TaxTMI 
TaxTMI 
2024 (5) TMI 1055
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....ntral excise duty by way of clandestine manufacture and surreptitious removal of their finished products, the DGCEI had conducted simultaneous searchs on 20.01.2007 at the factory and office premises, residential premises of the partners and other related persons. Various documents were recovered and seized. 2.2 During the course of investigation it was found that the appellant was engaged in trading of different goods of iron and steel and one Shri Biplab Mondal, proprietor of Appellant No.4 admittedly managed and controlled all the purchases and sales of those traded goods. The address of the company has been declared and shown to be at Kona, Benaras Road, P.S.-Liluah, Howrah-711323, which is used to be official address of M/s. Bharat Suppliers. During the investigation at the premises of Kona, Benaras Road, P.S.-Liluah, Howrah claimed to be under control and occupation of the appellant No.4, was visited and the enquiries made therein revealed that the premises was actually under control and occupation of M/s. Bengal Iron Corporation, appellant No.1 since last 10 years and no other company have ever owned the premises at that address. It was also revealed in the investigation ....
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....a, near Checkpost, Howrah and have no manufacturing activity. Certain details of bank accounts of M/s. Bharat Suppliers were also found and the statements of account from banks was also obtained, wherein it has been found that M/s. Bharat Suppliers received payment of sale of goods from different buyers and depositing the said in their bank account. After depositing the said amount in the banks they withdrew the said amount in cash. As during the course of investigation, it has been admitted by appellant No.2 & 3 that they were dealing on behalf of M/s. Bharat Suppliers, therefore, it was concluded as under:- "From the statements by Shri Radhe Shyam Agarwala, and his son Shri Prakash Agarwala, both partners of the company and that Shri Biplab Mondal, proprietor of M/s. Bharat Suppliers, it is thus very much clear that the Noticee No.1 had deliberately indulged in the fraudulent practices of clandestine manufacture and surreptitious removal of their finished goods during the material period by adopting a novel modus - operandi of dispatching their finished excisable goods under the guise of goods sold by a trading company, namely M/s. Bharat Suppliers by way of suppression ....
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....ants filed appeal before this Tribunal. Therefore, these appellants are before us. 4. The Ld.Counsel for the appellants submits that the impugned order has been passed on assumption and presumption. The same is not tenable. It is his submission that there is no material on record and nothing has been disclosed either in the show cause notice or the impugned order which even prima facie establishes that any part of the sale amounts collected/realized/encashed by the appellant No.4 relates to any excisable goods manufactured and cleared from appellant No.1 at any point of time. The case made out against the appellant in both the impugned order and in the show cause notice is fabricated and is based on unwarranted assumptions and presumptions, impermissible in law. Even the relied upon documents do not in any manner whatsoever support the findings made in and the purported demand confirmed by the said order. All clearance of goods manufactured in the appellant firm's factory during, inter alia, the material period was upon due compliance with the requirements therefore under the Act, including payment of appropriate central excise duty thereon. No evidence to the contrary has been ....
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....to even prima facie support this baseless assumption. In arriving at such baseless and patently incorrect finding, there is also no detail disclosed in either the show cause notice or the impugned order as to what were the excisable goods allegedly manufactured and cleared by the appellant firm on which no duty was allegedly paid, what were the quantities thereof, how and in what manner the amounts deposited in the banks of Bharat Suppliers detailed in Annexures Cl, C2 and C3 were correlated with goods manufactured and allegedly cleared by the appellant without payment of duty and how and in what manner, inspite of Sri Biplab Mondal of Bharat Suppliers specifically stating in his statements recorded under Section 14 of the Act that the amounts deposited by him in the said banks related to goods purchased by him from several parties and thereafter sold by him (which fact has not been disputed or denied in either the show cause notice or the impugned order), they were goods manufactured and cleared by the appellant. Moreover, there is nothing disclosed in the show cause notice or in the impugned order as to during which period the alleged goods had been manufactured and/or removed fr....
