TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 75
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....entral Excise Rules, 2002 on M/s. Vikromatic Steels (P) Limited, Maheshmara, Baijnathpur, Deoghar, Jharkhand (hereinafter referred to as the "appellant no. 1" / "company"). The impugned order also levies penalties of Rs.79,10,605/- on Shri Jai Prakash Choudhary (hereinafter referred to as the "appellant no. 2") and Rs.50,00,000/- on Shri Kapil Deo Choudhary (hereinafter referred to as the "appellant no. 3"), under Rule 26 of the said Rules. 2. The facts of the case are that M/s. Vikromatic Steels (P) Limited, the appellant no. 1 herein, carries on the business of manufacture of MS Ingots, MS Bars, Flats and such other iron and steel products falling under Chapters 72 and 73 of the First Schedule to the Central Excise Tariff Act, 1985. 2.1. On 23.12.2008, officers of the Directorate General of Central Excise Intelligence, Jamshedpur (in short, "DGCEI") conducted search and seizure operation in the appellant's factory cum office premises and seized certain documents under Panchnamas. During the course stock verification conducted on the basis of eye estimation, a shortage of 36.985 MT of MS Ingots was found, along with an excess quantity of 344.270 MT of MS Bars and 23.140 MT o....
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....1)/presently Section 11A(4) of the Act, by invoking the extended period of limitation. The Show Cause Notice also proposed penalty on the appellant-company under Rule 25 of the said Rules read with Section 11AC of the Act, along with penalties on Shri Jai Prakash Choudhary and Shri Kapil Deo Choudhary, Directors of the company, under Rule 26 ibid. 4. The said show cause notice dated 20.03.2012 was adjudicated by the Ld. Commissioner of Central Excise and Service Tax, Dhanbad, who vide the impugned Order-in-Original No. 02/CE/Commr./DNB/2016 dated 11.01.2016 has confirmed the demands proposed in the above Notice. 4.1. Aggrieved by the above order, the appellant-company and its two directors have filed the present appeals before this Tribunal. 5. The Ld. Sr. Counsel appearing on behalf of the appellant has made the following submissions: - (i) Although the Revenue alleges that the appellant-company has cleared excisable finished goods viz. MS Ingots, MS Bars, Flats, etc., in a clandestine manner, no documentary evidence or material or statement, as relied upon in the impugned proceedings, have been disclosed to them as relied upon documents to the Show Cause Notice.....
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....pect of their weighment, both at the time of issuance for manufacture as well as upon manufacturing thereof, while recording in the DSA vis-à-vis their purported actual weighment on weighbridge, as a consequence whereof there are bound to be variance in sets of weighment. In such cases, as per settled principles, there cannot be allegation of excess or shortage of final products merely on the basis of the physical stock taking, in the absence of any corroborative evidence to support the allegation of clandestine clearance. (vii) In any case, the demand confirmed on the basis of shortages and excesses found during the stock taking has already been set aside the Order-in-Original dated 28.03.2018 confirmed on this account, vide Final Order No. FO/7509575097/2018 dated 19.01.2018. Hence, the said evidences are not relevant for confirmation of the demand of duty on the allegation of clandestine clearances vide the show cause notice dated 20.03.2012. (viii) The manufacturing process in the rolling mills of M.S. flats and M.S. Bars takes place under separate production schedules. The M.S. flats which are produced are 22 mm x 6 mm long pieces, which are then cut i....
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....of the company, which has been retracted subsequently. (xii) The Commissioner in confirming the allegations against the Company and its directors and the purported demand of alleged short paid central excise duty has been made on the basis of his findings entirely on certain alleged entries in private/rough note book/documents recovered during search and seizure of the appellant's premises and the purported statements of the appellant's directors recorded during such purported search and seizure, one of which however was retracted at the earliest as recorded in the show cause notice itself. (xiii) It is a settled principle of law that charges of clandestine removal being quasi criminal are required to be proved sufficiently and such finding cannot be arrived at against the assessee in the realm of conjectures and surmises. Both the purported statements (including one retracted) in no manner whatsoever proves that there had been any clandestine removal by the Company of any quantity of the said goods during any period of time prior to 23/24th December, 2008. Further and in any event, both the said directors have been made co-noticees in the instant case. It is agai....
