TaxTMI 
TaxTMI 
TaxTMI 
2025 (3) TMI 1058
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.... Meena Fire Works and M/s Meena Sparklers with their relatives as partners; that these firms were used as conduit to split up their total turnover and they have been raising bills for all the items of fireworks in each firm irrespective of factory of manufacture of said items and thus resorting to evasion of duty payable on the fireworks cleared. Therefore, on 20.10.2010, the DGCEI officers searched the premises of these firms, their office premises, residences of the partners and the premises connected with them in their business activities and recovered incriminating documents which were seized under mahazars dated 20.10.2010 drawn in the presence of independent witnesses. Statements were also recorded from various individuals on different dates. 2. Based on the investigation undertaken by DGCEI with the active and inactive partners of three firms' suppliers of raw materials, supplier of packaging materials and their customers (Dealers & Traders), statements recorded, and on scrutiny of the documents recovered from various premises, officers of DGCEI were of the view that: a) Shri S. Meenrajan and his brothers Shri S Bhaskaran and Shri S Kannan admitted in their respecti....
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....is could be seen from the turnover submitted to the Commercial tax authorities and for the year 2009-10 the sale turnover of M/s Sparklers was even more than that of other two factories. f) They have procured raw materials such as Aluminium powder, Titanium powder, Barium Nitrate, and packaging materials such as gift boxes and corrugated cartons without bills as reflected in the two long size note books received from M/s Meena Trading Company vide their letter 4-10-2011(marked as Sl. No 19 of Annexure-B to the SCN) and in the file bearing SI No.23 recovered from Office premises (marked as Sl. no 9 of Annexure-B to the SCN). g) The documents contained in the file bearing Sl. No 16 (marked as Si no 18 of Annexure B to the SCN) revealed the manufacture of fireworks in M/s Meena Fire Works Industries and M/s Meena Fire Works and brought to the magazine at M/s Meena Fire Works Industries, which were cleared either under invoice or without invoices as discussed in the notice. h) The statements of Smt. Jeyanthi, Smt. B Sermaselvi, & Smt. K. Nithya reveal that they are dummy partners of M/s Meena Fire Works Industries for name sake. i) From the statement of Shri K.V.Selvaraj....
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....double consignments but also their realization. o) The small note books bearing: Sl. No 15 2/10, 15 3/10, 15 4/10, 15 5/10 and 15 8/10 & 7 (marked as Sl. no.3&2 of Annexure-B to the SCN) recovered from the office premises reflect the unaccounted transactions such as payments made towards the purchase of raw materials without bills, payment of coolie charges to the labourers, receipt of amounts against the illicit supply of fireworks from the customers establishing the clandestine removal of fireworks from all the three factories, as could be seen that there was no indication in the said documents showing reference to the sale of fireworks from the factory of manufacture. p) Thus from the documentary evidences available and evidences collected from all concerned and statements recorded from all concerned reveal the fact of unaccounted manufacture, unaccounted clearances, unaccounted purchase of Raw materials and Packing materials and realization of sale proceeds in cash and the deposit of such sale proceeds in various Bank Accounts maintained at different branches of the Banks in the name of the firms including fictitious firm viz. M/s. Meena Grinding Works and the partners and ....
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....s determined as detailed in the notice, considering coolie charges including the bonus attributed to 20% of the actual turn over as being determined as shown in para 5.6 of the notice. t) Thus, Shri S Meenrajan, Shri S Baskaran and Shri S. Kannan are effectively managing the entire affairs of three firms namely M/s Meena Fireworks Industries, M/s Meena Fire Works and M/s Meena Sparklers manufacturing different variety of fireworks. Investigation revealed that all the three units procure raw material, sell excisable goods and receive sale proceeds without any distinction between each other. They are managed as a single financial entity by the three brothers Shri S. Meenrajan, Shri S Baskaran and Shri S. Kannan. As such, it appears they are the one manufacturer manufacturing fireworks falling under heading No. 3604 of CETA 85 in three factories and cleared all varieties under the invoices of all the three firms irrespective of place of manufacture without distinction and are liable to pay excise duty as reflected in Annexure-D of the SCN by treating them as one manufacturer manufacturing and clearing excisable goods from one or more factories in terms of Para 2(v) of Notification N....
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....others were issued SCN No.81/2012/CE dated 13.08.2012 requiring them to show cause why the three firms should not be treated as one single manufacturer manufacturing and clearing fireworks from their factories in terms of section 2(f) of CEA read with para 2(v) of the Notification 8/2003-CE dated 01-03-2003, why the value of clearance of fireworks including sparklers from the three firms should not be clubbed together in terms of para (v) of the notification 8/2003-CE ibid to determine the aggregate value of clearance for demanding duty from the said three firms represented by the three brothers as they have jointly and severally indulged in the licit and illicit activities of the said three firms, why an amount of Rs.1,97,59,664/- towards duties and cesses payable should not be demanded from them under section 11(4) of CEA and the amount of Rs.15,00,000/- paid under various challans as detailed therein should not be appropriated against the said duties payable, a penalty should not be imposed on them under Section 11AC of the CEA and interest at applicable rate on the duty evaded should not be demanded from them under Sec 11AA of CEA. Proposals to impose penalty under Rule 2....
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....ies jointly in association with his brother S/ Shri. S. Meenrajan and S. Kannan. ix) Penalty of Rs.19,00,000/- in terms of Rule 26 of CER is imposed on Shri. S. Kannan, one of the three brothers and partner of M/s. Meena Fire Works for having masterminded the entire activities of three factories jointly in association with his brother S/ Shri. S. Meenrajan and S. Kannan (sic). 7. Shri N. Viswanathan, Ld. Advocate appeared on behalf of the appellants and argued the matter. He filed written submissions of the details of the appeal, details of the units and contentions as under: a) Appeal No: E/42077/2015 DB. Filed by M/s Meena Fire Works Industries [MFWI] for short] Demand for duty of Rs. 1,97,59,664/- covering the period from April 2007 to March 2012 but proposed and confirmed on group of three persons not partners of Meena Fire Works but partners in the other two units mentioned infra deeming them as a single manufacturing unit and a financial entity/Partnership firm. b) Appeal no: E/42078/2015 DB - Filed by M/S. Meena Fire Works [ MFW for short] for the common duty demand on the group of three persons. c) Appeal E/ 42079/2015 DB: Filed by M/S....
