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TMI Blog2016 (9) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... who had stated that it indicates removal of goods, duty liability cannot be fastened against the Appellant's firm. The preparation of 238 invoices at the utmost can create a doubt that the goods have been removed under the cover of such invoices, however the same has to be corroborated by conduction of further investigation from the buyers/ transporter and other persons involved. In absence of any such investigation, demand cannot be substantiated against the appellant. In case of demand of ₹ 96,27,789/-, the same has arisen on the sole basis of statement of Shri Nizzamuddin Sheikh who has stated that the production of Sponge Iron was 1600 MT per month. We find that his statement is not supported by any evidence. No documents in the form of his production register or wage record or any production report are available on record for substantiating his statement. Once Shri Sukumar Ghosh in his statement dated 27.05.2008 had stated that his earlier statements were based upon records shown to him, the investigation officers should have brought on record of clearance of goods from the factory of Appellant firm with enquiries from buyers, transporters and the employees/ persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat they have been recording the production on estimation basis which has led to such shortages. That since there are no corroborative evidence of removal of goods, therefore demand is not sustainable. We find that except shortage, no other evidence has been brought on record concerning the removal of goods. The shortages of goods may lead to an inference of removal of goods without payment of duty and a starting point of investigation. However, no further investigation has been conducted to ascertain the material fact of removal of goods. Since there is no buyer of goods and no investigation on removal of goods, in such a case we hold that duty demand is not sustainable merely on the basis of shortages of goods. Hence, the impugned order is not sustainable and are set aside. Since we have held that there is no sustainable demand, consequential penalties on Shri Sukumar Ghosh and Shri Iqbal Razzak Hingora are also set aside. - Decided in favour of appellant with consequential relief - Excise Appeal No.E/108/2010-EX [DB], Excise Appeal No.E/109/2010-EX [DB], Excise Appeal No.E/110/2010-EX [DB] - Final Order No. 52961-52963/2016 - Dated:- 9-8-2016 - S. K. Mohanty, Member ( Judici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from invoices that the goods were removed from the factory and the same has not been recorded in their books. He further stated that the invoices were prepared only for transportation purpose and that the sales proceeds has been collected by Shri Joes and Shri Ajay Khandelwal. When put to question regarding payment of duty on such invoices, he stated that the decision shall be taken by the director. It was alleged that M/s Shivalay has removed the goods under the cover of parallel invoices involving duty of ₹ 95,28,055/-. 2.2 Further, a statement of Shri Nizamuddin Sheikh, Labour contractor was recorded on 15.02.2007, wherein he stated that he is labour contractor since August 2006, but he does not have any agreement to show. That he is controlling the production of Sponge Iron. That for the period October 2006 to January 2007, the per month production of Sponge Iron was 1600 MT. On comparison of production stated by Shri Nizamuddin Sheikh with the production recorded in RG1 of the Appellant firm, it was found that there has been less recording of production of Sponge Iron. Accordingly a duty of ₹ 96,29,789/- was demanded alleging removal of the same without payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was removed without payment of duty. That also sponge iron of 143.100 MT was removed under the guise of dolochar for the period 01.11.2006 to 5.11.2006 as found from sales register. That Shri Sheikh is a paid contractor and his statement cannot be discarded as having no evidentiary value on ground of third party. (ii) That demand of ₹ 34,86,045/- on clandestine removal of 1849.400 MT of Sponge Iron on the basis of Log Sheets and Process Department Log Book is sustainable as the Appellant has not accounted for the Sponge Iron arrived on based of quantity of raw material mentioned in said records. The sponge iron quantity so arrived was not entered in statutory records. Since the panchnama proceedings was not disputed, therefore there is enough evidentiary value that the goods have been removed without payment of duty. (iii) That the demand of ₹ 13,10,287/- and ₹ 2,58,764/- is sustainable as the same is based on private records i.e. slip pads, dispatch advice and loose sheets seized during visit of the officers. (iv) The demand of duty of ₹ 14,94,236/- on shortage of M.S. Ingots is sustainable as the same was found during physical verification as Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. SHATABDI CEMENT (P) LTD. 2007 (217) E.L.T. 387 (Tri. - Del.) (iii) RAWALWASIA ISPAT UDYOG LTD.Vs. CCE, DELHI 2005 (186) E.L.T. 465 (Tri. - Del.) (iv) PET METAL PVT. LTD. Vs. CCE, VADODARA 2012 (278) E.L.T. 641 (Tri. - Ahmd.) (v) SHREE INDUSTRIES LTD. Vs. CCE., AHMEDABAD 2010 (261) E.L.T. 803 (Tri. - Ahmd.) (vi) CCE., LUDHIANA Vs. RENNY STEEL CAST. P) LTD. 2012 (283) E.L.T. 563 (Tri. - Del.) 5.1 As regard demand on the basis of contractor Shri Nizzammudin Sheikh, the ld. Advocate submits that a mere statement of the Contractor that the monthly production of Sponge Iron was 1600 MT is not supported by any documentary or other evidence. The contractor did not produce any records showing such production nor any evidence of the number of workers employed by him nor of any payments made to the workers. That even the cross examination of the contractor was not given on the ground that he was employee of the Appellant firm which is wrong and baseless. That his statement is contrary to the Director s statement. Shri Sukumar Ghosh in his statement dated 27.05.2008, in answer to question no. 9 has clearly stated that he does not know on what basis contractor has g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hows that the demand has got no basis. That the conclusion arrived at without discussion is not sustainable. That only on the basis of private records, no demand can be made. That as may be seen from the statement dated 15.02.2007 of Shri Nizamuddin Sheikh that he has stated that Shri Mithilesh, contractor was manufacturing MS Ingots. That even then no statement of Shri Mithilesh was obtained. This shows the lack of credibility of investigation. The slip pad cannot be said to be containing production of Appellant's unit. That it is not known from whose possession and which department of Appellant unit, such papers were seized. That no investigation has been done to prove that allegedly produced goods have been cleared from the factory. That the demand pertains to the period 18.11.2006 to January 2007. M.S. Ingots is produced from Sponge Iron. When the show cause notice demands duty on whole of sponge iron based on statement of Shri Nizamuddin Sheikh during this period, there would be no sponge Iron left for manufacturing MS Ingots. This shows that the demand is based only on conjectures and surmises. 