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TMI Blog2016 (5) TMI 777X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the impugned order is set aside. - Decided in favour of appellant with consequential relief - Appeal Nos. E/1953-1955/2010-EX(DB) - Final Order Nos. 249-251/2016-CHD - Dated:- 9-12-2015 - Ashok Jindal, Member (J) And Raju, Member (T) For the Petitioner : Shri P K Mittal Shri Naveen Bindal, Advs For the Respondent : Shri M R Sharma, AR ORDER Per Ashok Jindal The Appellants, namely, M/s. Nabha Steels Ltd., M/s. Pushpanjali Steels Alloys Pvt. Ltd. and Shri Ajay Goyal, Director are in appeals against the impugned wherein a demand of duty has been confirmed against M/s.Nabha Steels and M/s.Pushpanjali Steel Alloys Pvt. Ltd. along with interest on the charge of clandestine removal of manufactured goods and penalty imposed on all the appellants. 2. The facts of the case are that M/s.Nabha Steels Ltd. and M/s.Pushpanjali Steel Alloys Pvt. Ltd. are engaged in the manufacture of MS ingots and registered with the Central Excise department. On intelligence received by the DGCEI, it was found that these appellants are engaged in evasion of duty way of clandestine clearances and manufacture of goods. The factory premises were searched on 7.9.2007 of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out to 490 units per MT which is not possible in any circumstance. The said fact has not been considered by the adjudicating authority. He further submitted that the appellants were not having production capacity to produce the finished goods on which duty of ₹ 19 crores can be confirmed. None of the statements of any of the officers General Manager Works, Production Head, Engineers, Supervisors, Skilled and Semi-skilled Workers admitted any clandestine manufacture or removal of goods. With regard to the statement of the buyers, he submitted that the appellants were selling the goods to 28 buyers out of which 16 parties' statements were recorded and 15 parties stated that they have received the goods without bills and made payment in cash. Out of statements of 12 persons, these parties did not make statements at the dictate of the department. Therefore, the department has not relied upon the statements of these parties. No cross objection to 16 parties were allowed on the premise that as these parties had not retracted their statements, the cross examination is not required. The appellants asked the statements of remaining 12 parties under RTI but the department refused t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to August, 2007. As the appellants were doing trading of various steel items which were sold to buyers and the same is confirmed with the statement of Shri Ajay Goyal who categorically stated that the appellant had been doing trading also. Therefore, the payment received towards trading of finished goods cannot be treated as the amount of finished goods manufactured by the appellants. He also submitted that the appellants had been selling the goods to the buyers and receiving cash and post dated cheques and later on, when the buyer's cheque has been encashed after some time, the appellants used to return the cash so accepted at the time of sale of goods which is a normal trade practice. The appellants had been providing financing accommodation to various parties by providing cash to them on payment of nominal interest as and when there were surpluses have not been considered by the adjudicating authority. He further submitted that there was trading of scrap and also cash trading of finished goods. 7. With regard to the statements of broker and raw material suppliers, he submitted that 10-15 raw materials suppliers and the statement of two raw material suppliers and one brok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess production details. (ii) To find out whether the excess raw materials have been purchased. (iii) To find out the dispatch particulars from the regular transporters. (iv) To find out the realization of sale proceeds. (v) To find out finished product receipt details from regular dealers/buyers. (vi) To find out the excess power consumptions. Without following the above test, the charge of clandestine removal is not sustainable. 11. He also relied upon the decision of Laxmi Engineering Works-2010 (254) ELT 205 (P H). In the case, it is held that private records which have been recorded during the raid cannot be held a supportable evidence that there was an attempt of clandestine production/removal of goods. He also relied upon he decision of Gujarat High Court in the case of Chhajusing S.Kanwal-2011 (272) ELT 202 (Guj.) wherein the High Court has affirmed the decision of this Tribunal holding that evidence brought on record in the form of depositions/statements of suppliers, buyers and transporters were not reliable to prove charge of clandestine removal of goods. 12. He further submitted that as no cross examination was granted to them in the light of the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch goods by the manufacturers or persons authorized by him; (f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of buyers with some details of illicit manufacture and clearance; (h) proof of actual transportation of goods, cleared without payment of duty; (i) links between the documents recovered during the search and activities being carried on in the factory of production; etc. 16. We further find in the case of Continental Cement Company (supra) again the issue of clandestine manufacture and removal came up before Hon'ble Allahabad High Court wherein it has been laid down certain norms which are reproduced below:- 12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eelbhai Vohra of M/s. A.S. Corporation without actual supply of any material, despite which, the authorities had turned down the request made by M/s. A.S. Corporation as well as Sulekhram for cross-examining the traders and brokers. The Tribunal was, therefore, justified in holding that the statements of such traders and brokers were not admissible in evidence, as they had not been tested on the touchstone of cross-examination. It is apparent that the entire case of the Revenue is based upon the statements of traders and brokers who have stated that M/s. A.S. Corporation had procured fictitious bills from them and sold goods to their buyers as well as statements of transporters who have stated that they had lifted the goods from the factory of Sulekhram. M/s. A.S. Corporation had rebutted the statements of traders and brokers and no Director or employee of Sulekhram has admitted clandestine manufacture and removal of goods. Morever, the respondents have not been permitted to cross-examine the traders and brokers despite specific request having been made in this regard, thereby rendering the statements of such witnesses inadmissible in evidence. Insofar as the statements of transpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criteria to allege clandestine removal. In fact in a case it is alleged that there is clandestine removal of the goods in the factory in that case it is the duty of the adjudicating authority to give logical conclusion of consumption of electricity in the normal course of business. In this case, we consider the electricity consumption for clandestine manufacture of the goods, the electricity is required to be consumed 490 units to manufacture one MT of MS ingots which is not possible in any circumstances, therefore, the appellants are having good case and charge of clandestine manufacture of goods is not sustainable. 20. Further, we find that the production capacity of the appellants has no been considered by the adjudicating authority in true sense as machinery installed in the factory of the appellants having a capacity to manufacture such goods which have been alleged to be cleared by the appellants. If this fact has examined by the adjudicating authority, the impugned order was not required to be passed. Therefore, we find force in the arguments of the appellants i.e. to determine the production, manufacture is not relevant factor to allege clandestine removal which has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicating authority. In fact we have gone through the stock report which indicated that on each day certain goods were manufactured and out that goods some goods are sold and some remained unsold and on second day the stock position of the remaining goods was also shown in the stock report of succeeding day. This has been treated by the adjudicating authority as test report which is factually incorrect and no credence of the explanation given by the appellants was considered by the adjudicating authority. In that circumstance the stock report cannot be treated as test report and the demand cannot be confirmed on the basis of these test reports. 24. We also take note that no statement of any transporters of raw material/finished goods have been recorded to allege that there is clandestine removal and manufacture of the goods. Therefore the charge of clandestine removal does not qualify the test laid down by Hon'ble High Court in the case of Gupta Synthetics Ltd. and Laxmi Engineering Works (supra). In the circumstances, we hold that the demand on account of clandestine manufacture and clearance of the finished goods is not sustainable. We further find that there were certain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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