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....s furnished below: Sl. No Name of the Unit Constitution Management composition S/Shri/Ms. Remarks 1 Meena Fireworks Industries Sole Proprietor S. Kannan Started in March 2007 and continued as a proprietary firm till Feb 2010. Availed SSI exemption. Partnership firm S. Meenarajan, S. Kannan, S. Baskaran, Smt. M. Jayanthi, Smt. Sermaselvi & Smt. K. Nitya. Converted as partnership firm in Feb 2010 and continued to avail SSI exemption. 2 Meena Fireworks Partnership firm S. Meenarajan, S. Baskaran & T. Selvaraj. Started in 1981. Had six sheds and enjoyed SSI benefit. 3 Meena Sparklers Partnership firm S. Meenarajan, S. Kannan, S. Baskaran Started in 2003 and had separate shed to produce fireworks and enjoying SSI exemption. 7.5 Value of clearances effected by the three units during the material period: [pp 14] and 101 Annexure C-[ii] to SCN Year Meena Fireworks Industries. In lakhs] Meena Fireworks In lakhs Meena Sparklers In lakhs Remarks 2007-08 37,54, 793 40, 37, 927 3041000 Within SSI limit 2008-09 43, 48, 793 4....
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....and a hand written long size note books marked as Sl.no: 25 - 1/4 to 25 - 4/4 and a small size account note book Sl. No: 15 - 2/10, 15 - 3/10, 15 - 4/10, 15 - 5/10 and 15 - 8/10 detailing the stock of raw material held marked as A-1. The entries found in the various above note books was assumed by the investigation as containing the details of unaccounted removal of fireworks from all the three units for the period between 01/04/2007 to 31/09/2009, based on which only the demand for the duty for the said period was quantified. [vide Ann C [i] & [ii] -pp100-101]. It is pointed out that for the subsequent periods namely 2009-10 to 2011-12, the quantification was done based on averaging and on the amounts paid as coolie and bonus by the firms [Annexure C[i] and C[iv] and para 15.3 and 15.4 of the show cause notice]. 8.2 The officers during investigation recorded the statements from the so-called group of three persons, namely S/Shri S. Kannan, S. Meenarajan and S. Baskaran and. their spouses, and their father and from few of the raw material suppliers, and up-country dealers. The investigating agency also obtained and relied upon the amounts credited into 29 bank accounts of th....
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.... Amount of penalty Rs Period of demand Issue 1 Group of three brothers has been regarded as a single financial entity under Section 2 [f] 1, 97,59,664/- 1,97,59,664/- 2007-08 to 20112011. Clubbing of the alleged clandestine removal of the firework from the three units 2 Shri S. Meenarajan 19,00,000/- 3 Shri S. Baskaran. 19,00,000/- 5 Shri S. Kannan 19,00,000/- 10. The learned counsel submits that there is a preliminary objection as to the maintainability of the proceedings as creation of a single financial entity as canvassed in the SCN is contrary to law. The learned counsel submits that admittedly excisable goods were produced and cleared during the material period from the said three units which were partnership firms in their own right. Each of the said unit is a financial entity and as such they were the manufacturer of the subject excisable goods and were accordingly enjoying the SSI exemption in terms of Notification no 8/2003 CE as amended. 10.1 That the Partnership....
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....or the Central Excise Act of 1944 empowered the central excise officers to create a separate financial entity consisting of three individuals to hold them liable for the payment of duty for the clearances effected from the three independent factories owned and managed by different persons/partnership firms. Creation of a partnership is based on the free will of persons who wishes to do business and the same cannot be created by force by passing a statutory order by a Central Excise Authority. Such creation of a legal entity by fiction is neither legal nor valid in law and no tax liability can be fastened on the said creation. Discarding the existing legal entities who had produced and cleared goods and creating a new single financial entity in its place that too by including the three persons who are already partners in the existing firms is an act of illegality and a case of abuse of power. The legal status of the existing three partnership firms having not been extinguished as per law and when they continued to exist even now legally producing and clearing excisable goods, the impugned order passed is not leg....
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....ard is also fairly well settled in the following cases. * Commr. v. Unitech Containers Pvt. Ltd. - 2017 (358) E.L.T. 99 (Del.) * Premier Heavy Engineering Corpn. v. CCE - 2016 (337) E.L.T. 332 (Guj.) * CCE v. Urbane Industries - 2015 (325) E.L.T. 726 (Mad.) * CCE v. Diamond Scaffolding Co. - 2011 (274) E.L.T. 10 (Cal.) * Sree Nirmal Spinners v. CCE - 2014 (300) E.L.T. 469 (Tri. - Chennai) * CCE v. Copier Force India Ltd. - 2009 (245) E.L.T. 478 (Tri. - Chennai) * Poly Resins v. CCE - 2003 (161) E.L.T. 1136 (Tri. - Chennai). * Alpha Toyo Ltd. v. Collector - 1994 (71) E.L.T. 689 (Tribunal) - [Paras 8, 13] * K.R. Balachandran v. Commissioner - 2003 (151) E.L.T. 68 (Tribunal) - [Paras 8, 11, 13] * Ogesh Industries v. Collector - 1997 (94) E.L.T. 88 (Tribunal) - [Paras 8, 9, 10, 12, 13] * Ramsay Pharma Pvt. Ltd. v. Commissioner - 2001 (127) E.L.T. 789 (Tribunal) - [Paras 8, 10, 12, 13] 12. It is the submission of the ld. Counsel that the issue as to whether clubbing of the value of the clearances for considering the SSI exemption on the ground of maintenance of accounts in a common office is no more res-integra and has been settled in ....
