9911796707
TMI Blog2008 (11) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... e Central Excise Tariff Act, 1985 attracting central excise duty @ 12% [8% BED 4% AED(ST)] vide Notification No. 6/2002, dated 1-3-2002 read with Notification No. 14/2002, dated 1-3-2002. However, duty on processed cotton fabric had been exempted since 6-9-2002 vide Notification No. 47/2002, dated 6-9-2002. 3. The Hqrs. Anti Evasion team of Central Excise Commissionerate, Jaipur-II paid a surprise visit to the factory premises of the respondents on 1-11-2002 and conducted various checks over the goods manufactured and the books of accounts being maintained by the respondents. Physical stock verification of finished goods and goods under process was also conducted Sh. Prasanna Kr. Jain, Prop. of M/s. Leela (K) Tex, Pali and Sh. Bhainrulal Agarwal, Authorized Signatory of the respondents No. 1 were present at the time of visit of the factory premises and the physical stock verification was conducted in the presence of both these persons. 4. During the course of checking the visiting officers found that 120 thans of PMMF measuring 15151.75 mtrs. was short as compared to their opening balance in RG-1 register. They also recovered some private records. On comparison of the details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenged thereafter also, has been dropped by the adjudicating authority. (ii) Recovery of private records coupled with Resumption Memo and statement of assessee of the case clearly shows more than pre-ponderence of probability of removal of 1255716 mtrs. of Processed fabrics clandestinely without payment of duty amounting to Rs. 2212495/-. (iii) Further, no statement was retracted at any stage, but at the time of hearing, Shri Jain (Proprietor) in his statement dated 1-11-2002 had accepted the illegal activity being undertaken by them and also appended his signatures, on the statement of Shri Agarwal and Resumption Memo, as a token of acceptance of the same. (iv) Also despite 11 summons no one turned up. No new submissions were forwarded by the assessee even after the cross examination of the officers being allowed and photocopies of private bahis being supplied to the assessee. (v) All these direct and proximate evidences are enough to cause onus on the assessee to rebut why he has not retracted his statement earlier or why he has not complied with the summons. (vi) Original adjudicating authority in para 21 of the OIO has erred in holding that physical ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the Adjudication Order had followed the law by observing the principle of judicial discipline in following the judgments of Hon ble Tribunal and affirmed by Hon ble Supreme Court in arriving at the conclusions drawn in the Adjudication Order. (c) that the Adjudicating authority was correct in holding that the physical verification of the goods had been done without applying the correct parameters of measurement. Accordingly his observation that the stock taking report was inaccurate and therefore its veracity was doubtful. (d) that the records have not been resumed under a proper panchnama as provided under Notification No. 68/63 dated 4-5-1963 as amended by 9/65-C.E., dated 6-2-1965, 46/68-C.E., dated 23-3-1968, 13/88-C.E. (N.T.), dated 29-4-1988, 48/97-C.E. (N.T.) dated 2-9-1997 read with Section 110 of the Customs Act, 1962. As such the order rejecting the correctness of the documents allegedly recovered was perfectly legal and proper. (e) that in any event the documents relied upon by the Revenue needed to be examined and corroborated by cogent and tangible evidence, which had not been done by the Revenue. Consequently the Adjudicating Authority was perfect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, can be used by the prosecution in evidence before the court of law and not in departmental proceedings of Adjudication, Appeals etc. As has been urged in above grounds of objections it is the burden of the Revenue to establish the charge of clandestine removal by adducing positive evidence. (l) that the period in dispute is 1-9-2002 to 1-11-2002, the search was conducted on 1-11-2002 and the entire investigation have been completed on 8-10-2003. The Show Cause Notice dated 15-12-2006 invoking extended period under Section 11A(1) is barred by limitation. Hence the demand was time-barred. (m) that none of the Respondents had done any act of commission or omission so as to render them to any penalty under Rule 25 or Rule 26 of the Central Excise Rules, 2002 and the Adjudication order passed below by not imposing any penalty upon Respondent No. 2 and 3 under Rule 25/26 of the Central Excise Rules, 2002 was correct, legal and proper. (n) that in any view of the matter the Appeal filed by the Revenue is not maintainable and is liable to be quashed. 