TaxTMI 
TaxTMI 
2024 (6) TMI 1596
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....bove appeal against the impugned order to the extent of :- (i) denial of CENVAT Credit of Rs. 21,02,888/- for shortage of raw materials; (ii) denial of CENVAT Credit of Rs. 1,12,04,902/- for diversion of imported raw material weighing 1839 MTs, on which CENVAT Credit of CVD was taken from Bhiwandi godown; (iii) demand of duty of Rs. 1,01,81,000.00/- on clandestine removal of 898 MTs of PVC compounds in the guise of fictitious sale of sole parts of Hawai chappals; (iv) duty demand of Rs. 1,01,670/- on sale of waste and scrap, with interest and imposition of penalties. The department has filed the appeal against the impugned order in so far as the learned Commissioner has dropped the proceedings for denial of CENVAT Credit of Rs. 12,92,65,299/- on removal of inputs on which CENVAT Credit was taken in the guise of fictitious sale of modified LLDPE to the buyers located in Kolkata and consequential penalties on various persons. 1.2. Brief facts of the case are that on the collection of intelligence that the Appellant was indulging in evasion of central excise duty by way of diverting indigenously procured as well as imported inputs in the local....
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....e present appeals are filed by the revenue as well assessee and its director and employees. 4. We have heard Mr. Prakash Shah with Mr. Dinesh Mehta and Mr. Suyog Bhave, Advocates for the Appellants and Mr. Mihir Rayka, the learned AR appearing for the Commissioner. 5. Mr. Shah on behalf of the Appellant reiterated the following submissions made in their written submissions dated 25.10.2023: 5.1 There was no shortage of raw material and proposed denial of CENVAT credit of Rs. 4,59,156/- is wholly erroneous and untenable. 5.2 That the shortage was only on account of posting errors in registers as confirmed in the statement of Mr. Prakash Sahoo recorded on 26.04.2010. 5.3 That during 2009-10, the turnover of raw materials was of approximately 25,375 MT and posting error of around 80MT is bound to happen. The Appellant had submitted to the learned Commissioner detailed working statement in reply to the show cause notice. Factually, there is no shortage in the raw materials and the correctly ascertained stock has been carried forward. 5.4 The learned Commissioner, in paragraph nos. 49, 50.1 and 50.2 has merely relied upon the order dated 23.07.2015 passed by this Hon&#....
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....turning the processed material from Daman unit to Dadra unit. This was explained by way of illustration in paragraph 3.6.7 of the reply as under :- a. By Annexure-II job work Challan 2478 dated 31.12.2009, 10,000 KGs of raw material was sent from Dadra Unit to Daman Unit b. By Annexure-VI Challan No 1719 dated 04.01.2010, processed quantity of 3803 Kgs was returned to Dadra Unit with balance of 6,197 Kgs reported in the said Annexure-VI Challan c. By Annexure-VI Challan No 1720 dated 05.01.2010, processed material of 6,000Kgs and scrap of 197 KGs (Total 6,197 KGs) was returned to Dadra Unit d. Thus 10,000 Kgs received from Dadra Unit was returned as 10,000 KGs. e. This transaction was recorded accordingly on para no 331 of Annexure-V Job Work Register. 5.9 Mr. Prakash Sahoo of the Appellant has also clarified in his statement dated 26.04.2010 that the difference is on account on non-booking of invisible loss of around 0.5% for the last two years. 5.10 Accordingly, the shortage of around 280 MT was within 0.5% invisible loss and not booked in the computer records while returning job work materials to Dadra factory. Thus, it is submi....
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....4.09.09 Total of Duty-Paid Imported RM 1,839 1,12,04,903 6 654631 dt. 29.08.200 9 Duty Free import against AA PVC Resin 504 - 7 714960 dt. 09.10.200 9 PVC Resin 198 - Total of Duty-Free Imported RM 702 - Total Imported RM allegedly diverted in local market 2,541 - 5.18 The Appellant availed the services of the following transporters for transporting the imported goods from JNPT to Bhiwandi godown :- a. M/s. Vijay Shree Roadlines situated at C-3, 1st Floor, Neelkanth Cornor, Sector-2, Sanpada, Navi Mumbai b. M/s. Shri Krishna Transport Service situated at 2nd Floor, Room No. 29, Shroff Bhavan, P'Demello Road, Carnac Bunder, Mumbai c. M/s. Cargo Transport Organisation situated at 109, Ambica Terrace, Room No. 9, 4th Clive Cross Road, Masjid Binder (East), Mumbai. 5.19 The department officers claim to have visited the premises of above transporters on 18.03.2010 and recorded the statements of their representatives. 5.20 For the transport of goods from the Bhiwandi godown to the Dadra unit, the Appellant availed serv....
