TaxTMI 
TaxTMI 
2025 (6) TMI 261
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....ion under Notification No.8/2003-CE dated 01.03.2003, as amended. 3. On 06.08.2015, the Anti-Evasion Officers of Central Excise Commissionerate, Noida-II visited and searched the factory premises and head office of the Appellant. During the visit at factory, the officers on receiving telephonic information from the other team visiting the Head Office that the turnover of the Appellant had exceeded the exemption limit, seized the stock of finished goods on the reasonable belief that the finished goods are liable for confiscation having been manufactured without obtaining registration with an intent to remove the same clandestinely without payment of duty. During the visit at the Head Office of the Appellant, the Officers also collected sales details for the year 2011-12 to 2015-16 (upto July' 2015) and also recorded statement of Shri Shiv Shankar Barathi. Later on statements of Shri Hardesh Barathi were also recorded on 28.03.2016 and 18.04.2016. 4. Show Cause Notice [SCN] dated 20.06.2016 was then issued on the ground that the Appellant has clandestinely cleared pesticides and organic manure, to the extent that the value of first clearances of pesticides exceeded Rs.1.5 crores in....
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....ine removal; (iii) Even the sales details and MRP Lists obtained from Shri Hardesh Barathi during the course of recording his statement were prepared on the instance of the revenue and were on much higher side when compared to the sale details submitted during the search proceedings and also by letter dated 16.11.2015 and also there is no basis given in the SCN for computation of value of clearances being almost double the value of clearances admitted by the Appellant; (iv) Even in respect of the MRP relied upon in the SCN, no enquiry either from market or regular purchasers was conducted to find out the retail sale price (RSP), when at the time of search itself Shri Shiv Shankar Barathi in his statement stated that the sale was to direct parties and also to M/s Shimac Organics (P) Ltd. and M/s Amvac Agri-Rasayan (P) Ltd.; (v) The Revenue has not considered the effect of insertion of proviso in Notification No.8/2003-CE dated 01.03.2003 (Inserted by Notification No.8/2006-CE., dated 01.03.2006), which provides that exemption contained in this notification shall apply subject to the conditions. (vi) Admission of duty liability in letter dated 16.11.2015 was under the wrong i....
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..../2003-CE dated 01.03.2003, as amended. Notification No.8/2003-CE dated 01.03.2003 ('exemption notification') exempted first clearances of goods specified in the Annexure to the said notification, upto Rs.1.00 crores made on or after the 1st day of April in any financial year. The exemption under the notification was conditional and the relevant conditions for the purposes of the present appeal, as applicable during the period in dispute were as under:- "(iii) the manufacturer shall not avail the credit of duty on inputs under rule 3 or rule 11 of the CENVAT Credit Rules, 2002 (herein after referred to as the said rules), paid on inputs used in the manufacture of the specified goods cleared for home consumption, the aggregate value of first clearances of which, as calculated in the manner specified in the said Table does not exceed one hundred lakh rupees; (vii) the aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories, or from a factory by one or more manufacturers, does not exceed rupees three hundred lakhs in the preceding financial year." By Notification No.10/2005-CE dated 01.03.2005, the amount specified i....
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....further corroborative evidence is also required. For this purpose no investigation was conducted by the Department." Hon'ble Delhi High Court also recently laid down the same principle of law in Commissioner of Central Excise vs. Kuber Tobacco Products Pvt. Ltd. (2024) 18 Centax 417 (Del), as under:- "26. It is a settled law that there cannot be clandestine removal of the goods unless the assessee manufactures the same clandestinely and for that purpose, procures raw material clandestinely and uses it without disclosing its utilization. Admittedly, there is no evidence of purchase of major raw material like supari, tobacco etc even in the loose sheets/Hisaba Books recovered in the search. Revenue has not produced any evidence about the procurement of raw material which may be regarded as sufficient for the manufacture of the final product, which is alleged to have been clandestinely removed. 27. .............In Commissioner of Central Excise v. Shakti Zarda Factory (I) Ltd. 2015 (321) ELT 438 (Del), the Court declined to frame a question of law in a reference made to it from an order of a Tribunal on the issue of clandestine removal. In that case, it was found the CCE had re....
