2018 (3) TMI 1841 - HC - Central Excise

SSI Exemption - clubbing of clearances - Whether the CESTAT is correct in holding that M/s. Vyas Textiles and M/s. Vyas Textiles, B Unit are separate units, individually eligible for the benefit of N/N. 1/1993, as amended when the authorised signatory of both the units and son of the proprietor has clearly admitted that both units are owned by the same person? - HELD THAT - The CESTAT has erred in not holding that declarations opting under SSI scheme separately for both the units is a gross misdeclaration when they knew pretty well that they are proprietorship firms and owned by one and the same individual. This has been done with an intention to evade payment excise duty by wrongly availing SSI exemption for both the units and suppressed the information from the department with an intention to avail the ineligible exemption - Mr. M.G. Vyas, knowing that both the units are owned by him had filed option to avail SSI benefits for each units as if the both are separate units headed by separate individual. In view of the settled legal position brought out by the above referred decision of the Tribunal, the culpability of Mr. G.M. Vyas is clearly established. As such, the decision given by the Tribunal is erroneous and liable to be set aside. The CESTAT has erred in holding that the statements recorded from customers, workers and transporters cannot be the basis for establishing the misdeclaration that cone yarn/cheese yarn were removed under the guise of Hank yarn. On examination of the statements recorded from customers it is seen that there is a clear admission of the misdeclaration of the description of the goods by the respondent in the invoices which mentions plain reel hanks instead of the cone/cheese yarn dispatched by them. The CESTAT has not appreciated the fact that the usage of plain reel hanks is not required by the customers who manufacture Terry towels and that there is a deliberate misdeclaration regarding the Plain Reel Hanks supplied by the respondent to its customers stands clearly proved in this case - the CESTAT has not correctly reasoned or given any finding as to how these statements cannot be accepted especially when the customers themselves have admitted the receipt of cone yarns which are used by them for the manufacture of Terry Towels which is totally different from the description given in the invoice. Such a decision cannot stand the test of legal scrutiny and liable to be set aside. Clandestine Removal - Demand of Excise duty - cotton yarn in cheese form, cleared in the guise of Plain Reel Hank (PRH) - invocation of proviso to Section 11A of CEA - M/s. Vyas Textiles has not resorted to any clandestine removal when the conclusions drawn from admissions of the customers and the evidences brought on record speak otherwise? - HELD THAT - The adjudicating authority has not given due cognizance and a clear finding as to how the parallel set of invoices recovered by the investigating agencies from the premises of the respondent is not a valuable evidence for clandestine removal of cotton yarn or at best a corroborative evidence for the removal of cotton yarn in the guise of Plain Reel Hanks. This has also not been examined by the CESTAT as well. This recovery of parallel set of invoices from the premises points out to illegal dealing on the part of the respondents - the finding given by the Hon ble Tribunal that there is no sufficient corroborative evidence to sustain the case against the respondent lacks merit and hence liable to be set aside. Burden to prove clandestine manufacture and removal is on the revenue. The standard of proof has to be necessarily based on preponderance of probabilities. Conjunctures and surmises cannot be the basis of proof, when clandestine removal is alleged and for establishing the said charge, there should be positive evidence. Therefore, when the department has alleged clandestine production and removal of goods, without due proper accounting in the records and without payment of duty, the burden of establishing the allegation lies heavily on the department. In the case on hand, the department has not discharged the burden. No substantial questions of law, are involved - Appeal dismissed - decided against appellant.

Issues Involved:
1. Clubbing of value of clearances of both units for SSI exemption.
2. Invocation of the proviso to Section 11A for demanding duty.
3. Allegation of clearing cheese yarn in the guise of hank yarn.
4. Quantum of clearances and duty due.

Issue-wise Analysis:

1. Clubbing of Value of Clearances for SSI Exemption:
The primary issue was whether the clearances of M/s. Vyas Textiles and M/s. Vyas Textiles 'B' Unit should be clubbed for the purpose of SSI exemption. The adjudicating authority found that both units were registered separately before the SSI exemption was extended to cotton yarn. The registration certificates indicated that the main unit was in the name of G.M. Vyas, while the second unit was in the name of M.G. Vyas, his son. The department's allegation that the proprietor deliberately obtained two registrations by changing initials was found to be factually incorrect. The CESTAT upheld this finding, noting that the department failed to prove that both registrations pertained to the same individual. The Tribunal also noted that the returns were scrutinized and accepted by the proper officer, indicating no suppression of facts. Therefore, the respondents were deemed eligible for SSI exemption for both units for the year 1994-95.

2. Invocation of Proviso to Section 11A:
The department sought to invoke the extended period under Section 11A, alleging suppression of facts. However, the adjudicating authority noted that the applications for registration were made in 1992-93, a period when cotton yarn was not under the SSI scheme. Therefore, there could not have been any intention to evade duty at the time of filing the applications. The adjudicating authority concluded that there was no suppression of facts with the intention to evade duty, and thus, the demand of ?3,45,000/- was time-barred. The CESTAT concurred, emphasizing that the burden of proving suppression with intent to evade duty lies with the department, which it failed to discharge.

3. Allegation of Clearing Cheese Yarn in the Guise of Hank Yarn:
The department alleged that the assessee cleared cheese yarn in the guise of plain reel hanks (PRH), based on statements from customers, workers, and transporters. The adjudicating authority found that the statements were not supported by any material evidence. The Tribunal noted that the customers' statements were repetitive and lacked documentary support. Additionally, the transporters' statements were deemed unreliable as they had stopped business with the assessee years earlier. The Tribunal emphasized that the burden of proof lies with the department, which failed to provide corroborative evidence. The adjudicating authority's finding that there was no misdeclaration was upheld.

4. Quantum of Clearances and Duty Due:
The adjudicating authority found that the department failed to prove the clandestine removal of goods. It was noted that the clearances were supported by invoices, and no evidence was found at either the manufacturers' or customers' end to support the department's allegations. The Tribunal upheld this finding, noting that the department's reliance on uncorroborated statements was insufficient to establish clandestine removal. The Tribunal also highlighted that the assessee had fulfilled its hank yarn obligation as per statutory requirements, further supporting the argument that there was no misdeclaration.

Conclusion:
The High Court dismissed the appeal, emphasizing that the burden of proving clandestine manufacture and removal lies with the revenue, which must be based on positive evidence rather than conjectures and surmises. The concurrent findings of fact by both the adjudicating authority and the Tribunal were upheld, and no substantial questions of law were found to warrant interference.

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