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2015 (12) TMI 590 - AT - Central ExciseSSI Exemption - Clandestine manufacture and removal of goods - Estimation of production - electricity consumption - Availment of exemption under Notification No. 1/93 dated 28.02.1993, for the period 16.10.1993 to Feb, 1995 - Confiscation of seized goods - Held that - As seen from the Tribunal order, we find this Tribunal while remanding the case gave clear direction to the adjudicating authority to establish with evidences that for manufacture of acid slurry two important raw materials are required ie., sulphuric acid (oleum) and LAB, and the procurement of sulphuric acid from other units, and also clear evidences on removal of Acid slurry ie., final product which is very essential to establish for clandestine removal. Further the adjudicating authority was also directed to examine and to give clear findings on the electricity consumption for the alleged manufacture of finished goods and also to consider the cum-tax benefit. Whereas on perusal of the denovo order, we find that the adjudicating authority has discussed and reiterated only the statements of persons with regard to supply of LAB through SWC and failed to address the issue on the procurement of sulphuric acid/oleum, which is another raw material required for manufacture of acid slurry and electricity consumption. On perusal of various statements and records, it is seen that these are mainly recovered from SWC who manipulated and used various fictitious names for sale of LAB received from TNPL to various customers including the appellants. Adjudicating authority has computed the quantity and value purely on mathematical formula and worked out the total quantity of acid slurry by adopting the ratio of raw materials LAB and sulphuric acid purely based on the alleged quantity of LAB received by the appellants from SWC and not supported with any evidence. As regards the payments made to three employees of SWC, the appellants claimed that this was paid for the expenses. Regarding payment of ₹ 11 lakhs made by Fintex Chemicals to TNPL, we find that there is no finding to link the said payments to supply of LAB to the appellants and mere statements that they are related and controlled by the appellants, is not an evidence to hold that appellants revived LAB. In spite of clear directions by the Tribunal by giving an opportunity to the adjudicating authority to bring out all the evidences including the electricity consumption, adjudicating authority failed to bring out any material evidence in support of supply of LAB by SWC to the appellants, no evidence for such a huge amount of manufacturing activity, or no evidence of any payments for sale of finished goods clandestinely removed and no evidence on removal of spent acid. We also find that no attempt has been made to obtain the documents and records from TNPL, which is crucial for sale of LAB instead the LA had only relied on the statements and records of SWC who is a sole selling agent of TNPL. Entire demand of clandestine removal of acid slurry has been made based on assumption and theoretical calculations by arriving taking notional quantity of LAB. Accordingly, we hold that the demand is not sustainable and entire demand is liable to be set aside. The confiscation of the seized goods of 449 kgs of Acid slurry and imposition of fine ordered by the adjudicating authority is upheld. The excise duty demanded in the impugned order is set aside - However, Penalty on second assessee is reduced - Decided partly in favour of assessee.
Issues Involved:
1. Allegations of clandestine manufacture and removal of acid slurry without payment of duty. 2. Validity of the evidence presented by the department. 3. Compliance with the Tribunal's remand directions. 4. Role of raw material procurement and storage capacity. 5. Calculation of duty and penalties. Issue-wise Detailed Analysis: 1. Allegations of Clandestine Manufacture and Removal: The department alleged that the appellants clandestinely manufactured and removed acid slurry without paying excise duty. The initial investigation led to the issuance of a Show Cause Notice (SCN) on 19.04.1994, demanding Rs. 3,14,65,370/- for the period from 01.04.1989 to 15.10.1993 and Rs. 5,94,012/- for goods cleared for home consumption by wrong availment of exemption. The adjudicating authority confirmed these demands and imposed penalties. However, the Tribunal in its order dated 09.08.2002 remanded the case for de novo adjudication, emphasizing the need for concrete evidence of receipt of raw materials and manufacture. 2. Validity of Evidence Presented by the Department: The Tribunal noted that the department's case was primarily based on statements and records from Southern Warehousing Corporation (SWC), which allegedly supplied Linear Alkyl Benzene (LAB) to the appellants. The department failed to provide documentary evidence linking the payments made by Fintex Chemicals to the appellants' transactions. The Tribunal emphasized that mere statements and private records without corroborative evidence are insufficient to establish clandestine manufacture and removal. 3. Compliance with Tribunal's Remand Directions: The Tribunal had directed the adjudicating authority to establish clear evidence of receipt of both LAB and sulphuric acid (oleum), and to consider electricity consumption. However, the adjudicating authority, in the de novo order, reiterated the statements regarding LAB supply but failed to address the procurement of sulphuric acid and electricity consumption. The Tribunal found that the adjudicating authority did not comply with its directions and did not provide clear findings on these critical aspects. 4. Role of Raw Material Procurement and Storage Capacity: The appellants argued that they did not have the storage capacity for the alleged quantity of LAB and acid slurry. They also contended that the department did not provide evidence of receipt of sulphuric acid, which is necessary for manufacturing acid slurry. The Tribunal agreed, noting that the manufacture of such a large quantity of acid slurry would require significant storage capacity for both raw materials and finished products, which the appellants did not possess. 5. Calculation of Duty and Penalties: The adjudicating authority calculated the duty demand based on a mathematical formula, assuming a ratio of raw materials to final products. The Tribunal found this approach speculative and unsupported by concrete evidence. The Tribunal also noted that the payment of Rs. 11 lakhs by Fintex Chemicals to TNPL was not conclusively linked to the appellants. Consequently, the Tribunal set aside the excise duty demand and reduced the penalty on Shri A. R. Shanmugasundaram from Rs. 50,00,000 to Rs. 2,00,000/-. Conclusion: The Tribunal concluded that the department's case was based on assumptions and theoretical calculations without corroborative evidence. The demand for excise duty was set aside, and the confiscation of 449 kgs of acid slurry was upheld. The penalty on Shri A. R. Shanmugasundaram was reduced, and the appeals were disposed of accordingly.
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