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....finished goods, clandestine removal, transportation, payment, realisation of proceeds, modes and flow back of funds etc. We find from the records that no enquiry in this regard has been conducted and no material has been brought on record to sustain the charge of clandestine removal. In our opinion, the case of clandestine removal set up by the Revenue, falls foul of the parameters laid down by the Hon'ble High Courts, as referred above. 15. The only material on which the Revenue relies to sustain the charge of clandestine removal to the extent stated in the SCN, is the statement dated 28.03.2016 of Shri Hardesh Barathi and the sale details along with MRP Lists obtained from him on the basis of which duty liability has been quantified and his second statement dated 18.04.2016 wherein he admitted the duty liability. While the Revenue has heavily relied on the said two statements and the sale details along with MRP Lists, the ld. counsel for the Appellant has contended that the statements were obtained under duress and sale details were prepared at the time of recording of statement on the higher side under the duress of Officers. He further submitted that application of duress can ....
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....the recording of such a statement since the adjudicating authority exercises quasi-judicial powers." Thus, the Hon'ble Supreme Court has held that the Officer who records the statement has the onerous duty to see that the statement is recorded in a fair and judicious manner so that the statement can meet the standards of basic judicial principles and natural justice and it is the duty of the Adjudicating Authority to find out whether there was any duress or coercion in the recording of statement. 17. We find that the following findings have been recorded in paragraph 5.2(iii) of the Adjudication Order regarding the plea of duress and the assessable value determined on the basis of sale details obtained:- "(iii) I find that there is no dispute regarding assessable value of pesticides and organic manure, as the same value has been taken in SCN and by the party in defence reply dated 03.01.2017 vide Para No. 12.8. However, the difference in value resulting in to difference of duty as pointed out by the party is due to the fact that the exemption of Rs. 1.50 Cr was calculated by the party in all years whereas, the same was calculated in the SCN for only two years as discussed in pr....
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....th his father Shri Shiv Shanker look after all work of the unit; (ii) He produced copies of the following documents- a. MRP Lists for the years 2011-12, 2012-13 and 2013-14. b. Month wise and product wise sale details (i.e. quantity and value ) for the years 2010-11, 2011-12, 2012-13, 2014-15 and 2015-16 (up to 08.08.2015). c. Flow charts of process of manufacture of organic manures both Granules and Liquid. d. Copy of license issued by the State Government for manufacture of pesticides. Reference to the month wise and product wise quantity and value of clearances also finds place in paragraph 10 of the show cause notice, as under:- 10. Whereas, during the investigation, the party submitted product wise and month wise quantity and value of their clearances of pesticides and trading sale for the year 2011-12 to 2015-16 (up to 8th August 2015) (RUD-9) Thus, the month wise and product wise sale details along with quantity and value, referred to as RUD-9 in the Adjudication order, was nothing but the sale details obtained from Shri Hardesh Barathi during the course of recording of his statement dated 28.03.2016. Once the Appellant pleaded duress in recording of sta....
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....oboration 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." Further, the Adjudicating Authority has not found out whether there was any duress or coercion in the recording of statements. In the facts of the case, where post-dated cheques were collected at the time of search itself, sale details were obtained during the course of recording of first statement, duty was quantified on the basis of such sale details, duty so computed was accepted in second statement and there is no corroborative material on record to support the quantum of sales details, the Adjudicating Authority was required to undertake a deeper scrutiny of facts instead of rejecting the plea on the aforesaid reasoning. This issue has also not been considered in the impugned order despite specific ground taken in the appeal. 19. Apart from above, we also find that the Adjudicating Authority has not invoked Section 9D before relying upon the statements. The rationale behind Section 9D has been explained by Hon'ble Punjab & Haryana High Court in Jindal Drugs P....
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....has to be recorded before the adjudicating authority, as, in such an atmosphere, there would be no occasion for any trepidation on the part of the witness concerned. 19. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a Gazetted Central Excise Officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the Gazetted Central Excise Officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for proving the truth of the contents thereof, he has to first admit the statement in evidence in accordance with clause (b) of Section 9D(1)." Thus, before relying on the statements, the Adjudi....
