2015 (2) TMI 602 - AT - Central Excise

Clandestine removal of goods - disallowance of SSI Exemption - clearances value in the year 2003-04 exceeded the SSI Exemptions limit - Held that - except his statement which stands nullified in cross examination, and the note books no other corroborative evidence of clearance of goods by M/s Shree Krishna and receipt of the said goods by M/s Maruti is appearing on record. No investigation was conducted at the end of M/s Maruti Ceramics regarding receipt of goods and the charges were made only on the basis of notebooks and statement. I find that once the cross examination does not support the statement and the adjudicating authority does not contradict the contents of the cross examination, in that case it cannot be said that M/s Maruti Ceramics has received any clandestine clearances of M/s Shri Krishna. show cause notice has relied upon the investigation and statements of two transporters - no Lorry receipt or record of transportation was found. There is no quantity determined which he has transported. Only on the basis of statement, demand cannot be confirmed against M/s Shree Krishna. Since there is no consignee of the goods who has received any goods through M/s Shah Roadways. I am of the view that his statement cannot be a ground to make allegation against M/s Shri Krishna. Merely on the basis of the transporter statements, allegation of clandestine removal does not sustain. Except the alleged receipt of Borax Acid which is one of the material required for manufacturing of Fritz, there is no evidence appearing in the seized records or otherwise that the Appellant has received any other raw material clandestinely. Even no transportation of any of the other raw material required for manufacture of fritz is appearing nor alleged in show cause notice. The allegation of the clandestine removal needs to be established by showing receipt of major raw materials, atleast of some quantity, use of excess raw material, input output ratio, transportation of raw materials, use of such goods in manufacture of finished goods, excess utilization of power, fuel, transportation of finished goods, investigation at the buyer s end, receipt of money etc. However I find that none of the above factors are taken into consideration during the investigation, which leads me to the conclusion that charges of clandestine removal are not established. When the statements and records relied upon by the revenue are not considered to be sufficient ground for clandestine removal, in that case merely on the basis of statements authenticating the said records cannot be a ground to allege clandestine removal. The investigation has not been able to substantiate the charges of clandestine removal. - Since the charges of clandestine removal against M/s Shri Krishna does not stands proved and the demands raised are not sustainable, therefore the benefit of SSI Exemption to M/s Shree Krishna for the year 2004 05 is not deniable and hence there is no reason to demand duty. - Following decision of VISHWA TRADERS PVT. LTD. Vs. CCE 2013 (4) TMI 55 - GUJARAT HIGH COURT and COMMISSIONER OF CENTRAL EXCISE Versus BRIMS PRODUCTS 2008 (9) TMI 603 - PATNA HIGH COURT - Decided in favour of assessee.

Summary

Issues Involved:
1. Allegations of clandestine removal of goods by M/s Shri Krishna Industries.
2. Validity of evidence and statements relied upon by the revenue.
3. Eligibility for SSI Exemption for the year 2004-05.
4. Imposition of penalties on M/s Shri Krishna Industries and associated individuals.

Issue-wise Detailed Analysis:

1. Allegations of Clandestine Removal of Goods:
The primary issue revolves around allegations that M/s Shri Krishna Industries (with units at Vadu and Jambusar) engaged in the clandestine removal of Ceramic Fritz and Sodium Silicate during the periods 2002-03, 2003-04, and 2004-05. The revenue's case was based on statements from buyers, raw material suppliers, transporters, employees, and the proprietor, as well as documents seized from various locations. However, the Tribunal found that the evidence provided was insufficient to substantiate these allegations. Statements from buyers largely indicated that goods were received under cover of invoices, and cross-examinations did not support the claims of clandestine removal. The Tribunal emphasized that mere statements and seized documents, without corroborative evidence, could not establish clandestine removal.

2. Validity of Evidence and Statements:
The Tribunal scrutinized the evidence and statements relied upon by the revenue. It noted that the statements of buyers, suppliers, and transporters did not conclusively prove clandestine activities. For instance, statements from suppliers of Borax Acid, a minor raw material, were not corroborated by evidence of receipt of other major raw materials required for manufacturing Ceramic Fritz. Similarly, statements from transporters lacked supporting records of transportation. The Tribunal highlighted that the investigation failed to establish critical aspects such as receipt of raw materials, production, and removal of finished goods, and receipt of payments by M/s Shri Krishna. The Tribunal cited several judgments to reinforce that presumptions and assumptions could not replace positive legal evidence.

3. Eligibility for SSI Exemption for the Year 2004-05:
The Tribunal addressed the issue of whether M/s Shri Krishna Industries exceeded the SSI exemption limit in 2003-04, which would affect their eligibility for exemption in 2004-05. The demand for duty was based on the assumption that the turnover exceeded the limit due to alleged clandestine removals. Since the Tribunal found that the allegations of clandestine removal were not substantiated, it concluded that M/s Shri Krishna Industries was eligible for SSI exemption in 2004-05. Consequently, the demand for duty of Rs. 16,00,000/- was set aside.

4. Imposition of Penalties:
Penalties were imposed on M/s Shri Krishna Industries and associated individuals based on the alleged clandestine activities. However, since the Tribunal found that the charges of clandestine removal were not proven, it held that the penalties were also not sustainable. The Tribunal set aside the penalties imposed on M/s Shri Krishna Industries and other appellants.

Conclusion:
The Tribunal, after careful consideration of the facts, evidence, and submissions, concluded that the allegations of clandestine removal by M/s Shri Krishna Industries were not substantiated by tangible evidence. The demands and penalties imposed were set aside, and the appeals were allowed with consequential relief. The Tribunal emphasized the need for positive legal evidence to prove charges of clandestine removal and highlighted the insufficiency of mere statements and documents without corroboration.