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....ctly from JNPT to the Dadra factory. The said raw materials were never brought to the Bhiwandi godown and thus, the findings of the learned Commissioner that the same were diverted to the local market from the Bhiwandi godown are factually incorrect. 5.25 A total of 213 vehicles were used to transport the remainder 2,361 MTs of the imported raw materials from Bhiwandi godown to Dadra factory. 5.26 The case of the department is that the said imported raw materials stored in Bhiwandi godown were never brought to the Dadra unit and were instead diverted in the local market and credit of CVD and SAD is not available to the Appellant. 5.27 It is further alleged that the diversion of the imported raw materials in carried out under the guise of fictitious sale of finished goods, being sole parts of Hawaii Chappals. 5.28 The Respondent / department has relied upon the following to allege the above: a. Statements of 11 vehicle owners (hired by M/s. Vijay Shree Roadlines) as summarized below: Sr No SCN Para No. Date of the statement Name of the person Vehicle No Bill No 1 33.13 08.08.2012 Mr. Abdul Kalim Khan MH-04- DD-2613 992 dt. 27.....
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....lates that a statement made by a person before a Central Excise Office shall be relevant for the purpose of proving the truth of the facts which it contains only when the person who made the statement is examined as a witness and the statement is admitted in evidence. 5.31 Further, Section 9D(2) states that the above procedure shall apply to all proceedings under the Act. 5.32 In the present case, despite repeated submissions made by the Appellant in this regard, the Respondent did not comply with Section 9D of the Act and wrongly relied upon the statements of truck owners and Mr. Dhulla. 5.33 The department did not examine any of the above persons as a witness and did not record any finding demonstrating as to why the statements should be admitted in evidence, prior to placing reliance on the statements. 5.34 The strict compliance of the procedure prescribed in Section 9D of the Act to adjudication proceedings has also been judicially recognised and no statements can be relied upon in case of failure to comply with Section 9D. Some of the judicial precedents are referred to hereinbelow :- (i) Ambika International v. Union of India, 2018 (361) ELT 90 (P&H) ....
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....ssioner has wrongly ignored the retraction of the statements. 5.44 The department further alleged that 5 vehicles (out of the 239 vehicles used) were incapable of transportation of goods as per the RTO reports obtained. 5.45 It is submitted that the Respondent has erred in placing reliance on the above RTO reports. 5.46 The Appellant had already informed that the vehicle numbers, in respect of which the RTO reports were sought to be relied upon, were mentioned erroneously in the vehicle-wise statement submitted by the Appellant in respect of transport of raw materials from Bhiwandi godown to Dadra factory. 5.47 In the Reply, the Appellant had given details of the correct vehicle numbers along with the copies of Lorry Receipts ("LRs") reflecting the correct vehicle numbers. The details of the correct vehicle numbers are as follows: Sr No Incorrect Vehicle No. Correct Vehicle No. 1 MH 04 B 9358 MH 04 F 9358 2 MH 04 CC 1903 MH 04 AH 1903 3 MH 04 AF 6926 MH 04 F 6926 4 MH 12 R 9726 MH 12 R 9728 5 MH 04 AL 9564 MH 04 H 9564 5.48 The Respondent erred in not accepting the above contention of the Appellant (along with the....
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.... v. Commr. Of Central Excise [(2013) 29 STR 31 (Bom.)], the Hon'ble Bombay High Court has categorically held that it is open for the assessee to demonstrate on the basis of documentary evidence that the statements recorded are erroneous and it is incumbent on the department to consider the said documentary evidence. 5.62 Further, no effective investigation was carried out with other transporter, M/s. Indian Freight Cargo Logistics, except recording in para 33.28 of SCN that the summons issued to them dated 12.2.2013 and 25.2.2013 were returned with postal remark "not known". 5.63 The details of said transporter were communicated to the department through the Appellant's letter dated 21.03.2011, as recorded in para 33.3 of SCN. 5.64 However, the department waited for almost 2 years to summon the transporter. 5.65 However, the owner of said M/s. Indian Freight Cargo Logistics stated on oath by way of affidavit confirming the transportation of goods. The affidavit was produced by the Appellant in the adjudication proceedings. The department did not issue any further summon or examined him in the adjudication proceedings. 5.66 It is pertinent to note that there a....