8. Personal haring in the matter was held on 26-8-2008 when Shri Prassan Kumar Jain, Proprietor and Shri Amit Awasthi, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial evidence. The Learned Additional Commissioner after examining the evidence on record and following the law laid down by various court and Tribunal dropped the proceedings initiated against the Show Cause Notice. (ii) that in addition to submission made vide cross objections and reiterating the observations made by the Learned Additional Commissioner, the Respondents further begs to submit as under :- (A) Submission in respect of observations of Learned Additional Commissioner with regard to non-drawal of panchnama : Section 105 read with Section 110 of the Customs Act provides for power of search of any premises and also prescribe for the procedure with regard to seizure of goods, document and things. Sub-section (2) of Section 105 of the Customs Act provides that :- Section 105 :- (2) the provisions of the Code of Criminal Procedure, 1898 (5 of 1898), relating to searches shall, so far as may be, apply to searches under this section subject to the modification that sub-section (5) of Section 165 of the said Code shall have effect as is for the word magistrate , wherever it occurs, the word [Commissioner of Customs] were substituted. Your Honours kind attentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling Mills v. CCE, Calcutta-II, reported in 2005 (186) E.L.T. 326 (Trib.). (g) Kaushal Founders Engineers v. CCE, Kanpur reported in 2000 (116) E.L.T. 133 (Trib.). (h) Order-in-Appeal No. 91-CE/06 dated 28-7-2006 passed by CCE (Appeal), Lucknow in Re : Kundan Castings (P.) Ltd., Malwan, Fatehpur. (C) Submissions countering the allegation of clandestine removal : This Hon ble Chair is well aware in cases of clandestine removal huge demand cannot be confirmed on flimsy and presumptive evidence. It is also settled that no demand of duty can be raised on the basis of preponderance of probability. Reliance is placed on the following case laws :- (i) 2007 (212) E.L.T. 343 (Tri.-Mum) - Indo Green Textile Pvt. Ltd. v. CCE, Thane, Mumbai. (ii) 2008 (222) E.L.T. 417 (Tri.-Ahmd.) - Kalyan Glaze Tiles v. CCE, Rajkot, wherein the Hon ble Tribunal has held as follows :- Clandestine removal - Evidence - Affidavit of transporter not considered in impugned order - Appellant having group companies manufacturing identical goods and without correlation, transport chits not basis for clandestine removal - Investigation with buyers not made - Impugned transp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposed, there is no warrant to impose separate penalty on the proprietor as the proprietorship firm has no legal separate responsibilities then that of the proprietor. Reliance is placed on following case laws : (i) 2008 (228) E.L.T. 166 (Del.) - Anil Kumar Mahensaria v. CC, (ii) 2004 (167) E.L.T. 472 (Tri.) - Sarpin Pharma v. CCE. That even otherwise Respondent No. 2 is not exposed to any penalty under the provisions of Rule 26 of Central Excise Rules, 2002, inasmuch as there is no evidence nor any allegation raised by the Department that Respondent No. 2 acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest or acted in conscience disregard of his obligation or as to how Respondent No. 2 was instrumental in contravention of the provisions of Rule 26 of the Central Excise Rules, 2002. Hence, not even a minimum penalty is imposable upon the Respondent No. 2. That the Respondent No. 2 rely upon the case law of M/s. Farwood Industries v. CCE reported in 2005 (185) E.L.T. 401 (Tri.), wherein the Hon ble Tribunal has held as follows : Personal penalty upon Managing Director/Partner under Rule 209A or Rule 26 can be imposed onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estinely and duty of Rs. 24,455/- leviable on goods found short at the time of physical verification are recoverable under the proviso to Section 11A(1) of Central Excise Act, 1944 along with interest under Section 11AB of the Central Excise Act, 1944. (ii) The respondents are also liable for penal action under Section 11AC of the Central Excise Act, 1944 and under Rule 25(1) of the Central Excise Rules, 2002 for contravention of the provisions of Rules 4, 6, 8, 10, 