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TMI Blog2009 (11) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... the order dated 1-12-03 passed by the Commissioner, Ludhiana whereby the Commissioner has restricted the disallowance of the credit to the tune of Rs. 44,09,228/- instead of the amount of Rs. 4,08,71,796/- claimed by the department under show cause notice dated 31-1-2002. 3. The respondents have their factory at Doraha, Ludhiana and are engaged in the manufacture of woollen yarn, acrylic yarn and woollen blended yarn. The products manufactured by the respondent fall under Chapter 51 & 54 of the first Schedule to the Central Excise Tariff Act, 1985. Acting upon intelligence report regarding alleged involvement of the respondents in evasion of excise duty by fraudulently availing the Modvat credit in relation to the raw materials allegedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the department being dis-satisfied with the order passed by this Tribunal in the appeal filed by the respondents has preferred appeal before the High Court and the same is pending. In the facts and circumstances of the case, the department was therefore, required to satisfy the Tribunal as to why the present appeal should not be dismissed. 7. When the matter came up for hearing today, learned DR submitted that the issue in the appeal filed by the respondents was restricted to the demand of Rs. 44,09,228/- with reference to specific transactions whereas the issue involved in the present appeal relates to all other transactions involving an amount of Rs. 3,64,62,568/- out of the total demand made under the show cause notice to the tune of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judication in the said appeal to the extent the dispute was sought to be raised in that appeal and the same essentially restricted to sum of Rs. 44,09,228/- and nor to the entire amount of demand under the show cause notice. Being so, the matter will have to be considered on merits. 9. It is the contention on behalf of the appellants that the Commissioner did not take into consideration the materials which would disclose clandestine diversion of the inputs and illegal availment of the Modvat credit by the respondents. In that regard, attention was drawn to para 3.12 and 3.13 of the impugned order vis-à-vis para Nos. 13.2.1, 13.2.2, 17.1, 17.2, 18, 19, 22.8, 24, 24.1, 24.2, 24.3, 25, 26 and 27 of the show cause notice. Learned DR submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 3.12, 3.13 and 3.14, learned Advocate submitted that the Commissioner after taking note of the verification of the records maintained by the respondents has held that the appellants were able to establish allegation only to the extent of Rs. 44,09,228/- which has also been set aside by the Tribunal in the appeal filed by the respondents. He further submitted that the appellants have not been able to establish even from the verification of the records that the respondents had failed to utilize the inputs for manufacture of their final product. Merely because initially the inputs were received by the dealers of the respondents that can not lead to a conclusion that those inputs were never received by the respondents and were not utilize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al in the earlier order dated 1-3-05 and the matter is presently pending before the Hon'ble High Court. 12. As regards the demand in relation to the remaining amount, the Commissioner has clearly stated that the department has failed to establish co-relation between the allegations made in various statements with the actual transaction in relation to the inputs which are alleged to have been diverted to the market or being received and utilized by the respondent. While arriving at the said finding, the Commissioner has referred to the records disclosing periodical stock verification report, annual stock verification report etc. as also to the test report of the samples drawn from the final product manufactured by the respondents. Learned D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly diverted to other parties. In fact, as rightly observed by the Commissioner, there appears to be no attempt made at any point of time in the course of investigation to establish such co-relation between the inputs alleged to have been diverted and the final product which was found without the presence of the PFY element. In fact, it was purely elementary which the investigation agency ought to have known in order to establish the charge of clandestine disposal of the inputs without utilization thereof in the manufacture of the final product. This aspect should have been clearly established by the investigation machinery. In this regard, neither there was any proper investigation nor appropriate efforts on the part of the department to br ..... X X X X Extracts X X X X X X X X Extracts X X X X
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