TaxTMI 
TaxTMI 
2026 (7) TMI 323
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....2). 2.1 On the basis of intelligence of the Directorate General of GST Intelligence, Guwahati Zonal Unit (the DGGI) indicating that Appellant No.(1) had evaded Central Excise duty by clandestinely clearing 1520% of their production of MS Ingot to appellant no.2 who were using the same for clandestine manufacture and clearance of MS Square Bar, MS Patti and MS Angle, the DGGI officers carried out search at Factory premises of Appellant No.(1) & Appellant No.(2) as well as their City/Head Office and Private undeclared office premises located at Kunj Ispat Bhawan, Block-A, 2nd & 3rd Floor, N.S. Road, Fatasil, Guwahati - 781009 on 23.03.2018. 2.2 Records, documents and pen drive (unofficial records) containing data/information relating to manufacturing and clearance of excisable goods from the factories of appellant no.1 and appellant no.2 were recovered from the above premises and seized. Scrutiny of the seized records/documents and investigation reveals the following: (i) From the note book seized from the factory premises of Appellant No.(1) appeared that Appellant No.(1) had cleared 25 consignments of MS Ingot/Mill Roll, total quantity amounting to 478.49 MT, from th....
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.... Cast Iron 4.2 - Ferro Silicon 0.04 - Silico Manganese 0.35 - Light - - 2.3 From the said Daily Production and Sale Sheets, it was also seen that Appellant No.(2) received their principal input i.e. Ingot from Appellant No.(1). Comparison of records of purchase of input (Ingot) of Appellant No.(2) as recorded in the Daily Production and Sale Sheets with the Central Excise invoices of clearance of Ingot by Appellant No.(1) to Appellant No.(2) reveals that 474 MT of Ingot was cleared in excess / without Central Excise invoice by Appellant No.(1) to Appellant No.(2) during the period December 2016 to March 2018. 2.4 On cross checking of the details of clearance of goods from Appellant No.(1) to Appellant No.(2) as mentioned in the Daily Production Report and Dispatch seized from the premises of Appellant No.(1), with the data of receipt of goods by Appellant No.(2) from Appellant No.(1) as mentioned in the Daily Production and Sale Sheets seized from the premises of Appellant No.(2), it was found that all the entries of dispatch of the goods by Appellant No.(1) to Appellant No.(2) mentioned in the Daily Report of Production and Dispatch match/ ....
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....ce from the Department by mis-stating the facts in their ER-1 returns and Daily Stock Register, thereby manufactured and cleared excisable goods without payment of Central Excise duty. The willful misstatement and suppression of facts by Appellant No.(1) and Appellant No.(2) would have The to come to the notice of the department under normal course, but for the specific intelligence at the red and the search operations/ investigation conducted by DGGI. Thus the Central Excise to lines appeared to be recoverable under Section 11A (4) of the CE Act along with interest Section 11AA of the CE Act. Further, it appeared that they are liable to penalty under Section 1 IAC of the CE Act and/or Rule 25 of the CE Rules for the said reason of mis-declaration/mis-statement and contravention of provisions of CE Rules with intent to evade it payment. Further, it appeared that they are liable to penalty under Rule 27 of the CE Rules for 2 ailing to assess their duty appropriately, pay appropriate Central Excise duty and file periodical returns as prescribed under the CE Act and CE Rules. 2.10 It also appeared that Appellant No.(3) Shri Krishna Choudhury, Director of both Appellant No.(1) & App....
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....red by limitation. and liable to be set aside on the grounds of limitation before discussing the case on merits. The Ld. Commissioner failed to discuss the law point and confirmed the demand without passing a speaking order on limitation. In this regard, he relies on the decision of the Hon'ble Supreme Court in the case of Associated Cement Co. Vs. Commissioner of Customs, reported in (2001)4 SCC 593 = (2001) 128 ELT 21 (SC). He further submits that the Ld. Appellate Authority failed to establish fraud, collusion, misstatement, intentional evasion of duty, hence proviso to Sec. 11A on extended period of limitation is not invokable in the present case and as such, the impugned Order-in-Appeal is liable to be set aside in the ends of justice on the grounds of limitation. 3.1 He further submits that the invocation of extended period of limitation is applicable in cases where fraud, collusion and wilful suppression of fact and intentional evasion of duty is present. That the Ld. Appellate Authority failed to substantiate involvement of fraud, collusion, wilful suppression of material facts and evasion of duty in the present case in hand. In absence of fraud, collusion, wilful suppre....
