The relevant facts that arise for consideration are appellant-company herein are manufacturers of HDPE/PP, woven fabrics, sacks. The appellant-company availed Cenvat credit of the duty paid on HDPE/PP granules purchased f....
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....ns, cannot be the basis for coming to a conclusion that there was clandestine removal. It is now a well settled law that mere presumptions and assumptions cannot be the basis for fastening the charge of allegation of clandestine removal". 8. We further find that in the case of CCE, Cus. & Ser. Tax, Daman v. Nissan Thermoware P. Ltd. (supra), the Hon'ble Gujarat High Court has observed as under :- "7. Thus, on the basis of findings of fact recorded by the Tribunal upon appreciation of the evidence on record, it is apparent that except for the shortage in raw material viz., HD which was disputed by the assessee and the statement of the Director, there was no other evidence on record to indicate clandestine manufacture and removal of final products. On behalf of the revenue, except for placing reliance upon the statement of the Director recorded during the course of the search proceedings, no evidence has been pointed out which corroborates the fact of clandestine manufacture and removal of final products. In the circumstances, on the basis of the material available on record, it is not possible to state that the Tribunal has committed any legal error in giving benef....
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....d goods from the factory premises of the appellant. The assumptions which have been considered by the Revenue authorities are totally faulty inasmuch as that the charge of clandestine removal is first to be established based upon the clandestine manufacture and removal of the goods. In the instant case, except for the statements of the partners that there was clandestine removal of the finished goods, there is nothing on record to indicate that the appellant assessee had, in fact, manufactured the final products out of the inputs detected short on the calculation of input-output ratio. I find that as correctly pointed out by the ld. Counsel that this Bench in the case of Suzlon Fibres Pvt. Ltd. (supra), in Para 3 has categorically stated as under : "3. We agree with the above contention of the ld. Advocate, apart from the input-output ratio, there is no evidence on record to show clandestine manufacture and clearance of the goods. Such cases are required to be established beyond doubt on the basis of concrete and positive evidences. We accordingly set aside the impugned order and appeals are allowed with consequential relief." 17. My view as regards there ca....
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....available so as to bring to the fore the true picture and therefore, it concluded against the Revenue observing that not permitting the cross-examination of a person in-charge of records of M/s. Sunrise Enterprises and absence of other cogent and positive evidences, would not permit it to sustain the demand of Rs. 1.85 Crores raised in the Demand notice and confirmed by both the authorities below". which has been affirmed by the Hon'ble Apex Court. 11. In this case also, we find that the case has been made out only on the basis of the statement of Shri Baldev Singh, Managing Director of the appellant and no other evidence in the form of to manufacture of such huge quantity, the consumption of electricity, additional packing material, payment for purchase of additional packing material, payment received for clandestine removal of goods, how the goods were transported has been brought on record by the Adjudicating Authority or the inspecting team, therefore, relying on the said decision cited hereinabove, we hold that charge of clandestine removal is not sustainable in the absence of any corroborative evidence to the statement of Shri Baldev Singh, Managing Director. ....
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....e. RG-1 register. Hence the veracity of private records need not be doubted and the figures taken from the private records appear to be having the strength of corroborative evidence and hence the demand of Rs. 68,35,193/- made on the basis of figures shown by private records requires to be confirmed. As this demand is dropped, the order appears to be not proper to this extent. 6. We have carefully considered the submission and perused the impugned order. Insofar as the assessee's appeal is concerned, we notice from the extracted portion of the Commissioner's order that Revenue is solely relying on the exercise note books mainly balance steets. The Tribunal in large number of cases which have already been noted above in the tabulated list of citations furnished by the Counsel has held that unless there is clinching evidence on the nature of purchase of raw materials, use of electricity, sale, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of note books maintained by some workers. The facts in the case of Aswin Vanaspati Industries would be identical to the facts herein as in that case also the allegation was with regar....
