TaxTMI 
TaxTMI 
2026 (8) TMI 1592
X X X X Extracts X X X X
X X X X Extracts X X X X
....1)(c) of the Central Excise Act, 1944, were confirmed against the appellant. 2. The facts of the case are that the proceedings originated from an investigation conducted by the officers of the Directorate General of Central Excise Intelligence (DGCEI), Guwahati Unit and Kolkata Unit in respect of the appellant's activities during the Financial Years 2012-13 and 2013-14. On 02.07.2014, officers of the DGCEI, Guwahati Unit and Kolkata Unit conducted searches at the office and factory premises of the appellant as well as at the residential premises of its Chief Executive Officer, Shri Mukesh Goyal. During the course of such searches, various documents, registers and other records were seized and subsequently examined by the investigating authorities. On scrutiny of the seized records and other documents obtained during the course of investigation, the Department formed a view that the appellant had engaged in clandestine manufacture and clearance of finished goods without payment of Central Excise duty and had also cleared certain goods to a related person at a value lower than the value applicable to independent buyers. 3. It was noticed by the Department that the appellant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd 10,83,660 kgs. for 2013-14, respectively. Applying the value adopted by the Department for such finished goods as Rs.45.00 per kg., the alleged Central Excise duty evasion on this count was quantified at Rs.84,73,518/-, inclusive of applicable cess. 4. Further, the Department also formed the view that the appellant had evaded payment of central excise duty on account of clearances made to M/s. Akash Enterprise. Upon scrutiny of the documents, including invoices and bank statements, it appeared to the Revenue that the appellant had sold certain finished goods to the said concern at prices allegedly lower than those charged from its independent customers. It was further noticed that Shri Mukesh Goyal, who was the Chief Executive Officer of the appellant-company, was also the proprietor of M/s. Akash Enterprise. From the website of the Ministry of Corporate Affairs, Government of India, it was noticed that Smt. Pinky Mittal and Smt. Nitu Agarwal were the Directors of the appellant-company. The Department took note of the fact that Shri Mukesh Goyal was related to Smt. Pinky Goyal, one of the directors of the appellant-company, as brother and sister. The other director, Smt. Nitu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctions had, for the most part, been received through account-payee cheques. The appellant also furnished separate statements for the Financial Years 2012-13 and 2013-14, together with the corresponding bills and challans, in support of its contention. 6.2. As regards the allegation concerning M/s. Akash Enterprise, the appellant disputed the finding that the said concern was its related person and consequently denied that there had been any clearance at a lower value warranting differential Central Excise duty. In respect of the proposed Service Tax demand under GTA services, the appellant contended that the Department had failed to take into account the ST-3 Return for February 2013 and that, upon consideration of the said return, there would be no discrepancy between the figures reflected in the Balance Sheet and those declared in the Service Tax returns. 6.3. The proceedings culminated in the Order-in-Original No. 25/COMM/CE/SLG/16-17 dated 30.09.2016, whereby the ld. adjudicating authority confirmed the demand of Rs.84,73,518/- on account of alleged clandestine manufacture and clearance of finished goods and Rs.76,051/- on account of the alleged undervaluation of goods cl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hence, cannot sustain in law. (v) That M/s. Akash Enterprise i.e. the buyer is a proprietorship firm while appellant i.e. the seller is a private limited company. There is no allegation even that the appellant had any involvement and/or share in the business of such buyer Even if the proprietor of the buyer happens to be the brother of one Director of the appellant company that does not ipso facto renders the two concerns related person' in order to invoke the provision of Rule 9 of Central Excise Valuation Rules, 2000. It is settled position of law that in order to invoke such provision of law, existence of 'mutuality of interest' has to be established first, which the Revenue has failed to substantiate. Further, there is no evidence that the goods sold to M/s. Akash Enterprise were undervalued. Hence, any demand of Central Excise Duty in this regard is also not sustainable in law. (vi) The following case-law were relied upon: - * Continental Cement Company v. Union of India [2014 (309) ELT 411 (All.)]; * Triveni Engineering and Industries Limited v. Commr. of C.Ex., Allahabad [2016 (334) ELT 595 (All.)]; * Chandan Steel Lim....
