2018 (8) TMI 1216 - AT - Central Excise

SSI Exemption - dummy units - case of the Department is that, all the Appellant firms/companies are the dummy units of one Shri B.M. Garg (proprietor of Garg industries), which have been created to fragment and/or bifurcate the total clearances so as to fall within the exemption limit of SSI benefit - demand entirely based certain alleged private records recovered by the department. Held that - Upon perusing the Panchnama, it is found that the same does not give any description of the documents recovered and, instead uses the expression file containing misc. loose pages without indicating what the said misc. loose papers are. The Panchnama does not specifically state who had actually found the documents sought to be relied upon and from where he had found them. The Panchnama simply states that documents pertaining to sale and purchase, manufacture and clearance of goods were found in the room. Moreover, there is nothing stated in the panchnama as to whether the documents recovered were sealed or not, so as to avoid any manipulation and, in case they were sealed, whether any panchnama proceedings were recorded while de-sealing the said records. Cross-examination - principles of natural justice - Held that - As no opportunity of cross-examine has been given to the appellant, the Commissioner has committed error in law in relying upon the statements. The charge of clandestine clearance is a serious charge and the department is required to prove the allegations of clandestine clearance by producing sufficient positive and cogent evidence - In the present case, the case of the department is based upon certain private records which are seriously disputed by the appellant and, corroborating the same by statements for which the appellant had not been afforded opportunity to rebut. Use of Brand nae of others - Held that - Since beginning, it is the stand of all the appellants that neither of them nor Shri B.M. Garg or any other individual are owner of the brand names in issue. Shri Adesh Tiwari- Manager of Deepak Hinges, had also confirmed this fact in his statement dated 25.06.14. Nothing has been brought on record by the department to establish that the said brand names belonged to any other person . Thus, SSI benefit cannot be denied to the appellant(s) on the ground of using the brand name of other person - benefit allowed. Clubbing of clearances - Held that - The facts of the case does not warrant clubbing of clearances of all the units as the Commissioner has confirmed the demand jointly as well as severally on each of the companies/firms thus accepting their separate and independent identity. All the units are entitled to get benefit of SSI notification, there is no requirement to maintain statutory records. Once, they are not entitled to maintain statutory records, the allegation that goods were found in short and/or excess, is legally not sustainable and liable to be set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Legality and authenticity of the Panchnama proceedings.
2. Reliance on statements recorded during the investigation.
3. Allegations of clandestine manufacture and removal.
4. Denial of SSI exemption under Notification No. 8/2003-CE.
5. Clubbing of clearances for determining total value.
6. Demand of duty based on annexures.

Detailed Analysis:

1. Legality and Authenticity of the Panchnama Proceedings:
The appellants challenged the Panchnama proceedings dated 03/04.07.13, arguing that the documents recovered were manipulated and fabricated. The Tribunal found that the Panchnama failed to describe the documents adequately, did not specify who found them, and lacked details on whether the documents were sealed to prevent manipulation. The Tribunal cited the case of Kuber Tobacco Products Ltd. v CCE, Delhi, emphasizing the need for detailed guidelines in Panchnama preparation to ensure credibility.

2. Reliance on Statements Recorded During the Investigation:
The Tribunal noted that the Commissioner relied on statements recorded during the investigation, which the appellants disputed. The appellants argued that they were not given the opportunity to cross-examine the individuals who made these statements, violating principles of natural justice. The Tribunal referred to the cases of Andaman Timber Industries v CCE, Kolkata and CCE v Kurele Pan Products Pvt. Ltd., concluding that the Commissioner erred in law by relying on these statements without cross-examination.

3. Allegations of Clandestine Manufacture and Removal:
The Tribunal highlighted that the charge of clandestine clearance is serious and requires positive evidence. The case against the appellants was based on private records and statements, which were disputed. The Tribunal found that the quantification of demand was based on assumptions and lacked corroborative evidence. Citing the case of Oudh Sugar Mills Ltd. v Union of India, the Tribunal concluded that the allegations of clandestine clearance could not be upheld.

4. Denial of SSI Exemption under Notification No. 8/2003-CE:
The appellants argued that the SSI exemption could not be denied based on the use of brand names, as the department failed to establish ownership of the brand names by another person. The Tribunal found that the department did not provide evidence that the brand names belonged to any "other person," thus the SSI benefit could not be denied. The Tribunal referred to various decisions supporting this view, including CCE, Ahmedabad-II Vs. Gujarat Healthcare and Ample Industries Vs CCE, Rajkot.

5. Clubbing of Clearances for Determining Total Value:
The Commissioner held that the clearances of all companies should be clubbed, as they were allegedly controlled by Shri B.M. Garg. However, the Tribunal found that the Commissioner confirmed the demand jointly and severally, thus accepting the separate identities of the companies. The Tribunal cited the cases of Punjab General Manufacturing Works Vs. CCE, Lucknow and Bentex Industries v CCE, New Delhi, concluding that clubbing of clearances was not warranted.

6. Demand of Duty Based on Annexures:
- Annexure 5: The demand was based on sales invoices of customers/dealers. The Tribunal found that the department did not establish that the dealers dealt exclusively with the appellants' goods, thus the demand could not be confirmed.
- Annexure 4: The demand was based on private records recovered during the Panchnama. The Tribunal found that no inquiries were conducted with the buyers listed in the statutory invoices, rendering the demand unsustainable.
- Annexure 3: Similar to Annexure 4, the demand was based on statutory invoices without inquiries with the buyers, making the demand unsustainable.
- Annexure 2: The demand was based on entries in private records, which the Tribunal found unreliable due to serious infirmities in the Panchnama.
- Annexure 1: The demand was proposed and confirmed despite no entries relating to the appellant, making it unsustainable.

Conclusion:
The Tribunal found that the evidence relied upon by the department was insufficient and flawed. The Panchnama proceedings were not conducted properly, and the statements used were not corroborated by cross-examination. The allegations of clandestine manufacture and removal, denial of SSI exemption, and clubbing of clearances were not supported by adequate evidence. Consequently, the Tribunal set aside the orders of the Commissioner and allowed the appeals with consequential relief to the appellants.