TaxTMI 
TaxTMI 
2001 (6) TMI 160
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....d by them. The payments already made by the firms are to be adjusted against the above demands. I impose a penalty of Rs. 1,27,000/- on M/s. DC, Rs. 2,80,000/- on M/s. VC and Rs. 1,89,000/- on AMC in terms of Rule 173Q of the C.E. Rules, 1944. I also impose a penalty of Rs. 2,93,130/- on D.C., Rs. 5,96,334/- on V.C. and Rs. 5,82,289/- on AMC in terms of Section 11AC of the C.E. Act, 1944. I further demand interest on the above amounts in terms of Section 11AB of the Act. I impose a penalty of Rs. 1,00,000/- each on M/s. Aksol Chemicals, Ranipet, and Shri A. Murugesan and Rs. 50,000/- on Shri M. Chakravarthy in terms of Rule 209A of C.E. Rules, 1944." 2.The facts of the case in brief are that Officers of the HPU made a surprise visit to the factories of the appellants on 11-9-97 and found an excess stock of goods valued at Rs. 5,66,629/- and a shortage of goods valued at Rs. 7,68,640/-. The excess goods were seized and the officers also recovered 8 small note books from the Chemist Sri R. Settu and monthly production statements prepared on the basis of small note books. The proprietor of M/s. Dinesh & Co. (DC) Sri A. Murugesan is also a partner in M/s. Vidya Chemicals (VC) along w....
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.... duty amount of Rs. 4,18,410/- (Rs. 1 lac vide TR6 challan dated 13-9-97, Rs. 1,06,332/- vide TR 6 challan dt. 17-9-97, Rs. 12,078/- vide TR 6 challan dt. 17-9-97 and Rs. 2 lacs vide TR 6 challan dt. 17-11-97) should not be adjusted towards demand of duty as per (a) above; and (d) why a penalty in terms of Rule 173Q of C.E. Rules, 1944 r.w.s. 11AC of the C.E. Act, 1944 should not be imposed on them, either individually or collectively for the contravention of Rules mentioned above. 3.Appellants denied the allegations brought out in the show cause notice. We have noticed from the impugned order that the entire case against the appellants has been made out on the basis of seizure of private note books and production details recorded therein maintained by the Chemist Shri R. Settu. The Department has taken recorded statements from (i) Shri M. Chakravarthy, Manager for entire group of firms (ii) Shri R. Ganesan, Chemist, Dinesh & Co., (iii) R. Settu, Chemist, ACP, (iv) K. Rajenderan, Chemist, ACP and (v) S. Petchi Raj, Chemist, DC. Finally, the statement of partner of Vidya Chemicals Shri A. Murugesan was recorded. There is no recording of st....
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....ich the note books have been maintained, there are clearances on large number of days which are entered in R.G.1 register which are more in number in quantities compared to what is written in the note book. Further, there are days on which clearances have been shown in R.G.1 register while in the note book, no entry is found. There are large number of entries which do not tally with the allegation in the SCN presuming those entries to be of certain goods which they did not manufacture at all. There is also entry of unpacked goods which have not reached R.G.1 stage and therefore entries in various diaries did not represent the clearances but only about certain other details pertaining to the manufacture and therefore it is pleaded by the appellants that total reliance on these small note books maintained by the Chemist without any corroborative evidence and without any evidence of any nature does not prove the case of the Department. In this regard, appellants had relied on large number of judgments to contend that mere entries in private note books cannot be the basis for confirming the demands. However, the said contention has not been accepted in terms of judgments by the Commiss....
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....not sufficient to establish clandestine removal of excisable goods for demanding duty." 1997 (23)(8) RLT 609 (CEGAT) Ratio :"Allegation of clandestine removal based on entries made by appellants' employees in a diary not established when investigation is not done from other sources to corroborate the entries." 1997 (23) RLT 707(9) (CEGAT) Ratio "Allegation based on entries in a private diary maintained by authorised: signatory - no correlation with entries in statutory records done - entries not corroborated by other evidence case is remanded for de novo adjudication." I observe that the ratio emerging from all the36. above decisions is that clandestine removal cannot be established merely on the basis of private records maintained by the employees of the manufacturing firm unless supported by other corroborative evidences and that when R.G.1 entry shows more production than in the private records, such private records cannot be relied upon. I find that in this case, although on certain dates, the RG1 entries showed more production than the private records when the entire financial year's production month wise was taken vis-a-vis the production entered in the small note books ....