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....mercial invoice and LR. 5.78 It is submitted that the department has erred in alleging that the said purchase transaction was a paper transaction merely because further documents regarding the transportation could not be recovered either from the transporter or the RTO owing to the lapse of time. 5.79 The said allegations are based on mere conjecture and without disproving the documentary evidence produced by M/s M B Engineering Works in respect of the purchase of the machines. 5.80 In support of the sale of the machines, the Appellant has submitted the following documentary evidence: (i) Commercial invoice dated 20.01.2010 for sale of the three machines to Tara Holdings Pvt. Ltd. (ii) Lorry Receipt No. 56375 dated 20.01.2010 under which M/s Baba Roadlines transported the said machines to Kolkata 5.81 It is submitted that the Respondent has erred in placing reliance on the statements of the transporter to brush aside the above documentary evidence. 5.82 It is reiterated that the said reliance is in complete contravention of the procedure under Section 9D of the Act. 5.83 In any event, even assuming without admitting that the sale of the three mac....
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....e learned Commissioner wrongly observed that no permission for storage of imported raw material was taken by the Appellant from the department. 5.94 This is factually incorrect as permission was required under Rule 8 of the CENVAT Rules only when Cenvat credit is availed on inputs and thereafter stored outside the factory premises. In any case the investigation of the department and as recorded in para 33.9, 33.10 and 33.11 of SCN itself proves that the imported material was duly received in Bhiwandi godown from JNPT port. 5.95 The Respondent also failed to give findings on various relied upon pronouncements relied upon by the Appellant in support of the contention that in absence of any corroborative evidence regarding disposal of imported raw materials the demand cannot be confirmed on assumption and presumption. 5.96 Accordingly the confirmation of demand is not maintainable. Submission against demand of Rs.1,01,81,000/- (demand on alleged removal of finished goods based on arithmetic calculation) 5.97 The demand of Rs. 1,01,81,000 on the removal of final products is merely based on arithmetic calculation as per following details: Sr. No. Particulars ....
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.... finished goods cleared on payment of duty to following four parties located in Kolkata as per Annex. A-09, A-10, A-11, A-12 of SCN including 1029 MT cleared to EOU as duty free against CT-3 certificates. Name of the buyers/ Consignors Type of clearance shown Qty in Kgs Value (in Rs) Duty demanded (Rs.) M/s TARA HOLDING P LTD, (100% EOU), 24 PARGANAS Duty Free (CT-3) `Modified LLDPE' etc. 10,29,675 8,16,49,200 1,12,29,233 M/s TARA HOLDING P LTD, (100% EOU), 24 PARGANAS Duty Paid `Modified LLDPE', PE Compound s etc. 48,38,350 29,25,00,675 2,92,43,885 M/s TARA HOLDING P LTD, HOWRAH and M/s SARLA GEMS LIMITED, HOWRAH (W.B.) Duty Paid PVC Compound, PE Compound s Modified LLDPE. 60,75,000 43,87,83,600 3,72,82,492 M/s Maurya Commercial Company, 1 / 4, K.C Road, Cossipore HO, Kolkata (W.B) Duty Paid PVC Compound, PE Compound s 67,35,200 44,27,53,000 5,15,09,689 Total 186,78,22 5 125,56,86,475 12,92,65,29 9 5.104 The allegation of the department is that the Appellant did not clear the finished g....
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....nd date and also submitted separate paper book of Waybill as per para 6.12 of RL (Also Pg. No. 89 of CO). (ii) EOU warehousing records of 1029 MT delivered to M/s. Tara Holding Pvt. Ltd. (EOU) (Ex-T of RL, Pg. No. 295-467) (iii) Ledger accounts of all transporters (Ex-V/W/X/Y/Z of RL - Pg. No. 475 to 588). (iv) Endorsement of the Superintendent of Central Excise on receipt of the re-warehousing certificate from jurisdictional excise authority of EOU 5.112 All the above documentary evidence including way bills/warehousing records of goods at EOU proves beyond doubt that the Appellant supplied the material to all parties located at Kolkata on payment of excise duty. 5.113 It is submitted that the department could not disprove the documentary evidence produced by the Appellant. 5.114 Thus, the Respondent rightly dropped the demand by observing in paragraph 54 of impugned order that there is no existence of any single evidence proving alleged illicit clearance of raw material. 5.115 The Adjudicating Authority also rightly observed that the contention of the department regarding non transportation of goods is not sustainable in view of the EOU ware....
