TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 59
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....n December 3, 2010 and September 20, 2013. Thereafter, the appellants were issued a show cause notice dated December 3, 2013 alleging suppression of actual quantum of production and they had maintained statutory records showing a quantity of production lesser than the alleged actual, with intent to evade payment of central excise duty. It was alleged that the appellant had not recorded the production of finished goods actually manufactured out of the concerned raw materials viz. copper rods. It was alleged that no Excise Duty was paid on the clearances made under the Challans. After due process, the Adjudicating authority vide the impugned Order dated 25th March 2014, confirmed the demand, interest and penalty against the appellant company. He also imposed penalty on the second appellant [the Director]. Being aggrieved, the appellants are before the Tribunal. 2. The Ld. Senior Advocate appearing on behalf of the appellants makes the following submissions: 2.1 From paragraph 10.2 of the impugned order, it would be seen that the Commissioner had allegedly got the voluminous sets of challans submitted by the appellant in support of its contention, along with its replies to....
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....e, there is no evidence of any increased electricity consumption, water, labour, or flow of revenue that would be attributable to the alleged clandestine clearances made to third party buyers. There are also no details provided in the impugned order of the purported buyers to whom undeclared goods had been sold by the appellant as alleged. In addition, there exists no evidence to establish that payments were received by the appellant in respect of the said alleged clandestine clearances from the said premises. The impugned order is therefore founded on mere assumptions/presumptions with no factual basis whatsoever. The findings made in the impugned order are purely inferential in nature, thereby rendering the same illegal, perverse and liable to be set aside. 2.5 The impugned order fails to disclose any material that would evidence the use of undeclared inputs and raw materials for the manufacture of finished goods allegedly removed by the appellant without payment of duty thereon. In particular, there is no statement obtained from any person or third party to whom the alleged unaccounted finished goods were sold or of the transporters purportedly conveying the same. ....
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....to corroborate the purported incriminatory, yet contradictory statement dated December 3, 2010, that could serve to justify and/or explain the Commissioner's reluctance to place any relevance on the appellant no. 2's subsequent statement dated September 20, 2013. 2.9 It is settled law that mere alleged confessional statement of a person said to be in charge of business or a partner or director thereof without any corroborative evidence is not sustainable. In this respect reliance is placed upon the following decision:- i) CCE Vs. Seven Seas Corporation 2010 (259) ELT 652 (Bom) ii) Commissioner of Central Excise Vs. Omkar Textiles Private Ltd. 2010 (259) ELT 687 (Guj) iii) Tejwal Dyestuff Industries Vs. CCE 2007 (216) ELT 310 (T) - approved by Gujarat High Court in CCE Vs. Tejwal Dyestuff Industries 2009 (234) ELT 242 (Guj) iv) Poojan Dear Pvt. Ltd. Vs. CCE & ST, (2023) 11 Centax 152 (T) 2.10 As aforesaid, it is a settled principle of law that clandestine removal must be proved and supported by sufficient evidence and the burden of proof in this regard is on the Department. The Department is required in law to establish clandesti....
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....gy Ltd. Vs. CCE, C & ST 2025 (5) TMI 1012-CESTAT, KOLKATA. 2.12 In paragraph 11.11 of the impugned order read with paragraph 2.8.1 of the show cause notice, a fabricated annual capacity of production has been determined, and on the basis thereof, it has been alleged/held that there has been excess production of excisable goods than recorded in the statutory records, which were allegedly cleared without payment of duty. This has been done by taking the production of finished goods in terms of enamel coated Copper Wire and Drawn Bare Copper Wire at 146 MT/month, being the figure disclosed in the ER1 return for the month of March 2010, which reflected alleged production figure of only one month out of a total period of 3 years involved, and the figure contained in the alleged application for registration is said to have been made by the appellant before the Steel Authority of India Limited declaring their capacity of production of enamel coated copper winding wire at 1800 MT per annum. The ex facie incorrectness of the said allegation is evident from the following facts: (i) A chartered engineer's certificate certifying production/installed capacity at the factory, a....
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....ation with the Steel Authority of India Limited, which was not submitted by the appellant is totally irrelevant. Figures provided in such a draft application does not in any manner whatsoever establish or can establish the actual production capacity of the appellant, as alleged. However, in spite of the aforesaid submissions in respect of annual production capacity being made by the appellant before the Commissioner, he has regardless proceeded to the pass the impugned order in ignorance thereof, thereby rendering the same illegal, invalid and bad. In this regard reliance is placed upon the following decisions: (i) Commissioner of Central Excise Vs. Emtee Poly Yarn, 2005 (179) ELT 33 (T) -affirmed in Commissioner Vs. Emtee Poly Yarn, 2015 (320) ELT A 341(SC) (ii) Commissioner of Central Excise Vs. Synfab Sales, 2015 (318) ELT 38 (SC) (iii) Punjab Oil & Silicates Mills Vs. Collector of Central Excise, 1993 (65) ELT 268 (T) (iv) Toshika International Limited Vs. Commissioner of C.Ex, 2009 (240) ELT 68 (T) (v) Beekayon Synthesies Vs. Commissioner of C.Ex, 2003 (158) ELT 307 (T) (vii) Vasavi Synthesies (P) Ltd. Vs. Commissioner of C....
