2018 (4) TMI 1307 - AT - Central Excise

Clandestine manufacture and removal - footwears - the goods were shown to have been manufactured by societies which as per the department were bogus - Revenue is against the findings that the goods were manufactured by the individual cobblers/ karigars and cleared through societies and that there is no evidence to show that the Respondents manufactured the goods themselves or got the same manufactured on their behalf - corroborative evidences. Held that - when the revenue has failed to show any involvement of Respondents in manufacture of footwear, in that case there is no reason to raise demand against the Respondents. Further the sales tax, income tax assessments clearly shows that the Respondent did not undertake any manufacturing activity. Even the police enquiry conducted shows that the societies were genuine and had some genuine members. In the whole investigation it is nowhere appearing that the Respondents purchased any raw material or leather for getting the footwear manufactured. Even none of the individual or entity has named Respondent as the person who got the goods manufactured on his behalf - The onus of proving that the Respondent is the manufacturer of the goods has nowhere been discharged the revenue. The show cause does not even show as to where the goods were manufactured and in which premises the actual physical activity of manufacture took place. There is no inculpatory statement of any person of the Respondent company that they themselves were manufacturing the goods in question. In order to show that there has been production of goods the evidences in the form of use of raw material, labour, machine etc has to be shown whereas in the present appeals none of such elements are present. Hence it cannot be said that the Respondents has produced the goods. The Respondents cannot be held liable for duty as no evidence of manufacture of footwear by them or on their behalf has been brought to the record - appeal dismissed - decided against Revenue.

Issues Involved:
1. Whether the respondents were the actual manufacturers of the footwear.
2. Whether the respondents used cooperative societies as a conduit to claim inadmissible benefits of exemption from Central Excise duty.
3. Whether the statements of the office bearers of the cooperative societies are admissible as evidence.
4. Whether the respondents can be held liable for duty under Central Excise law.

Issue-wise Detailed Analysis:

1. Whether the respondents were the actual manufacturers of the footwear:
The brief facts of the case indicate that the respondents were engaged in the manufacture of footwear and were issued show cause notices alleging that they procured goods from various cooperative societies to claim exemptions. The adjudicating authority dropped the proposed demands, holding that the goods were manufactured by individual cobblers/karigars and cleared through societies. The revenue's appeal argued that the respondents were the actual manufacturers, using cooperative societies only for billing purposes. However, the tribunal found no evidence that the respondents themselves manufactured the goods or got them manufactured on their behalf.

2. Whether the respondents used cooperative societies as a conduit to claim inadmissible benefits of exemption from Central Excise duty:
The revenue argued that the respondents used cooperative societies to claim exemptions under Notification No. 198/97-CE and Notification No. 88/88-CE. Statements from office bearers of the societies indicated that the societies did not manufacture any footwear but only issued purchase bills for monetary consideration. The tribunal, however, noted that the respondents maintained records showing transactions with the societies and that the goods were manufactured by local karigars and supplied through these societies. The tribunal concluded that the societies were not mere facades and had some genuine members.

3. Whether the statements of the office bearers of the cooperative societies are admissible as evidence:
The revenue relied heavily on the statements of office bearers of the societies, who stated that the societies did not produce any footwear and only issued bills. The tribunal, however, found that these statements alone were insufficient to prove that the respondents were the actual manufacturers. The tribunal emphasized the need for concrete evidence, such as the procurement of raw materials, use of power, and details of manufacturing premises, which were not provided by the revenue.

4. Whether the respondents can be held liable for duty under Central Excise law:
The tribunal held that the burden of proof was on the revenue to show that the respondents were the manufacturers of the goods. The tribunal found no evidence that the respondents engaged in any manufacturing activity or supplied raw materials to any unidentified manufacturers. The tribunal also noted that the respondents' records, including sales tax and income tax assessments, supported their claim that they were not manufacturers. Consequently, the tribunal upheld the adjudicating authority's decision to drop the demands and rejected the revenue's appeals.

Conclusion:
The tribunal concluded that the respondents could not be held liable for duty as no evidence of manufacture by them or on their behalf was brought to the record. The appeals filed by the revenue were rejected, and the impugned orders were upheld. The cross-objections were also disposed of.

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