11 and 12 of the Central Excise Rules, 2002. (iii) Shri Prasanna Kumar Jain, Proprietor and Shri Bhainrulal Agarwal, authorized signatory of the respondent s unit are also liable for penal action under Rule 26 of the Central Excise Rules, 2002 for their involvement in the clandestine removal of cotton and man made fabrics with an intention to evade payment of duty. 8. Now, I will take up the above issues one by one as under. The Central Excise Anti Evasion team of Central Excise Commissionerate, Jaipur-II paid a visit to the factory of the respondent on 1-11-2002 and conducted various checks. Physical stock verification of finished goods and goods under process was conducted in the presence of Shri Prasanna Kuma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted further defence reply to the adjudicating authority. After hearing the appellant in person, the adjudicating authority dropped the demand of Rs. 22,37,950/- against which the department filed this appeal to determine the legality and the correctness of the impugned order. 10. I find that there is no dispute that the officers detected a shortage of 15,151.75 mtrs. of processed man made fabrics involving duty of Rs. 25,455/- on the basis of stock challenge report and statutory records. The appellant have challenged the authenticity/genuineness of physical verification i.e. proper measurement of length. In absence of any panchnama before the pancha witnesses it is not known as to how the shortage in meterage was arrived at. There is also no indication in any authentic document prepared by the officers on the spot to suggest that fabric was physically measured to ascertain the exact shortage of 15151.75 mtrs. As such the accuracy of physical verification of goods was not beyond doubt. The stock verification was not done in the presence of independent witnesses and no panchnama was drawn. The appellant unit is a registered unit and physical stock challenge was conducted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... established, buyers of finished goods had not been contacted and the receipt of sale proceeds has not been proved. (a) In the case of CCE, Coimbatore v. Sangamitra Cotton Mills (P) Ltd. reported in 2004 (163) E.L.T. 472 (Tri.-Chennai), the Hon ble CESTAT held as under : 3. I have heard Shri Mani and the learned Counsel Shri Balasubramanian. On a careful consideration of the submissions and perusal of the record, I note that the case has been built on the basis of the seized notebook and the file. There is no evidence of the assessee committing the offence of removal of goods clandestinely. There is no evidence of use of inputs to prove that there was manufacture of product. There is no evidence of clearance of final goods without payment of duty. There is no statement to show as to from whom the appellant purchased the raw material and there is no evidence of use of electricity, receipt of sale consideration to prove the event of manufacture and clearance of goods clandestinely. The Tribunal in the judgment relied by the Commissioner (Appeals) has clearly laid down that there has to be concrete evidence to prove the charge of manufacture and sale of goods without payment of du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice has been issued to any supplier of raw material or consignees. In the show cause notice, it was alleged that the goods were removed clandestinely to various consignees mentioned in the private records, then show cause notice should have been issued to such consignees also for penal action. The persons related to some of the alleged consignees firm who appeared before the adjudicating authority for cross examination categorically denied the receipt of any fabrics shown in alleged challan and invoices. Further, they denied the fact of any payment made by them or by their firm to the appellant related to such challan/invoice. These facts prove that there is no relevance of such documents i.e. challans, invoices and bills mentioned in the show cause notice with the appellant. 12. I further find that during investigation neither the handwriting examination was carried out nor it was established by any means that the alleged private records pertains to appellant particularly when the same was not resumed in presence of panch witnesses as required under the law quoted by respondents above. There are no evidences on record which proves any excess purchase/supply of raw mater ..... X X X X Extracts X X X X X X X X Extracts X X X X
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