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TMI Blog2011 (10) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced for cross examination; in the absence of any other tangible evidence to show that the appellant had been procuring the other major raw materials required for manufacture of Frit without recording in books of accounts, we are unable to accept the contentions of the ld.AR appearing for the Revenue and the findings of the adjudicating authority, that there was clandestine manufacture and clearance of the finished goods. In the absence of any tangible evidence which would indicate that there was clandestine manufacture and clearance of the goods from the factory premises of M/s VTPL, in the peculiar facts and circumstances of this case, we hold that the impugned order which confirms the demand on the appellant M/s VTPL and imposes penalty on them is not sustainable and is liable to be set aside and we do so. - Decided in favor of assessee. - E/1855, 931, 156, 936, 771, 1856/2006 - Final Order No. A/1846-1851/WZB/AHD/2011 - Dated:- 1-11-2011 - MR.M.V. RAVINDRAN, DR. P. BABU, JJ. Represented by: Shri Devan Parikh, Sr.Adv., Shri S.J. Vyas, Adv., Shri D.K. Trivedi, Adv. Shri S.R. Dixit, Adv., Shri Paritosh Gupta, Adv. for Assessee. Shri J.S. Negi, Authorised R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing authority also granted an opportunity of hearing to M/S VTPL and its Director Shri Vivek Maheshwari. Both these appellants as well as other appellants contested the Show Cause Notice on merit as well as on legal issues before adjudicating authority. The adjudicating authority, after considering the submissions made by all concerned, did not accept the contentions raised and recorded the following orders: "(i) I confirm the demand of duty amounting to Rs.89,63,253/- (Rupees Eighty Nine Lakhs, Sixty Three Thousands, Two Hundred and Fifty Three only) from M/s VTPL under the first proviso to Section 11A of Central Excise Act, 1944. Since an amount of Rs.31,11,020/- has already been paid by M/s VTPL, this amount is appropriated towards their duty liability. I also direct M/s VTPL to pay interest at the applicable rate on the above mentioned short paid duty as per the provisions of Section 11AB from the 1st day of the month succeeding the month in which the duty ought to have been paid till the date of payment of duty. (ii) I impose penalty of Rs.89,63,253/- (Rupees Eighty Nine Lakhs, Sixty Three Thousands, Two Hundred and Fifty Three only) on M/s VTPL under the provisions of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estine removal but there cannot be any positive evidence to show clandestine removal has not taken place. It is his submission that it is settled, in law of evidence, that negative cannot be proved and there cannot be any evidence that there is no clandestine removal. After making these opening submissions, ld.Sr.Advocate would take us through the evidences relied upon by the Department by referring to the Show Cause Notice and the Order-in-Original. He would try to point out commissions and omissions in Commissioner's order as regards charge of clandestine removal. He points out the following:- i) Basic documents relied upon are laid down in Para 9.4.1 of Order-in-Original and all these documents were recovered from the premises of Shri Anil Jadav, who was Accountant. ii) Further, reliance is placed on the documents for the year 2000-2001 and 2001-2002, again recovered from the premises of Shri Anil Jadav. iii) There is a reference of extract of certain alleged zipped floppies stated to have been recovered from the factory premises showing cash receipts during the period April to June 2002. iv) Few sheets and slips alleged to be recovered from the factory premises, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries for manufacture and clearance of final product clandestinely, out of the goods supplied by M/s VTPL. It is his submission that this Tribunal had held in favour of the said M/s Amar Ceramics Industries on the ground that Shri Dharmendra Patel, has retracted the statement. Hence, it is his submission that there is no statement of M/s Amar Ceramics Industries, which inculpates M/s VTPL. It is his submission that there is no evidence brought on record by Revenue for the purchases of other raw materials which are required for manufacturing their final product. It is his submission that for manufacture of their final product i.e. 'Frit', inputs required are Quartz, Feldspar, Zinc, Borax Powder, Calcium and Dolomite. It is his submission that Borax Powder which is used as one of the ingredients, constitutes 12-15% of the material in final product as against Quartz which is approximately 45% of the finished good. It is his submission that despite such large scale investigation including the visit to the premises of raw material suppliers, there was absolutely nothing brought on record to show that the appellant had purchased all the raw materials without recording the same in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring on behalf of M/s Amar Ceramics Industries would make only 2 submissions; based upon the statement that they have received the raw material i.e. Frit from M/s VTPL, Revenue had proceeded against M/s Amar Ceramics Industries, alleging them of clandestine manufacture and clearance of their final product from their factory premises. This demand was upheld in Order-in-Appeal No.231-232, by the appellate authority and M/s Amar Ceramics Industries preferred an appeal before Tribunal in Appeal No.2562/2004, which was decided by Final Order No.A/698/WZB/AHD/2007, dt.29.3.07. It is his submission that this Bench, after going through the merits of the case and also considering the fact that statement has been retracted and there being no tangible evidence for the manufacturing of final product, has allowed the appeal and set aside the demand raised on M/s Amar Ceramics Industries. He would submit that there cannot be any penalty on M/s Amar Ceramics Industries. Other advocates for appellant companies M/s Weldecor, M/s Excel Ceramics, M/s Sun Borax Industries submitted that the penalty imposed by adjudicating authority under Rule 26 of Central Excise Rules, 2002 is incorrect as such pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oborated by the statement of the partner and further corroborated by the statement of the merchant manufacturers, referring to any other requirement for proving clandestine removal not always necessary. It is his submission that the very same case-law laid down that sufficiency of evidence on record is to be considered and Revenue cannot be expected to prove its case by producing direct evidences. 