TaxTMI 
TaxTMI 
2025 (2) TMI 676
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.... In view of the facts and circumstances stated above, I pass the following order: (i) I confirm the demand of duty of Rs.2,44,04,352.00 (16,73,666.00+ 19,36,394.00 + 3,05,640.00+3,99,312.00 +2,53,260.00 + 4,45,786.00+ 1,93,90,294.00) (Rupees two crores forty four lakhs four thousand three hundred fifty two only) under proviso to Section 11A of Central Excise Act, 1944. I also impose a penalty of Rs. 2,44,04,352.00 (Rupees two crores forty four lakhs four thousand three hundred fifty two only) on M/s Sai Sulphonate Pvt. Ltd., 19, Sarsuna Main Road, Kolkata-61, under Section 11AC of the Central Excise Act, 1944. (ii) I also confirm the demand of Rs.2,77,850.00 (Rupees two lakhs seventy seven thousand eight hundred fifty only) under proviso to Sec.11A of Central Excise Act, 1944. I also impose a penalty of Rs.2,77,850.00 (Rupees two lakhs seventy seven thousand eight hundred fifty only) on M/s Sai Sulphonate Pvt. Ltd., 19, Sarsuna Main Road, Kolkata- 61, under Section 11AC of the Central Excise Act, 1944. (iii) I disallow the modvat credit wrongly availed and utilized to the extent of Rs.1,38,040.00 (Rupees one lakh thirty eight thousand forty only) and con....
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....e Sulphonic Acid (LABSA) which is known as Acid Slurry and is a major raw material form all Laundry Detergent. The main input for the manufacture of LABSA was LAB and Sulphuric Acid. The LAB was being procured from M/s. Reliance Industries ltd. at Patalganga, Maharashtra, Indian Petrochemical Corporation Ltd. at Boroda, Gujarat and Tamilnadu Petro Products Ltd. at Chennai, Tamilnadu. The Salphuric Acid was produced mainly from Jahshree Chemical and Fertilizer, Khardah, West Bengal and The Phosphate Co. Ltd., Rishra West Bengal. 5. On 29.09.1998 a search was conducted by the department and seized almost all the documents of the company, but the department did not proceed against the company after about 3 ½ years more. On 22.11.2001, the department again searched the office of the factory of the appellant and the records were seized. Thereafter, on 30.10.2002 a show cause notice was issued alleging the following :- • The first allegation was suppression of production of Acid Slurry. Such allegation has been made stating that the appellant had shown less production in their RG-1 Register based on the ratio of 1:1.45 (LAB is to LABSA) when the actual should have ....
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....g the process of layer separation, which is must in relation to the mixtures of two or more liquid material of different specific gravity and drained out by bottom discharge basis through which Spent Acid recovered first followed by mixed Spent Acid with LABSA. The mixed quantity required further operation for separation and temporarily stored in the dedicated storage tank and subsequently processing take place, the re-processed batch again placed in a separator like normal batches recovered LABSA and Spent Acid as per norms. Thus, as per arithmetical calculation number of batches charges have been taken and assumed the total production which is erroneous and cannot be maintainable in law. To support this contention, Ld.Counsel relied on the decision Commissioner of Customs, Central Excise & Service Tax, Gaziabad v. Auto Gollon Industries (P) Ltd. (supra). • The demand of Rs.14,03,998/- has been alleged on account of suppression of production and clandestine removal as evidenced from computer print outs. The department calculated the clearance of 2,06,405 kgs. of Acid Slurry on which Central Excise duty of Rs.14,03,998/- was demanded. • The Ld.Counsel subm....