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....iance in this respect is relied upon, inter alia, the following decisions: (i) CCE Vs. Bihariji Manufacturing Co. Pvt. Ltd., 2015 (323) ELT A23 (SC) affirming CCE Vs. Bihariji Manufacturing Co. Pvt. Ltd., 2015 (323) ELT 106 (Del) rejecting the appeal of the Revenue against the order of the Tribunal in Bihariji Mfg. Pvt. Ltd. Vs. CCE, 2005 (186) ELT 587 (T) (ii) Maan Aluminium Ltd. Vs. CCE, 2015 (322) ELT 184 (SC) (iii) Commr. of Central Excise Vs. Lord's Chemicals Ltd., 2010 (258) ELT 48 (Cal), affirming CCE Vs. Lord's Chemicals Ltd., 2009 (245) ELT 695 (T-Kol) (iv) Commissioner of Central Excise Vs. Brims Products, 2011 (271) ELT 184 (Pat) (v) Commissioner of C. Ex. Vs. Laxmi Engineer Works, 2010 (254) ELT 205 (P&H) (vi) Commissioner Vs. Vikram Cement (P) Ltd., 2014 (303) ELT A82 (All), affirming Vikram Cement (P) Ltd. Vs. Commissioner of Central Excise 2012 (286) ELT 615 (T) (vii) Portland Cement (I) Ltd. Vs. Commissioner of C. Ex, 2015 (326) ELT 304 (T) (viii) Commissioner Vs. Sakeen Alloys Pvt. Ltd. 2015 (10) TMI 558 -SC affirming CCE Vs. Sakeen Alloys Pvt. Ltd. 2014 (5) TMI 606 GUJARAT HIGH COURT affirming....
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....rically stated that no such letter was sent by his firm. This fact is not disputed either in the show cause notice or the said order. Answer to both (i) and (ii) above are contained in the statement of Sri Prakash Agarwala, the appellant no. 3, dated 22nd July 2009. In his statements, it is in clear and ambiguous terms explains the reason why Lamba Trading might have sent the two letters to the appellant's partner Shri Prakash Agarwala. There has been no denial of the correctness of these statements in the show cause notice or in the said order nor any evidence to the contrary has been disclosed. They have been ignored on mere surmises, which is impermissible in law. 10. The fact that the money belonged to Bharat Suppliers alone is not only evidenced by two documents dated March 21, 2006 and August 28, 2004 themselves and related to goods sold by the said Bharat Suppliers to Lamba Trading in its own capacity, the same is also evidenced from Sri Biplab Mondal's (proprietor of M/s. Bharat Suppliers) statements, inter alia, dated 30th April 2007. As a matter of fact, summarising the statements, the show cause notice itself acknowledges the fact that Sri Biplab Mondal and Bharat....
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....ating to his firm and submit relevant returns and that because of this reason documents relating to his firm, Bharat Suppliers, were kept in the appellant's office with the said Nandan Mukherjee. It is because of this reason that the torn invoices of Bharat Suppliers were found in the appellant's factory. As acknowledged by the appellant's partner, Radheshyam Agarwala, in his statement dated 20th January 2007, the goods recorded in these challans had been removed from the appellant's factory premises by Bharat Suppliers. Although it was not clear whether excise duty liability on the said goods were discharged in respect of the said goods, Sri Radheshyam Agarwala undertook that "in the event of any central excise duty liability" in respect of the said goods removed "under those challans of Bharat Suppliers" was required to be paid, we would pay the same. The duty amount involved under these three challans amounted to Rs. 1,38,340/-. 13. Contrary to the misconceived and erroneous allegation made in several places in the show cause notice and finding in the impugned order that the undertaking on the part of Sri Radheshyam Agarwala amounted to "confession" on his part about goods be....
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....ulsion and had to be written at the dictates of the concerned DGCEI officials. This fact has not been disputed or denied in the impugned order. Further, there are no other statements or evidence /materials of any kind whatsoever which corroborates the alleged inference sought to be drawn from the said statement of Radheshyam Agarwala. Thus, the decision of the Supreme Court relied upon in the said order is clearly distinguishable and has no manner of application whatsoever to the instant case. 16. Similarly, the decision of the Punjab and Haryana High Court relied upon in the said order is clearly distinguishable and has no manner of application whatsoever to the instant case. In that case, there was no request for cross examination of the persons whose statements had been relied upon and it is in this premises that the Hon'ble Punjab and Haryana High Court was of the view that the relied upon statements therein retained their evidentiary value. In the instant case specific request for cross examination of persons whose statements have been relied upon were made but the same was denied on patently illegal and wrongful reason. It is settled law that no reliance can be placed ....