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....s clearly revealed from how the quantification of the demand has been done. 14.1. The quantification of the duty liability is indicted in Annexure D [pg. 105] which clearly records that it is the work sheet showing the duty liability of the three brothers payable on the fireworks manufactured and cleared from the three units. Thus, in the first place the said annexure makes it clear that the demand made is not on the units but on the three individuals named in the interest. It may not be out of place to submit that from April 2007 the SSI limit of exemption was enhanced from Rs.1 Crore to 1.5 cr. per annum per unit/per manufacturer as per the SSI notification. Accounted turnover of the three units is available in page 101 - Annex C-[ii] showing that the said value is below the thresh hold limit for each of the units and for each of the financial years. It was the stand of the appellants that the figures found in the long note books only pertained to the orders placed on each of the three units part of which pertained to the licit removals with respect of the cases either not supplied or procured and supplied from other units involving only a trading activity a fact for which proof....
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....dence. Hence the notice has gone on to quantify the value based on the coolie or wages and bonus paid to works as found in the private register recovered during search operations. The said note book also contained coolie charges paid only up to September 2010. The notice further assumed that the appellants had used both factory workers and contract labourers in the ratio of 3:1 and based on the said assumption had worked out the total coolie charges paid up to September 2010 and interpolated the same to arrive at the assumed figures for the period from October 2010 to March 2011 without any evidence being available on record by assuming that the wages would accounts for 20% of total sale value and by extrapolation of the coolie figures for the financial year 2010-11 on a totally assumed basis. This annual turnover is based on hypothesis which is highly unreasonable and biased. [Work sheet in Ann C [iv] pp 104]. In any case and without prejudice since the accounted clearance is only Rs.1.43 cr. for 2010-11, they are eligible for SSI benefit. 14.4. The Ld. Counsel submits that for the period 2011-12, there is no evidence of any unaccounted production and clea....
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....guished the law laid down in the above cases to hold that the demand for duty based on the proposal to club the clearances effected by the various firms as not sustainable and the ratio laid down in the said case squarely applied to the facts of the present case of the appellants. Copy of final order enclosed 16. The Ld. Counsel further submits that inspite of repeated requests seeking the permission to cross examine the investigating officer/s who conducted the investigation and who have recorded the statement/s from the various persons to test the authenticity of the claim made by the investigation, the learned respondent had rejected their request without assigning any cogent reasons vide his finding in para 35 of the impugned order. The case laws cited by the respondent to support his decision not to allow the request for cross examination are not only irrelevant but also extraneous. The appellant was pressing for the cross examination of the investigating officers since the deposition of Shri S. Kannan and the cross examination of the alleged buyers which was permitted earlier by the predecessor adjudicating authority was telling a different story clearly evidencing to ....
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....more particularly in terms of the Partnership Act or the Central Excise Act 1944 for the family members to form a partnership for business in their own right. So long as the composition of the family members constituting the partnership are different in each firm, each such firm is to be regarded as a separate legal entity for all purposes including for the availment of the SSI exemption provided under notification no 8/2003 CE. The CBEC vide its circular No: 06/1992 dated 19.05.1992 and 37B order dated 19.05.1992 had concurred with the above legal position which has been followed in a number of judgments delivered by this Hon'ble Tribunal also. It is also by now well settled law that clubbing of clearance under the value-based SSI exemption notification is not permissible unless the revenue alleges and prove that the units involved were dummy or a camouflage or there was flow back of funds between such units, whereas in this case without existence of any of such facts or even when there are no such allegations to that effect, the impugned order in para 37 had concluded all the said facts are available and has cited some judicial pronouncements to sustain the proposal for clu....
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....t for and its quality. Actual supply of goods depends on various factors and the one agreed at the time of delivery takes place on the basis of availability of the stock on hand; the transport and money to buy with the buyers etc., There are many instances where the order for supply noted in the order book had not fructified due to various facts and circumstances involved. The assumption that all the entries found in the long note books represented only the unaccounted removal w/o bills is highly improper and totally untenable. Many instances of supplies with bills were taken out from the entries found in the register and matched. This position was also accepted by the respondent herein in his observation found in para 31 @ page 54 of the order in original. Even though he had accepted that Shri S. Kannan has matched some entries but had gone on to observe without any justification that these are instances of double removals against single invoice to conclude that the said four registers contained only unaccounted sales. Such an observation is extraneous to the assumption. 18.5. It is the submission of the Ld. Counsel that, even assuming that the entries might have a co....
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....e records/ledger or any other records maintained by him for the sale of chemicals to the appellant or realisation of such sale proceeds. Since he being a trader, has towed the line of the department's version to avoid any trouble, with the only intention of satisfying the officers to buy peace to avoid any possible trouble. The department also on its part did not initiate any action on the said supplier for his act of the alleged collusion and evasion of duty or have not even informed the said fact of sale by them to the VAT authorities for the unaccounted supplies obviously for the reason that there was no documentary evidence to justify the charge and to ensure his continued support to nail the appellant. The Ld. Counsel submits that the bald statement which is exculpatory in nature has no evidentiary value without the supporting documentary or other corroborative evidence either in the form of his statutory records or VAT records or any private records for the sale and supply to the appellant. 18.7. The Ld. Counsel further submits that the department has failed to bring in evidence about the total quantity of raw material procured from the above suppliers and how mu....
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....ements/records from buyers, the Ld. Counsel submits that during the material time the appellant had more than 100 customers both up-country and within Tamil Nadu. Though they undertook local supplies in their own van, out station supplies and interstate supplies were done though lorries and trucks belonging to the various transport agencies. The investigating agency could not produce even a single lorry receipt or transport records/consignment note etc from any one of the transport agencies to sustain their charge of unaccounted removal. The fact that goods were transported through public transport were provided in their reply. As they do not have any national permit their van cannot cross T. Nadu border at all. To get over the inability of the investigation to produce the consignment note or lorry receipt and in order to justify their unreasonable charges, they merely observed that the appellants had used their vans for all the unaccounted supplies, which is far from truth. The investigation agency also could not show a single instance that their van was intercepted or caught by the Commercial tax / VAT flying squad or VAT check post for carrying goods without invoice. ....