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....infer the clandestine removal of goods. The demand on this account also cannot be maintainable in law. To support this contention, the Ld.Counsel relied on the decision of Gupta Synthetics Ltd. vs. Commissioner of C.Ex., Ahmedabad-II [2014 (312) E.L.T. 225 (Tri.-Ahmd.)], K. Rajagopal vs. Commissioner of Central Excise, Madurai [2002 (142) E.L.T. 128 (Tri.-Chen.)], Commissioner of Central Excise, Jaipur-I vs. Nirmal Bhandari [2013 (289) E.L.T. 418 (Raj.)], Triveni Engineering and Industries vs. Commissioner of Central Excise, Allahabad [2016 (334) E.L.T. 595 (All.)]. • Another demand of Rs.2,27,850.62 has been demanded under the show cause notice on account of clandestine removal of Spent Acid of 25,23,658.40 kgs. This allegation has been made on the basis that Spent Acid is generated during the course of production of LABSA and no evidence has been given in the show cause notice to show that the disproportionate quantity of LABSA was produced during the period from October 1997 to 22.11.2001. • In reply to the said allegation, the appellant submits that the said allegation is not only hollow and baseless, but also not practicable. The clearance of Spent Ac....
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....rt payment of Central excise on account of sale through consignment agent, on the value at which the goods were sold from the consignment agent's place. • Regarding this, the appellant explained that the excess realization mentioned by the department was not correctly reflected by the appellant. The total realization was Rs.2,68,582/- and as cum-duty price out of which Rs.40,707.05 is payable as Central Excise duty and not Rs.3,26,046/- as claimed by the department. The said amount of Rs.40,707/- as accepted by the department has been paid through Cenvat Credit. • The Ld.Counsel for the appellant further submitted that the entire period of search, there were only three suppliers of LAB i.e. Reliance, IOCL and TPPL. The department could not produce even a single document in support of their assumptions and presumptions to prove that excess purchase had been made than as per actual record of the appellant. The department could not produce the evidence of excess electricity consumption for production of such a huge quantity of LABSA and Spent Acid, therefore, the entire demand of the department is based only on assumptions and presumptions, which is not susta....
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....aneswar-I, cited supra, wherein the Tribunal has held as under:- "7. We find that the issue to be decided in this case is whether the appellant has clandestinely removed the goods on which the duty demand has been made. We find that in the entire proceedings, no evidence, much less corroborative evidence, has been adduced to show that input goods have been procured to manufacture goods for clandestine clearance. No evidence for extra production or unaccounted cash or statement of buyers or transporters has been obtained. It is a settled legal position that charge of clandestine clearance is a serious charge and the onus to prove the same is on the Revenue by adducing some evidence. The Tribunal has taken consistent view that in absence of corroborative evidence, the charge of clandestine clearance cannot be levelled against the assessee. Some of the decisions are as below : • • Ghodavat Pan Masala Products Ltd. v. CCE - 2004 (175) E.L.T. 182 (Tri.-Mumbai) • CCE v. Supreme Fire Works Factory - 2004 (163) E.L.T. 510 (Tri.-Chennai) • CCE v. Suvidha Limited - 2009 (236) E.L.T. 675 (Tri.-Del.) 8. We further find that ....
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.... 21. The law is well settled that the electricity consumption cannot be the only factor or basis for determining the duty liability that too on imaginary basis especially when Rule 173E mandatorily requires the Commissioner to prescribe/fix norm for electricity consumption first and notify the same to the manufacturers and thereafter ascertain the reasons for deviations, if any, taking also into account the consumption of various inputs, requirements of labour, material, power supply and the conditions for running the plant together with the attendant facts and circumstances. Therefore, there can be no generalization nor any uniform norm of 1046 units as sought to be adopted by the Revenue especially when there is no norm fixed under Rule 173E till date by the Revenue and notified by it. The electricity consumption varies from one unit to another and from one date to another and even from one heat to another within the same date. There is, therefore, no universal and uniformly acceptable standard of electricity consumption, which can be adopted for determining the excise duty liability that too on the basis of imaginary production assumed by the Revenue with no other supporting r....
