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TMI Blog2014 (4) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... nterprise. In view of the above observations and the law laid down by various judicial pronouncements, including the judgment of jurisdictional High Court in the case of Commissioner of Central Excise, Customs & Service Tax vs. Vishwa Traders Pvt. Limited [2013 (4) TMI 55 - GUJARAT HIGH COURT], even if certain suspicion was raised by the statements recorded by the investigation made by the officers of DGCEI but the same are not sufficient to hold clandestine manufacturing and clearance of excisable goods by the appellants - Appeal No. : E/3491-3493/2005, E/858/2006 & E/819,820/2007 - ORDER No. A/10570-10575/2014 - Dated:- 10-4-2014 - Mr. M.V. Ravindran and Mr. H.K. Thakur, JJ. For the Appellant : Shri P.M. Dave, Shri Kuntal Parikh, Advocates, Shri S.K. Mall, AR For the Respondent : Shri S.K. Mall, AR JUDGEMENT Per : Mr. H.K. Thakur; Following appeals are being decided by this common order as the issue involved in all these appeals is same:- Sr. No. Appeal No. Name of Appellant OIO/ OIA No. Date (i) E/3491/2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to Revenue, was a non-existing firm at the relevant period. During the searches carried out 64 packed bales of 100% Cotton Fabrics processed at Shree Govind Synthetics, were seized from the transporter M/s. Deluxe Roadlines, Narol, Ahmedabad. Authorised representative of M/s. Shree Govind Synthetics, Shri N.C. Thakkar disclosed that the seized fabrics cleared from M/s. Shree Govind Synthetics were actually processed by M/s. Rajesh Enterprise with the aid of power and only documents were prepared to show as if the fabrics have undergone hand screen printed and exempted processes at the premises of M/s. Shree Govind Synthetics. 3.1 On the other hand all the other appellants, contested during the proceedings that no fabrics manufactured by M/s. Rajesh Enterprise was clandestinely cleared without payment of duty and that all the fabrics, for which show cause notices were issued, were hand screen printed by M/s. Gayatri Fabrics on the hand screening printing tables of M/s. Shivkarandas and have thereafter undergone exempted processes at the premises of M/s. Shree Govind Synthetics. 4. Shri P.M. Dave (Advocate) and Shri Kuntal Parikh (Advocate) appeared on behalf of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anchnama that all fabrics processed in the factory premises of M/s. Shree Govind Synthetics were received from M/s. Rajesh Enterprises. That it is highly impractical that machine printed fabrics of M/s. Rajesh Enterprises could be brought to M/s. Shree Govind Synthetics when M/s. Rajesh Enterprises had its own machines for carrying out exempted processes done in M/s. Shree Govind Synthetics. (vii) That there is no evidence that excess raw materials required for machine printing were procured by M/s. Rajesh Enterprises. That no evidence of any cash transactions for the fabrics alleged to be processed with the aid of power is brought on record. (viii) That both Shri Prayank P. Aggarwal and Shri Hukum Singh Shekhawat during cross-examination have said that their statements recorded by DGCEI were under duress and can not be taken as gospel truth. That depositions made during cross examination have remained unshaken. (ix) That the cross examination of DGCEI officers also made it clear that no investigation was made regarding extra procurement of raw materials or from those contractors who were engaged by M/s. Gayatri Fabrics for hand processing. (x) That statement of Shri Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /INV/54/ 2001 dt. 26.3.2003 for demanding duty u/s 11A(1) of Central Excise Act, 1944, read with Rule 4 of Central Excise Rules,2001 and imposition of penalty under Section 11AC of Central Excise Act, 1944. (OIO No. 34/Commr(Adj) /2005 dt. 21.7.2005 1999-2000 (25.08.1999 to 31.3.2000 and 2001-02 (31.07.2001 to 19.09.2001) Amount of duty involved Rs. 86,55,334 DGCEI, ZU, Ahmedabad SCN adjudicated by Commissioner, Central Excise, Ahmedabad-1 vide OIO No. 34/ Commr(Adj)/2005 dt. 21.7.2005 confirmed duty under Section 11A(1) and imposed equal penalty on M/s. Rajesh Enterprises under Rule 25(1) of CER,2001 r/w Rule 173(Q) of CER, 1944. Also imposed penalty of Rs. 25 Lakhs each on M/s. Govind Synthetics and Shri Prayankbhai Prayagraj Agrawal. These parties have filed appeal No. E/3491 to 3493/2005. (iii) V.52, 53, 54/15-24/ Ofence/Rajesh- Govind/ 05-06 dated 09.11.2005 amount to Rs. 19,70,132/- Asa per Anne. C 14.11.2000 to 06.03.2001 and as per Anne D 2001-2002 i.e. from 20.09.2001 to 18.10.2001 DGCEI, ZU, Ahmedabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f cross examination. That as per the statement of Shri Haroon Yusuf Chippa also only 50,000/- LMT of fabrics can be printed on 14 Hand screen printing tables in a month and that large quantities of fabrics, claimed to have been hand screen printing, can only be processed with the aid of power at the premises of M/s. Rajesh Enterprise. That settling the case for the period 20.6.2002 to 18.7.2002 before the Settlement Commission clearly indicate the modus operandi adopted by the appellants for