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2019 (1) TMI 368 - AT - Central ExciseClandestine manufacture and removal - MS Ingots - unaccounted purchase of raw material and sale of finished goods - excesses and shortages of finished goods and stock - Held that - Out of the total confirmed demand of ₹ 3,79,32,215/- Central Excise Duty of ₹ 3,39,36,175/- pertains to the supposedly received by the appellant quantity of M.S. Ingots clandestinely from M/s Pankaj Ispat Ltd. This amount of Central Excise Duty is purportedly have been evaded by the appellant No.1 on the quantities of their finished goods manufactured out of the total quantity of 9240.395 MTs of MS ingots received by the appellant from M/s Pankaj Ispat Ltd. It is an admitted fact that record of receipt of clandestinely removed M.S. Ingots was recovered in the form of private record maintained in the premises of M/s Pankaj Ispat Limited. - During the search in the premises of the appellant No.1, no record has been recovered to suggest any clandestine receipt of the raw materials, namely, MS Ingots from which they purportedly manufactured and cleared quantity of 8316.357 MTs of their finished goods i.e. angle, channel and bars. There is no other evidence with respect of purported clandestine manufacture or clearance of 8316.357 MT of finished goods. The third party evidence can be considered as a mere starting point of investigation and cannot be considered as a reliable evidence without corroboration. The whole case against the appellant has been made merely on the basis of certain records found in the premises of M/s Pankaj Ispat Ltd. and a generalised confessional statement of Sh. Pankaj Aggarwal that the records found from his premises are correct. These records contained entries not only of the appellant but also many other parties. Record of removals and specific entries in the private records of Pankaj Ispat Ltd. pertaining to the appellant were not questioned. There is no corroboration to the same with any corresponding record of purchase in the appellants factory, manufacture, sale of finished goods, receipt of cash, electricity consumption by the appellant. Sh. Girdhar Sahu denied the contents of the statements and stated that a computer typed statement was signed by him without reading the same and could not identify the signatures on material receipts. Sh. Radhey Shyam did not appear for cross examination. Thus, the veracity of their statements could not be tested in cross examination. Even Sh. Pankaj Aggarwal, Director of M/S Pankaj Ispat ltd. did not appear for cross-examination. These charges against the appellant cannot be upheld merely on the basis of third party documents and certain statements which could not be tested in cross-examination. The revenue has failed to establish the charge of clandestine removal - the allegations of clandestine activities are serious allegations and are required to be arrived at on the basis of concrete evidences and not on the basis of assumption and presumption. A similar issue of assumed manufacture on the basis of records of supply of raw materials found in the third party premises was examined in the case of RHINO RUBBERS PVT. LTD. Versus COLLECTOR OF CENTRAL EX., BANGALORE 1994 (4) TMI 196 - CEGAT, MADRAS , and it was held that it is not safe to rely only on the third party s records evidence when no direct links of the transactions established. Other parameters like electricity consumption etc. should have been considered before demanding duty on the alleged clandestine manufacture and removal of goods. Demand of ₹ 25,71,244/- in respect of IN Slips seized from the premises of the appellants - Held that - The receipt of unaccounted materials against these IN slips has been admitted by the Director Sh. Bajrang Jain and he has also accepted to pay duty on the supposed manufacture of finished goods from these un accounted material - once the non accountal of these raw materials was accepted by the appellant, the onus lied upon him to prove that the same were not used in the manufacture of finished goods. Once this onus is not discharged upon, the presumption would always be that the same were used in the clandestine manufacture of finished goods - demand upheld. Demand of ₹ 14,24,796, on shortage of 330.288 MTs, of cast iron ingot moulds and 15.85 MT of M S Ingots and excess stock of 191.752 MT of MS channels/Angles - Held that - The appellant was under a stautory obligation to properly account for all the cenvatable inputs and finished goods in the statutory records. The failure would meet with all the consequences of demand and penalties. A mere mathematical possibility that the shortage of CI moulds could have resulted in manufacture of excess finished stock of angles, channels etc. could not be accepted without respective entries in record. The claim is all the more not acceptable because the appellant has been found to be indulging in clandestine manufacture and clearance - Demand, interest, penalty and redemption fine are upheld. The penalty of ₹ 39,96,040/- against the appellant is upheld out of total penalty of ₹ 3,79,32,215/- and rest is set aside. The redemption fine of ₹ 15,97,000/- imposed in the impugned order is upheld. Appeal allowed in part.