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....e instant case the duty demand is upheld by Ld. Commissioner merely on the basis of entries in the Kachcha Delivery Challan recovered from the premises of Appellant unit and statement of partner and supervisor of Appellant's firm who never confessed the guilt and whose statement is not tested in accordance with Section 138B of the Customs Act 1962 (Section 9D of Central Excise Act 1944), impugned order legally not sustainable. 4.3 We also find that the Appellant disputed the impugned demand confirmed on the basis of statements recorded during the investigation. It is settled preposition of law that the said statements cannot be relied upon as admissible evidence in absence of examination during the adjudication proceedings as required by Section 138B of the Customs Act 1962 (Section 9D of Central Excise Act 1944). The Hon'ble Chhattisgarh High Court in the matte of Hi Tech Abrasives Ltd. Vs Commissioner of C.Ex&Cus., Raipur held that : "9.5 Undoubtedly, the proceedings are quasi criminal in nature because it results in imposition of not only of duty but also of penalty and in many cases, it may also lead to prosecution. The provisions contained in Section 9D, therefore,....
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..... That decision turned on its own facts. In para 19 of the judgment, it was concluded as below : "19. We are of the considered opinion that it is established from the record that the aforesaid statements were given by the concerned persons out of their own volition and there is no allegation of threat, force, coercion, duress or pressure being utilized by the officers to extract the statements which corroborated each other. Besides the Managing director of the Company of his own volition deposition the amount of Rs. 11 lakhs towards excise duty and therefore in the facts and circumstances of the present case, the aforesaid statement of the Counsel for the Respondents cannot be accepted. This fact clearly proves the conclusion that the statements of the concerned persons were of their volition and not outcome of any duress." Accordingly, on the first and second question of law, we hold that the statement of the Director could not be treated as relevant piece of evidence nor could be relied upon without compliance of Section 9D of the Act. The two questions of law accordingly, stand answered in that manner. 4.4 Similarly in the matter of Basudev Garg Vs Commissio....
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....e Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice. (2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceedings under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court." 11. We may straightaway say that the provisions of Section 9D of the Central Excise Act, 1944 are identical to the provisions of Section 138B of the Customs Act, 1962 which would be applicable in the present case. 12. Section 138B of the Customs Act, 1962 reads as under :- "138B. Relevancy of statements under certain circumstances. - (1) A statement made and signed by a person before any gazetted officer of customs during the course of any inquiry or proceeding under this Act shall be relevant for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, - (a) When the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose ....
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.... those circumstances have been stipulated in Section 9D of the Central Excise Act, 1944. The circumstances referred to in Section 9D, as also in Section 138B, included circumstances where the person who had given a statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay and expense which, under the circumstances of the case, the Court considers unreasonable. It is clear that unless such circumstances exist, the Noticee would have a right to cross-examine the persons whose statements are being relied upon even in quasi judicial proceedings. The Division Bench also observed as under :- "29. Thus, when we examine the provision as to whether the provision confers unguided powers or not, the conclusion is irresistible, namely, the provision is not uncanalised or uncontrolled and does not confer arbitrary powers upon the quasi judicial authority. The very fact that the statement of such a person can be treated as relevant only when the specified ground is established, it is obvious that there has to be objective formation of opinion based on sufficien....
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.... (325) E.L.T. 106 (P & H) and to another decision of the Hon'ble Punjab & Haryana High Court in the case of C.C.E. & S.T., Ludhiana v. Anand Founders & Engineers reported as 2016 (331) E.L.T. 340 (P & H). Its stand held on the above decisions that the clandestine removal charges based on shortages in stock cannot be confirmed in the absence of any other evidence brought on record by the Revenue showing such illegal activities on the part of an assessee. The said decisions stand followed by the Tribunal in many numbers of cases. 4.6 We also observed that the Hon'ble High Court in the the case of Continental Cement Company v. Union of India reported in 2014 (309) E.L.T. 411 (All.), it was held as under : "12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is fo....
