TaxTMI 
TaxTMI 
2025 (6) TMI 261
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....availing Small Scale Industries [SSI] exemption 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 cl....
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....upon, there is no material on record to sustain the charge of clandestine 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 cond....
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....ear. 12. We propose to first examine the issue of demand of duty qua entitlement to exemption under Notification No.8/2003-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 ....
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....ind out finished product receipt details from regular dealers/buyers. (vi) To find out the excess power consumptions. 13. Thus, to prove the allegation of clandestine sale, 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.....
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....venue. 14. Applying the aforesaid test in the present case, we find that there is no material on record to show that there was excess production, purchase of raw material, excess electricity consumption, excess sale of 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 con....
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....minimum judicial standards. Certainly a statement recorded under duress or coercion cannot be used against the person making the statement. It is for the adjudicating authority to find out whether there was any duress or coercion in 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 ....
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....on and documents required under summons. Finally Shri Hardesh Barathi, partner of the firm appeared on 28.03.2016 when his statement was recorded under Section 14 of the Central Excise Act, 1944 (RUD-7) wherein he inter-alia stated as under- (i) That he in association with 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) (RU....
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.... fact resiled from it, even if it is after a period of time, then it is no longer safe to rely upon it as a substantive piece of evidence. The question is not so much as to admissibility of such statement as much as it is about its 'reliability'. It is the latter requirement that warrants a judicial authority to seek, as a rule of prudence, some corroboration of such retracted statement by some other reliable independent material. This is the approach adopted by the CESTAT and the Court finds it to be in consonance with the settled legal position in this regard." 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 aforesai....
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....se Officer, has every chance of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D(1) mandates that the evidence of the witness 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....
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.... Rs.1.50 crores till 2012-13, comes as under:- Year Duty @ 12.36% accepted Aggregate value of Clearance basis duty @ 12.36% Aggregate value of Clearances after adding Rs.1.50 crores till 2012-13 2010-11* 0.00 0.00 1,50,00,000 2011-12** 1,09,369.00 8,84,862.00 1,58,84,862 2012-13** 8,45,959.00 68,44,328.00 2,18,44,328 2013-14 37,41,318.34.00 3,02,77,656.47 3,02,77,656.47 2014-15 38,01,660.25 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....
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....working for aggregation of value is reflected in Annexure-B to this Panchnama." Thus, the Panchnama dated 06.08.2015 shows that retail sale price was declared by the Appellant on the finished goods which were yet to be cleared and hence there cannot be any presumption that the goods cleared by the Appellant prior to the date of search were such on which retail sale price was not affixed. However, for the products mentioned in Charts A to E to the SCN, the Revenue relied on the MRP Lists obtained 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 ....
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....ement dated 06.08.2015, Letter dated 16.11.2015 and SCN dated 20.06.2016. To test this submission, we deem appropriate to reproduce the contents of the Statement dated 06.08.2015, letter dated 16.11.2015 and SCN dated 20.06.2016 relied upon by the ld. counsel for the Appellant :- "Statement dated 06.08.2015:- Q. No. 11:- Pl. state as to how and under which notification the organic manure are exempt from central excise duty and also state what do you mean by organic manure and how they are manufactured. 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 m....
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....tement dated 06.08.2015 shows that the Officers did made enquiries regarding exemption of organic manure and also with regard to inputs used in the manufacture of organic manure. Paragraph 14 of the SCN also shows that the position got clarified only when upon examination of invoices submitted by the Appellant, the revenue found that the organic manures are of vegetable fertilizers. Though paragraph 14 of the SCN refers to the date of letter as 04.08.2016 but the said date appears to be incorrect as SCN was issued on 20.06.2016. However, in absence of any other communication issued by revenue in this regard to the 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....
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.... such an interpretation which leads to ambiguity cannot be accepted. We add that even in such a case, the benefit of ambiguity has to be strictly interpreted in favour of the Revenue, for which we rely on the constitution bench judgment of Hon'ble Supreme Court in Commissioner of Customs vs. Dilip Kumar & Co. (2018) 9 SCC 1 where it has been held thus :- "53. After thoroughly examining the various precedents some of which were cited before us and after giving our anxious consideration, we would be more than justified to conclude and also compelled to hold that every taxing statute including, charging, computation 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 t....