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....sport documents such as L.R. or consignment note which would contain the quantity, weight and value of goods transported, the charge of unaccounted removal stands un proved. 19.3. It is further submitted by the Ld. Counsel that assuming that the deposition of the said customers is true, legal action ought to have been initiated against them for their complicity and abetment in the alleged illegal transaction by way proceeding under Rule 26 of CER 2002 and also their case should have been referred to the State VAT authorities for action against them. Since no action seems to have been initiated against them, their statements are clearly proved to have been obtained under a promise of turning a blind eye on their alleged act as a quid pro quo to supporting the case of DGCEI. 19.4. The Ld. Counsel submits that during the cross examination, even the said five local buyers have deposed that they had signed the statement as desired by the officers. The truth of their deposition was tested before the LAA which is a judicial proceeding and the evidentiary value of the cross-examination proceedings have more credence than the recorded deposition before ....
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....deposition/clarification given by the various deponents before him during cross examination but proceeded to rely and pass order on the basis of the original statement which is legally impermissible in law. [ pp289 to 301] 21. With respect to the statements of the group of three persons, the Ld. Counsel submits that the investigating officers have recorded totally seven statements from Shri S. Meenarajan; one statement each from S/Shri S. Baskaran and S. Kannan. The said statements were touted as confessional / admission statements. The said statement mainly touched upon the entries found in the four long books, [sl.no: 1 of the mahazar] assumed to contain details of unaccounted sales; five small note books [ Sl. No: 2 said to contain receipt details of unaccounted sales] ; made up file Sl.No: 13 said to contain details of wages paid; etc. 21.1. The Ld. Counsel submits that as submitted supra, mere admission of the alleged offence in the statements by making reference to data/s found in the above seized records/note books is not sufficient to prove a case of alleged clandestine removal resulting in evasion of duty by indulging in illicit manufacture and unaccoun....
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....with bills since in the trade of fireworks most payments are received in cash only that too during the material period. This apart the credit side receipt also represent transfer from current Account to the partner's account and deposit due to closure or foreclosure of FDs. A reconciliation statement was also submitted along with the reply to substantiate their defence. It is not un common for person to hold more than one Bank account for so many reasons namely better service, nearness, loan of OD facility. There is no legal bar for individuals to maintain several accounts with different banks. The department has collected details about the said bank accounts and the deposits made into the said accounts and furnished the same as annexure C-[iii]. The notice had clearly recorded that the said information is only for the purpose of corroboration of the allegation made in the notice. According to the notice the accounts represented receipt of consideration for the licit and illicit sales but the notice did not make any attempt to segregate the receipts pertaining to licit and illicit transactions. The deposits made into these accounts were not treated as the receipt of considera....
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.... on the perceived infractions also has to necessarily fail. The Ld. Counsel also contends that the Adjudication has been inordinately delayed as the notice issued in 2012 was adjudicated only in 2015 and thus there is a violation of the mandate of Section 11A(11) of CEA and places reliance on the Judgement dated 10-2-2024 of Delhi High Court in M/s.VOS Technologies India Pvt Ltd v The principal ADG & Anr. and the Tribunal Final order Nos.59511-59720/2024 dated 25.11.2024 in M/s. Kopertek Metals Pvt Ltd v Commissioner of CGST. The Ld. Counsel also submits the decisions in M/s. Balaji Packagings v Commissioner of GST & Central Excise, Tirunelveli and Madurai (Vice-Versa), 2023 (9) TMI 180-CESTAT CHENNAI, CCE, Tirunelveli v Universal Fireworks Industries, 2015 (317) ELT 277 (Tri-Chennai), Renu Tandon v UOI, 1993 (66) ELT 375 (Raj) and Final Order No.40295-40298/2022 dated 18.08.2022 in M/s. Vadivel Pyrotech Private Ltd v The Commissioner of CGST & Central Excise, Madurai. The Ld. Counsel also submitted the Circular 6/92 dated 29-051992 of CBEC on the subject of clubbing of clearances of various firms- different firms to be treated as different manufacturers for exemp....
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....valence of inclement weather during that part of winter season or shortage of raw materials or packing materials or visit of officials of various departments necessitating to stop the clearing activities, the same could not be made ready and dispatched; sometimes the parties concerned to whom such invoices were raised cancel their orders abruptly leading ourselves to tear those invoices and such torn invoices were used for rough work. The investigation has brought out the fact that they were in the habit of raising invoices of the same number with different consignments to different parties. Once the consignment reached the destination of the Customer, the said invoices are torn and used as rough sheets. This fact has been accepted by triad in their respective statements. Shri S. Kannan has also admitted the same in his reply, but quoting various reasons for such cancellation of invoices; this activity shows that they never respected the laws relating to Commercial Tax; the invoices are regarded as negotiable instrument;, though the situation warrants cancellation of invoices, they should not have been torn but instead they should have cancelled and kept in file for inspection or v....
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....ooks recovered from the M/s. Meena Trading Company Above all, the 3 brothers who have masterminded the illicit activities of procuring raw materials without bills, manufacturing of fireworks without maintaining any books of account and sale of fireworks without bills have also admitted that they have only carried out all those activities relating to their 3 factories; their relative were also included into the constitution of the firms to create an impression that they are separate firms to claim the exemption in respect of each factory in addition to the clandestine activities; had their claim that they are independent in all respects been true, fireworks manufactured in M/s. Meena Fireworks would not have been permitted into the premises of other factory namely M/s. Meena Fireworks Industry and so did in the case of M/s Meena Sparklers to M/s. Meena Fireworks and vice versa; the raw materials procured in the name of M/s. Meena Fireworks and M/s. Meena Sparklers need not to be brought and stored in the M/s. Meena Fireworks Industry where Shri. S. Bhaskaran was always available; he distributed required raw materials to the other units as and when required as admitted in his stateme....
