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TMI Blog2014 (12) TMI 1036X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 91 - SUPREME COURT OF INDIA] followed. Records were not recovered from regular business premises. Some of these records related to production were said to be tallying with the records seized from the factory. However in the show cause notice there is nothing stated that the details of goods found were tallying with the details of the clearances on payment of duty or otherwise and to whom. We find that the entire case of the revenue is based upon the dispatch details found from the files and data recovered from the secret office. However except these evidences there is virtually no other evidence to reflect upon the clandestine production and removal by M/s Hingora. Alleged dispatch details and the parallel invoices said to be found from the secret office contained the name of the parties to whom the goods were cleared as well as other details. However no evidence is appearing on record that the officers investigated such recipients, inspite of their details appearing in all such alleged clearance records. In such case, it has to be held that the said evidence is uncorroborated. In all clandestine removals, it has been now well laid that the crux of the issue in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the charges of clandestine removal against M/s Hingora Industries are not sustainable. Thus, in the peculiar facts and circumstances of this case, we hold that the impugned order which confirms the demand against M/s Hingora Industries and imposes penalty on them is not sustainable and is liable to be set aside and we do so. There is no sustainable demand, consequential penalties on various other appellants, who are in appeal before us, would also automatically be set aside - Decided in favour of assessee. - Appeal No.E/585-588/2011-DB - Order No.A/12102-12105/2014 - Dated:- 1-12-2014 - MR.M.V. RAVINDRAN AND MR. H.K. THAKUR, JJ. For the Appellant : Shri J.C. Patel, Adv. For the Respondent : Dr. Jeetesh Nagori, Addl.Commissioner (AR) JUDGEMENT Per: M.V. Ravindran; 1. These appeals No. E/585/2011 to E/588/2011 have been filed by M/s. Hingora Industries Pvt. Ltd. Daman and its director Shri Jaiprakash Motwani, Shri Iqbal R. Hingora and Ayub. R. Hingora. The Appeals are directed against the same Order-in-Original No. 09/MP/DAMAN/2010, dt.29.10.2010 passed by the Commissioner, Central Excise, Daman hence all these appeals are being disposed by this common o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Prince Bar; that he also visits that office occasionally just to look after the office. That Shri Jamunadas was on 10 days leave and Shri Ramprasad sits in his office and he is also on leave. He further stated that at their secret office challans/ documents relating to goods manufactured in M/s Hingora were prepared and these documents were signed by Shri Jamunadas or Shri Ramprasad. (ii) That on scrutiny of the records seized from the factory of M/s Hingora vis-a-vis the records seized from the alleged secret office and the data retrieved from the hard disk of the computer seized from the secret office shows that M/s Hingora have used the said secret office for generating and storing their documents of illicit clearances. That the documents recovered from the secret office belong to M/s Hingora Industries, as the details mentioned in the records seized from the factory are corroborated with the details shown in the records seized from the secret office. (iii) That M/s Hingora has shown manufacture of Texturised yarn on job work basis till 07.07.04 and with effect from 08.07.04 they started their own production of texurised/Crimped Yarn. That a secret place was hired nea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spatches are also available. As per the Daily Finished Stock Account register maintained in the factory, during the period from 01.04.04 to 07.07.04. However no supporting documents like job work challans or job work register could be produced by M/s Hingora. As per the Daily Finished Stock Account Register maintained in the factory, during the period from 01.04.04 to 07.07.04, it was shown that the goods were manufactured on job work basis for which no duty was paid. However no supporting documents like job work challans or job work register could be produced by the Appellant to prove the job work as claimed in the statement of Shri Jayprakash Vishnudas Motwani, the Director of the firm. During the impugned period, finished goods, manufactured out of the POY, illicitly received by them were cleared to various parties as indicated in the documents seized from the alleged secret office. (vi) that the File marked as A/8,A/9, A/10 and A/11 contains the copies of the daily production, receipts, stock and dispatch statements for the month of April 04 to Oct 04 as well as name of Parties and address, quantity of boxes, denier, lot no etc. That the verification of the daily stock reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible and it was proposed to impose penalty upon them under Rule 26 of the Central Excise Rules, 2002. Vide ex-parte Order-in-Original dt.19.11.2007 the Commissioner on the ground of non appearance and non filing of reply by the Appellants confirmed the demands against the Appellant and imposed penalties. The Appellants filed appeal before Tribunal and the Tribunal vide Order No.A/122-125/WZB/AHD/2010 dt.06.01.2010 remanded back to the case to the Commissioner. 3. The Appellants requested for cross examination of Shri Indravardhan Champaklal and Shri K.M. Tripathi whose statements were relied upon for making allegations against the Appellant. The Appellant were informed by the office of the Commissioner that their request for cross examination has not been acceded to. The Appellants thereafter appeared for the personal hearing and made submissions in their support. 