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....I reported in 2005 (182) E.L.T. 389 (T) = 2005 (98) ECC 790 (T). 23. The Tribunal has consistently taken the view that wherever electricity consumption alone is adopted as the basis to raise demands, the order of the lower authorities have been held to be unsustainable in law and set aside and the Revenue had been directed to carry out experiments in different factories on different dates to arrive at the average to be adopted as a norm, which can be followed thereafter and the Revenue in the present case not having conducted any experiment whatsoever cannot be permitted to justify the demands raised. It will be appropriate on the part of the Revenue to conduct experiments in the factory of the appellants and others and that too on different dates to adopt the test results as the basis to arrive at a norm, which can be adopted for future. The impugned demand based merely on assumptions and presumptions cannot, therefore, be sustained nor could be justified both on facts and in law. 24. The law is well settled that in every case of alleged clandestine removal, the onus is on the Revenue to prove what it alleges with positive and concrete evidence. In the absence of....
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....abad High Court in the case of Bajrang Petro Chemicals (supra) as relied by the Learned Authorized Representative for the Revenue. We are of the view that the said decision is clearly distinguishable inasmuch as in that case, demand was raised on the ground that final products were physically found to be short pursuant to verification of stock undertaken by the Departmental officers in presence of the assessee, the reasons of which could not be explained by the assessee. The Hon'ble High Court in para 10 of the order specifically noted that there was a huge shortage of finished goods for which no explanation was offered by the assessee which meant that the assessee had admitted the shortage and paid the duty accordingly. Based on the said finding, the High Court observed that the method of clandestine removal of the goods is not required to be explained. Therefore, the said decision has no application to the facts of the present case. In fact, in the instant case, no shortages of goods were ever found which fact is on record and not in dispute. In any case, since we have already noted hereinabove, that the whole basis of allegation of clandestine removal is the production pattern o....
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....rds the receipt of consideration of the said clandestinely removed final product. It is well-settled law that shortage of one of the raw-materials cannot lead to the inevitable conclusion of clandestine manufacture and removal. Further, it also stands held by various courts that the confirmation of demand of duty cannot be on theoretical basis of input output ratio. The appellants' 95% production is being sold to the manufacturers of three wheeled motors, who will admittedly not accept clandestinely removed goods as unaccounted for goods." 14. The adjudicating authority sought to allege clandestine removal on arithmetical calculation of the number of batches charges which is not sustainable under law. Accordingly, the demand of Rs.19,36,934/- is dropped. 15. Further a demand of Rs.14,03,998/- sought to be confirmed alleging suppression of production and clandestine removal as evidenced from computer print outs. In response to that the Ld.Counsel has submitted that whenever any Acid Slurry was cleared, those were cleared against Central Excise invoices on payment of duty. No invoice was prepared against refused water generated out of plant waste and other related activities co....
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....device and the panchanama proceedings started late at about 8:00 p.m. The statement of Shri Ravi Bhushan Lal was obtained only after the Panchanama proceedings were over, and therefore, the officers recorded his statement during his detention in the office that too in night. To test the veracity of the search proceedings the cross-examination of the Pancha witness was necessary, which was not allowed to the appellant and, therefore, we are left with no option; but agree to the contention of the Learned Advocate that the veracity of the panchanama is doubtful. We have also considered the judgments cited by the Learned Advocate and hold that search and seizure proceedings are made in violation of Section 100 of Cr PC read with Section 18 of the Act, for the reason that department has failed to follow the provisions of Section 36B of the Act. We also agree with the contention of the Learned Advocate that at the time of sealing and desealing of the external data storage device as well as the time of obtaining printouts therefrom, a certificate should have been obtained as per the provision of Section 36B of the Act. No such certificate has been brought on record without which the evide....
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....elied upon documents which were allegedly based on these documents. The details contained on the loose sheets and third party documents are actually not comprehensible and, therefore, cannot be accepted as admissible piece of evidence. Moreover, none of the 12 persons on whose statement reliance was placed by the department were cross-examined. In C.C.E. v. Kuber Tobacco Product Ltd. [2016 (339) E.L.T. A-130] the Hon'ble Delhi High Court has held that without any corroborative evidence, loose papers, documents cannot be a sufficient to prove charges of clandestine removal. The Hon'ble Delhi High Court in case of C.C.Ex. v. Vishnu & Co. Pvt. Ltd. [2015-TIOL-2792-HC-DEL-CX = 2016 (332) E.L.T. 793 (Del.)] has also held that merely on the basis of statement made by the third party including transporter, agents and employees are not sufficient to prove the charges of clandestine removal in absence of independent corroborative evidence. The Hon'ble P & H High Court in case of M/s. G-Tech Industries Ltd. v. Union of India [2016 (339) E.L.T. 209 P&H] has held that Section 9D of the Act has to be construed strictly, as mandatory and not merely directory. We have seen that the learned Commis....