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....penditure was nothing but the disbursement of cash towards illicit purchase of raw materials; on seeing the contents in the diary bearing Sl No. 4 recovered from his residence showing the date relating to the year 2009, he admitted that the amount of Rs. 1,05,70,872/- was the net profit earned by the sale of fireworks manufactured from M/s. Meena Fireworks, M/s Meena Fireworks Industry and M/s. Meena Sparklers. 29. The Ld. AR states that further in para 35 the Adjudicator has found that despite his admission of the facts contained in the private documents recovered from their office premises and his residential promises, Shri. S.Kannan stated in his reply that they have deposed those statements under threat of arrest and coercion; being an Engineering graduate having ample experience in the marketing, maintaining separate accounts in different banks for deposing the illicit receipts earned through the unaccounted sale of fireworks, floating a firm said to be grinding chemicals on job work basis without raising any invoice /coolie bills, Shri S. Kannan cannot be considered as a lay man deposing statement under threat of the officers as claimed by him, had it been so he could have r....
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.... petitioner was entitled to cross-examination, is question which may largely depend on the facts and it is for the adjudicating authority to decide. Ld. AR reiterates the reliance placed by the adjudicator on the decisions in Modi Alkalies & Chemicals Ltd, 2004 (171) ELT 155 (SC), Parle Bisleri Pvt Ltd, 2011 (263) ELT 15 (SC), Supreme Engineering Works, 1996(82) ELT 102 (Tri) and L.R. Industries, 1999 (114)ELT 550 (Tri) while stating that the decision relied upon by the Adjudicator in H.T. Bhavnani Chemicals (P) Ltd, 1997(92) ELT 502 (Tri) may not apply as three units therein were in one single plot. 30. The Ld. AR submits that when the corporate veil is lifted it is clear that the existence of the three companies independently was a sham and the distinct legal nature cannot be used as an eyewash to portray their independent nature as the companies are indeed interdependent and related through financial control and management and therefore the value of clearances is to be clubbed together. 31.Ld.AR submits that the plea of delay in adjudication was never raised before the adjudicating authority or in the grounds of appeal and was being raised for the first time during arguments a....
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....ne another with common understanding to evade duty and to fulfil their goal, have illicitly procured raw materials, manufactured fireworks in the units, M/s. Meena Fire Works Industries, M/s. Meena Fire Works and M/s.Meena Sparklers and cleared all varieties of fireworks under the invoices of three units irrespective of place of manufacture and also without raising invoices and without payment of Central Excise duty thereon. They have also not informed the local Central Excise authorities truthfully reflecting their transactions in the statutory records and returns. Hence the Central Excise duty payable on the fireworks manufactured and cleared in the said three units manufacturing fireworks is demandable from them under the provisions of Section 11A(4) of Central Excise Act 1944 and they are liable for penal action under Section 11AC of Central Excise Act, 1944 and Rule 25 of CER, 2002 (emphasis supplied) 40. In view of the above discussions, it appears that the fireworks of all varieties manufactured and cleared accountedly and unaccountedly by the three brothers from M/s. Meena Fire Works Industries, M/s.Meena Fireworks, and M/s. Meena Sparklers irrespective of place of ....
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....duty by indulging in illicit business activities of the three firms, should not be treated as one single manufacturer manufacturing and clearing fireworks from their factories in terms of section 2(f) of Central Excise Act read with para 2(v) of the Notification 8/2003-CE dated 1-3-2003 as amended. i) I hold that M/s. Meena Fireworks Industries, M/s. Meena Fire Works and M/s. Meena Sparklers represented by the three brothers viz., Shri. S. Meenrajan, Shri. S. Baskaran and Shri. S Kannan, who have associated one another with the common understanding to evade excise duty by indulging in illicit business activities of the three firms, are to be treated as one single manufacturer manufacturing and clearing fireworks from their factories in terms of section 2(f) of Central Excise Act read with para 2(v) of the Notification 8/2003-CE dated 1-3-2003 as amended (ii) The value of clearances of fireworks including sparklers manufactured and cleared from M/s. Meena fire Works Industries, M/s. Meena Fire Works and M/s.Meena Sparklers during the period 2007-08 to 2011-12 should not be clubbed together in terms of para 2(v) of Notification 8/2003-CE dated 1-3-2003 as amended, for the reaso....
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....brothers viz, Shri S. Meenrajan, Shri. S Bhaskaran and Shri. S. Kannan, who have jointly associated one another with common understanding to evade duty and to fulfil their goal, have illicitly procured raw materials, manufactured fireworks in the units, M/s. Meena Fire Works Industries, M/s. Meena Fire Works and M/s.Meena Sparklers and cleared all varieties of fireworks under the invoices of the three units irrespective of place of manufacture and also without raising invoices and without payment of Central Excise duty thereon, and the Central Excise duty payable on the fireworks manufactured and cleared in the said three units manufacturing fireworks is demandable from them under the provisions of Section 11A(4) of Central Excise Act 1944 and they are liable for penal action under Section 11AC of Central Excise Act, 1944 and Rule 25 of CER, 2002 and further they are individually liable for penal action under rule 26 of CER 2002 and also they are liable to pay interest on the duty not paid under Section 11AA of Central Excise Act, 1944; yet, para 25 of the SCN calls upon M/s. Meena Fire Works Industries, M/s. Meena Fire Works and M/s. Meena Sparklers to show cause to the adjudicati....
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....s amended, to determine the aggregate value of clearances for demanding duty from the said three firms. The demand of duty and imposition of penalty under Section 11AC is also on them. 39. It is also pertinent that both the SCN and the impugned Order in Original indicate that they are issued to the three firms as well as the three brothers. 40. On a perusal of condition (v) and (vii) of para 2 of the exemption notification No.8/2003-CE dated 01-03-2003, they are seen to stipulate as under: "(v) where a manufacturer clears the specified goods from one or more factories, the exemption in his case shall apply to the aggregate value of clearances mentioned against each of the serial numbers in the said Table and not separately for each factory;" (emphasis supplied) (vii) the aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories for from a factory by one or more manufacturers, does not exceed rupees four hundred lakhs in the preceding financial year." 41. Thus, there ought to be a manufacturer who has a factory or factories, the clearances of which are to be taken in aggregate for determining the exemption in t....