X X X X Extracts X X X X
X X X X Extracts X X X X
....manufacture and clearance of finished goods amounting to Rs.84,73,518/- 11. We find that the appellant has placed on record that, during the Financial Years 2012-13 and 201314, it had received 'Wire Rod in coil form' under a total of 33 invoices, comprising 21 invoices during 2012-13 and 12 invoices during 2013-14. The Central Excise duty paid on such inputs was stated to be Rs.14,28,882/- during 2012-13 and Rs.13,71,461/- during 2013-14, aggregating to Rs.28,00,343/-. 11.1. A significant aspect which weighs with us at the outset is that no CENVAT credit was availed by the appellant in respect of the aforesaid inputs. The Revenue has not placed any contrary material on record to demonstrate that the appellant had, in fact, taken or utilized CENVAT credit on the said duty-paid inputs. The absence of any such contrary evidence assumes relevance because the Department's principal premise is founded upon the non-entry of the said inputs in the RG-23A Part-I Register. In this regard, it is also to be noted that the mere absence of entries in RG-23A Part-I cannot, by itself, lead to the inevitable conclusion that the corresponding inputs were necessarily consumed in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ial Years 2012-13 and 2013-14, corresponding to the particulars contained in Annexure-A to the Show Cause Notice, setting out the details of the quantities of 'Wire Rod in coil form', which, according to the appellant, were sold as such in the course of its trading activity upon payment of applicable VAT. The appellant has asserted that no CENVAT credit was availed in respect of these goods and that the said goods were sold directly from its premises without being subjected to any process of manufacture. It is further borne out from the records that the appellant had furnished copies of the aforesaid statements, together with the corresponding sale invoices, challans and other supporting documents, before the adjudicating authority during the course of adjudication proceedings. The said documents demonstrate that the quantities reflected in Annexure-A to the Show Cause Notice represented goods purchased and subsequently sold as such in the course of trading activity, rather than inputs clandestinely consumed in the manufacture of excisable goods. For better appreciation of the facts, the said statements furnished by the assessee have been scanned and reproduced below: - 12.2. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ccount for the apparent shortfall and that the balance amounts were received in cash in the ordinary course of business. We find that the aforesaid explanation furnished by the appellant has not been effectively controverted by the Revenue by bringing on record any positive or independent evidence to demonstrate that the alleged differences in receipts represented consideration for clandestinely manufactured and cleared goods. Objection No. 2 - Alleged duplication of Invoice No. SVPL/076/13-14 12.6. The second objection pertains to Invoice No. SVPL/076/13-14 dated 25.03.2014, which, according to the adjudicating authority, was shown in the reconciliation statement against two different purchasers, namely, M/s. Nangalic Pokarmar Edu and M/s. Super Traders Pvt. Ltd., for quantities of 24.81 MT and 24.08 MT respectively. This discrepancy was treated by the adjudicating authority as another circumstance indicative of the appellant having resorted to unfair means. 12.7. The Ld. Counsel for the appellant, however, has brought to our knowledge in this regard that the reference to Invoice No. "SVPL/076/13-14" against M/s. Nangalic Pokarmar Edu was merely a clerical/typing error an....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cannot establish the essential allegation of clandestine manufacture and removal. The absence of a banking trail may invite examination of the manner in which the transaction was accounted for under other applicable fiscal laws; however, it does not, without more, constitute evidence of manufacture of excisable goods or their clandestine clearance. For the purposes of the present proceedings, what is required to be established is the physical transformation of the inputs into excisable finished goods and their subsequent clearance without payment of duty. In the present case, no independent evidence has been brought on record to establish any corresponding unaccounted consumption of labour, electricity, production activity, transportation, stock movement or identification of buyers of the alleged clandestinely manufactured finished goods. The Revenue has essentially proceeded from the premise that the inputs which were not reflected in the RG-23A Part-I register must necessarily have been consumed in manufacture and the resultant finished goods must thereafter have been clandestinely cleared. Such a chain of inference cannot, in our view, be completed merely on the basis of absenc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers, unaccounted financial transactions or other contemporaneous material connecting the alleged inputs with the alleged clandestine clearances. Mere theoretical variations in electricity consumption, freight expenditure or accounting records, without a demonstrable nexus with clandestine production and removal, cannot by themselves discharge such burden. 