2019 (1) TMI 1162 - AT - Central Excise

Clandestine removal - demand raised on the ground that investigation and searches were conducted at the factory and office premises of the Appellant concern and one trading firm M/s Sankalp Foils Pvt. Ltd (SFLP) - demand mainly based upon the pen drives seized from the locker whose key was found from ice cream parlour of Shri Manoj Tanna and 11 bundles of loose papers out of which 4 bundles contain the sheets written in gujarati by Shri Ramesh Shah, director of M/s SFL - it is alleged that M/s SFL has acted in contravention of provisions of Central Excise Act as they had received unaccounted raw-materials, suppressed production and clandestinely removed goods against cash sales, issued invoices without actual clearance of goods, availed cenvat credit without actual receipt of goods - cross-examination denied - demand on the ground of under-valuation - imposition of penalty - CENVAT Credit - fake invoices - issuance of invoice without delivery of goods. Held that - Apart from the ledgers pointed out by the revenue one more ledger i.e Purchase-godown ledger was maintained which carried details of sales made by the Appellant. The Appellant has shown from sample entries that the purchases shown in said Purchase godown ledger were of M/s SFPL and is almost same to the sales shown in Bombay Sales ledger. It is their contention that the Purchase-godown legder shows the receipt of goods from M/s SFL by SFPL and the Bombay Sales ledger the sales of said goods by M/s SFPL which makes clear that the Bombay sales ledger belong to M/s SFPL and not SFL. We find that it has not been disputed that the godown at Vasai was owned by M/s SFPL, hence in such case if any godown purchase is shown the same can be only of M/s SFPL. The officers alongwith such ledgers also found the godown records of M/s SFPL and those bundles numbered as 8 to 11 were in handwriting of Dheeraj Jain, godown keeper of M/s SFPL alongwith duplicate copies of chits founds were on account of dispatch of goods thru borkers. The Appellant has shown the total of value mentioned in purchase godown ledger and compared with Bombay Sales which shows that the figures of both are of around same value - Some of the brokers viz. Shri Chhail Singh Deora and Gajendra Purohit also stated that SFL has sold SSCR Coils without any invoice on cash basis of which some coils were used by them for circle cutting and some quantities were sold to some other parties in which case they acted as broker and the payment was collected in cash, but they were not able to provide even the single buyer s name and address who has purchased such goods from them which leads to doubt about the credibility of their statement. The department apart from the papers seized from the locker has not been able to give any independent evidence which can corroborate the charges. Denial of request for cross-examination - Held that - The Appellant had requested for following the provisions of section 9D and cross examination of the persons whose statements were relied upon. It was more necessary in the circumstances that not a single documents was seized from these brokers to support their statement and it was only the pen drives and loose sheets on the basis of which allegations were made. The brokers who supported the allegation of the show cause notice could not produce a single document to support the allegations of clearance of goods without payment of duty. In such case the denial of cross examination and non following the provisions of section 9D is not correct. The sole evidence which has been relied upon by the department is only pen drive date and statement of brokers which were even self contradictory. Though the statement of directors has also been relied upon by the department, but we found that even in some statements they have stated that the data found in pen drive do not belong to M/s SFL and it belongs to M/s Sankalp. Inspite of fact that some of the statements were recorded in presence of Snehil R shah who is director of M/s Sankalp, but even then he was not questioned about such data. Atleast the officers could have recorded his statement to ascertain the truth. Even if the statements of director are considered inculpatory the same cannot be relied upon in absence of corroboration with material evidence. Also, revenue did not undertake any investigation at the end of M/s SFPL from where the clearance of goods has taken place. When the brokers had stated that the delivery was taken from Vasai Godown which was under the ownership of M/s SFPL, the officers should have made investigation. Thus in such circumstances, the demand on account of clandestine removal cannot be made. The onus to prove clandestine clearances has to be discharged by sufficient cogent, unimpeachable evidence - the charges of clandestine removal on the basis of pen drive data and sheets are not sustainable. Demand on the ground of undervaluation - Held that - The revenue has relied upon the statement dt. 28.01.2014 of Shri Kartik Shah wherein he stated that the conclusion drawn by the investigating officers seems to be correct. However no evidence has been placed on record. Even the statement dt. 28.01.2014 gets negated by the subsequent statement dt. 08.10.2013 wherein he stated that he is not able to offer explanation as the pen drives do not belong to Appellant and they have never received any differential value over and above the value shown in invoice. This statement was not mentioned in show cause notice and the appellants have annexed copy of the same with the appeal papers. In such case only on the basis of pen drive the charges of undervaluation cannot be sustained - demand on account of undervaluation is not sustainable. CENVAT Credit - fake invoices - it is alleged that M/s SFL has availed credit on the basis of invoice without actual receipt of goods - Held that - The revenue has not proved the allegation with any evidence as it has to be shown by making investigation at the supplier s end, statements of suppliers and other corroborative evidences. It has also to be shown as to how the purchase amount paid by the Appellant to the supplier came back to them. None of such evidence are on record - the allegation and the findings of the adjudicating authority is not sustainable. Moreover there is no person who has received the cash from the Appellant. No person from Appellant company has been named as having receipt of cash and place where the cash was received or manner of receiving cash. Thus the allegations on this account are not sustainable. Demand also on the ground that they issued invoices without delivery of goods - Held that - The Appellant has consigned the goods to their buyers through M/s SFPL. The goods were handed over to the parties/ brokers from Vasai godwn by M/s SFPL and the Appellants had no role to play in such delivery of goods. There is no evidence at the Appellant s end that they issued any invoice without delivery of goods - the contention of the revenue that the Appellant issued invoice without actual clearance of goods is not sustainable. The demands and penalties imposed against Appellant M/s Shah Foils Ltd. are not sustainable. For the same reason we also hold that the penalty against other appellants is also not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Allegations of clandestine removal of goods by M/s Shah Foils Ltd (SFL).
2. Allegations of undervaluation of goods by M/s SFL.
3. Allegations of availing credit without actual receipt of goods by M/s SFL.
4. Imposition of penalties on M/s SFL and its directors.