clandestine manufacture and clearance of finished goods by M/s. Rajesh Enterprise in the guise of hand screen printing. On the issue of quantification of duty and quantity of fabrics shown to be hand screen printed by M/s. Gayatri Fabrics, while countering the argument of learned advocate of the appellants, AR argued that the quantity of fabrics processed has been taken from the records maintained by M/s. Shree Govind Synthetics as quantity shown against the name of M/s. Gayatri Fabrics which did not existed at the relevant time. That the investigation done by HQ (Prev.) for a subsequent period cannot be relied upon for the investigation conducted by DGCEI for the earlier period as per Apex Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no evidence on record that M/s. Rajesh Enterprise procured excess raw materials required for processing of fabrics etc. and that during investigation no discrepancies were found either in the raw material stock or the finished goods stock. The case of the Revenue is primarily based on the statements of Shri Hukumsingh Shekhawat, power of attorney holder of M/s. Gayatri Fabrics, Shri Prayank P. Aggarwal of M/s. Rajesh Enterprise and Shri Haroon Yusuf Chippa of M/s. Malvika Fabrics and also that these statements were only retracted during the course of adjudication of the case made by DGCEI. It is observed from Para 19.11, 19.13 and 19.15 of the impugned OIO dated 21.7.2005 passed by the Adjudicating authority that though cross-examination took place in April-May 2005 before the Adjudicating authority but in his statement dated 25.4.2003, i.e. two years before the cross-examination of Shri Prayank P. Agarwal it was stated on page 4 of Shri Prayank P. Agarwal that M/s. Gayatri Fabrics (hand processing unit) was operating till 2001-02 and was sending hand screen printed fabrics to M/s. Shree Govind Synthetics for carrying out process of padding, clandestinely and open stentering. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record). Q-7. In the statement recorded on 13.03.2003 by Sr. I.O., DGCEI, you have stated that M/s. Gayatri Fabrics was not having any activities but in your statement recorded on 24.04.2003 you have stated that Gayatri Fabrics was engaged in hand processing of fabrics. Which is the correct statement i.e. whether statement recorded on 24.4.2003 or 13.03.2003? Ans. The statement dated 13.03.03 was recorded was recorded under threat and coercion. However, I have neither reiterated this statement nor I have made any representation to any senior officer or to any other court. Because they were not trusting anybody and the whole atmosphere was also of fear and threats. 19.15. In this regard, Shri Y.A. Daulti, Sr. Intelligence Officer, DGCEI who has conducted investigation of this case was also cross-examined on 02.5.2005 when he deposed as follows: Q-5 The demand in this case is for more than 40 Lakh meters of fabric. Have you inquired how much quantity of chemicals, dyes, water and electricity were required for processing such a huge quantity of fabrics? Ans. No. I have not enquired. Q-6 Did you check up the ledger or cash book or bank statements of Rajesh Enterprise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances only statements cannot be made as the basis for establishing a case of clandestine manufacture and clearance of goods against the appellants. 6.2. Arguing the case for the appellants it was also emphasised by the learned Advocate that certain para-meters fixed by this very Bench in Para 40 of the order dated 26.09.2013 in the case of Balaji Exports vs. CCE, Ahmedabad-III (supra) are required to be fulfilled. The relevant Para 40 is reproduced below:- 40. After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following:- (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of: (a) raw materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not inferential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearings in the present appeals were concluded), once again reiterated the same principles, after considering the entire case-law on the subject [Hindustan Machines vs. CCE, 2013 (294) ELT 43]. Members of Bench having hearing initially differed, the matter was referred to a third Member, who held that clandestine manufacture and clearances were not established by the Revenue. We are not going into it in detail, since the learned Counsels on either side may not have had the opportunity of examining the decision in the light of the facts of the present case. Suffice it to say that the said decision has also tabulated the entire case-law, including most of the decisions cited before us now, considered them, and come to the above conclusion. In yet another decision of a co-ordinate Bench of the Tribunal [Pan Parag India v CCE, 2013 (291) ELT 81], it has been held that the theory of preponderance of probability would be applicable only when there are strong evidences heading only to one and only one conclusion of clandestine activities. The said theory, cannot be adopted in cases of weak evidences of a doubtful nature. Where to manufacture huge quantities of final products the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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