14.2. The said issue has also been examined by the Hon'ble High Court of Allahabad in the case of Continental Cement Company v. Union of India [2014 (309) E.L.T. 411 (All.)], wherein it has been held as under: - "10. We have heard the learned counsel for the parties and gone through the material available on record, from which it appears that Shri Shubhashis Dev, Government Examiner of questioned documents, Shimla gave his written opinion dated 12-6-1998, wherein he has stated that "the documents of this case have been carefully and thoroughly examined. The enclosed writings and signatures stamped and marked were all written by one and the same persons". 11. From the above, it appears that all the documents were written by one and the same persons, though the dates and the name of the parties are different. Wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the addition and cancel the penalties. Hence we hereby set aside the impugned order passed by the Tribunal and restore the order passed by the first appellate authority, along with the reasons mentioned herein. 17. In the result, all the appeals filed by the appellants are hereby allowed." 14.3. Further, the Tribunal in M/s. Nova Petrochemicals v. Commissioner of C.Ex., Ahmedabad-II [Final Order Nos. A/11207- 11219/2013 dated 26.09.2013], while dealing with a similar issue, has observed as follows:- "40. After having very carefully considered the law laid down by this Tribunal In the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenues which mainly are the following: (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of: (a) raw materials, in excess of that contained as per the statutory records; (b) Instances ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....even that the Noticee is flouting all the rules and taking shelter under the plea of 'accounting mistake.' The term 'accounting mistake' seems to be a very convenient excuse and a clever ploy by the Noticee to escape from the allegations. But, I do not consider this to be an 'accounting mistake' or 'oversight' or 'clerical error' but rather a very grave and serious offence. By terming it as an 'accounting mistake' the Noticee is trying to belittle the charge, whereas the action of clearing from nil balance constitutes a grave offence to say the least. The RG-1 forms the very backbone of documents of the factory from where each and every detail can be inferred. This register is to be maintained scrupulously and conscientiously. Any lacuna on the part of the assessee in maintaining the register is to be viewed with utmost seriousness. On receipt of the inputs by the Noticee they were required to cause necessary entries in their register incorporating all the details and such goods were to be removed under the cover of an invoice as envisaged under Rule 11 of the Central Excise Rules, 2004. I find that the Noticee paid scant reg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n our considered view, do not furnish sufficient basis for rejecting the entire explanation and, much less, for concluding that the corresponding goods were necessarily subjected to a process of manufacture and clandestinely cleared. Electricity and Freight/Carriage Expenses 18. Before we part on this issue, we find it relevant to take note of another circumstance relied upon by the Revenue for arriving at the said allegation of clandestine manufacture and clearance, viz. the variation in electricity consumption expenses and freight and carriage expenditure between the two financial years. As noticed hereinbefore, the Department has sought to draw an adverse inference from the fact that, whereas electricity expenditure was stated to be approximately Rs.112 lakhs for 2012-13 against production of about 820 MT, the corresponding expenditure in 2013-14 was approximately Rs.73 lakhs despite the reported production increasing to about 938 MT. Likewise, freight and carriage expenditure was found to have declined from approximately Rs.52 lakhs in 2012-13 to Rs.29 lakhs in 2013-14, notwithstanding the increase in the reported production. According to the Revenue, these variations wer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. A presumption, however strongly worded, cannot take the place of legal proof, particularly when the charge in question is one of clandestine manufacture and removal of goods. In the absence of independent and affirmative corroboration, the variations in electricity and freight expenditure can, at best, raise a suspicion; they cannot, by themselves, constitute the foundation for sustaining the demand of Central Excise duty on alleged clandestine manufacture and clearance. 