4. The Commissioner, Central Excise, Daman vide order dt. 09/MP/DAMAN/2010 dt.29.12.2010 confirmed the duty demand of ₹ 3,24,46,937/- and ed. Cess of ₹ 3,52,822/- against the Appellant and also imposed equivalent penalty. Personal penalty of ₹ 30 lakhs each was imposed upon director Shri Jayprak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Had the parallel invoices were been used, as contended in the impugned order, these invoices would have been available with the buyer. As far as the recovery of packing slips is concerned, whatever small quantity of goods that might have been purchased from the market, i.e. from the dalals, it is bound to have packing slips prepared in the factory but the parallel invoices cannot be linked with these few packing slips. the so called clandestine clearances as available in parallel invoice books A/17 to A/24 is linked to a few packing slips recovered from M/s Yogeshwar Textiles who has not even made a single payment for these purchases. That is a well established legal principle that without ample proof regarding procurement of raw materials, use of production facilities, transportation of, raw materials into the factory and finished goods out of the factory, and financial flow of these transactions, the allegation of clandestine procurement, production and removal cannot sustain. Such serious allegations cannot be substantiated by mere recovery of some documents, that too from entirely different premises which do not have even a remotest connection with the Appellant. (v) that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t mean that M/s Hingora did not undertake job work activity for the said concern as the department could have very well undertaken investigation at the end of M/s Star Synthetics. Even the alleged non maintenance of job work data could have easily been verified from the records of M/s Star Synthetics for whom they had undertaken the job work. However the investigation officers did not investigated the same on the ground that the unit was closed. (ix) That from the production capacity of machines installed in the factory the quantity of goods alleged to have been cleared clandestinely cleared cannot be manufactured as shown in their reply and appeal. That as per panchnama dated 1.11.2004 only 7 nos. of machines were installed in the Appellants factory. From the said machines even as per the actual capacity of the machine, the quantity of goods capable of being manufactured is far less than the alleged quantity of clandestine manufacture and removal. The production capacity is only 3581 MT Approx. As against this, the Appellant manufactured total quantity of texturised yarn is 3799 MT Approx., which is more or less equal or near to the capacity of installed machineries. The varia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record of recruitment of workers or staff required for such production and payment records of the salary and wages paid to them. There are no receipts of any cash or kind on account of clandestine clearance and sale of goods. No records/ documents have been seized from any party to show that the goods have been clandestinely cleared to such parties. 7. The Ld. DR supports the order of the Commissioner. He would submit that the employee Shri Tripathi and Shri I.C.Pipwala being employee are not third party and hence their cross examination was not required. That the director of the Appellant Shri Jaiprakash Motwani did not co-operate during investigation; that the alleged secret office was taken by the Appellant on rent to store the documents related to clandestine production and removal of goods; that at the secret office the parallel invoices and records relating to production were found. It was submitted some of the lot numbers of the goods manufactured were found to be tallying with the data found at secret office. He takes us through the contents of the statements as well as in show cause notice to show that the goods were clandestinely removed from the factory of M/s Hingora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein their Lordship held no reliance can be placed on the oral statement of the raw material suppliers as he is not subjected to any examination and cross examination during adjudication. 9. As regard documents recovered from the alleged secret office we find that these records were not recovered from regular business premises. Some of these records related to production were said to be tallying with the records seized from the factory. However in the show cause notice there is nothing stated that the details of goods found were tallying with the details of the clearances on payment of duty or otherwise and to whom. We find that the entire case of the revenue is based upon the dispatch details found from the files and data recovered from the secret office. However except these evidences there is virtually no other evidence to reflect upon the clandestine production and removal by M/s Hingora. There is no author of such records and in absence of such verification, the records cannot be relied upon as held in the case of M/s Kuber Tobacco - 2013 (290) ELT 545 (Tri.). Similar view has been taken by the Tribunal in the case of CCE Ludhiana Vs B.T. Alloys - 2013 (297), ELT 387 (Tri-D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be a ground to demand duty as no investigation was undertaken regarding the delivery of the goods produced by M/s Hingora. This was most crucial aspect which needed to be determined and in absence of delivery of goods elsewhere or any evidences in this behalf, duty demand cannot be fasten upon M/s Hingora Industries. 