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....law that charge of clandestine removal is a serious charge and such charge cannot be levelled on the appellant on the basis of unauthorised data collected by the department. Without corroborating with other documentary evidences. The Appellant rely on the ratio of the decision of the Hon'ble Calcutta High Court in the case of Commissioner of Central Excise, Haldia, Vs. Lord's Chemicals Ltd., reported in (2010) 258 ELT 48 (Cal HC DB), wherein the Hon'ble Calcutta High Court held - Demand - Clandestine removal - Show cause notice issued on the presumption that entries, as recorded in private note book maintained by labour contractor, should be taken as the clearance figures of finished products from the factory - Such presumption not permissible in the absence of any corroborating reliable and independent evidence - Section 11A of Central Excise Act, 1944. [para 2] From the above interpretation of law by the Hon'ble Calcutta High Court, the impugned Order-in-Appeal is not sustainable and liable to be set aside in the ends of justice. (3) For that the Ld. Appellate Commissioner failed to appreciate the contents that the finished goods manufacture by the Appe....
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....ttings during the material period from Dec,2016 to April,2017 by way of wilful misrepresentation of facts with an intent to evade payment of Central Excise Duty without any invoices/Bills and clearance thereof is not supported by any positive evidence corroborating the clandestine manufacture and removal thereof and is a mere presumption. In this context, the Appellant strongly denies the allegation of intentional, wilfull evasion of payment of duty as levelled against them is a fabricated story on presumption. The allegation clandestine manufacture is not corroborated by any positive and tangible evidence of clandestine manufacture, clearance in the factory premises in course of investigation conducted by the department and as such, the allegation of clandestine manufacture and removal thereof is an afterthought, not tenable in the eye of law and liable to dropped on this ground. He also relies on the ratio of the decision of the constitution bench of the Apex Court as held in the case of Oudh Sugar Mills Ltd. Vs. UOI, 1978 (2) ELT(J172)(S.C). 3.4 He further submits that the clandestine removal cannot be established on the basis of presumption or assumption unless some positive....
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.... Central Excise, Haldia Vs. Lords Chemicals Ltd. reported in 2010 (258) ELT 48 (Cal) wherein the Hon'ble Calcutta High Court has observed as under : "2. Admittedly, a show cause notice was issued on the presumption that the entries, as recorded in the private note book maintained by the labour contractor, should be taken as the clearance figures of finished products from the factory. It is settled law that such presumption is not permissible. The presumption, on the basis of which the show cause notice was issued, was misplaced in the absence of any corroborating, reliable and independent evidence. Therefore, the Tribunal below was right in rejecting the contention of the revenue and in accepting the contention of the assessee. Therefore, the appeal is summarily dismissed." 7. Further, in the case of Sulekhram Steels Pvt. Ltd. Vs. Commissioner of Central Excise, Ahmedabad II reported in 2011 (273) ELT 140 (Tri.-Ahmd.), this Tribunal has observed as under : "15. After carefully considering the submissions and appreciating the evidences available on record, we first take up the issue of clandestine manufacture and clearance of goods by M/s. SULEKHRAM STEEL PVT. L....