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.... goods by the Company during the said period thus are ex facie untenable and unsustainable. It is a settled proposition of law that suspicion, however grave, cannot and does not take the place of proof. This specific contention of the Company also finds no reference whatsoever in the impugned order, let alone being dealt with by the Commissioner. (xvi) 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. Charge of clandestine removal being a serious charge, it is required to be proved beyond doubt on the basis of affirmative evidence and not on inferences, which unfortunately has not been the method resorted to in the instant case. Such onus to prove is required to be discharged by production of sufficient tangible and affirmative evidence, which are absent in the instant case. Charge of clandestine removal cannot be made and/or confirmed against an assessee on the basis of assumptions, based on purported documents whose authenticity is disputed, ignoring materials on record and/or on misconstruing the same and/or by resorting to arbitrary valuation based o....
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....7 should also have been reflected there. It is thus evident that this document is also a rough document which does not reflect actual clearances of goods. (xix) As regards the Rough Note Book/Diary marked as 01/DGCEI/VSPL/JRU/08, the entries therein were made by the appellant's director, Sri Jai Prakash Choudhary, mostly recording preliminary enquiries sought for by parties on telephone regarding quantity, price, etc. of the said goods being manufactured and sold by the appellant, in order that upon taking similar such quotes from different parties the said parties or otherwise take a decision whether or not to place orders for the said goods upon the Company and, if so, of what quantity thereof. On the basis of such enquiry negotiations also take place on rates, whereupon, if agreed to, firm orders are placed. Such a document and entries therein in no manner whatsoever can reflect manufacture and sale of said goods from the appellant's factory during the said period, though some of the entries therein may have resulted in production and sale of the subject goods ordered for amongst the said goods by the concerned parties, in the manner aforesaid. Moreover, from the said R....
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...., pig Iron, other melting Scrap etc. (b) Taking the purported additional quantity of the said goods alleged to have been sold as made in the show cause notice, on the basis of the aforesaid input output ratio, the additional raw material that would be required is as follows: (i) Doc. Ref. TMT/Flat Ingot 01/DGCEI/VSPL/08-Annex.-Q 1.3 of SCN (MT) 1062.30 500.00 06/DGCEI/VSPL/08-Annex.-Q 2 of SCN (MT) 62.655 0 -------- ------- Total 1124.955 500.00 (ii) Raw material Required (MT) 1382.000 584.00 -------- ------- Total Raw material Required (MT) 1965.00 (xxii) There is no material disclosed in the show cause notice or in the impugned order as to whether or not and/or as to how and from where the said additional quantity of raw materials amounting to 1965 MT was received by the appellant. This contention of the Company has also remained unanswered in the impugned order. In the absence thereof it is conclusively established that the show cause notice and the impugned order are based on mere surmises and conjectures and/or based on assumptions and presumpt....
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....urt - 2015 (321) ELT A217 (SC).] viii. Commissioner of Central Excise Vs. Lord's Chemicals Ltd. [2010 (258) ELT 48 (Cal)] ix. Sharda Re-rollers Pvt. Ltd. Vs. CCE, C&ST [2025 (5) TMI 1281-CESTAT KOLKATA] x. Dinabandhu Steel & Power Ltd. Vs. CCE & ST [2024 (4) TMI 721-CESTAT, KOLKATA] xi. Crackers India (Alloys) Ltd. Vs. CCE & ST [2025 (5) TMI 1282-CESTAT, KOLKATA] xii. Seeta Integrated Steel & Energy Ltd. Vs. CCE, C & ST [2025 (5) TMI 1012-CESTAT, KOLKATA] xiii. Prinik Steels Pvt. Ltd. Vs. Commissioner of CE, C & ST [(2024) 15 Centax 313 (Tri-Cal)] xiv. Commissioner of Customs & Central Excise Vs. Venkateswara Silk Mills [(2024) 25 Centax 403 (Telengana)] (xxv) It is their further plea that there is no material on the basis whereof the Proviso to Section 11A(1) of the Act can be made applicable, the conditions laid down therein being not satisfied and hence, the instant show cause notice and consequently the impugned order are barred by limitation. Thus, it is submitted that there being no contravention by the Company of any provision of the Act for the reasons aforestated, there can be no imposition of penalty ....