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.... judgment cited by the appellant in case of C. C. Ex., Lucknow v. M/s. Sigma Castings reported at 2012 (282) E.L.T. 414 (Tri.-Del.), M/s. Micro Forge (I) Pvt. Ltd. v. C. C. Ex., Rajkot reported in 2004 (169) E.L.T. 251 (Trib.- Mumbai), C.C.Ex. Indore v. M/s. Kapil Steel Ltd. 2006 (204) E.L.T. 411 (Tri.-Del.), C.C.Ex., Lucknow v. M/s. Kundan Casting (P) Ltd. reported at 2008 (227) E.L.T. 465 (Trib.-Del.), M/s. RHL Profiles v. C.C.Ex., Kanpur reported at 2013 (290) E.L.T. 247 (Trib.-Del.). In view of the findings contained in these judgments we hold that the shortage was detected on average basis is not sustainable and, therefore, we set aside the demand. 21. We have considered the submissions made by the other appellants as regard penalty imposed against them. We find that no material evidence was brought on record to prove the charges to attract penalty against them, except the statements which were relied upon by the department without following the mandate of Section 9-D of the Act. Under the circumstances we also set aside the duties and penalties imposed on the other appellants as well." In view of the above, the demand of Rs.14,03,998/- is not sustainable, hence dr....
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....nts 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 case, without one or more of the evidences referred to above being present. In fact, this Bench has considered some of the case law on the subject in Centurian Laboratories v. CCE, Vadodara, 2013 (293) E.L.T. 689. It would appear that the decision, though rendered....
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....er day was taken from Register A-21 but in reality no such details were found in the said Register. No clarification has been sought by the investigating officer regarding the expressions appearing in the Register titled as 'A-21'. There was no corroborative material to suggest that GSL had manufactured and cleared such a huge quantity of DT Yarn without payment of duty. It is the further submission of GSL that the case made out by the Revenue that GSL had achieved optimum production fails even on the basis of seized document titled as A-21. This document itself indicates that the machine stopped on each day for several hours. It was further submitted that the details compiled in Annexure A(1) to the show cause notice clarifies that the demand of Rs. 32,07,422/- was based only on Register titled as A-21 and not based on any documents namely A-19 and A-20. The expression used in the document titled as A-21, like "A.P total", "A.P Production total", "A.P", etc. was never clarified by V.N. Parab as no such question has been put forth to him for clarification of the expression mentioned in the entries during the course of recording of the statement. The entries made on each page of the....
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....ay and is arrived after considering the aforesaid figure and the time taken for the machine idle. We have considered the submissions of both parties. We find that no evidence has been produced by the Revenue to show that GSL has effected sale of such huge quantities of 91929.140 Kgs of DT Polyester Yarn. There is no tangible evidence of GSL having actually produced all the DTY or Twisted Yarn from out of non-duty paid POY supplied by Nova. No transporters' documents have been seized or produced by the Department to show transport and sale of such huge quantities of POY from Nova to GSL or, even for that matter, from GSL to the buyers of DTY produced by GSL. No evidence has been forthcoming of purchase of raw materials by Nova for production of POY in such huge quantities, or of payments effected by GSL to Nova for the excess quantities of POY, clandestinely manufactured and cleared by Nova and sold to GSL, or even of payments made by the buyers of DTY from GSL made out of quantities alleged to have been purchased by GSL from Nova. The only basis of the demand is the figures contained in A/19 and A/21, seized from GSL premises, of which V.N. Parab is the author. Even if the....