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....r central excise invoices whereas the statement (Annexure "F") discloses quantity/ value/excise duty amount paid against the respective invoice numbers mentioned in alleged challans seized by the Central Excise Department (as stated in Annexure "C" of the show cause notice). The statement (Annexure "G") shows quantity/value of the excise duty amount paid where same vehicles had been used to deliver the materials. None of the said material evidences on record have been either considered or dealt with in the impugned order. 2.16 The patent absurdity and untenability of the purported demand of central excise duty allegedly not paid made in the show cause notice and confirmed in the impugned order is further evident from the allegation made in the show cause notice itself. It is alleged in the show cause notice that for production of 1 kg. of enamel copper wire, there is requirement of 0.975 kg. of copper rod by the appellant. Assuming though denying this allegation, from the chart, being Annexure "J" to the reply to the show cause notice, it would be seen that on determination of the alleged purported production of finished goods said to have been produced and cleared without....
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....he impugned order. It would be seen that all finished goods covered thereby were cleared under central excise invoices and upon payment of duty. It is thus evident that the allegation based on packing slips has no substance or merit whatsoever and the Commissioner has erred in purporting to, inter alia, rely upon the same in passing the impugned order. 2.19 Reliance placed by the Commissioner upon the decisions of the Supreme Court in the cases of Assistant Collector of Central Excise Vs. Duncan Agro Industries Ltd., 2000 (120) ELT 280 (SC) and Ekramuddin Vs. Collector of Central Excise, 2003 (155) ELT A244 (SC) are wholly misplaced. The said decisions are clearly distinguishable and have no manner of application whatsoever in the instant case. None of the said decisions in any manner whatsoever support the purported findings of the Commissioner in support of accepting what was contained in the statement dated December 3, 2010 of the appellant no. 2 and rejecting what has been stated by him on September 20, 2013. Moreover, contrary to the misconceived findings in the impugned order, from the materials on record and from what is stated hereinbefore it clearly established th....
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....fied in the instant case. There is in fact no allegation or finding that there has been any commission or omission on the part of the appellant No. 2 as specified in either Rule 26(1) or 26(2) of the said Rules because of which he is liable to be proceeded against for imposition of penalty under the said provision. In the absence of disclosure of such material, the conditions precedent for proceeding against the appellant No. 2 to impose penalty under Rule 26 of the said Rules is contrary to law and hence untenable and unsustainable. 3. The Ld. Authorized Representative (A.R.) appearing for the Revenue reiterates and relies on the detailed findings given by the ld. adjudicating authority. He submits that the clandestine manufacture and clearance is proved by way of : (a) Seized Challan Books, showing clearance of goods without payment of Excise Duty. (b) The input vis-à-vis the output shown by the appellant is false because of which the output shown in much less than what has been declared in the Daily Stock Account. Hence, such unaccounted-for goods are the clandestinely manufactured goods and the same have been cleared without payment of Excise duty. ....
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....ments from the purported vendors of the raw materials, statement from the purported receivers of the clandestinely removed goods. No private records have been seized about the cash transactions. In the absence of any corroborative evidence, the demands made on assumptions and presumptions cannot be legally sustained. (e) The Revenue, relies heavily on the recorded statement of the Director on 3.10.2010, on the ground that he has confessed to the clandestine removal charges, without taking into consideration his second statement dated 20.09.2013, wherein he has clearly stated that he has not indulged in any such activity. The Revenue cannot pick and choose from the recorded statements. The Statements recorded have not been subjected to the procedure specified under Section 9D of the CEA 1944. Therefore, even the statement purported to be favouring the Revenue, cannot be directly taken as evidence without application of the procedure prescribed under Section 9D of the CEA 1944. (f) Since the appellant has properly accounted for all the clearances, the Revenue cannot invoke the extended period provisions to issue the SCN for the period December 2008 to November 2010,....