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....and in any event and without prejudice to the aforesaid, there can be no question of the Company being involved in acts of any omission or commission rendering it liable to penalty under Rule 26 of the said Rules. Hence, the Commissioner has erred in law in imposing penalty of Rs.50 lakhs upon the Company by the impugned order. (v) Further, the impugned order does not disclose as to how and on what basis the appellants are liable to a penalties of Rs. 79,10,605/- and Rs. 50,00,000/- respectively in the facts and circumstances of the instant case. The imposition of the quantum of penalties are therefore by a nonreasoned order and, hence, illegal, invalid and untenable. 5.2. In view of the aforementioned submissions, the Ld. Sr. Counsel for the appellants prays for setting aside the impugned order passed by the Ld. Commissioner and allowing the appeals filed by the appellants, with consequential relief. 6. On the other hand, the Ld. Authorized Representative of the Revenue reiterated the findings in the impugned order. He submits that the demand has been worked out on the basis of private documents / records recovered from the factory of the appellant no. 1 at the time....
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....as not subsequently brought out any evidence regarding the method and mode adopted by it for physical stock taking of the subject goods available in the factory of the Appellant Company. Since the Department has solely relied upon the statement of Shri Jay Prakash Chaudhary, to arrive at the conclusion that there was excess availability of impugned goods in the factory, and such statement having been retracted by the said person, the averment made therein cannot be legally sustainable for initiation of proceedings against the appellant for confiscation of the goods and for imposition of penalties. Further, I find that the Department has not brought out any tangible evidence to prove that the Appellants had the Intention to remove the excess goods in clandestine manner. Since, the excess found finished goods were available in the factory and no proper weighment was done by the Department, it cannot be said that the goods were liable for confiscation. I find that in the decisions relied upon by the Id. Advocate for the appellants, the Tribunal has set aside the demand, holding that in absence of proof of clandestine removal, the goods cannot be confiscated and penalties cannot be imp....
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....nt's director, Sri Jai Prakash Choudhary and upon the entries contained in a rough pocket diary said to be resumed from the said director at the time of search and seizure on 23/24th December, 2008. In addition, two purported private documents said to have been recovered from the office premises and staff room respectively, have been relied upon to work out the duty liability on the appellant company. We observe that the materials available on record evidences that the said Document No. 02/DGCEI/VSPL/JRU/08 contained only rough entries. No evidence has been brought on record to the extent that the goods have been actually manufactured and cleared as per the details available in the rough note books/documents. It is a settled principle of law that a private document containing rough entries cannot be relied upon as evidence to allege clandestine clearance without any corroborative evidence. The purported document marked as 06/DGCEI/VSPL/JRU/08 is also not an authentic document of receipt, production and clearances. It can well be verified from the appellant's invoices dated December 22, 2008 that some of the clearances reflected in the invoices are not mentioned therein. For example....
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....n are reproduced below: - "6. After considering the submissions made by both sides and after going though the impugned order, we find that the demand stand confirmed against the appellant on the basis of entries made in the so-called lot register read with statement of the Director, though the appellants have denied that such lot register belong to them, in as much as they used the letter 'K' for allotting lot number and the word 'W' was never used by them, we find that said lot register, in any case, is a private document. We have seen the said lot register giving details of the clearances along with the name and address of the buyer. Surprisingly enough, neither of the buyers, whose names and addresses were available in the said register, stand contacted by the Revenue and no efforts have been made by them to find out and ascertain the correct position from the said buyers, by investigating them and by recording their statements. This failure on the part of the officers definitely act as fatal to the Revenue's case, in as much as it is well settled law that the entries in the private record cannot be made the sole basis for upholding the allegations of clandestine remova....
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.... alleging clandestine manufacture and clearance are satisfied in this case, we find that such an allegation against the appellants cannot be sustained, merely on the basis of assumptions and presumptions. 12. We observe that a similar issue has been dealt with by the Tribunal at Ahmedabad in the case of Arya Fibres Ltd. v Commissioner of C.Ex., Ahmedabad-II [2014 (311) E.L.T. 529] wherein it has been held that the allegation of clandestine removal is to be corroborated by supporting evidences. The relevant observations of Tribunal in the said order are reproduced below for ease of reference: - "40. After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw mater....