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....ate or anoint a group of persons as the 'manufacturer' or a group of firms as the 'manufacturer.' We thus find considerable force in the preliminary contention of the Ld. Counsel for the appellant that neither the Partnership Act of 2015 or the Central Excise Act of 1944 empowered the central excise officers to create a separate financial entity consisting of three individuals to hold them liable for the payment of duty for the clearances effected from the three independent factories owned and managed by different partnership firms and that such creation of a legal entity by fiction is neither legal nor valid in law and no tax liability can be fastened on the said creation. This Tribunal in Amit Talwar v CCE, Delhi-I, 2018 (362) ELT 324 (Tri-Del) has held that it is well-settled that demand cannot be made jointly and severally. Likewise, in Chemicos v CCE, Meerut, 2012 (281) ELT 121 (Tri-Del), this Tribunal while holding that both the units therein cannot be held liable for the demand has held that it is well settled law that the duty cannot be confirmed against the two assessees without arriving at a finding against whom the same is required to be confirmed. 42. The lack of clar....
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.... distributing the exemption may not arise. If one firm or one individual owns several factories, he or it gets exemption only in respect of one lot and the manufacturer being only one entity, there will be no question of distributing the exemption. Whether or not in the expression 'by or on behalf of a manufacturer' the expression 'from one or more factories' is added, the effect would be the same if the manufacturer is also the same. The expression 'one or more factories' only further clarified that whether the factory is one or more, it is the clearances by or on behalf of the same manufacturer which is to be taken into consideration for purpose of interpreting the exemption Notification. The matter requires to be viewed accordingly." 26. In the case before us, though there are partners common in these firms, the constitution of all firms are different. In other words, the pattern of partnership is not repeated in any of the firms. As per the circular, when there are firms with only some of the partners in common, each firm is entitled to separate exemption limit. The clarification though issued with regard to Notification No.175/86, the principle is applicable to the present ....
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....ment is dismissed." 43. As noted supra, in the instant case before us, since the said lacunae of lack of clarity in demand exists in the demand proposal in the SCN as well as its confirmation in the impugned OIO, it is a fundamental flaw that cannot be cured and the impugned order in original is liable to be set aside on this count alone. 44. Be that as it may, we notice that the adjudicating authority has arrived at his findings on the premise of statements given by the three brothers regarding the transactions including that pertaining to the entries in the four long books assumed to contain the details of unaccounted sales, five small note books said to contain receipt details of unaccounted sales and a made up file containing details of wages paid etc, statements of the customers, statement of supplier of raw materials, statement of shri. S. Kaleeswaran, partner of Balaji Traders and statement of Shri. K B Selvarajan incharge of Meena Trading Co, statement of other partners of the three manufacturing units. The contentions of the brothers that the statements were obtained under threat of arrest and coercion was discounted stating that it was made only in the reply submitted....
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....justice. This sub section (b) of Section 9D(1) takes care of a situation where the witness who is deposing before the adjudicating authority turns hostile and on an evaluation of the circumstances of the case the adjudicating authority decides to discard the version given by the witness before it and instead place reliance on the earlier statement given before the Gazetted Officer. As elucidated supra, this also applies in a case where the witness deposing stands by his earlier statement and is thereafter offered for cross-examination to the opposite side and in case of minor inconsistencies/no inconsistency, if the adjudicating authority is of the opinion, having regard to the circumstances of the case that the statement should be admitted in evidence in the interests of justice, the adjudicating authority can do so as per this Section 9D(1)(b). 59. However, implicit in this procedure stipulated in 9D(1)(b) is the necessary requirement for the adjudicating authority to depose all the deponents who have given statement under Section 14, save as those that are unavailable in the scenarios given in 9D(1)(a), for the purposes of evaluating whether the statements are voluntary, to a....
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....view that the said interpretation would hold good under the pari materia provisions of Customs Act as well." This tribunal had also thereafter summed up the position in law as under: "66. In sum, the following emanate from the aforesaid discussions and judgements : A. The statement given under Section 14 of the Central Excise Act, 1944 (or under Section 108 of the Customs Act, 1962) in response to a summons by a gazetted customs/excise officer, is not hit by Section 25 of the Indian Evidence Act, 1872, because a customs/excise officer is not a "police officer". B. At this stage, it is merely a recorded statement-not yet admissible or relevant. It becomes relevant under the circumstances stated in S. 9D of the CE Act 1944/S.138B of the Customs Act. C. The fact that a statement is made and recorded, and is said to be relevant as per IEA/BSA, does not mean it is proved. D. For the S.14/S.108 statement to be admissible under general circumstances there must be an examination in chief and a subsequent cross examination that would bring it into the evidentiary pool for consideration. It needs to be examined whether the statement is voluntary; in other words, whether it w....
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....o as to render the evidence unacceptable, that the adjudicating authority may not be in a position to place reliance on such evidence. Serious contradictions and inconsistencies which materially affect the case of the Department have to be understood in clear contradistinction to mere minor discrepancies in the statement of the witness. G. Cross-examination is thus not an absolute right and if the conditions of sub-sections (a) or (b) of S.9D(1)/S 138B(1) exist, then the statement becomes relevant and can be made admissible without cross examination in the circumstances more elaborately elucidated supra. H. As laid down by the Hon'ble High Court in J & K Cigarettes v. CCE, 2009 (242) ELT 189 (Del), while invoking Section 9D of the Act, the concerned adjudicating authority is to form an opinion on the basis of material on record that a particular ground, as stipulated in the said Section, exists and is established; such an opinion has to be supported with reasons; and before arriving at this opinion, the authority would give opportunity to the affected party to make submissions on the available material on the basis of which the authority intends to arrive at the said opinion ....
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....vide Final Order No. 40295-40298/2022 dated 18.08.2022, held that as per Section 9D of the CEA, 1944, the statement can be relied only if the person is examined. The relevant portion is as under: "37. Apart from the computer printouts, another evidence relied for confirming duty is the statement of Sales Tax Consultant Shri. Subbiah. It is alleged that he admitted issuing two set of invoices. The Ld. Counsel submitted that in spite of request, the appellant was not afforded an opportunity to cross examine any of the witnesses. As per Section 9D of the Central Excise Act, 1944, the statement can be relied only if the person is examined. Again, on perusal of records, there is no documentary evidence to show the two set of invoices have been recovered by the department. The department has relied upon the statement of Accounts Manager Shri. Gopinath. In absence of examination/cross examination his recorded statement is of no evidentiary value." 50. We therefore find that the reliance placed by the adjudicating authority on the statements of deponents not subjected to examination in chief as well as the reliance placed on the depositions of the witnesses who have resiled without ex....