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....e Show Cause Notice and the Order In Original [ Para 7.9 and 7.9], we find that the Revenue has considered the input / output ratio of 1 : 1.67 as sacrosanct based on the expert opinion of Institute of Mineral Technology, Govt of India and another opinion of Popuri Engineering & Consultancy Services, Hyderabad. There is nothing to indicate that the Revenue has made independent study of the working of the appellant's plant to take some sample outputs to study the pattern of input / output ratio. As per the data of Purchase of Iron Ore Fe Content, Grade-wise Coal purchased, Input / output ratio declared by the appellant in their Annual Returns, reproduced in the previous paragraphs by way Table, the year-wise details show that the input / output ratio ranges between 1:1.92 in 2008-09 to 1: 1.87 during the period April 2009 to February 2010. The contents of the Table are all declared figures and are verifiable. There is nothing to indicate that due consideration was given for these submissions by the Adjudicating authority before coming to his conclusions. His conclusions seem to be flowing directly from the input/output ratio adopted by the Dept at the time of issuing the Show Cause ....
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....ER 7 records to be around 98 MT per month. The Revenue has taken the same to be around 133 MT per month. This would result to about 40% to 45% of the monthly production going unaccounted every month. The unaccounted quantity arrived at 761 MT by the Revenue would be approximately 8 month's production, if appellant's monthly figures are taken. This would be approximately 6 month's production, if the Revenue's versions is considered. This would mean the electricity consumption also has to be more on account of such production. No corroborative evidence has been gathered on this issue. 8. The next point to be considered is the purported sellers of the raw materials and purported buyers of the finished goods, the usage of vehicles for to and fro movement. No statements have been recorded from any person on these issues. 8.1. The statement recorded by the Director on 3.12.2010 and 20.09.2013 do not match in their substance. First of all, it is not known as to why there should be delay of nearly 3 years to record the second statement from the Director. While admittedly, he has not retracted the statement given on 3.12.2010, he has practically done so when the second opportunity was....
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.... be in relation to the proceedings before the adjudicating authority. 9.3 A conjoint reading of the provisions therefore reveals that a statement made and signed by a person before the Investigation Officer during the course of any inquiry or proceedings under the Act shall be relevant for the purposes of proving the truth of the facts which it contains in case other than those covered in clause (a), only when the person who made the statement is examined as witness in the case before the court (in the present case, Adjudicating Authority) and the court (Adjudicating Authority) forms an opinion that having regard to the circumstances of the case, the statement should be admitted in the evidence, in the interest of justice. 9.4 The legislative scheme, therefore, is to ensure that the statement of any person which has been recorded during search and seizure operations would become relevant only when such person is examined by the adjudicating authority followed by the opinion of the adjudicating authority then the statement should be admitted. The said provision in the statute book seems to have been made to serve the statutory purpose of ensuring that the assessee ....
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....ause notice was not recorded nor formation of an opinion that it requires to be admitted in the interest of justice. In taking this view, we find support from the decision in the case of Ambica International v. UOI rendered by the High Court of Punjab and Haryana." 9. Coming to the aspect of non-corroboration by way of other evidence brought in by the Revenue, the case law of various High Court on this would be useful for reference: • Continental Cement Co. Vs. UOI [2014 (309) E.L.T. 411 (All.)] "12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects: (i) To find out the excess production details. (ii) To find out whether the excess ....
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.... production, as entered in the records (both statutory i.e. RG-I and the logs/Daily Production Reports). The alleged production is based on a theoretical calculation of weight gain and the assumption (i) Entire quantity of POY issued will result in PTY of equivalent quantity, (ii) No loss whatsoever of POY will occur in production of PTY, (iii) No loss of Anti Static Oil will ever occur in production process (iv) Combined total of POY weight and Anti Static Oil weight will result in total PTY weight, at all times. This assumption of input output ratio of 1:1 with efficiency of 1 is against all cannons of industrial production. Output has to be always less than the total inputs, in actual wastage does arise and production efficiency has to be factored in reality. Assumptions made to base such theoretical calculations cannot be upheld to bring home the charge of clandestine production and removal. In any case, Anti Static Oil is not the major input, the major input is POY; to manufacture all the unaccounted quantity of PTY, POY is required to be processed. No such evidence exists of unaccounted POY receipts and or use. Reliance is well placed on the Supreme Court decision in case of ....
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....n the basis of the statement of Shri Dinesh T. Magia which was without any corroboration. The CESTAT therefore set aside the orders and allowed the appeals including the appeal filed by the Respondents above named. 9. We have perused the findings recorded by the Tribunal. The order passed by the lower authorities disclose unequivocally that both the authorities have relied upon the confessional statement made by Shri Dinesh Magia who was allegedly Incharge of the business of the Respondents. In the absence of any other material to corroborate the said statement as regards misdeclaration of the quantity of goods, in our view, the view taken by the Tribunal can be said to be a plausible view in the facts and circumstances of the case. The learned counsel for the Appellant fairly submitted that the fact that there was no corroborative material on the basis of which liability could be fastened on the Respondents cannot be disputed. In that view of the matter, we do not find any merit in the above Appeal which is accordingly dismissed and the question of law stands answered accordingly." 10. We find that after going through the factual matrix, no corroborative evidence has b....