5.4 The Ld. Counsel relied upon following judgments in support of his conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities and the demand has been made solely on his statement. In his written submission, the ld. Counsel relied upon the judgment of Tribunal in case of MOHTESHAM MOHD. ISMAIL Vs. SPL. DIRECTOR 2007 (220) ELT 3 to submit that statement of co-accused cannot be relied upon in absence of cross examination. 5.7 He further submits that the demand is not sustainable in absence of the evidence that there is no procurement of raw material used for producing the alleged huge production of finished goods. No statement of any raw material supplier has been recorded to show that the Appellant firm has purchased any additional raw material to produce such a huge quantity of finished goods. The investigating agency could not locate even a single supplier of the raw material needed for such huge production or the buyer of the alleged clandestinely cleared goods. No excess transportation of raw material to Appellant s factory. No clandestine manufacture. No excess power consumption, coal consumption or any other input required for manufacture of finished goods. There is no evidence of transportation e.g. bilty book or railway receipt, which can show that the Appellant removed any goods cland ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be considered as an instance to allege removal of goods, but the removal of the goods covered with the invoices has to be corroborated with further investigation and evidences. In the instant case, we find that in spite of possession of 238 invoices, no investigation was conducted to ascertain the veracity of those invoices. We further find that the department has not disclosed the source of such invoices. It is not forthcoming on record as to whether such invoices were seized from the buyers or from the possession of any employee or director or from the office/ factory of the Appellant. Even if the invoices were received by the department, the officers could have conducted investigation from the buyers of the goods or the transporters as number of transport vehicles were appearing in invoices, but no investigation was conducted. Only on the basis of statement of Shri Sukumar Ghosh, who had stated that it indicates removal of goods, duty liability cannot be fastened against the Appellant's firm. The preparation of 238 invoices at the utmost can create a doubt that the goods have been removed under the cover of such invoices, however the same has to be corroborated by conduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mar Ghosh, the officers did not record statement of any of the employee of the Appellant s unit which was connected with production or clearance activities of the unit. Even the directors of the firm Shri Jaiprakash Motwani and Shri Hingora have refused to the fact of any clandestine production and removal of goods. In such eventuality, it was incumbent upon the adjudicating authority to grant cross examination of Shri Sukumar Ghosh. Having denied the opportunity of cross examination, the statements of Shri Sukumar Ghosh cannot be made basis for demand. Also the cross examination of Labour Contractor Shri Nizzamuddin Sheikh has been denied on the ground that he is employee of the Appellant firm which is not correct. Being not an employee of a firm and no document/ production record having been found out from his possession, his cross examination should have been granted as his statement was only basis for demand. The Ld. DR has placed reliance upon the judgment of M/s Shalini Steels Pvt. Ltd. Vs. Commr. Of Cus C.Ex, Hyderabad 2011 (269) ELT 485 (A.P), wherein it was held that the statement of employee has to be accepted as the same has been accepted to be true by the Managing Dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been brought on record. In such case, we are of the view that demand cannot be made on the basis of statement of Shri Sukumar Ghosh or Shri Nizammuddin Sheikh. Our views are also based upon the judgment of Hon ble Madras High Court in the case of CCE, TIRUCHIRAPALLI Vs. SREE RAJESWARI MILLS LTD. 2011 (272) ELT 49 (MAD.), wherein it was held that statement of Security and Liasion officers who have got nothing to do with production and clearance of goods are not admissible as evidence of clandestine removal. 8.2 In case of RAWALWASIA ISPAT UDYOG LTD.Vs. CCE, DELHI, 2005 (186) E.L.T. 465 (Tri. - Del.) and other judgments cited by the Appellant, it has been settled that in absence of information/ identification of person from whom the invoices were recovered and in absence of investigation from the buyers of the goods, no demand can be made on account of clandestine removal. Similarly, in case of demand based upon statement of Shri Nizzamuddin Sheikh, we find that apart from his statement no other documentary evidences are available on record. We, therefore hold that the demand of ₹ 95,28,055/- and of ₹ 96,29,789/- are not sustainable. 8.3 In case of demand of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve pleaded that the quantity is mentioned on estimation basis as may be seen from the panchnama dated 14.02.2007 and not on actual weighment basis. This has resulted into variation in physical stock. It is also contended by them that the recorded quantity was arrived at on the basis of quantity mentioned in RG-1 till 31.01.2007 and then adding to that quantity the alleged production for the subsequent period and deducting the clearances. The officers have also added quantity of 164.780MT of M.S. Ingots on the ground that the same is production for the period 09.02.2007 to 14.02.2007. Addition of said quantity is without any basis as there is no mention in panchnama as to the place from where the production slips were obtained. Even the production slips were not relied upon in the show cause notice, and thus, the said quantity is not liable to be deducted. We find that the denial of cross examination of Shri Sukumar Ghosh who was present at the time of physical verification has been wrongly denied. That they have been recording the production on estimation basis which has led to such shortages. That since there are no corroborative evidence of removal of goods, therefore demand is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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