Detailed Analysis:

1. Allegations of Clandestine Removal of Goods:
The demand against M/s SFL was based on data retrieved from pen drives and loose papers seized from a locker, which allegedly indicated clandestine clearances. The adjudicating authority confirmed the demand, relying on statements from brokers and buyers, which were deemed contradictory and lacked corroborative evidence. The Tribunal found that the data from the pen drives and loose papers alone could not substantiate the allegations without independent corroborative evidence. The Tribunal emphasized the necessity of following Section 9D of the Central Excise Act, which mandates cross-examination of witnesses whose statements are relied upon. The Tribunal concluded that the denial of cross-examination and the lack of corroborative evidence rendered the allegations unsustainable.

2. Allegations of Undervaluation of Goods:
The demand for undervaluation was based on ledger accounts "Direct Purchases (Value Diff.)" and "Direct Sales (Value Diff.)" found in the pen drives. The adjudicating authority alleged that M/s SFL recovered additional amounts in cash over the invoice value. However, the Tribunal noted the absence of any corroborative evidence, such as proof of receipt of additional consideration. The Tribunal found that the statements relied upon were inconsistent and lacked substantial evidence. Consequently, the demand on the grounds of undervaluation was deemed unsustainable.

3. Allegations of Availing Credit Without Actual Receipt of Goods:
The demand was based on the ledger account "Smi (Cash)" containing entries marked "Only Bills," implying receipt of invoices without goods. The Tribunal found no evidence to support the allegation, such as statements from suppliers or other corroborative evidence. The Tribunal highlighted that the Gujarat VAT forms indicated the actual movement of goods, contradicting the allegation. Hence, the demand was found unsustainable.

4. Imposition of Penalties:
Penalties were imposed on M/s SFL and its directors under Rule 26(2) of the Central Excise Rules, 2002. The Tribunal found that the penalties were based on the same uncorroborated evidence as the demands. Given the lack of substantial evidence and the procedural lapses, the Tribunal set aside the penalties.

Conclusion:
The Tribunal set aside the demands and penalties imposed on M/s SFL and its directors, emphasizing the lack of corroborative evidence and procedural lapses in the investigation. The appeals were allowed with consequential reliefs.