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....o manner whatsoever establishes that the sale proceeds collected by Bharat Suppliers / Sri Biptab Mondal related to excisable goods manufactured by the appellant which were cleared without payment of duty. 20. He further submits that in passing the impugned order the Commissioner has purported to rely upon alleged statements of persons recorded during the course of investigation by DGCEI, which were relied upon documents on the basis whereof allegations were made in the show cause notice and findings have been recorded by the Commissioner in the impugned order. However, inspite of specific request made in clear terms in the reply to the show cause notice filed for allowing cross examination of the said persons, the Commissioner wrongfully and illegally, on a patently flimsy and ex-facie untenable reasoning that since such request for cross examination was not repeated subsequently by the appellant, no opportunity of cross examination was required to be afforded. This is impermissible in law and has by itself vitiated the impugned order and has rendered the same illegal, untenable and unsustainable. In this regard reliance is placed upon inter alia the following decisions:- ....
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....d bad. In the premises, Section 11A of the Act is inapplicable. 23. Consequently there being no liability on the appellant's part to make payment of any imaginary Central Excise duty confirmed as not paid by the appellant, there can be no demand of any interest under Section 11AB of the Act. The said provision has no manner of application whatsoever and demand to die contrary made in the said order is erroneous and sustainable. 24. He further submitted that for the reasons aforestated, it is clear and evident that there has been no contravention by the appellant of any provision of the said Rules or the Act and findings to the contrary in the impugned order are misconceived, without any substance or merit whatsoever. In the premises, the imposition of penalty upon the appellant firm under Section 11 AC of the Act is contrary to law, untenable and unsustainable. The condition precedent for invocation of the said provision has not been and cannot be said to have been satisfied in the instant case. 25. The penalties imposed upon the appellant Nos. 2, 3 and 4 all under Rule 26(1) of the said Rules, are also untenable and unsustainable. The reasons therefor are set out deta....
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....emises of the appellant No.1 cannot establish the case of the Revenue that appellant No.1 is clearing goods in the guise of appellant No.4. Before alleging clandestine removal against the appellant No.1 to 3, the Revenue has to establish that the appellant No.1 has procured raw material for manufacturing such a huge quantity and labour to manufacture the said finished goods + consumption of electricity and mode of transportation of the finished goods. Admittedly, Revenue has not established the fact that appellant No.1 was having the capacity to manufacture extra quantity alleged to be clandestinely removed or not. Moreover, it is not coming out from the investigation that how the appellant No.1 procured raw material and from whom. How the payment thereof was made by the appellant No.1. Moreover, whether extra labour has been employed or not? What was the electricity consumption of the clandestinely removed goods? All these facts are missing. 31. The case of the Revenue is based on only the statement of buyers and the appellants. The statements of the appellants have been retracted, but statements have not been tested in terms of section 9D of the Central Excise Act, 1944 to kno....
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....retracted statements in order to persuade the Court to hold that the impugned order of the CESTAT is perverse. According to her the retraction made more than 20 months after the making of the initial statements "would have no effect in the eye of law". She too submitted that the responsibility of ensuring the presence of such persons for crossexamination was of the noticees themselves. 41. What the above submission overlooks is the 'reliability' of such statements. Once it is shown that the maker of such statement has in fact resiled from it, even if it is after a period of time, then it is no longer safe to rely upon it as a substantive piece of evidence. The question is not so much as to admissibility of such statement as much as it is about its 'reliability'. It is the latter requirement that warrants a judicial authority to seek, as a rule of prudence, some corroboration of such retracted statement by some other reliable independent material. This is the approach adopted by the CESTAT and the Court finds it to be in consonance with the settled legal position in this regard. 42. The contention that it is the responsibility of the noticees to produce the witness....