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.... Book containing 83 pages which was seized from the factory and the said Note Book contained details of samples drawn from various position of spindles on DT Machine. On the basis that the average production of DT Yarn was 1560 Kgs, per day, huge quantity has been worked out for the period from 1-4-2001 to 30-6-2002, alleging that POY of 115.68 deniers was processed on the DT machines during the aforesaid period because reports of drawal of samples were shown in documents titled as A-23. It is the submission of GSL that the author of the said report has not been identified by the Revenue. The purpose for making such entries is also not clear. The entries made in the said register have not been established by the officers during interrogation of any person. It is the further contention of GSL that no admission has been made by Mohan Lal Gupta or by V.N. Parab as regards the optimum production having been achieved on all days in the factory or average production having been achieved for all days. It was further submitted that the drawing of samples would not necessarily mean that the machine was operating on that very particular day and average production of 1560 Kgs was achieved on ....
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....L made out of quantities alleged to have been purchased by GSL from Nova or any other company. We also find force in the submission made on behalf of GSL that no efforts have been made by the Revenue to establish the words or expressions used in the document titled as A-23. The meaning of the words and expressions used in the document could have been easily ascertained by asking a question to this effect to any of the responsible person working with GSL. Actual production achieved by GSL ought to have been established by the Revenue by concrete evidence. Statements by itself cannot be made the basis of concluding the production achieved by GSL. We are constrained to reiterate that it is one thing to make out the content of entries made in a document, it is totally a different thing to assess the probative value of the contents of the document. As repeated by this Tribunal, clandestine manufacture and clearance cannot be readily inferred from documents and statements. They have to be established on evidence, relatable to or linked with actual manufacturing operations. As far as the present demand is concerned, there is no such evidence forthcoming in the record before us. Mere relia....
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....cause notice to support the said allegation and there is no evidence in respect of disproportionate procurement of LAB/Sulphuric Acid illegally by the appellant and no corroborative evidence has been produced. 20. We find that the said issue has been examined by this Tribunal in the case of Arya Fibers Pvt.Ltd. vs. Commissioner of Central Excise, Ahmedabad (supra), wherein this Tribunal after considering the fact that to allege clandestine manufacture and removal clearance test has been laid down to be followed to confirm the demand. The Tribunal has held as follows: "40. After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following : (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 con....
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....ed or consumed and not merely the recording of confessional statements. A co-ordinate Bench of this Tribunal has, in another decision, reported in the E.L.T. issue of 5-8-2013 (after hearings in the present appeals were concluded), once again reiterated the same principles, after considering the entire case-law on the subject [Hindustan Machines v. CCE [2013 (294) E.L.T. 43]. Members of Bench having hearing initially differed, the matter was referred to a third Member, who held that clandestine manufacture and clearances were not established by the Revenue. We are not going into it in detail, since the learned Counsels on either side may not have had the opportunity of examining the decision in the light of the facts of the present case. Suffice it to say that the said decision has also tabulated the entire case-law, including most of the decisions cited before us now, considered them, and come to the above conclusion. In yet another decision of a co-ordinate Bench of the Tribunal [Pan Parag India v. CCE, 2013 (291) E.L.T. 81], it has been held that the theory of preponderance of probability would be applicable only when there are strong evidences heading only to one and only one c....
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....rectly of Rs.40,707/-, no demand is sustainable against the appellant. 25. We further find that in this case it is a fact on record that the appellant received LAB from three suppliers namely Reliance, IOCL and TPPL and no other supplier has supplied the said goods to the appellant and Revenue has not brought in any evidence to support that the said raw materials have been received by the appellant from other sources. 26. In that circumstances, the case made against the appellant by the Revenue is only on the basis of assumption and presumption, therefore, in such cases without bringing any evidence on record of procurement of raw material from other sources demands are not sustainable. 27. Moreover, the appellant has contested that the investigation was conducted on 29.08.1998 and all the records were taken, spot memo was issued, the same was replied by the appellant on 05.06.2000 and no investigation further took place. Thereafter, all on a sudden on 22.11.2001, the department again searched and on 31.10.2002, a show cause notice was issued. 28. We find that in such cases extended period of limitation is not invocable as the allegation made in the show cause notice fo....