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.... 2010-11. We do not condone such arbitrary determination of unaccounted clearance value and consequential determination of tax liability and hold such quantification arrived at as illegal. It is also pertinent that the adjudicating authority has despite conceding in para 31 of the impugned order in original that the appellants were able to match some of the consignments that were listed in the rough note book which the department claims as indicating the unaccounted clearances, with clearances from their units under invoices as shown in List I, which List I was filed along with their reply, has surprisingly not found it necessary to exclude such accounted entries while determining the quantification of unaccounted clearances, which too has rendered the said inflated quantification of duty demand untenable in law. The appellant in para 18.13 is seen to have rebutted the allegation of clandestine removal premised on the entries in Annexure B 14 and 30 giving details of accounted clearances including copies of relevant invoices in List IV to their reply. In fact, the categorical rebuttals to the relied upon documents as elaborated in the appellant's reply have not been controverted in....
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....re beyond reasonable doubt, these standards have also been eschewed in favour of "clear and convincing evidence" when the allegations are of more serious nature and also attract heavy financial consequences. At the cost of repetition, we reiterate that the three steps in sequence involved in applying the principles of evidence law, as we had elucidated supra, would be to at first find out whether the fact, the evidence in respect of which it is sought to be adduced to prove it, is relevant, and the next step would be to see whether the evidence that is being sought to be adduced to prove such a relevant fact is admissible and lastly whether the fact or facts so proved are sufficient to determine the issue. Sufficiency is completely determined only by adjudicating authority and is thus the adjudicating authority's evaluation of the extent of the bearing the proven facts have in the matter as per the standards of evidence called for in the adjudication process, which in matters of clandestine removal would call for "clear and convincing evidence" . 81. We see that the standard of proof required in cases of clandestine removal including the aspects that need to be proved have been ....
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....0. 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 manufacturer 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. 83. In Arya Fibres Pvt Ltd v. CCE, Ahmedabad II, 2014 (311) ELT 529 (Tri-Ahmd), a coordinate bench of this Tribunal after considering various Tribunal decisions formulated certain parameters to be established by Revenue in matters where clandestine removal are being alleged. The relevant paragraphs are as below: 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 establ....
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....atements of the raw materials suppliers taken do not indicate the quantum of raw material that is alleged to have been supplied), excess production, excess purchase and consumption of packing material (again the statements of the suppliers of packing material does not indicate any quantum), evidence of transporters who have actually transported the alleged unaccounted goods, receipt of consideration etc. While undoubtedly credit of amounts in the bank statements have been provided, not even a single entry has been evidenced or linked as payment received for clandestinely cleared goods. Such bank statement has been stated to be shown in the notice only for purpose of evidencing that the actual quantification and demand of duty made in annexure D is less than the amount credited in the Bank Accounts during the respective years. This caveat in the SCN itself evidences that the investigators have not bothered to try to segregate the receipts pertaining to licit and illict transactions. There is no corelation of receipt of money transaction wise or customer wise. Mere indication of credit entries is of no avail without any explanation as to the nature of such credits. The SCN at para 13....
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....e units manufacture all the products. It is also not the case of the Revenue that all the units dispatch products of other firms at all instances. In fact, no efforts seem to have been undertaken to quantify the alleged clandestine removal from each of such units that were being proposed to be clubbed, when admittedly all the units were engaged in manufacturing separately. The occasional sourcing of goods manufactured by other firms and dispatching it may at best be instances of trading for any reason, for example, not wanting to refuse a customer requirement for fear of losing the order, but that cannot be a reason to hold that the units are inter dependent, more so when their separate physical existence with distinct products and different manufacturing facilities as well as separate labour are not in dispute. The brothers helping each other out in the course of conducting the businesses of the respective firms that they are partners of, cannot be misconstrued as administrative, financial or managerial control of one over the other, control requiring one to be subservient or subordinate to another. The units indisputably were in possession of legal documents such as separate PAN,....
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....istence or facilities for manufacture of goods on their own. Such evidences are absolutely absent in the present case. Merely because Shri V.Arumugasamy, his son and family members were partners in the different units cannot be a ground to say that there is mutuality of interest. Ld. Counsel has adverted to Circular No.6/92 dated 19.05.1992. The relevant part of the said circular reads as under : "1. Different firms will be treated as different manufacturers for the purpose the purpose of exemption limit. But if a firm consisting of certain partners say A,B, or C has got more than one factory, all these factories should be of course be combined. Limited companies whether public or private are separate entities distinct from the shareholders composing it. Hence, each limited company is a manufacturer by itself and will be entitled to a separate exemption limit. 2. If there are two firms with only some of the partners in common, each firm is entitled to separate exemption limit and hence the question of distributing the exemption may not arise. If one firm or individual owns several factories, he or it gets exemption only in respect of one lot and the manufacturer being only on....
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....odi Alkalies & Chemicals Ltd, 2004 (171) ELT 155 (SC), Parle Bisleri Pvt Ltd, 2011 (263) ELT 15 (SC), Supreme Engineering Works, 1996(82) ELT 102 (Tri) and L.R. Industries, 1999 (114)ELT 550 (Tri). As is evident from the facts of the case discussed above, they are at variance from the facts and circumstances of the cases relied upon by Ld. AR and are thus distinguishable. 56. We now also address the issue of delay in adjudication agitated by the Learned Counsel for the Appellants. The Ld. Counsel had contended that the Adjudication has been inordinately delayed as the notice issued in 2012 was adjudicated only in 2015 and thus there is a violation of the mandate of Section 11A(11) of CEA and places reliance on the Judgement dated 10-2-2024 of Delhi High Court in M/s.VOS Technologies India Pvt Ltd v The principal ADG & Anr. and the Tribunal Final order Nos.59511-59720/2024 dated 25.11.2024 in M/s. Kopertek Metals Pvt Ltd v Commissioner of CGST. 57. We notice that the SCN issued to the Appellants was dated 13.08.2012. We are of the view that the decisions cited by the Ld. Counsel do not come to the aid of the appellants for the following reasons: i. Firstly, the jurisdictional....