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....T. 310 (Tri.) and 2009 (234) E.L.T. 242 (Guj.). Thus the statement of directors cannot lead to inference that the goods stated in "Bombay Sales" ledgers are of Appellant. We also find that the brokers have even stated that they have taken the goods from Vasai Godown of M/s. SFPL. In such case there is no reason to hold that the Appellant has dealt with M/s. SFL. Thus in both cases i.e. "Bombay Sales" and "Smi Cash Sales" apart from the statements which are even contradictory no corroborative evidence. The Appellant has placed reliance upon various judgments to canvas their point that in absence of corroborative evidence no demand can be made. We find that no corroborative evidence has been stated in show cause notice in the form of receipt of unaccounted raw material, transportation of unaccounted such raw material to SFL factory, consumption of unaccounted raw material, production of unaccounted finished goods, production record of unaccounted finished goods, use of consumables, extra labour and excess consumption of electricity, clearance of goods from the factory, receipt of cash from even a single person on account of alleged clandestine sale. We also find that the revenue did ....
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.... (150) E.L.T. 290 (T), CCE v. Shingar Lamps Pvt. Ltd., 2010 (255) E.L.T. 221 (P & H), Ruby Chlorates (P) Ltd. v. CCE, 2006 (204) E.L.T. 607 (T), CCE v. Gopi Synthetics Pvt. Ltd., 2014 (302) E.L.T. 435 (T), CCE v. Gopi Synthetics Pvt. Ltd., 2014 (310) E.L.T. 299 (Guj.), Aum Aluminium Pvt. Ltd. v. CCE, 2014 (311) E.L.T. 354 (T), Sharma Chemicals v. CCE, 2001 (130) E.L.T. 271 (T), Resha Wires Pvt. Ltd. v. CCE, 2006 (202) E.L.T. 332 (T), Atlas Conductors v. CCE, 2008 (221) E.L.T. 231 (T), Vishwa Traders Pvt. Ltd. v. CCE, 2012 (278) E.L.T. 362 (T), CCE v. Vishwa Traders Pvt. Ltd. 2013 (287) E.L.T. 243 (Guj.), CCE Swati Polyester, 2015 (321) E.L.T. 423 (Guj.), Commissioner v. Swati Polyester - 2015 (321) E.L.T. A-217 (S.C.), Flevel International v. CCE, 2016 (332) E.L.T. 416 (Guj.), CCE v. Renny Steel Casting (P) Ltd., 2012 (283) E.L.T. 563 (T), CCE v. Akshay Roll Mills Pvt. Ltd., 2016 (342) E.L.T. 277 (T), Industrial Filter & Fabrics Pvt. Ltd. v. CCE, 2014 (307) E.L.T. 131 (T), CCE v. Birla NGK Insulators Pvt. Ltd., 2016 (337) E.L.T. 119 (T), CCE v. Ganesh Agro Steel Industries, 2012 (275) E.L.T. 470 (T), UOI v. MSS Foods Products Ltd., 2011 (264) E.L.T. 165 (P & H), CCE v. Sree Rajeswa....
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....s, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly 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 documents recovered during the search and activities being carried on in the factory of production; etc. Needless to say, a precise enumeration of all situations in which one could hold with activity that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of note books or diaries privately maintained or on mere statements of some persons, may even be responsible officials of the manufacturer or even of its Directors/partners who are not even permitted to be cross-examined, as in the present c....
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....corroborate them with other cogent evidence on record. On comparative assessment of the entries made in the notebooks with the entries made in the statutory records, the department raised the demand of duty on the basis that the entries in the notebooks were not matching with the entries in the statutory records which according to them were unaccounted purchase of raw materials or sale of finished goods leading to the inference of clandestine clearance. The fact is that the entries in the notebooks would not match with the statutory records as they were not actuals but were fabricated or hypothetical as admitted by the writer of these notebooks Sri Sarma. Moreover, no investigation has been made by the department to verify the correctness of the entries. It was obligatory on the department to establish the truthfulness of the entries made in the notebooks by bringing on record independent evidence showing receipt of unaccounted raw material from various parties and also of sale of unaccounted finished goods. 14. The law on the issue is well settled that onus to prove clandestine removal must be discharged by sufficient, cogent and unimpeachable evidence as observed by the ....