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.... the CENVAT Credit of 1,12,04,902 with interest and penalties are imposed. The impugned order has further confirmed the demand of duty of Rs. 1,01,81,000 with interest on the removal of PVC compounds without payment of duty and penalties are imposed on the Appellant. 6.2 As regards the diversion of imported raw materials from Bhiwandi without brining into the factory, it is held by the Learned Commissioner that 11 vehicle owners in their respective statements have denied the transportation of imported raw material from Bhiwandi to the factory of the Appellant at Silvassa and five vehicles were incapable of transporting the imported raw materials. 6.3 It is argued by the learned Counsel for the Appellants that the CENVAT Credit of Rs. 1,12,04,902, is denied on the allegation that the Appellant diverted the imported raw materials is primarily based on statement of 11 vehicle owners and the statement of Shri Rajesh Dhulla of M/s Kalpesh Roadways, who have denied transportation of goods from Bhiwandi to Dadra for Appellant. Further, the Learned Commissioner has relied on RTO reports of five vehicles which allegedly claim that they were incapable of transportation of goods. 6.4....
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....ly, on 14.11.2018, two vehicle owners, namely, Shri Shivjor Yadav and Shri Dhansukh Patel, were offered for cross-examination by the Ld. Commissioner. In respect of the said cross-examination, the Appellant had sought an adjournment due to unavailability of its advocates. However, it appears that instead of granting the requested adjournment, the Ld. Commissioner has herself cross-examined the two persons, who merely confirmed their statements. 6.8 Based on the above diversion of imported raw materials and non- manufacture and sale of sole parts of Hawaii chappals, it is alleged by the revenue that the Appellant illicitly cleared finished goods of PVC compounds weighing 898 MT under the guise of clearance of sole parts of Hawaii chappals. 6.9 Apart from the above, the revenue alleges that the Appellant diverted raw materials, weighing 18,678 MT, under the guise of manufacture and sale of finished goods such as Modified LLDPE, etc. to three buyers in Kolkata. For alleging the same, the revenue has mainly relied on statements of the transporter and some of the vehicle owners, who have denied transportation of goods from Dadra to Kolkata on behalf of the Appellant. 7. Shri Mi....
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....ated Paraffin and Plasticizer, cumulatively weighing 86,045 kgs and valued at Rs. 55,83,195. Further, a similar shortage of raw materials cumulatively weighing 2,81,452 kgs and valued at Rs. 1,99,37,276, was also observed at the Daman factory. The case of the revenue is that the said shortage is on account of clandestine clearance of the said raw materials by the Appellant without preparing any invoices and without payment of duty. 8.3 However, from a perusal of the record and the impugned order, we find that apart from the said shortage discovered due to physical stock taking, at both the units, no other evidence is adduced by the revenue in support of its allegation that the said raw materials have been cleared clandestinely by Appellant. The revenue has not produced any evidence regarding the transportation of inputs found short, details of the buyers to whom raw material found short, flow of consideration, etc. pertaining to the alleged illicit clearance of raw materials found short. There is no investigation by the department and the demand is confirmed on sole basis viz. shortage of raw material. 8.4 In Commissioner of C. Ex. & ST, Chandigarh-II v. Kewal Garg, 2019 (369....
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....found short during the course of investigation as the same was not manufactured goods by the respondent. The adjudicating authority also failed to prove that the cash recovered was the sale proceeds of clandestine removed goods. Thus, it was held that the seized currency during the course of investigation could not be confiscated without any evidence that the same was the sale proceeds of excisable goods cleared clandestinely. Consequently, the impugned order passed by the Commissioner was set aside and the appeals were allowed. The relevant findings recorded by the Tribunal read thus :- *** 7. Learned Counsel for the appellant-revenue has not been able to point out any error or illegality in the findings recorded by the Tribunal warranting interference by this Court. No substantial question of law arises. Consequently, all the appeals stand dismissed." 8.5 In Jai Balaji Industries Ltd. v. Commissioner of Customs, C. Ex & ST, Durgapur, 2021 (378) ELT 674 (Tri .- Kolkata) "9. We find that the charge of clandestine clearance cannot stand as the department has not been able to provide clinching evidence in support of the same. Clandestine clearance is a s....
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....e demand of Excise duty has been made on the basis of allegation that the appellant has manufactured and cleared Gutkha clandestinely. Such an allegation can be sustained only on the basis of documentary and oral evidence which establishes such clandestine manufacture and clearance. For this purpose, the investigation should have brought evidence to prove procurement of additional raw materials and establish that such additional manufacture has happened. Further, it will be necessary to probe from whom such raw materials have been procured and to whom the alleged clandestinely cleared goods have been sent. We find that no such detailed investigation have been carried out in this case. The Railway Receipts, which are the basis for quantification, indicates some names of consignor and consignee. However, consignor is not shown as the appellant factory or anyone connected with it. No investigation has been undertaken to probe further who was the actual consignor whose name is indicated in the Railway Receipts. The ultimate recipients of the alleged clandestinely cleared Gutkha have also not been investigated. 15. Demand for such huge amount of Excise duty cannot be sustained ....