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....erson, who had initially admitted about clearance and it was because of coercion and threat given by the investigating officials, he was forced to accept that the diary is an authentic document but later resiled from the same. Even on independent examination of the diaries, it goes to clearly disclose that the entries do not lead to the conclusion that there was suppressed manufacture or clandestine removals without payment of duty. 8.The further charge was that M/s. Aksol Chemicals, who were marketing agents was a related person and therefore the price adopted by the Aksol Chemicals for sale of goods of four units should be adopted for the purpose of valuation. On this point, appellants pointed out that during the period in question, the marketing unit had reorganised itself, and the partnership deed was reconstituted by taking independent partners in said marketing agencies, who had independent sales to various persons and also several products manufactured by other persons. There was no change in the price and the price was constant throughout the period, hence they cannot be considered as a related person. However, on this aspect, no clear finding has been given by the Commiss....
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....atement is incriminating in nature. Even our closer look into the said statements, did not give any specific clue to the quantum of production and items removed and funds received. The statements are general in nature which cannot be the basis for confirmation of demands. One of the partners Shri Murugesan's statement also is not incriminating in nature. Although the note books are not denied but the same were not maintained for the purpose of making any entry of production or for the purpose of clandestine removal. They were maintained only to keep record of certain test of materials of intermediate product and other details pertaining to items which did not reach the R.G.1 stage. He has produced comparative detailed chart pertaining to each of the unit in which clearances vide R.G.1 register were made and compared with production note book to show that on large number of days, the production figure in the R.G.1 register were much more higher than in the private note book. Ld. Counsel refers to said comparative chart to submit that even on number of days, where there were clearances in R.G.1 register which were shown as NIL in the private note book. He submits that there is no ind....
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.... citation that tainted private book could be relied on for confirming demands in the absence of any correlatable evidence, ld. SDR was unable to place any judgment in support of his contentions. On a specific query being posed as to why various judgments noted in para-35 (which has been extracted supra) are not applicable to the facts of this case, and only the private books, which did not reflect the true and correct facts could be relied for confirming the demands, ld. SDR submitted that the Commissioner has given findings on this aspect which could be relied. He points out that the argument of appellants have been taken as a theoritical one and it does not show the truth of the matter. On a further specific query to explain with regard to details of R.G.1 clearances being more on various dates in each of the company as reflected from R.G.1 compared to the production book, and in such circumstances how the production book could be accepted, ld. SDR pointed out to the finding of the Commissioner who had taken the total average of the clearances from both the registers to show that clearances in the note books were more, hence leading to the conclusion of clandestine removal of goo....
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....average production figures. This finding is not acceptable for the reason that once it is shown that production note book entries are not correct and Settu also in his cross examination has clearly explained as to what these entries were, then in such circumstances, we are not inclined to accept the entries to be reflecting the 'gospel truth' and reflecting the correct picture of quantum of manufacture and of clandestine removal of various items. We notice from the deposition of Settu, Chemist before the Commissioner on 16-7-98 that he has stated that he was interrogated between 11.30 a.m. & 10 p.m. in the night of 29-9-97. He was asked to explain regarding the enclosures to the SCN and was asked to identify the in-process products. His reply is as follows :- "Saltan Black - There is no such product manufactured Saltan Gel Black - -do- In-process materials - Binder SMPCMDBismark Brown Salt & AK - No such product Salt & V - -do- Fat lac - -do- Any product which has been manufactured if it fails in the test, will be subjected to further processing or reprocessing. The status of that product while in reprocess is also known as inprocess material. I h....
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.... RT-12 returns for the four units. He has stated that since the RG.1 figures of production all normally recorded only, when the chemicals were packed, he was not prompted to compare the figures of production. He also submitted that there were sales made and most of the sales were through cash and without bills. He stated that he is not in a position to give further details and he does not know the quantity, value and excise duty involved on such sales without bill (or) bills with Solfat-V names in the past years, and he has stated that details of which may be enquired from Mr. A. Murugesan. On a perusal of this statement, we do not see any incriminating nature in it, which the ld. Commissioner holds this statement as sufficient to uphold the charges. Ld. Commissioner has not given any finding as to how this statement is helpful to department to lead to a conclusion of clinching nature regarding production and clearance of specific quantity of each of the materials. Shri Chakravarthy had only stated that he was depending on the note book to know the production. This would not lead to a conclusion that so much quantity of final products were manufactured and it was in the packed cond....
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....er has noted in para-35 all those citations and has given his finding in para-36 which is extracted supra holding that same are distinguishable, without coming out with his finding as to how it is distinguishable. The law on private diary being maintained by the workers or employees being not a reliable evidence is well settled from the judgments noted. In order to take a departure from such a finding, there has to be corroborative and substantial evidence which should be clinching in nature. In this case as noted, the investigation stopped with the seizure of note books and recording of statements from Sri Chakravarthy, Settu and Murugesan and other customers. Except the initial statement of Chakravarthy, there is nothing on record to confirm the demands. Even from the statement of Chakravarthy, the details of production and sale does not come out clearly. Therefore, there is nothing in his statement to say that there was production and clearance individually by each of the units. Further, as noted, the investigation agency has not examined any responsible person/partner of the other four units. Revenue has miserably failed to prove the case in this regard. 19.As regards the char....