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.... in the case of Raipur Forging Pvt. Ltd. Vs. CCE, Raipur-I - 2016 (335) ELT 297 (Tri.- Del.) = 2016-TIOL1121-CESTAT-DEL, CCE & ST, Raipur Vs. P.D. Industries Pvt. Ltd. - 2016 (340) ELT 249 (Tri.-Del.) and CCE & ST, Ludhiana Vs. Anand Founders & Engineers - 2016 (331) ELT 340 (P&H) = 2015-TIOL-2655-HCP&H-CX. It stands held in all these judgements that the findings of clandestine removal cannot be upheld based upon the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods." We thus agree with the contention of the respondent that the notebooks are not reliable piece of evidence as the revenue failed to investigate so as to corroborate the entries in the private records. C. Statement retracted 15. The undisputed fact is that on the search of the residential premises of Sri Sarma on 9.12.2011, seven notebooks and some loose papers were seized and his statement was recorded on the spot where he stated that notebooks numbers 1, 2, 6 and 7 are relating to the party wise finished goods sold and payments received and raw materials purchased and payments made against them and the entries made therein tally with t....
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..... Thereafter, I decided to take revenge from the company and fabricated certain entries in the note books which was seized from my residence on 9.12.2011. Q.No.10. Why the search started from his residence only on 9.12.2011 when unit of the company was visited next day i.e. 10.12.2011 and under what circumstances, the search operation could have started from his residence at first point of time. Ans. That I on my own had contacted one Shri Viblav Das who was working in M/s.Lahri laminates and also looking after Central Excise work of the said company. He knew one Shri B.K. Jena an Excise Officer and thereafter information was passed on to the Preventive Wings who was first visited my residence on 9.12.2011, seized the records by drawing a pachnama and by recording my statements. On the basis of the said seizure of records, the Preventive Wing visited the factory next day. Q.No.11. Please explain why you have taken contradictory stand after five months of case booked against M/s.Nutan Ispat & Power Pvt. Ltd. Ans. I wanted to take revenge and accordingly, I deposed accordingly. However, said incident my family advised me that whatever I had done wa....
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....s, which were recovered from the residential premises of one of his employees Shri S.V.S. Sarma to Shri Pradeep Kumar Agrawal, Director of M/s.NIPL and M/s.ILBP and why he was not interrogated on these note books on the same date and why he was interrogated much after this date. These all substantiates the contentions of the notice-I in respect of the mischievous act of his employee Shri S.V.S. Sarma. It is also equally true that Shri Pradeep Kumar Agrawal, Director of M/s.NIPL and M/s.ILBP have no control over the note books recovered from the residential premises of Shri S.V.S. Sarma and which was claimed to have been written by him in his own handwriting with a dishonest motive. This has also been established form the aforesaid unearthed truths that even, he was not having any knowledge about the same. Undoubtedly, these seized note books are private third-party records, which cannot be used against the NOticeeNo.1 and 4 unless and until some primary or secondary or corroborative evidence have been brought on record, which could substantiate the entries contained in these note books. But it is observed that no such evidence has been discussed in the impugned show cause notice. H....
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....less there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removal, 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." Similarly, in Commissioner of Central Excise, Delhi vs. Vishnu & Company Pvt. Ltd., (supra), Delhi High Court reiterated the principle that it was for the department to explain why the entries in the documents were not further investigated by them and why someone in a responsible position in the company was not examined to establish the link between such evidence and the respondent there. Having held that the department did not carry its investigation to their logical end, the Court concluded that the charge against assessee was not proved. The relevance of the recovery of documents have been stated to be the starting point of investigation and the investigating agency is expected to make enquiries from relevant factors and certain loose sheets or non-stat....
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.... substantive and independent evidence. The seized record from the residence of Sri S.V.S. Sarma cannot be related to the business accounts of NIPL. In Plama Boards Pvt. Ltd. vs. CCE, Mangalore - 2010 (262) ELT 20 1058 (Tri-Bang.), the Tribunal was dealing with a Pocket Diary of the accountant of the assessee and it was observed that diary itself is not an official record of the assessee as it is a private diary and contains personal details including private transactions engaged in by Sri Ashraf, which is not acceptable without corroboration. Thus, it was incumbent on the revenue to have conducted further investigation as per the parameters laid down in various decisions to unearth reliable evidence to corroborate the contents of the notebooks and in the absence thereof the burden is still on the revenue and has not been shifted to the respondents. The notebooks recovered here can at best raise a suspicion in the minds but is not sufficient to prove the charges of clandestine removal as observed in Ashutosh Metal Industries vs. Commissioner of C.EX & ST, Delhi - 2018 (15) GSTL 38. We would also like to take note of the observations made by the Delhi High Court in the case of Vishnu....