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.... duly booked in excise records. The Appellant further submitted that the waste generated during the process of manufacturing is dumped in the corner of the manufacturing factory having no sale value and periodically excise duty is discharged. Considering the submissions made by the Appellant, we are inclined to accept the contention of the Appellant that there was no intention to evade duty as no evidence of removal of scrap is found. We therefore set aside the penalty in the facts of the present case. Further, we find that duty is already deposited by the Appellant. 8.10 We shall now deal with the issue pertaining to denial of CENVAT credit on imported raw materials weighing 1,839 MT claimed to have been diverted by the Appellant and demand of excise duty on clandestine removal of PVC compounds weighing 898 MT. These two issues and demands are interlinked and are dealt with together. 8.11 The Appellants have contended that they imported certain raw materials weighing 2,541 MTs. Out of 2,541 MTs, part quantity of 180 MTs was directly brought to the Dadra factory of the Appellants. The balance quantity of 2,361 MTs were stored in a godown at Bhiwandi. The balance quantity of r....
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....further find that none of the four persons produced before the learned Commissioner were examined by the department but were first cross examined by the learned Commissioner. We further find the Appellants have contended that the cross examination of said four person was allowed in most restricted manner. Section 9D of the Act reads thus :- "SECTION 9D. Relevancy of statements under certain circumstances. - (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, - (a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or (b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the....
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....he 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 are not subjected to demand, penalty interest on the basis of certain admissions recorded during investigation which may have been obtained under the police power of the Investigating authorities by coercion or undue influence. 9.5 Undoubtedly, the proceedings are quasi criminal in nature because it results in imposition of not only of duty but also of penalty and in many cases, it may also lead to prosecution. The provisions contained in Section 9D, therefore, has to be construed strictly and held as mandatory and not mere directory. Therefore, unless the substantive provisions contained in Section 9D are complied with, the statement recorded duri....
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....ch a finding could be based by the learned adjudicating authority. In Meenakshi Food Products (P) Ltd. v. CCE & ST, Ahmedabad-II, 2019 (370) ELT 1330 (Tri - Ahmd.), and Commissioner of Central Excise, Delhi-I v. Kuber Tobacco India Ltd., 2016 (338) ELT 113 (Tri - Del.) this Tribunal has taken the similar view. 8.19 We also find that the right and importance of an opportunity of cross- examination has been recognized by the Hon'ble Supreme Court in the case of Andaman Timber Industries [2015 (324) ELT 641 (SC)] by observing as follows :- "6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportun....
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....y procedure under the provisions of Section 9D of the Act and settled law referred to above. 8.23 Further, we note that contrary to the denial of Mr. Dhulla and the vehicle owners, Shri Vijay Walunj of M/s Vijay Shree Roadways, whom the Appellants had contracted and who, in turn, had contracted M/s Kalpesh Roadways, has emphatically confirmed having transported the raw materials from Bhiwandi to Dadra. In light of the said contradictory statements, it was all the more imperative for the department to have produced Mr. Dhulla before the Learned Commissioner and examined him and offered for cross-examination to the Appellants. The statement of Mr. Dhulla has not been tested in cross examination. 8.24 We find that the statements recorded during investigation in the present matter, whose makers are not examined in chief before the learned Commissioner, would have to be eschewed from evidence, and it will not be permissible for the learned Commissioner to rely on the said evidence. Therefore, we hold that none of the said statements were admissible evidence in the present case. 8.25 Further, we find that the Appellants had submitted the affidavit of Shri Mohammad Asrasali Tayab....
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.... MH 04 AF 6926 MH 04 F 6926 4 MH 12 R 9726 MH 12 R 9728 5 MH 04 AL 9564 MH 04 H 9564 8.28 The learned Commissioner, without examining the above, proceeded to hold that the vehicles were reported to be incapable for transportation of any goods. The Learned Commissioner has brushed aside the contentions of the Appellant by holding the same to be contradictory to the statement given by Shri Vijay Walunj, who had stated that the said reports were wrong. 8.29 The Ld. Counsel for the Appellants had shown the relevant lorry receipts to us during the course of argument. We found on examination of the relevant consignment notes produced by the Appellants in the paper book that there was an error in giving vehicle numbers during investigation. The correct numbers can be seen from the lorry receipts and the RTO reports of the said vehicle numbers show that the vehicles were capable of transportation of material. In view of the documentary evidence on record, we cannot sustain these findings of the learned Commissioner that the said vehicles were incapable of transportation. 8.30 Further, we find that the Appellant had produced before the Ld. Commissioner and befo....