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....d that no goods were actually supplied by them to M/s. A.S. CORPORATION under the cover of invoices raised by them and it was only bills which were issued against which payments were received by them by cheque from M/s. A.S. CORPORATION. 16. As regards merits of the case, we find that the adjudicating authority has properly framed the disputed issue with which we shall be dealing one by one. 17. In Para 27.1 of his impugned order, Commissioner has observed, after discussing various evidences that if the traders/dealers had not supplied the goods to M/s. A.S. CORPORATION, then from where he procured the TMT bars and supplied to his customers under his own bills/invoices. After framing above issue, he refers to the statement of the buyer who has purchased the goods from M/s. A.S. CORPORATION and observed that inasmuch as the TMT/CTD bars purchased from M/s. A.S. CORPORATION were embossed with mark "SULEKHRAM" which identified the name of the manufacturer, it has to be held that the goods supplied by M/s. A.S. CORPORATION were manufactured in the factory of M/s. SULEKHRAM STEEL PVT. LTD. and it gets established beyond doubt that the goods supplied to 20 buyers under ....
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....ained by them. Copies of such trip registers stand produced before us and we find that except entries in three places, the trip registers nowhere indicates that the goods were actually loaded from the premises of M/s. SULEKHRAM STEEL PVT. LTD. In fact, no trip registers are available in most of the cases and wherever they are available, no such entry showing loading of the goods from the factory of M/s. SULEKHRAM STEEL PVT. LTD. stand mentioned. The Commissioner has picked up only 3 entries from the said registers showing loading of the goods from the appellant's factory that too in one of the case, it stand written as "SULEGHRAM" instead of "SULEKHRAM". As such, we are of the view that the records maintained by transporters cannot be held to be corroborative evidences so as to support statements of transporters. It is well settled legal position that the allegation of clandestine removal cannot be sustained on the basis of transporters' records, which is third party's record without the help of any corroborative evidence. Reference in this regard may be made to Tribunal's decision in the case of M/s. Sidhartha Tubes - 2006 (195) E.L.T. 52 and M/s. Radheshyam Kanoria - 2006 (....
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.... proved and has referred to various decisions of the Tribunal. Accordingly, he has concluded that admitted facts need not be corroborated. We are of the view that the above phrase i.e. "what is admitted need not be proved" stand mis-interpreted by the adjudicating authority. We are at a loss to understand as to what stand admitted and by whom. The appellants are definitely agitating the allegations in the show cause notice and the finding in the impugned order. There is no clear admission on the part of the any representative of M/s. SULEKHRAM STEEL PVT. LTD. admitting to clandestine manufacture and clearance or the goods. The findings are required to be arrived at by appreciating the entire evidences on record and in absence of any admitted fact and evidences, the observations by the adjudicating authority than that what is admitted need not be proved, cannot be appreciated. 22. We further note that the allegations of clandestine removal are required to be established by production of positive and tangible evidences and should not be arrived at on the basis of assumptions and presumptions. It does not require the support of any judicial pronouncement to observe that the c....
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....xcise Rules. Penalty of Rs. 10 lakhs imposed upon Shri Chhajusingh S. Kanwal, Chairman cum Managing Director of M/s. SULEKHRAM STEEL PVT. LTD. has also been set aside. 23. As regards penalty of Rs. 5 lakhs imposed upon Shri S.A. Vohra, Partner of M/s. A.S. CORPORATION, we find that the same has been imposed upon him in terms of provisions of Rule 26 of Central Excise Rules, 2002 on the ground that he was fully concerned in transporting and removal and concealing and selling of excisable goods, cleared illicitly by M/s. SULEKHRAM STEEL PVT. LTD. Having held that there was no clandestine removal, clearance from the factory of M/s. SULEKHRAM STEEL PVT. LTD., penalty upon Shri S.A. Vohra cannot be upheld. For the same reason, penalty upon Shri Kiritbhai C. Patel Proprietor of M/s. Avantika Steel Suppliers imposed for arranging alleged bogus bills, cannot be imposed. As regards other traders, it stand pleaded that even if the allegations made by the Revenue are accepted, imposition of penalty upon them in terms of Rule 26 of Central Excise Rules, 2002 cannot be upheld in terms of Larger Bench decision of the Tribunal in case of M/s. Steel Tubes of India Ltd v. CCE, Indore - 200....