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....s", it cannot be assumed that the "Polyester Knitted Grey Fabrics" not cleared by the Appellant. Further, it is on record that Appellant has requested for cross-examination of Proprietor of M/s Uma Textiles Processors to find out that what was received by them from the Appellant, however Ld. Adjudicating Authority has not granted his cross-examination. The said approach of Ld. Commissioner legally not correct and against the principles of natural justice as held by Tribunal and high court in various decisions.We also find that the register maintained by the Appellant also shown description of goods as "Polyester Grey Fabrics". We also agree with the argument of Ld. Counsel of Appellant that description "Polyester Grey Fabrics" is a generic description and is wide enough to cover "Polyester Knitted Grey Fabrics" also. We also find that in the present matter Appellant had received payment for the said transaction by cheque and the said transaction were recorded in statutory books & accounts of the Appellant. 4.9 We, further find that in support of their contention department nowhere produced any corroborative evidence to show that the Appellant has cleared 3,04,463.50 L. Mtrs of P....
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....presumption could be drawn with regard to manufacture and removal of the final product. Presumptions and assumptions cannot take place of positive legal evidence, which are required for proving the charge. Even if, it is assumed that some raw materials were received at the factory of the respondent during the said period, the same cannot become conclusive proof of production and clandestine sale to different parties. Due to lack of positive evidence, benefit of doubt will always go in favour of the assessee. 10. Accordingly, we answer the reference against the Revenue and in favour of the assessee and it is held that the receipt of one of the raw materials, does not conclusively prove clandestine manufacture and surreptitious removal of finished final product. Further, since the charge is regarding clandestine manufacture and removal of finished product for evading excise duty, the same cannot be held to be proved on the basis of principle of preponderance of probabilities and the Revenue has to prove the same beyond doubt. The reference is answered accordingly. 4.10 In the matter of M/s. Sakeen Alloys Pvt. Ltd. v. C.C.Ex. 2013 (296) E.L.T. 392 (Tri.) which was upheld b....
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.... the request of the appellants for cross-examination of Shri Mukeshbhai V. Patel of M/s. Sunrise Enterprise was necessary to bring out the truth whether the records/pen-drive maintained by M/s. Sunrise Enterprise pertained to same stock which is received under duty paid invoices or otherwise. 7. It is also observed from Para 14.4 of the show cause notice that names and address of M/s. Siddhi Industries Pvt. Limited and M/s. Mahavir Alloys, Dabhol, Nani Daman are manufactured who were alleged to have supplied the excess raw materials to the appellants from which clandestinely removed goods were manufactured. Their addresses were made available to the department but no enquiry was conducted at the supplier's end to establish that excess materials in fact were supplied to the appellants. Similarly, no investigation has been extended to the buyers of the finished goods whose names are in the records/pen-drive of M/s. Sunrise Enterprise. This part of the investigation was necessary to establish that clandestinely removed goods have reached to the buyers and they have confirmed to have received such goods. Appellants herein have filed affidavits from some of such buyers which th....
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....ished and accordingly, the following point of law was decided in favour of the assessee:- "Whether on the basis of private records, the Central Excise duty can be demanded or not when these private records show higher production than that reflected in the statutory records resulting into removal of the excess stock clandestinely i.e. without issue of invoice and without making entries of production and clearance in the statutory records?" 10. Similarly, in the case of CCE, Chandigarh-1 v. Shingar Lamps Pvt. Limited [2010 (255) E.L.T. 221 (P&H)], the Hon'ble High Court held that the private records which have been discovered during the raid may not be sufficient for holding clandestine production and removal but there should be some positive evidence suggesting clandestine production and removal. The Hon'ble Supreme Court in the case of Shalimar Rubber Industries v. Collector of Central Excise, Cochin [2002 (146) E.L.T. 248 (S.C.)] has also held that once the statement is retracted and the assessee asked for cross-examination then if such cross-examination is denied, the department cannot make such statements as the basis for concluding that there was clandestine r....