19. In the light of the foregoing discussion, we are unable to concur with the adjudicating authority that the non-entry of the disputed inputs in RG-23A Part-I, coupled with the discrepancies noticed in the reconciliation statements, constitutes sufficient evidence to sustain the allegation of clandestine manufacture and removal. The procedural lapse, though established, cannot be elevated into substantive evidence of clandestine clearance in the absence of the requisite corroborative material. 20. Having an overall view of the facts, and upon a cumulative appreciation of the evidentiary material placed on record, we hold that the allegation by the Revenue, of clandestine manufacture and removal, has no l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ellant cannot, by itself, establish mutuality of interest between the appellant-company and his proprietary concern. His position as an employee or managerial functionary of the appellant is conceptually distinct from ownership or financial participation of the appellant in his separate proprietary business. Equally, the fact that he happened to be the brother of one of the Directors of the appellant does not, without further evidence demonstrating the requisite financial or commercial interdependence, satisfy the statutory test. 21.3. Accordingly, we find that the foundational requirement for invoking the related-person provisions under Section 4(3)(b) of the Central Excise Act, 1944 has not been established in this case by the Revenue. The mere familial relationship between the proprietor of the buyer and one of the Directors of the appellant, coupled with the fact that the proprietor was also employed as the appellant's CEO, is insufficient to bring the transaction within the statutory definition of a related-person transaction. Consequently, the consequential adoption of a higher value for the purpose of determining Central Excise duty also lacks a sustainable legal foun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....01060 10000 4150 15,01 2013 AT 151 Svp1/013/12-13 Suraj Kumar ( Beedogra) 452652 1510J 4703 21.12.2017 ILC/906/12-13 Indore Link Chain 15.318 998153.65 23926.15 0.2 622030 17.01.2013 15.318 iv:4/014/12-13 Anunag Chows | Mathathanga 5157836 14681,4 6434 25.12.2012 ILC/1006/12-13 Indore Link Chain 15.387 601463.98 24058.55 0.46 625523 11.01.2013 8.400 V/00G/12-13 Suraj Pradhan ( Milk ] 3216CC 12534 3344 11.01.2013 7.187 Sval/007/12-13 Areshuman Basumatadi 206957 11371 308-8 26.12.2012 ILC/1014/12-13 Indore Link Chain 15.176 600102.38 24004.1 0.52 624107 10.01.2013 15.276 vpl/005/12-17 Ram Charan Paswan 614095 24564 63865 07.01.2015 LD/1036/12-13 Indare Link Chein 13.82 STANCE.12 22550,72 0.16 587359 10 01.2013 13.82 Swpl/001/12-13 Garysacher Promotors (P) Ltd 55450G 23313 6075 07.DL.2015 LC/1057/12-13 ndore Link Chain 13.8 563950.8 22558.03 0.17 586503 10.01.2013 Nol/007/17-13 Gangadhar Promotors (P) Ltd 543742 23350 5070 17.01.2019 LC/103/12-13 negre Link Chain 1183 565176.78 22507.07 0.15 587784 10.01.2013 13.83 N:1/003/12-13 Gangachar Fromators [P] Ltd 595000 23400 CUBA 07.01.2015 ILC/1069/17-13 ndote Link Chain 14.8 563950.8 22....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 07.05.2013 01 542/006/13-14 Sandlp Agarwal 200400 1020 210428 ANNEXURE - A 13-14 Purchase Detall's Trading Purchase and the Oty will be sale deatials Sale Deatails davet no. $ Amount Vat Tax Total Date and no Neme of Supplier Quantity Amount led Ed Cess ih Cast Vat 4% Rolf Total Date Bil No Party Name 04.04.2013 DGF-67 Super Smelters Limited 23.38 974241 116909 2338 1169 $4733 1149390 30.05.2013 QTy 10.000 Svol/013/13-14 Bishnu Barman 400000 20000 420000 30.05.2013 10.000 5val/014/13-14 Narayan Barman 400000 20000 420000 30.05.2013 8.380|Svol/015/13-14 santosh Barman 335200 16760 351950 04.04.2013 DGP-68 Super Smelters Limited 25.24 866450 103974 2079 1040 48677 1022220 28.05.2013 25.24 Sval/011/13-14 Manifold Vanilya P Ltd 10OS600 50430 1060080 06.05.2013 556 Baba Strips & Tubes Ltd 32.73 1129120 135494 2710 1355 63434 1332113 10.05.2013 16 365 5val/007/13-14 Narayan Chettri 654600 32730 687330 10.05.2013 16 365 5val/008/13-14 Nabin Chettri 654600 32730 687330 03.05.2013 559 Baba Strips & Tubes Ltd 31.05 1071153 128540 2571 1285 60178 1263737 11.05.2013 15.00 Svol/009/13-14 Rakash Sarkar GOOOOO 300....