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....nished final product. Further, since the charge is regarding clandestine manufacturer and removal of finished product for evading excise duty, the same cannot be held to be proved on the basis of principle of preponderance of probabilities and the Revenue has to prove the same beyond doubt. The reference is answered accordingly. 11. As a result, this reference case is dismissed. However, there will be no order as to cost." 9. Further, in the case of Oudh Sugar Mills Ltd. Vs. Union of India reported in 1978 (2) ELT (J172)(SC), the Hon'ble Apex Court has had an occasion to deal with the issue of alleging calculation of raw materials fed into the process and working of the machinery during test inspection and observed as under : "7. Now, these calculations certainly involve some assumptions. The first is that the difference of 56 maunds noticed by the Assistant Chemical Examiner during the two and quarter hours test conducted by him on May 7, 1957 was uniform for every 21/4 hours working throughout the working hours of the crushing season which began on November 4, 1956 upto May 7, 1957 when the test was conducted. 8. The second assumption is that the per....
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....average of number of analysis conducted by him. They point out that as the juice in cane is not uniformly distributed in the pith and the rind, the resultant juice by different milling procedures cannot be the same, or in other words it cannot be presumed to hold a constant and definite ratio to the brix of the first expressed juice. According to Noel Deer, the ratio between the brix of absolute juice and primary juice is 0.975. They point out that in a given case the proportion between the two would depend upon two factors, the fibre percentage of the cane and milling performance. Then they proceed to say : "Fibre per cent cane in Java used to be about 12.5 while in India it is mostly about 16. Indian cane thus has thicker rind and less of pitch. Pitch contains richer juice and the rind contains only protoplasm water. Hence, the absolute juice factor of 0.975 is not absolute for its application under Indian conditions particularly in our case and that is why no reference has been made and no cognisance taken by Sugar Technologists. Association of India regarding its application for inferentially calculating mixed juice per cent in the revised draft for publication of "Met....
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....wing the weight of mixed juice on an average of 7.5 tons and that their only plea was that this was not intentional or deliberate nor did it signify any mala fides on their part. No reliance has, however, been placed upon this confession in the Respondent's statement of the case. We may however point out that the gross annual turnover of sugar manufactured in the factory is in the neighbourhood of 12 lakhs of maunds and the amount of excise duty the appellant pays to Government runs into about a crore of rupees per annum. It would therefore be a little far-fetched to infer that what happened at the time of the inspection was something more than an error occasioned perhaps by carelessness nor could it be said that this shows that there was a deliberate attempt on their part to evade payment of duty on a mere 11,606 maunds and amounting to less than a lakh of rupees. We are saying this not because an error due to carelessness in maintaining the registers properly as required by Rule 83 does not amount to a contravention of that rule; the only reason why we mention this is that in a factory where the turnover of sugar is so considerable and the operations conducted in which the human ....
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....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 materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) discovery of such finished goods outside the factory; (d) instances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of buyers with some details of illicit manufacture and clearance; (h) proof of actual transportation of goods, cleared without payment of duty; (i) links between the documents recovered during the search and activities being carried on in the factory of production; etc. 16. We furt....
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....e the same positive evidence of clandestine production and removal of goods. 18. Further in the case of Chhajusing S. Kanwal (supra), Hon'ble Gujarat High Court has observed as under :- 12. From the facts and contentions noted hereinabove, it is apparent that the Tribunal has based its conclusion upon the findings of fact recorded by it after appreciation of the evidence on record which have remained unchallenged inasmuch as the appellant has not raised any question assailing the impugned order on the ground of perversity. The Tribunal has found as a matter of fact that the case of the Revenue is based upon the statements of the traders and brokers who had stated that they only used to give bills to Shri Shakeelbhai Vohra of M/s. A.S. Corporation without actual supply of any material, despite which, the authorities had turned down the request made by M/s. A.S. Corporation as well as Sulekhram for cross-examining the traders and brokers. The Tribunal was, therefore, justified in holding that the statements of such traders and brokers were not admissible in evidence, as they had not been tested on the touchstone of cross-examination. It is apparent that the entire c....