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....nt, confirmed the manufacture and sale of the sole parts. The Appellants further contended that the said 3 machines were sold to Tara Holdings Private Limited under an invoice dated 20.01.2010. The Appellants have produced the sale invoices and lorry receipts under which the said machines were transported to Tara Holdings. The Appellants contended that they had sold the machines to Tara Holdings Pvt. Ltd., Kolkata, prior to the date on which search was conducted at the Dadra unit and for this reason the machinery was not found in the factory on the date of search. 8.34 We find that the Ld. Commissioner has disbelieved the case of the Appellants of having machinery and production of sole parts of Hawaii chappals by placing reliance on the statement of transporters, namely, Mr. Sumer Singh of M/s Shree Baba Roadlines and Mr. Kashiram Chaudhary, Manager of Jaipur Golden Transport Co. Pvt. Ltd., in addition to the non- availability of machinery at the time of search at the factory of the Appellant. 8.35 We find that the services of Jaipur Golden Transport Co. Pvt. Ltd. were used for transport of the machines from the supplier's premises to the Appellant's factory. We furt....
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....ove statements of the transporters, the learned Commissioner has held that sale and purchase of injection moulding machine had never taken place at the time of its purchase and sale as shown by the Appellants and these machines were never received and never cleared by the Appellant and were only paper transactions. We are unable to agree with the findings of the learned Commissioner that there was no purchase and sale of the three vertical moulding machines and that they were only paper transactions. We find that the Appellant had purchased the three machines from M/s M B Engineering on 29.12.2006, used them in the manufacture of sole parts of Hawaii Chappals and sold them to Tara Holdings Pvt. Ltd. on 20.01.2010, i.e., prior to the conduct of search proceedings at the Appellant's factory in the month of February 2010. 8.39 Apart from the above, investigation was also carried out in respect of the buyers of the said sole parts, namely, M/s Kalpana Udhyog, M/s Shri Balaji Enterprises and Kanta Devi Polymers Pvt. Ltd as well as the transporters used for transport of the sole parts to such buyers. It is the case of the revenue that the said sale transactions were only paper tra....
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....ind that in the impugned order, the Learned Commissioner has also referred to the investigation carried out regarding the money channel created by the Appellant through the fictitious sales. We find that the Appellant had submitted the extracts of the bank statements to show the payments received from the three buyers in lieu of the sales made to them. During the course of the investigation, the department had requisitioned the bank statements of the three buyers and found that they had sufficient balances in their banks to make the aforementioned payments to the Appellants and had received the moneys in their accounts through various parties. We find that department did not carry the investigation to its logical end citing lack of response. The Learned Commissioner has concluded that the money channel employed by the Appellant was also discovered during the investigation. However, we find that apart from the issuance of the summons, no further steps were taken by the department to investigate into the customers of the three buyers. No search proceedings or visits were made to any of the said persons who deposited the amounts in the bank accounts of the three buyers. No reasons are....
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....ale by Appellants. As discussed above, the case the department of fictitious sale of sole parts of Hawaii chappals is not proved and not accepted by us. 8.45 We find that the Appellants contended that the allegation of illicit clearance of PVC resin weighing 898 MT is based merely on the basis of arithmetic calculations of the weight of finished goods manufactured and raw materials imported by the Appellants. It was further contended that when it is the case of the department that there was no receipt of raw material in the factory of the Appellant and there was no sale of sole parts of Hawaii Chappals, on what basis the department claims that the Appellants manufactured and sold 898 MT of PVC resin without payment of duty. 8.46 On perusal of the records and examination thereof, we find that the Learned Commissioner held that the Appellant illicitly cleared PVC resin weighing 898 MT without payment of duty. We find that the department has arrived at the figure of 898 MT merely by reducing the quantity of imported raw materials, i.e., 2,541 MT, from the quantity of finished sole parts of Hawaii Chappals cleared by the Appellants, i.e., 3,439 MT. We find that the said demand is....
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....articulars from the regular transporters. (iv) To find out the realization of sale proceeds. (v) To find out finished product receipt details from regular dealers/buyers. (vi) To find out the excess power consumptions. 13. Thus, to prove the allegation of clandestine sale, further corroborative evidence is 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 good....
