TaxTMI 
TaxTMI 
2003 (12) TMI 212
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.... documents were seized. The statements of the key officials of the appellant No. 1 vis-a-vis dealers were recorded. The appellant No. 1 is selling its products viz. "Star Gutkha" presently in Maharashtra, Goa and Karnataka. The "Star Gutkha" is being marketed through various distributors. They have also set up a sales depot, in Belgaum to cater to the dealers/distributors in Karnataka State. The manufacturing process of the said product, using following raw materials, is as under :- (i) Betelnut (ii) Kattha (iii) Menthol (iv) Perfumes/Flavors (v) Kimam (vi) Lime (vii) Cardamom (viii) Tobacco (ix) Glyserene (x) Spices (xi) Magnesium Carbonate The CMD of appellant No. 1 in his statement dated 16-11-96 explained that all the above raw materials are mixed in a definite proportion to manufacture the Star Gutkha. He also stated that the raw material requirement to manufacture 2500 pouches (i.e. one carton bag in terms of which Star Gutkha is cleared in the wholesale trade in terms of carton bag containing 50 packets and each packet containing 50 pouches of 2.25 gm to 2.50 gm per pouch) v....
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....ive at net raw material consumed and from the net raw material consumed weight of the finished gutkha is deducted to arrive at net loss of raw material; that on 29-2-1996 the officers of the Pune Commissionerate visited the factory of the appellant No. 1 and took two samples of 1000 pouches each were drawn from the raw material stock and their weights were ascertained as 400 gms and 520 gms respectively, which means that these samples could generate 2500 and 1923 pouches per kg respectively; that on 12-6-96 officers of Central Excise from Pune visited the appellant and ascertained 200 pouches of PLRs supplied by different suppliers, result of the same was as below :- Sr. No Name of Supplier No. of pouches drawn as samples Wt. of 200 pouches gms. No. of pouches per Kg. 1. Champion pkg. Ind. 200 79.40 2518 2. -do- 200 75.30 2656 3. Sailam Pckg. 200 77.30 2587 4. -do- 200 78.20 2557 5. Flex Inds. Ltd. 200 89.10 2244 6. -do- 200 87.15 2294 7. Multiflex Lami Print 200 83.90 2383 8. -do- 200 82.25 2431 9. Sunrise Inds. 200 78.55 25....
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....n/storage/removal/disposal of the said goods or on such land or in such building or produced or manufactured with such plant, machinery, material or things should not be confiscated under the provisions of Rule 173Q (2) of the Rules. Further, the parties mentioned at Sr. No. 2 to 12 should not be imposed penalty under Rule 209A. 4. The appellants filed their replies dated 9-10-97, 6-1-97, 2-2-97 and 17-2-97 to the show cause notices as on pages 122 to 203. In the replies the appellants have inter alia denied all the allegations made in the show cause notice; that there was no materials brought on record on the basis of which the authorities could form reasonable belief; that the evasion of Central excise duty was in respect of "Star Gutkha" manufactured by them; that the percentage of losses and wastage as stated by Shri S.D. Godhavat was not accepted in the show cause notice while that pertaining to number of pouches being manufactured per kg of PLF is taken as basis for calculation of quantum of clandestine clearance and duty evasion. The production of pouches for one kg of PLF is substantially lower than 2500 or 2200 pouches per kg as stated by CMD. The PLF used upto June ....
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.... contained in the final gutkha as well as wastages that occur after receipt in the factory; the fact that the ratio of consumption of each type of raw material from year to year has remained stable and consistent indicates that the consumption of raw material worked out even by the normal rule-of-thumb method is indisputable and reliable; the consumption ratio as well as percentages of wastages and losses have also been accepted in Income-tax assessment orders for the years 1993-94, 1994-95 and 1995-96 (photo copies filed on the record); the percentage of wastage of Supari is of about 22%; Supari comes in raw condition with lots of soil, dust, small pieces as also substantial moisture, there is bound to be weight loss during the processing of Supari - in cutting, cleaning, sieving, drying and mixing processes; the said percentage of loss should have been accepted by the department who had opportunity to inspect the nature of raw materials and physical production process during their visit; that the clandestine production and clearance are alleged without producing even single documentary proof establishing beyond doubt or even prima facie that the said Gutkha was manufactured or cl....
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.... declared at any stage; in this regard the appellants relied on the following documents:- 1. Letter to Supdt. C.Ex. Jaysingpur dt. 18-1-94 2. Letter of Supdt. C.Ex., Jaysingpur dt. 18-1-94 3. Central Excise letter No. JSP/GPMP Misc./91 dt 18-1-94 4. JSP/GPMP Misc./94/976, dt. 18-1-94 5. Letter to Supdt., C.Ex., Jaysingpur dt. 21-2-94 6. GPMPIPL Scrap Bill No. 270, dt. 31-8-94 - 743.860 kgs. 7. Scrap Bill No. 843 dt. 20-12-94 - 1198.990 kgs. 8. Bill No. 410 dt. 14-3-95 - 736.770 kgs. 9. Bill No. 317 dt. 583.200 kgs. 10. Bill No. 1700 dt. - 792.450 kgs. 11. Bill No. 2915 dt. 12-3-96 - 885.000 kgs 12. Bill No. 621 dt. 2-6-96 - 400.000 kgs. 13. Bill No. 1472/7-9-96 - 1210.000 kgs. 14. Bill No. 1698 dt., 30 - 1854/9.96 - 185.000 kgs 15. Bill No. 1800 dt., 10-10-96 - 465.000 kgs 16. Bill No. 1854 dt., 16-10-96-200.000 kgs. 17. Bill No. 2034 dt., 2-11-96 - 300.000 kgs 7. Thus from the above, it may be seen that wastage had been declared from time to time to Central Excise authorities. The total raw material consumed by the appellant No....