12. We also find that the Appellant in his reply to the show cause notice as well as in the appeal memo had clearly shown the production capacity of the machines found during the panchnama and pleaded that their records clearly shows that the goods produced from the machines as per their production capacity was fully accounted for in their records. We find that the revenue has not been able to controvert this submission and thus we find that the Appellant submission regarding non production of clandestine cleared goods has lot of credence. Our view is also based upon the Tribunal observation in the case of M/s Kuber Tobacco Prod. Ltd Vs CCE Delhi - 2013 (290) ELT 545 (Tri-Del), wherein it was held that it was burden of the department to establish capacity of machines and to prove that the clandestine production took place. 13. We are also conscious of the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e investigating officers have specifically identified the person in whose custody (cupboard from which) the said invoice was recovered. It has also not been shown that investigating officers have taken any efforts to question the buyers mentioned in the said invoices. Under these circumstances, the Commissioner (Appeals) accepted the version of the respondent that Invoice No. 7, dt.24.12.2001 was a commercial invoice and not excise invoice. In the absence of investigation, mere finding of the original authority that need for issue of commercial invoice is not disclosed, is not sufficient to fasten duty liability holding that there was clandestine removal. There is no material revealed in the grounds of appeal which can upset the finding of the fact by the Commissioner (Appeals). (iii) In the case of CCE, Ludhiana Vs Nand Mangal Steels Ltd - 2008 (226) ELT 701 (P H), the Hon ble High Court in Para 4 held as under: We have heard learned counsel for the appellant. However, we are not inclined to accept the submissions made by the counsel for the appellant/revenue. As in the present case, the department has failed to produce any material corroborating the parallel in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of duty by M/s Hingora Industries. It is well settled legal position that without corroborative evidences in the form of procurement of raw materials, use of production facilities, transportation of, raw materials into the factory and finished goods out of the factory, and financial flow of these transactions, the allegation of clandestine procurement, production and removal cannot sustain. Such serious allegations cannot be substantiated by mere recovery of some documents, that too from entirely different premises which do not have even a remotest connection with the Appellant. Our views are based upon following judgments of co-ordinate benches: (i) In the case of T.G.L. Poshak Corpn. Vs CCE Hyderabad - 2002 (140) ELT 187 (Tri-Che.), the Tribunal has recorded as under: Para 6 - We have carefully considered the submission and perused the impugned order. Insofar as the assessee s appeal is concerned, we notice from the extracted portion of the Commissioners order that Revenue is solely relying on the exercise note books mainly balance steets. The Tribunal in large number of cases which have already been noted above in the tabulated list of citations f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent inadmissible in evidence. The findings recorded in Para 16 that the Accountant is now not available and his whereabouts could not be traced is not acceptable for the reason that at the time of the raid and the seizure of the notebook, the said Accountant was very much present. Be that as it may, the Revenue is required to show that appellants have purchased raw materials valued more than ₹ 1.09 crores. It is the specific plea of the appellants that the inputs are supplied under licence under the Explosives Act and they are required to purchase only through governmental sources. This was explained by the Managing Partner when he was examined by the Investigating officers. Therefore, at the time of investigation, it was the duty of the said officers to have contacted the supplier of Governmental agency and examined them and should have seen through their records as to whether the appellants have purchased such huge quantities of inputs for manufacture of the fireworks. The said non-examination of the supplier of raw material which is controlled and a licensed commodity is fatal to this case and it can be easily concurred that Revenue has not proved the case with regard to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been proved including the scribe not having been examined, therefore applying the ratio of all the judgments noted supra, the impugned order is set aside and the appeals are allowed. (iii) Further in the case of M/s Dhanavilas (Madras) Snuff Co. - 2003 (153) E.L.T. 437 (Tri-Chennai), we find that in Para 6, the Tribunal has recorded as under: 6. Revenue ought to have produced the evidence of purchase of raw material, manufacture and clearance of goods clandestinely by examining the workers and also those who have received the goods without payment of duty. In view of lack of evidence, the Commissioner has rightly dropped the proceedings with regard to the charge pertaining to clandestine removal. However, he has upheld the charge pertaining to certain other charges and has confirmed duty and penalties. (iv) Further in the case of S.T. Texturisers - 2006 (200) ELT 234, this Bench, in respect of clandestine removal, very clearly held as under : 6. Considering the above arguments of the appellant in the light of the various decisions of the Tribunal, it is seen that it has been consistently held by the Tribunal that entries in rough regis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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