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.... and accordingly set aside. We shall now take up the appeal filed by the department against the dropping of demand for CENVAT credit of Rs. 12,92,65,299 by the Learned Commissioner. 4.50 We find that the case of the department for denial of CENVAT credit of Rs. 12,92,65,299, was that the Appellants in the guise of manufacture and sale of Modified LLDPE to buyers in Kolkata, diverted the raw materials weighing 18,768 MT. During the relevant period, the Appellants claimed to have made the following clearances of finished goods either on payment of duty or to an EOU by following procedure of CT-3, which are relevant to the issue at hand :- Name of the buyers/ Consignors Type of clearance shown Qty in Kgs Value (in Rs) M/s TARA HOLDING P LTD, (100% EOU), 24 PARGANAS Duty Free (CT-3) `Modified LLDPE' etc. 10,29,675 8,16,49,200 M/s TARA HOLDING P LTD, (100% EOU), 24 PARGANAS Duty Paid `Modified LLDPE', PE Compounds etc. 48,38,350 29,25,00,675 M/s TARA HOLDING P LTD, HOWRAH and Duty Paid PVC Compound, PE Compounds 60,75,000 43,87,83,600 M/s SARLA GEMS LIMITED, HOWRAH (W.B.) Modified LLDPE. M/s Maurya C....
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....led to bring on record any evidence proving that the raw materials were diverted by the Appellants. The Appellants also contended that they had paid the entire duty liability on the finished goods, which was in excess of CENVAT credit attributable the raw materials cleared in the guise of finished goods. This fact is not denied or disputed by the department. Therefore, the Appellants had effectively reversed the entire credit which was sought to be denied even if the case of the department is to believed. 8.54 We find that the Learned Commissioner has held that the finished goods were not delivered by the Appellants to the buyers in Kolkata by placing reliance on the statement of the transporter, namely, Shri Sumer Singh of M/s Baba Roadlines and certain vehicle owners, who according to the Learned Commissioner, denied transportation of the finished goods to Kolkata for the Appellants. As discussed above, we find that during his statement, Mr. Sumer Singh of M/s Baba Roadlines had stated that they had transported goods for the Appellants only to the states of Maharashtra and Rajasthan. However, in the cross-examination, reproduced at paragraph 46.3 of the impugned order, Mr. Sum....
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....ls, we find that the waybills indeed prove that the finished goods of the Appellants had crossed the borders of the state of West Bengal and were transported to Kolkata. In light of the above documentary evidence, in our view, the statements relied upon by the Learned Commissioner do not inspire confidence. However, despite recording the above in the impugned order, we find that the Learned Commissioner has completely ignored the same and has instead disbelieved the transportation of the finished goods based merely on unverified statements. We are therefore unable to sustain the findings of the Learned Commissioner that the finished goods were not transported from the Appellant's factory to the buyers in Kolkata. In our view, in light of the documentary evidence produced by the Appellant and the confirmation of transport given by Mr. Sumer Singh in his cross-examination, it can be fairly concluded that the finished goods were indeed sold and delivered by the Appellant to the buyers in Kolkata. 8.58 We observe that in its appeal before us, the revenue has sought to controvert the above finding at paragraph 54.3.2 of the impugned order by contending that in an earlier paragrap....
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....ound Kolkata is based only on the statements of transporters & vehicle owners stating not to have transported such finished goods. As per annexure-A-9 to A-12 to the show cause notice, it is observed that over a period of 2 years, a huge quantity of 18678.225 MT of finished goods were alleged to be not accompanied with the sales invoices issued by the noticee and in guise of these goods, duty paid raw materials were diverted by the noticee in local market. The noticee viz. M/s Kalpena, Dadra has strongly opposed the allegation made in the show cause notice. 54.9.6. In this regard, I find that the department has not a single evidence in support of the demand of Cenvat Credit on alleged illicit clearance of raw material detailed in the annexures-A-9 to A-12 to the show cause notice. During the investigation, no such evidence has been taken on record suggesting illicit clearance of such raw material. It is well settled law that no demand can be made applying general practice adopted by any assessee, without any evidences of illicit clearance of raw material. Therefore, I find that the demand made in the instant SCN regarding illicit clearance of raw material allegedly cleared....
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....unal, some of which have also been affirmed by the courts of law, has observed that it is well settled that input credit when reversed for payment towards final duty liability would be reversal of credit originally taken and no further reversal would be called for. Following the said decisions, the Learned Commissioner has held that since the Appellants have paid the higher duty liability on the finished goods, the impugned demand of CENVAT credit is not sustainable and the same cannot be recovered. From the facts of the present case, we find that Appellant had availed CENVAT credit in respect of plastic granules either procured locally or imported by them and the said goods were sold after manufacturing modified LLPE. As per the submissions of the Ld. Counsel, the Appellants have discharged the excise duty at the time of removal of such imported goods. In our view if the excise duty was paid on such goods at the time of clearance no demand exist. 8.62 As regards the availment of CENVAT credit, we refer to Rule 16 of Central Excise Rules, 2002 which reads as under :- "Rule 16 of Central Excise Rules, 2002 (1) Where any goods on which duty had been paid at the t....