X X X X Extracts X X X X
X X X X Extracts X X X X
....031/13-14 Sla Flour Mills P Ltd 912396 47120 959516 11.03.2013 DGP-1619 Super Smelters Limited 25.88 800674 96081 1922 9SE 44982 944620 25.08 2013 5.85 Svol/03/0/13-14 Sle Flour Mills P Ltd 942032 47102 989134 19.10.2013 DGP-2495 Super Smelters Limited 24.61 288502 94620 1392 946 44295 93025 10.2013 24.61 Svpl/042/13-14 Suraksha Vyapaar P Ltd 9142515 457:3.5 959975 10.12.2013 116 Ramajee Ispat Put Ltd 19.23 74710 1494 747 34981 734609 15.12 2013 19.22 Svol/044/13-14 Radiant Nimman P Ltd 732663 36633 769296 11.12 2013 123 Ramajee Ispat Pvt Ltd 18.03 583811 70057 1401 TOL 32799 688769 17.12 2013 13.03 Svpl/045/13-14 Radiant Nimman P Ltd 686943 34347 721290 23.12.2013 127 Ramajee Ispat Put Ltd 19.13 619429 74331 1487 743 34500 730790 0 05.02.2013 19.13 5val/057/13-14 Sureksha Vynpaar P Ltd 914414 45721 960135 23.12.2013 128 kamajee Ispat Put Lid 19.94 645657 71479 1550 175 36273 761734 06.02.2013 19.54 5vpl/058/13-14 super Traders Fut Ltd 757720 37826 795606 OL01 2014 527 Amardere Ispat Pvt Ltd 19.39 710662 36933 775595 05.01.2014 19,79 Sval/046/13-14 Geral Vicomn Pvt Ltd 761057 18053 759110 04.01.2014 1290 G D Kalani & 5ons 19.34 700140 1 35457 0.23 744597 597 1 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9341 1456263 09.03 2014 DGP-4769 Super Smelters Limited 25.44 859191 107903 2158 1079 50517 1060845 12.03.2014 23 .44 pl/073/13-14 Nangalic Pokarmar Edu, 1331392 69070 145046] 10.03.2014 DGP-1782 Super Smelters Limited 24.08 851121 102135 2043 1021 47816 100413G 5.03.2014 0 CA 30//076/13-14 Super Traders Pvt Ltd 1307544 65377 1372921 15.01.2014 DGP 4854 Super Smeltees Limited 20 705216 84625 1693 846 39519 832000 25.03.2014 10 Supl/07 7/13-14 Sarveshrestha Traders P Led 10$6000 QUERES 1140100 5.03.2014 OGP-4851 Super Smelters Limited 27.51 972356 136683 2324 1167 54527 1147167 15/03.2014 2 Smp//075/13-14 Luraksha Vypaar P Ltd 1493793 74690 1568481 02 2014 OGP-5059 Super Smelters Limited 24.81 874821 104979 2100 1050 49148 1032098 25:03 2014 1481 5.00/076/13-11 Ä°Rangylle Pokarmar Edu, 1354625 67721 142135X ANNEXURE =A 13-14 Purchase Details WE Andet Trading Purchase and the Qty will be sale deatials Sale Deatalla davaleria . A. off Total Vat Tax Total Date am no Neme af Supplier Quantity Amount Bed Ed Cess Sh Ceis Wat 4% Date Qty 24 NO Party Name 400000 04 04.2013 OGP-67 Super Smelters Limited 28.38 974241 116909 1138 1159 34733 14933....