Issues Involved:
1. Demand of ?3,39,36,175/- against M/s Hanukripa Ispat Pvt. Limited for unaccounted supplies from M/s Pankaj Ispat Ltd. 2. Demand of ?25,71,244/- for unaccounted raw materials as per "IN Slips." 3. Demand of ?14,24,796/- for shortages detected during stock-taking. 4. Confiscation of 191.752 MT of MS channels/angles and imposition of redemption fine of ?15,97,000/-. 5. Penalties imposed on the Directors under Rule 26 of the Central Excise Rules, 2002. 6. Demand of ?1,76,125/- against M/s Rooplaxmi Industries India Pvt. Ltd. for clandestine removal. Detailed Analysis: Demand of ?3,39,36,175/- Against M/s Hanukripa Ispat Pvt. Limited: The main contention is based on the alleged purchase of 9240.395 MTs of MS Ingots without accountal from M/s Pankaj Ispat Ltd. The appellant argued that the demand is premature as the case against M/s Pankaj Ispat Ltd. is still pending. The adjudicating authority relied on third-party documents and statements which were not independently corroborated. The Tribunal observed that third-party evidence cannot be considered reliable without corroboration and set aside the demand of ?3,39,36,175/- due to lack of concrete evidence. Demand of ?25,71,244/- for "IN Slips": The demand pertains to unaccounted raw materials received as per "IN Slips." The appellant contested the demand on the grounds that certain supplies were covered by duty-paid invoices and should be excluded. However, the Tribunal upheld the demand, stating that the onus was on the appellant to prove that the raw materials were not used in the manufacture of finished goods. The Tribunal confirmed the demand along with interest and penalty under Section 11AC. Demand of ?14,24,796/- for Shortages Detected During Stock-Taking: The appellant claimed that the shortage of 330.288 MTs of 'cast iron ingot moulds' was due to scrapping and re-melting, resulting in excess finished goods. The shortage of 15.85 MT of MS Ingots was attributed to weighment errors. The Tribunal found that the appellant failed to properly account for the inputs and finished goods and upheld the demand along with interest, penalty, and confiscation of the excess stock. Confiscation of 191.752 MT of MS Channels/Angles and Imposition of Redemption Fine: The appellant argued that the confiscation was unwarranted as there was no finding that the goods were about to be cleared without payment of duty. The Tribunal upheld the confiscation and redemption fine, stating that the appellant was found to be indulging in clandestine manufacture and clearance. Penalties Imposed on the Directors: Penalties were imposed on the Directors under Rule 26 of the Central Excise Rules, 2002. The Tribunal reduced the penalties to ?5 lakhs each, considering the totality of facts and the reduced demand. Demand of ?1,76,125/- Against M/s Rooplaxmi Industries India Pvt. Ltd.: The demand was based on "IN Slips" recovered from M/s Hanukripa Ispat Pvt. Ltd. premises and a confessional statement by its Director. The Tribunal found no corroborative evidence at the end of M/s Rooplaxmi Industries and set aside the demand along with consequent interest and penalty. Conclusion: The Tribunal set aside the demand of ?3,39,36,175/- against M/s Hanukripa Ispat Pvt. Limited due to lack of concrete evidence. The demand of ?25,71,244/- for unaccounted raw materials was upheld along with interest and penalty. The demand of ?14,24,796/- for shortages detected during stock-taking was also upheld along with confiscation and redemption fine. Penalties on the Directors were reduced to ?5 lakhs each. The demand of ?1,76,125/- against M/s Rooplaxmi Industries India Pvt. Ltd. was set aside due to lack of corroborative evidence.
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