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.... the finished goods manufactured by the Appellants were removed without payment of duty. The other transporters have not been produced for the purpose of cross-examination nor the statements of drivers who might have actually carried the goods, had been recorded. Moreover no statement of any of the recipients of the goods had been brought on record. Thus the statements of the transporters have remained uncorroborated and also suffers from the shortcoming of being not being cross-examined by the Appellants. It has been the settled law that the liability cannot be fastened on an assessee on the strength of documents seized from the possession of third party. There should be some corroborative evidence/material. The Tribunal has in the case of Emmtex Synthetics Ltd., supra, when the charge of clandestine removal was made against the Appellants therein out of yarn received from a third party based on the diary, loose documents and packing slips allegedly recovered from Shri B.M. Gupta, Vice President of the Supplier Company, held that "no presumption on the basis of uncorroborated, uncross-examined evidence of B.M. Gupta and the alleged entries made by him in the private diary, loose s....
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....ers can also not be relied upon by the Revenue as these persons were not produced for being cross-examined. Moreover, there is no corroboration of their statements with regard to the Trucks by which the goods were allegedly removed or the persons who received the goods. The Truck driver Shri Shiv Bahadur Yadav has also not been cross-examined and cleaner Shri Rakesh Kumar had deposed that the Bills/Invoices are supposed to be with the Driver and he being cleaner had no knowledge. 10. The confirmation of duty in respect of 149 consignments is also based on the records seized from the premises of M/s. Chitra Traders and not on the basis of any record seized from the premises of the Appellant-company. The Revenue has not been able to adduce any corroborative evidence to show the movement of goods from the premises of the Appellant-company to the premises of M/s. Chitra Traders or the Customers whom the goods were sent directly to as per the direction of Chitra Traders. No inquiry has also been made into these Customers who ultimately received the goods. There is no substance in the reasoning given by the Commissioner in the impugned order to the effect that "as the party did ....
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.... 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 suspicion whosoever cannot take the place of evidence regarding clandestine removal of excisable goods. Moreover, after having positive evidences, quantification of duty on clandestinely removed goods also becomes essential. As already mentioned above, the stock lying in the stock yard of M/s. Sunrise Enterprise, Mehsana was found containing the goods received from M/s. Sakeen Alloys Pvt. Limited under proper invoices. When the goods received under proper invoices are found in the stock yard of M/s. Sunrise Enterprise, then it is possible that out of such goods certain quantities were sold to various customers by accepting payment in cash. In such a situ....
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.... Pvt. Ltd. as reported in 2006 (197) E.L.T. 260 (Tri.-Mumbai), laying down that the burden to prove the clandestine removal lies solely and exclusively on the Department and is required to be discharged by concrete and clear evidence. 4.14 Viewing the evidence relied upon by the Commissioner, in the light of the ratio of law declared in the above judgments, we find that the entire case of the Revenue is based upon the surmises and conjectures. No concretes positive and tangible evidence appears on record. The evidences brought into the record by the department are incomplete, inconsistent and not a reliable piece of evidence to prove charges of clandestine removal. Relying on these judgments, we also hold that the charges of illicitly removal of the alleged goods is not sustainable in the present matter. 4.15 Without prejudice to the above finding, we also find that once the CT-3 certificate was issued the duty liability if at all arises stands shifted to the recipient who has issued the CT-3certificate and the appellant's clearances are covered by CT-3 is not chargeable to duty. The Tribunal in case of Santogen Textile Mill Ltd. v. CCE, Mumbai-II,2007 (214) E.L.T. 386 (Tri. ....
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....ty demand on goods consumed in the finished goods and on the other hand it is demanding duty on the finished goods which is wrong. Even if there is any duty demand, the same shall be restricted only upon finished goods. The raw material duty cannot be demanded as the same were consumed for intended purpose of manufacture. Our views are also based upon Tribunal's decision in cases of Sanjari Twisters, 2009 (235) E.L.T. 116 the said decision maintained in Supreme Court wherein it was held that:- 4. The department being aggrieved with the said portion of the impugned order by which no duty stand was confirmed in respect of raw materials, has filed the present appeal. The appeal has been filed on the ground that non-duty paid raw materials were admittedly used in finished products which were cleared to DTA in contravention of provisions of law. Such raw materials, which were imported by availing the benefit of notification No. 53/97-Cus. dt. 3-6-97, should have discharged the duty. 5. After hearing the ld SDR, we find that the main issue involved relates to the determination of FOB value of export to arrive at the quantum of eligible domestic clearances and whether th....