X X X X Extracts X X X X
X X X X Extracts X X X X
....21 78103 164012 37.03.2013 10.5 53 /025/13-14 Radiant Nimman P Lid 809750 40488 850228 17/07.2013 20.76 5vpl/026/13-14 Radiant Norman P |b! 820020 41001 AG1021 09.07.2013 Sampl/172 Shri Ambika Metaliks Put Itd 20.73 78470G 37240 #24036|24.08.2013 20.73|5.pl/029/13-14 Sig Flour Mills P Ltd 857185.5 2859.5 9000-15 19.06.2013 Sampl/244 Shri Ambika Metaliks Put itd 41.37 1654800 #2740 1737540 21 08 2013 41.37 5mpl/027/13-14 RacSant Nirman P Ltd 1710649 5 15532.5 1795152 20 08.2013 Sampl/245 Chei Ambika Metaliks Pvt ltd 41.38 1655200 82760 17379 950 22.08.1013 01.15 50://918/13-14 Radiant Ninman P Ltel 1711063 BS553 1796616 10.08.2013 DOP-1508 Super Smelters Limited 25.49 800sas 95118 1922 961 44999 944985 5.05.2013 25.89|Sval/031/13-14 Sus Flour Mills P Ltd 742395 47120 969516 13.08.2013 DGP-1619 Super Smelters Umited 25.88 800574 96091 1922 361 44982 944525 25.08.2013 25.88 5vgl/010/13-14 Sip, Flour Mills P Ltd 92032 47102 959134 09.10.2013 DGP-2496 Super Smelters Limited 24.61 TRESO2 14620 1892 946 44296 930256 17.10.2013 5.32.2013 24.61 5v/042/13-14 Suraksha Veapaar Pted 914761.5 45713.5 959075 10.12.2013 116 Ramajee Ispat Pvt Ltd 19.23 82205....
X X X X Extracts X X X X
X X X X Extracts X X X X
....:641 2093 40990 1028784 28.42.2014 24 24.91 5vpl/C69/13-14 Radiant Nainnan P Ltd 1370050 18503 :438553 25.02.2014 DGP-4543 Super Smelters Limited 20 67 723585 B68 35 1737 BER 1028 20551 48124 553571 LDL0511 02 2034 28 02 2014 20.67 vpl/070/13-14 Sarıgalic Pokarmar Edu 1126515 56326 1182841 25.07.1014 DGP-4544 Super Smelters Limited 24.47 456620 102793 2056 2124 1067 49950 30 01. 2014 24.47 vpl/071/13-14 Jangalic Pokarmar Edu 1333615 G5681 1400296 18.02.2014 DGP-4448 Super Smelters Limited 24.58 899285 106714 1183 LO691 60 12.03.2014 24 98 5-01/080/13-14 adiant Numan P Ltd. 1373900 SAGSS 1442595 09.01.2014 DOP-4758 Super Smelters Limited 25.54 902726 108327 167 1079 90715 10517 1065018 12.03.2014 25 54 5x21/072/13-24 Nangalit Pokarmar Edu, 1316822 69341 1456163 09.03.7014 DGP-4769 Suser Smelters Limited 25.44 199191 10730] 2158 2043 1021 17836 1060848 15.03.2014 25.44 5vol/073/13-14 Mangall; Pokarmar Edu. 1381392 69070 1450462 10.07 7014 Dop Aldz Super Smelters limited 14.08 85112 02135 34626 545 19619 1004136 15.03.2014 4.01 5:0/076/13-14 Super Traders Put Lirt 1307544 65377 1372921 15 03 2014 DGP.4854 Super Smelters Limited 20 703216 1693 1357 54627 132000 ....