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....rs passed long after issuance of show cause notice would be in violation of principles of natural justice. Nothing precluded the petitioner from knocking the doors of the Court under Article 226 of the Constitution of India for a Mandamus to direct the respondents to complete the assessment or bring a closure to the issue. The petitioner is equally guilty of the delay in not asking the respondents to pass an order earlier." (emphasis supplied) Recently in a judgement dated 13.09.2013 in W.P. No.9614 of 2022 in the case of M/s. Ramnath & Co Pvt Ltd v. The Dy Commr of Customs, the Hon'ble Madras High Court has held as under: "5. The principle ground, on which, the impugned order is attacked is that it has been passed beyond the limitation period prescribed under Section 28 (9) of the Act. Section 28 (9) of the Act has been amended. When the Show Cause Notice dated 26.12.2014 was issued, Section 28 (9) of the Act, provision read differently. At the time of adjudication of the said Show Cause Notice dated 26.12.2014 vide impugned Order-in-Original No.87695/2022, dated 31.01.2022, Section 28 (9) of the Act read differently. They read as under:- During the issuance of show cause no....
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....sions of this Act or the rules or regulations made thereunder, or in any other law for the time being in force, in case where, notice has been issued for non-levy, short-levy, non-payment, short payment or erroneous refund prior to 29 days of March, 2018, being the date of commencement of the Finance Act, 2018 (13 of 2018) such notice shall continue to be governed by the provisions of Section 28 as it stood immediately before such date. 5.2 Thus, it is evident that the show cause notice, dated 26.12.2014, had to be examined in the light of Section 28 (9) as it stood prior to the amendment w.e.f. 29.03.2018. Therefore, the show cause notice was required to be adjudicated within six months from the date of issuance of such notice. The above limitation was qualified with expression '' Wherever, it is possible, to do so''. Prima facie, it appears that the Department was not precluded from adjudicating the show cause notice beyond six months." As can be seen from the decision in M/s. Ramnath & Co Pvt Ltd, the jurisdictional High Court has held, in para 5.2 that "The above limitation was qualified with expression "Wherever, it is possible, to do so". Prima facie, it a....
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....er communication. It is seen that the period one year from 28.04.2015 expired on 27.04.2016. Even if cause was not shown by the noticees to the said notice, the Adjudicating Authority should have proceeded to decide the matter ex parte, but what is seen is that the Adjudicating Authority even let this statutory time limit of one year pass without even adhering to the stipulation contained in the show cause notice that the matter would be decided ex parte even if no cause is shown within thirty days. It appears that it is only on 07.09.2016 i.e. almost after a period of five months after the expiry of one year that the first hearing was fixed by the Adjudicating Authority on 07.09.2016. The chart submitted by the department further shows that after the first hearing was fixed on 07.09.2016, the matter was taken up on 22.02.2018 for cross- examination which period is itself after more than one year, and this cross-examination continued from 22.02.2018 to 22.03.2021 and though five dates for cross-examination were fixed in 2018, four dates were fixed in 2019 and thereafter two dates for cross-examination were fixed in 2021. There is absolutely no reason assigned in the written submiss....
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....djudicating Authority cannot endlessly wait and has to utilize its discretion in a fair and reasonable manner so as to balance between the principles of natural justice and the time set out in the Statute for adjudication of the show cause notice. The show cause notice required the noticees to file a reply within thirty days, failing which it was mentioned that the matter would be adjudicated ex parte. Assuming that no reply was filed by the noticees, still the Adjudicating Authority should have proceeded to adjudicate the show cause notice ex parte as it was bound to adjudicate in show cause notice within one year, unless there were strong and compelling reasons for it not to adjudicate the show cause notice within the stipulated time. Learned authorized representative appearing for the department is, therefore, not justified in making this submission. Nothing has been shown which can even remotely demonstrate that there were circumstances, much less insurmountable exigencies, which prevented the Adjudicating Authority from completing the adjudication process within the stipulated term. This Tribunal has thereafter held as under: "40. The facts of each case have to examined ....
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....e to follow the rule." Implicit in the said observation of the Honourable High Court, is the essential prerequisite of laying such a challenge before the authority, viz., that the adjudication is being delayed due to the inaction of the authority, which in turn shifts the onus on the authority to prove why it was not practicable or possible to follow the rule. 60. We have also perused the decision of the Delhi High Court in M/s. Vos Technologies India Pvt ltd cited before us and the summation given therein is as under: "85. The position which thus emerges from the aforesaid discussion and a review of the legal precedents is that the respondents are bound and obliged in law to endeavour to conclude adjudication with due expedition. Matters which have the potential of casting financial liabilities or penal consequences cannot be kept pending for years and decades together. A statute enabling an authority to conclude proceedings within a stipulated period of time "where it is possible to do so" cannot be countenanced as a license to keep matters unresolved for years. The flexibility which the statute confers is not liable to be construed as sanctioning lethargy or indolence. Ulti....
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....ave in the preceding paragraphs of this decision taken note of the various statutory amendments which were introduced in Section 28 and were clearly intended to ratify and reinforce the jurisdiction which the Legislature recognised as inhering in them. The above observations are, of course, confined to those cases to which the Second Proviso placed in Section 28(9) would not apply. The Second Proviso where applicable would in any case deprive the respondents of the right to continue a pending adjudication or frame a final order once the terminal point constructed by statute came into effect." In light of the confinement of these observations to cases where the second proviso placed in Section 28(9) of Customs act would not apply and given that the cases where the second proviso applies the statute itself provides a terminal point to the proceedings, we don't see any impediment in the said decision that is contrary to our views expressed above. In fact, all that is mandated is to conduct the adjudication within reasonable time and even if the assessee seeks repeated adjournments, the adjudicating authority is to proceed exparte under a caution that it can be so proceeded exparte o....