8. We have considered the submissions made at length by both sides and perused the records. 9. The entire case of the Revenue in these cases is starting from the visit of various premises on 8.7.02. On that date, simultaneous visits were organized to the raw material suppliers and customers and residential premises of employees employed with M/s VTPL. It is also undisputed that evidences which the department relies upon for confirmation of demand in the appellant M/s VTPL's case is based upon the docucmentary evidences recovered from the premises of Accountant, Factory Manager and Plant Manager of the appellant. It is also undisputed that only statements of 2 customers were recorded indicating receipt of finished goods by them without payment of duty and only one raw material suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issed the request for cross examination only on the ground that M/s VTPL has not given any reason and justification for cross examination of these persons. We find that this approach of the adjudicating authority is inconsistent with the settled law of evidence. It is undisputed that the persons who had given inculpatory statements (as indicated herein above) were 3rd party and were only employees of the assessee. There could be an element of doubt that these persons jointly or severally were working against appellant M/s VTPL or otherwise. This could be ascertained only during the cross examination, by confronting the persons with the documents recovered from their possession. Be that it may be, documentary evidences recovered from the residential premises of the employees, the veracity of the same needs to be always checked and cross checked before relying upon such evidences. M/s VTPL were well within their rights to ask for cross examination of these employees to bring on record that documents which were recovered and on which reliance has been placed by adjudicating authority for confirmation of demand of duty, could have been maintained by other persons or 3rd party for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stries against the appellant. In the absence of any other statement of M/s Amar Ceramics Industries which inculpates the current appellant M/s VTPL, the statements relied upon by Department is to be discarded. As regards other statement of M/s Excel, we have already recorded our finding that, having not produced the person who made the statements for cross examination, such statement cannot be relied upon by the Department for coming to the conclusion, that there was clandestine removal from the premises of M/s VTPL. 12. Be that as it may be, it is to be noted that there is no dispute that to manufacture of said final product 'Frit' requires the use of Quartz, Feldspar, Zinc, Borax Powder, Calcium and Dolomite as inputs/raw material. On the date of visit of the officers to the factory premises of the appellant, it is undisputed that the stock of raw materials as well as finished goods was tallying with recorded balances. This conclusion can be reached from perusal of records, as there is nothing on record to indicate otherwise. 13. On careful perusal of the entire records of the case, we find that there is nothing on record as to unrecorded purchases or consumption of various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l that entries in rough register cannot be made the sole basis for arriving at finding of clandestine manufacture. Reference in this regard be made to the Tribunal decision in the case of Essvee Polymers (P) Ltd. [2004 (165) E.L.T. 291 (Tri.- Chennai)], Krishna Bottlers (Vijayawada) Pvt. Ltd. v. Commissioner of Central Excise, Gantur [1999 (32) RLT 845 (CEGAT)], Ganga Rubber Industries v. Collector of Central Excise [1989 (39) E.L.T. 650 (Tribunal)]. The ratio of all the above decisions is that the allegations of clandestine manufacture and removal being quasi criminal in nature are required to established beyond doubt by producing evidence in the shape of procurement of raw materials, shortage, excess use of electricity, flow back of funds and purchase of final products by customers etc. Admittedly no such evidence has been produced on record by the Revenue, the evidentiary value of the statements relied upon by the Revenue already stands discussed by me in the proceedings paragraph. The said statements having been made under Section 108 of the Customs Act, 1962 are not comparable to the confession recorded under Section 164 of CRPC before Magistrate, and as such are required to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Frit, either in the form of entries in the books of accounts or in the form of statements of supplier of the other major raw materials. It is undisputed that for manufacturing of Frit (the final product) major raw material is 'Quartz' which is approximately 45% of the total inputs going in the manufacturing of 'Frit'. We find from the records that Revenue has not produced a shred of evidence, to indicate that the appellant had been procuring Quartz without accounting them in books of account nor is there any evidence to indicate that other raw materials were also procured without recording them in books of accounts. In the absence of any such evidence, we are unable to persuade ourselves that the appellant M/s VTPL had clandestinely manufactured the quantity of 'Frit' during the period 1998-99 to January 2002. If there is no clandestine manufacture, there cannot be any clandestine clearance. Further, we also find from the records that there is no investigation which has been carried out to indicate that there has been unusual consumption of electricity or any other evidence in the form of receipt of raw material into the factory premises of the appellant M/s VTPL or that the produc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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