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....the department to arrive at the actual figure. Had the department gone by the actual raw material used in the preparation of Star Gutkha and the wastage and scrap as claimed by the appellants, the question of clandestine removal as alleged by the department would not have arisen. He submitted that the wastage which normally occurs in preparation of the Star Gutkha out of the said raw material as mentioned above is over 22%. He also submitted that though the appellants do not maintain the records of wastage and scrap as it was not incumbent upon them being non dutiable goods, wastage could be ascertained from the appellants balance sheets itself as the consumption all raw material is mentioned therein, raw materials over and above the said star gutkha have not specified laid along quantities, mode of receipt, disposal. He further contended that the investigating official never shown any interest in undertaking any experiment with regard to the wastage and scrap although the management of the appellants has managed to do so. Input/output of all major raw materials was available to the department in terms of the balance sheet. No attempt has been made by the department to establish th....
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.... over 22% as claimed by Shri Sanjay Ghodavat in his statement. He also contended that the input/output receipt of the finished viz. Star Gutkha was never seriously studied by the Investigating Officer or else they could have easily allowed the wastage of 22% and thereby there was no need for issue of show cause notice. The gauge of plastic film was little thicker and therefore only 1600 pouches were produced per kgs. Suppliers of PLR were questioned as to the capability of production of pouches per kg. The figures given are between 2400 to 1600 pouches per kg. Normally on the assumption of such quantity should have been manufactured which was much higher than the initially declared quantity. The Commissioner has confirmed the huge demand merely on presumption. He also submitted that the appellant referred to the investigation carried out by them with the help of some officers of Central Excise, Pune Commissionerate on 13-8-1998. The officers consist of Shri R.N. Medhekar, Inspector, Shri D.D. Kadam, Inspector, Shri Y.P. Gaikwad, Preventive Supdt. All from the said divisions and also different witnesses and in their own hand writing Shri Medhekar had shown of ranging between 1.85 gm....
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....oborative evidence is available either in the form of seizure of unaccounted goods lying in the factory or seizure of yarn having been removed without gate passes. There is no evidence in the form of sale records to show that the quantities other than those removed have been sold by the appellant. There is no allegation of the receipt and consumption of excess raw material. In short, there are no other evidences to support the allegation of excess production and their clandestine removal. Merely because of the entries in the Daily Production Register, especially when that is not the basis of recording production in the RG-1 Register, no firm conclusion can be arrived at without any, if not all on the above said types of corroborative evidences. In view of this we hold that the charges of the suppression of production and clandestine removal have not been established beyond reasonable doubt. It, therefore, discharged the appellants and dropped the demand confirmed against them. The ld. Consultant contended that this is a very similar case wherein the facts and circumstances of the instant case match with those cited in the said decision. Therefore the result has to be the s....
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....mptions and conjectures and no evidence, should be quashed. 10. The ld. Consultant submitted that though the said case relates to Bihar Land Revenue Act, however, the principle propounded by the Apex Court are fully applicable in the present case. The learned consultant also filed a copy of Tribunal order dated 12-11-2002 in the case of M/s. Kamanwalla Industries Ltd. V. CCE, Aurangabad - 2003 (152) E.L.T. 126 (Tri.) wherein the principal bench has set aside the demand based on theoretical calculation. The learned consultant also drew our attention towards the order dated 21-1-1999 passed in the appellants own case wherein ITAT inter alia held that no material or evidence whatsoever was found at the time of search which could show that the assessee had spent any amount outside the books of accounts. Therefore ITAT has deleted the impugned additions for the purposes of assessment. The point the ld. Consultant wanted to prove is that when the ITAT had not made any additions in respect of the case in question, it would not be justified for the department to have adopted contrary decisions for the purposes of raising the demand in question, when they are not in a possession of any d....
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....se with mathematical precision. He contended that the conduct of the appellant and the attending circumstances clearly go to show that the appellant has not discharged the burden and, therefore, the only conclusion is that the non-duty paid goods were proved to have been used in the manufacture of further excisable goods. In this regard, he drew our attention to Para 54 of the impugned order. He further contended that the Oudh Sugar Mills case is not applicable to the facts of the present case and the facts of both the cases are different. He also contended that in order to avail the exemption, the burden is on them to prove, that they are entitled for the exemption and they cannot take shelter under the lapses, if any, committed by the departmental officers in not taking the actual stock verification. He also contended that the appellant has not said anything about the statement of Shri Raju Bardia. In support of his contention he relied on the decision in the case of C. Aboo Backer Haji - 2002 (147) E.L.T. 150 (Tri.) and Rajasthan Synthetic Industries Ltd. V. Collector of C. Ex., Jaipur - 2001 (131) E.L.T. 424 (Tri.). 13. The ld. Consultant in his rejoinder submitted that the ....
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....ight to raise the demand merely on presumption/assumption. In a case of its kind the department was duty bound to have brought direct, tangible, corroborative and strict evidence to prove the clandestine removal beyond reasonable doubt. We do agree with the contention of the ld. SDR that mathematical accuracy cannot be expected in such a matter. However, it does not mean that the Department is absolved of its responsibility to bring on record the tangible, strict, positive, direct and corroborative evidence to prove clandestine removal beyond reasonable doubt as there is no evidence of actual excess production, removal of such excess production, transport of such excess production, confirmation from buyers and receipt of unaccounted cash towards sale of such unaccounted clearances. We find that the department has not done so. Few more cases in this regard are as under :- (i) 2001 (130) E.L.T. 228 (T), Commissioner of C. Ex., Patna V. Universal Polyethylene Industries Clandestine removal and clearance is a serious charge against manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. (ii) 2001 (130) E.L.T. 334....