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....8,01,660.25 3,07,57,769.00 3,07,57,769.00 * No dispute in the present appeal, as no demand has been raised for 2010-11. **Clearances of Rs.1.50 crores added to the clearances stated in letter dated 16.11.2015, as Appellant claimed SSI exemption till 2012-13. 21. On comparison of the aforesaid aggregate value of clearances of pesticides and organic manure calculated on the basis of letter dated 16.11.2015 with the aggregate value of clearances stated in paragraph 12 of the SCN, we find that the aggregate value of clearances stated in paragraph 12 of the SCN is almost double the amount of clearances admitted by the Appellant, as under:- Year Aggregate value of clearances submitted by the Appellant Aggregate value of clearances taken in para 12 of show cause notice 2011-12 1,58,84,862 3,71,54,263.00 2012-13 2,18,44,328 4,11,28,842.00 2013-14 3,02,77,656.47 5,78,33,911.00 2014-15 3,07,57,769.00 7,38,31,815.00 Although paragraph 10 of the SCN states that the sale value of pesticides shown in the documents resumed/submitted during search tallies with the sale value submitted during investigation, but we find that such sale value of pesti....
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....ed from Shri Hardesh Bararthi during the course of recording of his statement dated 28.03.2016 and admission of such MRP along with duty liability in statement dated 18.04.2016. We have already observed in the preceding paragraphs that statements alone cannot be the basis of demand in absence of any corroborative material and voluntary nature of the statements has not been properly examined by the Adjudicating Authority. In respect of the MRP Lists also, we find that no enquiry from market or regular purchasers was conducted by the Revenue to find out the retail sale price affixed on the products. When Shri Shiv Shankar Barathi in his statement recorded on the date of search stated that the sale of the Appellant was to direct parties and also to M/s Shimac Organics (P) Ltd. and M/s Amvac Agri-Rasayan (P) Ltd., the revenue ought to have enquired the matter further and find out the retail sale price affixed on the package. This exercise was clearly necessary when the Appellant was claiming submission of correct MRP List whereas the revenue was relying on the MRP List obtained from Shri Hardesh Barathi during his statement dated 28.03.2016 wherein he also stated that the MRP List pro....
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....ured. Also state the inputs used for the manufacture of organic manure. Ans:- As per my understanding and also as per trade practice the organic manure are not subjected to excise duty. VAT is also leviable on organic manure. However I am not aware under which provision of central excise law organic manure are exempt from duty. Letter dated 06.11.2015:- Dear Sir, You are aware that Central Excise Officers searched our premises on 06.08.2015. We participated in the investigation and given all the records as asked by the officers concerned. We have also taken central excise registration on the advice of the department. We are a small manufacturer of pesticides, insecticides and agro product falling under CETH 31 and 38 and entertained a believe that products manufactured by us are not excisable. Once informed about the duty liability by the department regarding our goods. We on our own assessee the duty liability which come to Rs 8499306.59 for the financial year 2010-11 to 2014-15 as per the sheet attached. We have decided to pay the above said amount in order to mitigate our future interest and penal liability. The payment has been made in the following SSI exemptions. ....
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....e Appellant prior to the issuance of SCN, it is clear that there existed a doubt in the mind of the partners regarding duty liability on organic manure and the position got clarified only on issuance of SCN. In this light, when we consider the contents of letter dated 16.11.2015, it is clear that the reference was to duty liability on all the products and not merely on pesticides, which is clear from the use of the words 'We are a small manufacturer of pesticides, insecticides and agro product falling under CETH 31 and 38 and entertained a believe that products manufactured by us are not excisable. Once informed about the duty liability by the department regarding our goods' and also that 'We are small manufacturer who bona-fidely believed products manufacturer are not excisable'. Thus, letter dated 16.11.2015 refers to duty liability calculated @ 12.36% on both pesticides and organic manure and once organic manure is chargeable to Nil rate of duty and there is absence of sufficient evidence to sustain the charge of clandestine removal and value of clearances stated in the SCN, the duty amount admitted in letter dated 16.11.2015 is clearly contrary to law. The aggregate value of cl....
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.... and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in charging provisions, the benefit must necessarily go in favour of subject/assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State." Thus, we approve the findings recorded by the lower authorities and have no hesitation in rejecting the submission of the Appellant on the issue of incorrect interpretation of exemption notification. 27. This takes us to the next issue of recovery under Rule 14 of the Cenvat Credit Rules, 2004 [CCR, 2004]. Rule 14 (1) of the CCR, 2004, after its substitution by Notification No.6/2015-CE (NT) dated 01.03.2015 with effect from 01.03.2015 provides for recovery of credit wrongly taken or erroneously refunded. Clause (i) of the said rule provides for recovery of credit taken wrongly but not utilised whereas clause (ii) provides for recovery of credit taken and utilised wrongly along with interest. Since it is not even the case of the revenue that the Appellant has utilised the credit or any part of it, hence clause (ii) of Rule 14(1) is clearly ....