2017 (12) TMI 7 - AT - Central Excise

Clandestine manufacture and removal - TMT Bars - duplication of demand - Held that - we are satisfied that the Department have wrongly read the account of the appellant in the books of KIL. It is evident that both the transaction on the debit column and the credit column have been added, arriving at erroneous conclusion. Thus, we hold that the show cause notice with respect to the demand of ₹ 16,00,60,335/- is erroneous and not sustainable. Accordingly, we set aside the demand of ₹ 16,00,60,335/- in respect of royalty payments by appellant to KIL, and remand the matter to the learned Commissioner for re-verification of the mistake in calculation, apparent on the face of record. Stock verification - case of appellant is that no actual stock taking was done by the officers and the statements recorded during search and investigation were under pressure, is not correct - Held that - regarding Physical verification of stock we observe that such exercise was challenged by the appellant immediately after search, the Pancha witness Shri Daulat Ram during cross examination confirms not undertaking of stock taking exercise. During subsequent statements the Appellant or its directors were never again confronted on the aspect of retractions and from this we find force in the appellants arguments that no such stocktaking was actually done - Ld. Commissioner s finding that each test recorded in the diary of chemist is one heat and calculating total production by an arithmetic calculation is not sustainable in view of the specific statement of the director during investigation and not recording of the any statement of the chemist who had made entries in the said diary. Further, it is a legally settled position that no demand for clandestine manufacture can be sustained based on theoretical and uncorroborated calculations. Clandestine removal based on register of vehicles booking maintained by New Vikas Transport Company - Held that - we find force in the appellants arguments that these are not record of vehicles actually transported but only a memoranda record of bookings recorded by transporter for approximate vehicles to be supplied to the appellant. This is very clear from the record of cross examination of the transporter Moin Khan, which leaves no room for any other interpretation and therefore any such demand is not sustainable. This also applies to the demand based on loose GRs. A perusal of ledger resumed from Kamdhenu Ispat Ltd Shows separate column for Debit and credit amount whereas Revenue has put the amount of debit column as well as credit column in one single Column and then totaled it, which is nearly doubled because of wrong merging of the Debit side and credit side column. In our view any confirmation of demand based on such doubling of amount(s) cannot be sustained. There is no plausible reasoning given by Revenue in support of totaling of debit amount and credit amount, while calculating demand of duty because of difference in royalty. Further, not recording of statement of Kamdhenu Ispat Ltd, on such resumed ledger account, also shows that there is no substance in the finding of the Revenue that alleged difference in royalty leads to clandestine clearances. Appeal allowed in part and part matter on remand.

Issues Involved:
1. Demand based on royalty payments.
2. Stock verification and related findings.
3. Demand based on booking registers and loose GRs of transporters.
4. Confiscation of goods and currency.
5. Imposition of penalties.

Detailed Analysis:

1. Demand Based on Royalty Payments:
The Tribunal found that the Department misinterpreted the appellant's accounts in the books of Kamdhenu Ispat Ltd. (KIL). The Commissioner wrongly added the debit and credit entries in the appellant's account, leading to an erroneous demand of ?16,00,60,335/-. The Tribunal set aside this demand and remanded the matter for re-verification, noting that the Department's interpretation was incorrect and lacked supporting evidence from KIL's records.

2. Stock Verification and Related Findings:
The Tribunal observed that the stock verification process was flawed. The immediate retraction by the appellants and the cross-examination of the Pancha witness, Shri Daulat Ram, who confirmed that he did not witness the stock-taking, undermined the credibility of the stock verification. The Tribunal also noted the impracticality of weighing approximately 2200 tons of steel within 15 hours. Consequently, the findings of stock discrepancies and related charges of clandestine clearance were deemed unsustainable.

3. Demand Based on Booking Registers and Loose GRs of Transporters:
The Tribunal found that the booking registers maintained by New Vikas Transport Company were not records of actual transportation but merely memoranda of bookings. This was corroborated by the cross-examination of the transporter, Moin Khan. The Tribunal held that the demand of ?7,33,57,221/- based on these registers and loose GRs was not sustainable, as there was no corroborative evidence of actual transportation of goods.

4. Confiscation of Goods and Currency:
The Tribunal set aside the order of confiscation of cash and goods, noting the lack of credible evidence supporting the Department's claims. The discrepancies in the stock verification process and the flawed interpretation of the appellant's accounts further weakened the basis for confiscation.

5. Imposition of Penalties:
All penalties imposed on the appellants were deleted. The Tribunal found that the Department's case was based on erroneous calculations, flawed stock verification, and unsubstantiated assumptions. Therefore, the penalties lacked a valid foundation.

Conclusion:
The Tribunal allowed the appeal No. E/56611/2013 in part, setting aside the demands of ?7,33,57,221/- and ?16,00,60,335/- (the latter remanded for re-verification), and nullified the confiscation of cash and goods along with all penalties. All other appeals were allowed with consequential benefits. The judgment emphasized the need for accurate and corroborated evidence in cases of alleged clandestine clearance and duty evasion.

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