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....oods. It is found that since the Appellants have paid duty equivalent to the Cenvat credit availed or more, no further demand would exist. 8.64 In any event, we find that the said issue is considered in various judgments, as cited by the Appellant and in the impugned order :- (i) Ajinkya Enterprises v. CCE, Pune-III [2013 (288) ELT 247 (Tri .- Mum)], affirmed by the Hon'ble Bombay High Court [2013 (294) ELT 203 (Bom.)] :- "9. We have seen from the facts of this case where as per Circular dated 7-9-2001, the activity of slitting of HR/CR coils into strip was amounted to manufacture. It is admitted fact that the said Circular was withdrawn on 2- 3-2005. Thereafter, the appellants sought clarification through various letters to the department to clarify whether the composite activity of de- coiling of HR/CR coils, cutting and slitting into specific sizes and thereafter pickling and oiling amounting to manufacture or not. That was clarified only on 24-6-2010. In the case of Resistance Alloys (supra) and P.V. Sanghvi (supra), wherein it was held that process of pickling and oiling would not amount to manufacture, but in the case in hand before us, the appellants were ....
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....SAIL (supra), M.P. Telelinks Ltd. (supra), Creative Enterprises (supra) which was upheld by the Hon'ble Apex Court that once duty on final products has been accepted by the department in the case, CENVAT credit cannot be denied even if the activity does not amount to manufacture. 12. Therefore in view of the above discussion, we find that the duty paid by the appellants has been accepted by the department which is admittedly more than the CENVAT credit availed by the appellants. Therefore, following the various judicial pronouncements as discussed herein above, we hold that the appellants are not required to reverse the credit. Accordingly, the appeals are allowed with consequential relief." (ii) Commissioner of Central Ex. & Cus., Surat-III v. Creative Enterprises [2009 (235) ELT 785 (Guj.)] as affirmed by the Hon'ble Apex Court in 2009 (243) ELT A120 (Supreme Court) :- 6. When one goes through the order of the first appellate authority, it is apparent that the respondent has been held to be a manufacturer as defined in Section 2(f) of the Central Excise Act, 1944. The appellate authority has taken into consideration the activities carried on by the re....
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....s." (iv) Vickers System International Ltd. v. Commissioner of C. Ex., Pune-I [2008 (10) STR 378 (Tri .- Mumbai)] :- "12. In the present case, the Department seeks to deny and recover the CVD amount availed as credit amounting to Rs. 6,49,78,829/- by the appellants or the imported inputs sold as such in India. 13. The appellants had cleared such imported goods on the payment of duty, wherein the assessable value was based on the sale price. The sale price used to have a general mark-up of 30% on the landed cost. Hence, the sale price was always higher than the (value plus customs duty) at the time of import. Reversal of credit now demanded by the impugned order has already been reversed by the appellants. Duty paid at the time of clearance should be treated as reversal of the alleged ineligible credit. Hence, the demand is not maintainable. The entire credit availed on imported inputs has to be considered as utilized towards the payment of duty on the sale of such imported goods only. Therefore, the Department cannot once again demand the reversal, which has already been done. 14. If no duty was payable on the sale of the imported goods, then the duty p....
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....v. Piramal Spinning & Weaving Mills Ltd. - 2002 (145) E.L.T. 322 (T) = 2002 (49) RLT 741 (T) took the credit of the duty paid on the processed fabric. The processed fabric was then subjected to the processes such as cutting, folding and packing. The credit taken on the processed fabric was utilized for the payment of duty on the packed fabric cleared by the assessee. The Department denied the credit taken on the processed fabric on the ground that the processes undertaken by the assessee did not amount to manufacture. The Tribunal dismissed the Department's appeal on the ground that the duty paid by way of the debit in the Modvat account should be treated as the reversal of the inadmissible credit taken and, therefore, no demand would lie. 17. The following case laws lay down that when the process is held to be not manufacture, then the duty paid on the final product should be treated as reversal of the ineligible credit on the inputs and the assessee cannot be called upon to pay the credit :- i) Singh Scrap Processors Ltd. v. CCE - 2002 (143) E.L.T. 619 (T) (ii) PSL Holdings Ltd. v. CCE - 2003 (156) E.L.T. 602 (T) (iii) Vinayak Industries v.....