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.... in holding that the Revenue has failed to establish its case against Sulekhram and set aside the demand and imposition of penalty against Sulekhram. 19. We have seen in this case that the appellants have contended that power consumption does not support the case of the Revenue for clandestine manufacture. As the statement of electricity consumption has been produced before us by the appellant wherein the consumption of electricity is around 900 to 1000 units per MT. If the charge of clandestine removal has taken as correct then the only 490 units is required to manufacture of 1 MT of MS ingots which is not possible. The adjudicating authority has not given any credence. To this evidence holding power consumption is not the criteria to allege clandestine removal. In fact in a case it is alleged that there is clandestine removal of the goods in the factory in that case it is the duty of the adjudicating authority to give logical conclusion of consumption of electricity in the normal course of business. In this case, we consider the electricity consumption for clandestine manufacture of the goods, the electricity is required to be consumed 490 units to manufacture one MT of ....
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....these 3 people have no evidentiary value in the absence of denial of cross-examination and not made party to the show cause notice to impose penalty under Rule 26 of Central Excise Rules, 2002 for allegedly dealing in excisable goods which were used in the manufacture of clandestine manufacture of final products. None of these buyers who has admitted that they have received the goods without payment of duty were made to the show cause notice for imposing penalty under Rule 26 of Central Excise Rules, 2002 to allege that they have dealt with the goods which are liable for confiscation. Therefore, the statements of these buyers are not admissible evidence. 23. We have taken note that the stock report has been treated as test report by the adjudicating authority. In fact we have gone through the stock report which indicated that on each day certain goods were manufactured and out of that goods some goods are sold and some remained unsold and on second day the stock position of the remaining goods was also shown in the stock report of succeeding day. This has been treated by the adjudicating authority as test report which is factually incorrect and no credence of the explanati....
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....06 to May, 2008, the short-levy was projected for entire period including period prior to August, 2006. We find that the confirmation of demand on this ground also is not supported by any corroborative evidence for transportation, money transaction, etc. Further, the clearance of ash and residue if is to be considered as clearance of aluminum dross, the Revenue has to establish as to how the actual clearance of ash and residue was made. Therefore, we find the case on merit is not sustainable due to lack of evidence to establish the allegations. The demand is not sustainable on the main ground that aluminum dross not being an excisable goods as per decisions of Hon'ble Supreme Court in the case of Indian Aluminum Company Limited reported in 1995 (77) E.L.T. 268 (S.C.) and 2006 (203) E.L.T. 3 (S.C.). In a recent decision, the Hon'ble High Court of Bombay in the case of Hindalco Industries Limited - 2015 (315) E.L.T. 10 (Bombay) examined the issue of duty liability of aluminium dross and after relying on the various decisions including the above mentioned decisions of the Hon'ble Supreme Court held the product as not liable to excise duty. 31. Considering the above legal posi....
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....secution, but Revenue should be able at least to discharge the initial burden of establishing the charge which is totally absent in the present case. In appreciating the evidence placed before us we fully bear in mind that in clandestine clearance it will be humanly impossible to establish every link in the clandestine activity. Revenue in the present case has merely extrapolated and summarized figures without any evidentiary support. The list of cases which state that the findings of clandestine removal are to be required to be based upon strong evidences and not on assumptions and presumptions is unending. 34. In Suzuki Synthetics Pvt. Ltd. - 2015 (318) E.L.T. 487 (Tri.-Ahmd.), the Tribunal observed that if the case of clandestine removal is to be sustained based on private records then the same is required to be supported by corroborative evidence with regard to purchase of raw material, manufacture of final goods, flow-back of money or identification of the buyers and their statement, etc. In Arya Fibers Pvt. Ltd. - 2014 (311) E.L.T. 529 (Tri.-Ahmd.) the Tribunal laid down certain principles, after detailed analysis of large number of case laws, to establish the case f....