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....ounted raw material purchased or consumed and not merely the recording of confessional statements. A co-ordinate Bench of this Tribunal has, in another decision, reported in the E.L.T. issue of 5-8-2013 (after hearings in the present appeals were concluded), once again reiterated the same principles, after considering the entire case-law on the subject [Hindustan Machines v. CCE [2013 (294) E.L.T. 43]. Members of Bench having hearing initially differed, the matter was referred to a third Member, who held that clandestine manufacture and clearances were not established by the Revenue. We are not going into it in detail, since the learned Counsels on either side may not have had the opportunity of examining the decision in the light of the facts of the present case. Suffice it to say that the said decision has also tabulated the entire case-law, including most of the decisions cited before us now, considered them, and come to the above conclusion. In yet another decision of a co-ordinate Bench of the Tribunal [Pan Parag India v. CCE, 2013 (291) E.L.T. 81], it has been held that the theory of preponderance of probability would be applicable only when there are strong evidences heading....
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....s also required. For this purpose no investigation was conducted by the Department. 14. In the instant case, no investigation was made by the Department, even the consumption of electricity was not examined by the Department who adopted the short cut method by raising the demand and levied the penalties. The statement of so called buyers, namely M/s. Singhal Cement Agency, M/s. Praveen Cement Agency; and M/s. Taj Traders are based on memory alone and their statements were not supported by any documentary evidence/proof. The mischievous role of Shri Anil Kumar erstwhile Director with the assistance of Accountant Sri Vasts cannot be ruled out. 15. In view of the above, we are of the opinion that when there is no extra consumption of electricity, purchase of raw materials and transportation payment, then manufacturing of extra goods is not possible. No purchase of raw material out side the books have been proved. 16. In the light of the above discussions and considering the totality of the case, we are satisfied that no case is made out for extra so called clandestine sale of the Portland Cement to the said parties. We are satisfied that the first appellate ....
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....ods. However, the appellant submitted that the input: output ratio also does not substantiate the allegation. In support of their contentions, the appellants have pointed out the details of the input and output ratio of their different divisions during the material period, which is as under: - Furnace Div Input Output Ratio : 85% Rolling Mill Div Input Output Ratio : 95% Aggregate (Approx.) IO Ratio : 80% Citing the above, it has been stated by the appellants that 81 kg of TMT/MS flat is manufactured out of 100 kg of consumption of base raw material i.e. sponge Iron, pig Iron, other melting Scrap etc. 13.1. Thus on the basis of the aforesaid input output ratio, the additional quantity of the said goods, as alleged to have been sold as made in the Show Cause Notice, the additional raw material that would be required is as follows: (i) Doc. Ref. TMT/Flat Ingot 01/DGCEI/VSPL/08-Annex. Q 1.3 of SCN (MT) 1062.30 500.00 06/DGCEI/VSPL/08-Annex. Q 2 of SCN (MT) 62.655 0 ------- ------ Total 124.955 500.00 (ii) Raw material Required (MT) 1382.000 584.00 ------- ------ Total....
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....e Notice." 14. It is also observed that apart from the above rough note books/private records resumed, the present case against the appellants is also based upon the aforesaid retracted statement of the appellant's director, Sri Jai Prakash Choudhary. In this regard, we take note of the appellant's submission that the said statement was taken under duress, coercion and threat and after long detention in the factory. Further, admittedly, the said statement has also been retracted. Thus, we find that the said statement has no evidentiary value. We also find that the provisions of section 9D of the Central Excise Act, 1944 has not been complied with for allowing the statements as evidence in the instant proceedings. We find that the above aspects have not been addressed in the impugned order for confirmation of the demands. 14.1. In this regard, it is relevant to refer to the decision of the Hon'ble High Court in the case of Hi Tech Abrasives Ltd. v. Commissioner of C.Ex. & Cus., Raipur [2018 (362) E.L.T. 961 (Chattisgarh)], wherein the Hon'ble High Court has observed that unless the substantive provisions contained in Section 9D of the Act are complied with, a statement recorde....
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....s 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." 15. From the above, we observe that the said purported rough diary and documents as also the retracted statement of Jai Prakash Chaudhary cannot be considered as admissible evidence in this case for alleging clandestine manufacture and clearance against the appellants or for confirmation of the impugned demands. In these circumstances, we do not find any reason to sustain the demand of central excise duty confirmed against the appellant-company and hence, we set aside the same. 16. With regard to the imposition of penalty, we find that penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 has been imposed on the appellant-company / appellant no. 1 herein. As it has been held that there is no sustainable demand against the appellant company in this case, the question of imposition of penalty on the appellant-company under Rule 25 of the Rules read with Section 11AC of the Act does not arise. Accordingly, the same is set aside. ....