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TMI Blog2015 (7) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... them in books of accounts. There has to be an illicit manufacture of goods to indulge in clandestine removals for which extra raw-material, extra manpower, transportation of finished goods, cash payments etc are required to be established with a reasonable degree. In the absence of any corroboration on above factual details, the case of clandestine removals cannot be held as established on the basis of few parallel invoices recovered from a third party. Impugned orders demanding duty as alleged clandestine removal with equal penalty deserves to be set aside. However, duty demand of ₹ 24,905/- in respect of shortage of finished goods found at the time of search of factory on 3.7.2001 is required be confirmed with equal penalty. Penalty imposed on Shri Manan K Shan, Director of the main appellant, is also set aside as on merit appeal has been predominantly decided in favour of the main appellant. - Decided partly in favour of assessee. - Appeal No. E/126-127/2009 - ORDER No. 10910-10911/2015 - Dated:- 30-6-2015 - Mr. H.K. Thakur, Hon ble Member (Technical),J. For the Petitioner : Shri Deven Parikh, Sr. Advocate, Shri P P Jadeja, Consultant For the Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - and ₹ 24,909/- u/s 11A of Central Excise Act, with equal penalty on the main appellant and imposed penalty of ₹ 5,00,000/- on Shri Manan K Shah, Director of the main appellant under Rule 26 of Central Excise Rules 2002 and on appeal the same has been upheld vide OIA No 6 to 7/2009 dated 6.1.2009, which is challenged here by the appellants in these two appeals. 3. Shri Deven Parikh, Senior Advocate, appeared alongwith Shri PP Jadeja, Consultant on behalf of the Appellants and submitted that the revenue has not provided copies of the relied upon parallel invoices, despite Hon ble CESTAT s order dt 27.1.2007. That after this Bench s Order No I/128-129/2015dated 27.3.2015 some documents (pages 1 to 100) were provided, which are also not sufficient to establish the serious charge of clandestine manufacture and removal of goods by the appellants. 3.1 Learned Senior Advocate argued that as per the law established by now, in cases of clandestine manufacture and clearance, 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 no merely interferenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mand drafts but the investigation has not found any such payments received in the two accounts of the main appellant which is reflected in Para 5.5 of the SCN; that although appellant has accepted only shortage of finished goods found and paid duty thereon, appellant has not accepted any details of manufacture and clearance of goods clandestinely made under alleged parallel invoices. Therefore, the evidences relied upon by the revenue to confirm the duty demand, are not sufficient to prove the case of clandestine manufacture and removal of goods. They also pleaded that evidence available on record have not been properly appreciated by the adjudicating authority. Appellants relied upon the following judgements, providing proposition of law applicable in cases of clandestine manufacture and clearance of goods based upon insufficient evidences, recovery of documents from their party, corroborative evidence, confessional statements etc : i) 2008(226)ELT.701(P H) CCE Vs Nand Mangal Steels Ltd ii) 2012(278)ELT.641(Tri.Ahd.) Pet Metals Pvt Ltd Vs CCE iii) 2014(308)ELT.655 (Guj) CCE vs Saakeen Alloys Pvt Ltd iv) 2011(274)ELT.94 (Tri.Del.) CCE vs Renny Steel Castings Pvt Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly argued by the Learned Authorised Representative that the confessional statements have not been retracted by the appellants and also the statements of the consignment recipient that parallel invoices and other complementary invoices recovered from the factory of main appellant corroborating clandestine manufacture and removal of finished goods. 5. Heard both sides and perused the case records. The Revenue s case of clandestine manufacture and removal of HDPE/LLDPE bags of Chapter 39, without payment of duty, by the Appellant is based mainly on the account of a search. Panchnama dt 3.7.2001 at appellants factory show the following discrepancies: * Shortage of 1946 kgs Finished Goods involving duty of ₹ 24,909/- * Shortage of raw materials 4050 and 4170 kgs of LDPE LLDPE, * Blank Invoice Book containing 23 sets of invoices and statements of Shri Naman K Shah, Shri Jignesh K and Shri Dhiraj and statements of the buyers the main appellant. It is observed that during search on 3.7.2001 a shortage of 946 kgs finished goods, involving excise duty of ₹ 24,909/- was found on which Shri Manan K Shah has stated before Panchas that he was not in a position to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence of flow back of money from the buyers to appellant ought to have been a crucial evidence to establish link of goods cleared by the appellant to buyers. However, there is no evidence that the main appellant has received any amount with respect to clandestinely cleared goods. In the absence of clear evidences to the flow back of money from buyer to appellant clandestine removals are not conclusively established. 5.3 I find that contents of the said parallel invoice have not been admitted by the appellant. Statement of Shri Manan K Shah, Director of the main appellant is relied upon by Revenue. Under this statement it has only been admitted that there were shortages of finished goods involving total duty of ₹ 24,905/- in these proceedings. I also find that huge quantities of finished goods are alleged to have been manufactured and removed clandestinely during the period in question, but in the absence of no corroborative evidence of excess receipt and consumption of inputs, electricity, manpower requirement, transportation etc. 5.4 I also find that demands are also based on unsigned documents found from the premises of the main appellant, but such documents are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture of Frit, there is also nothing on record to indicate that the appellant had purchased the Quartz, Feldspar, Zinc, Borax Powder, Calcium and Dolomite and without accounting them used for the manufacture of Frit for clandestine removal. There is also nothing on record nor there is any statement of the suppliers of other raw materials, which would indicate that the appellant had received unaccounted raw material from the suppliers of these raw materials. There is a solitary evidence in the form of statement of supplier of one of the raw material i.e. Borax Powder, who indicated that the appellant had procured Borax Powder and not accounted the same in his record; and the said entries and information were deduced from the documents of the premises of Shri Anil Jadav and whose evidence has been discarded for having not been produced 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 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moval without payment of duty. As already discussed the said statements are devoid of probative value and cannot be considered to be supportive of charges of clandestine removal. In yet another case in the case of T.G.L. Poshak Corporation - 2002 (140) E.L.T. 187, the co-ordinate Bench of the Tribunal held as under. 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 Commissioner s order that Revenue is solely relying on the exercise note books mainly balance sheets. The Tribunal in large number of cases which have already been noted above in the tabulated list of citations furnished by the Counsel has held that unless there is clinching evidence on the nature of purchase of raw materials, use of electricity, sale, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of note books maintained by some workers. The facts in the case of Aswin Vanaspati Industries would be identical to the facts herein as in that case also the allegation was with regard to removal of Vanaspati based on the inputs maintained. The T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that the clandestine removal could take place without receipt of other raw materials. The investigating authorities, during the course of raid, had even seized the records of security at the factory gate, but from these records, Revenue was not able to show that there was illicit receipt of the raw materials in the manufacture of final product in the factory premises. 6.1 In the present proceedings also it is observed that there has to be an illicit manufacture of goods to indulge in clandestine removals for which extra raw-material, extra manpower, transportation of finished goods, cash payments etc are required to be established with a reasonable degree. In the absence of any corroboration on above factual details, the case of clandestine removals cannot be held as established on the basis of few parallel invoices recovered from a third party. 7. In view of the above observations and settled proportion of law, impugned orders demanding duty as alleged clandestine removal with equal penalty deserves to be set aside. However, duty demand of ₹ 24,905/- in respect of shortage of finished goods found at the time of search of factory on 3.7.2001 is required be confirme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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