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TMI Blog2017 (5) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... s. There is no evidence for payment/receipt of money for excess inputs, extra labour and also payments made from the buyers end. In Dekon India Vs CCE, Kolkata-II [2004 (2) TMI 181 - CESTAT, KOLKATA] the Bench held that entries made in the plan diary cannot be basis to conclude that goods have been clandestinely removed. When the department is relying on private entries in some loose sheets/note books, the department has to complete the chain of purchase of inputs to production and removal in respect of the figures found in such private records. It is settled law that allegation of clandestine production and clearance is to be made only when the department has concrete evidence of un-accounted receipt of raw materials, its consumption and un-accounted production. The clandestine clearance has to be supported by evidence of transportation of material and also flow back of cash - there is no evidence to establish clandestine clearance of goods - demand is unsustainable - appeal allowed - decided in favor of appellant. - E/2705-2707/2011 - A/30407-30409/2017 - Dated:- 16-3-2017 - Ms. Sulekha Beevi, C.S., Member (Judicial) Sh. Y. Sreenivasa Reddy, Advocate for the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30.06.2009, the Commissioner (Appeals) set aside the demand related to fraudulent availment of CENVAT credit. The issue related to demand of duty on clandestine clearance of goods, was remanded to the adjudicating authority for fresh consideration. 4. After completing denovo proceedings, the adjudicating authority confirmed the demand of ₹ 30,08,927/- along with interest. An amount of ₹ 15 lakhs already paid by the appellant was appropriated. Equal amount of penalty was imposed on M/s SSOL and ₹ 3 lakhs penalty was imposed on Sh. V.N. Sunanda Reddy and ₹ 2 lakhs on Sh. N. Gangi Reddy under Rule 26 of Central Excise Rules, 2002. Aggrieved by the said order, the appellants filed appeal before the Commissioner (Appeals) and vide order impugned herein the Commissioner (Appeals) upheld the same. Hence these appeals. 5. On behalf of the appellant, the main submissions put forward by the Ld. Counsel Sh. Y. Sreenivasa Reddy can be summarised as under: (i) The entire allegations of clandestine clearance of bulk drugs/intermediaries (finished goods) is based on certain loose papers recovered from the factory premises of the appellant. The said loose papers/r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ba Reddy had taken control and management of the company, he replied to the show cause notice stating that clandestine removals are made by Sh. V.N. Sunanda Reddy and that the duty penalty etc., has to be paid by Sh. Sunanda Reddy. However, the show cause notice was responded by Sh. Sunanda Reddy and Sh. Gangi Reddy denying the allegations therein. Sh. Subba Reddy had also filed an appeal before the Tribunal on behalf of SSOL as E/2755/2011. The said appeal was dismissed as withdrawn. The present appeals are filed by the present Managing Director Sh. Sunanda Reddy on behalf of the company. The Ld. Counsel submitted that on the background of such rivalry between the two factions in the management of the company, the private records are only planted documents and therefore cannot be relied at all. It is also submitted that Sh. Subba Reddy has filed more than 25 litigations/complaints before various authorities against Sh. Sunanda Reddy. Complaints were filed before Provident Fund Authority, ESI Authority and other statutory bodies. The statements recorded by the department are mostly by persons who support Sh. Subba Reddy and are ex-employees of the company. (vii). The Ld. Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. Sh. Subba Reddy had used this case as an opportunity to settle his scores with the other Directors of the company with whom he had dispute. (xi). The Ld. Counsel relied upon the judgment in the case of CCE, Jaipur Vs Sumetco Alloys Pvt Ltd., [2008 (230) ELT 81 (Tri-Del)] to contend that the demand based on private note book maintained by an employee who is not authorised signatory cannot be relied without any corroborative evidence. The judgment in the case of CCE, Madurai Vs Madras Suspensions Ltd., [2003 (156) ELT 807 (Tri-Chennai)] was relied to argue that chits/notes recovered cannot be basis for establishing clandestine removal in the absence of supportive evidence like shortage of raw-materials, purchase of inputs, excess power consumption. The case CCE, Coimbatore Vs Sangamitra Cotton Mills Pvt Ltd., [2004 (163) ELT 472 (Tri-Chennai)] was relied to content that entries in note book or details contained in file are not sufficient to prove charges of clandestine clearance. (xii). Further, the department had filed an appeal before this Tribunal against the order passed by Commissioner (Appeals) who set aside the demand in respect of irregular availment of CEN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf does not match with the clearances recorded by the assessee. Though the appellant claims the quantities discharged under central excise invoices to be more than the quantities reflected in the private record, the appellants have not made any attempt to co-relate the said data with batch sheets of each product. That batch reports/sheets are to be maintained for every product manufactured in a drug unit. In respect of such evidence the appellants have merely stated that the clearance of goods have been properly accounted for. The statements of various persons/employees corroborate and establish the allegation in the show cause notice. Further, Sh. Subba Reddy has replied to show cause notice admitting the allegations and also pointing out that Sh. Sunanda Reddy is the person who is involved in such activities. That these evidences cannot be merely brushed aside stating to be rivalry between the Directors. 7. I have heard the rival submissions made before me. 8. The allegation in the present case is confined to the clandestine removal of goods and the confirmation of duty demand to the tune of ₹ 30,08,927/-. The allegation of fraudulent availment of credit was already c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reports maintained by the Production and Quality Control department. Simple entries like CDL-50Kg, in my opinion, are not conclusive of evasion. The nature of the document i.e. the daily report, the purpose for which the reports were maintained, the procedure of recording the production and dispatch of goods in these documents or records have to be examined to find out whether the scribbling done on these reports like 50 Kg CDL were borne out correctly or were misconceived by the staff in the quality control department. The daily reports show the stock position of different drugs manufactured and if there is clandestine removal as indicated in some reports by way of scribbling like 50 Kg CDL, the same should be out of either the recorded production which is manipulated to cover the clandestine removal or otherwise the quantity is not recorded in the production at all and directly removed without duty. Evidences have to be taken together to arrive at a conclusion whether the unit has actually indulged in evasion of duty. Though there is a confessional statement by Shri. V.N. Sunanda Reddy that accepted the entries in the records and the statements given by the employees, yet the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) (Annexure-C-10) 68 deals with Esomeprazole, the explanation by the assessee is as under: The analysis of the entries in the Daily Reports and actual invoices for the corresponding period are as detailed below: Sl. No Date Entries as per Daily Reports CENVAT Invoiced clearances Inv. No. Qty. Kgs Party Inv. No. Qty. Kgs Party 1. 23.08.05 - 20 - 192 50 Glen 2. 24.08.05 - 50 Glen - - - 3. 27.08.05 - - - 197 20 Okasa Total = 70 Total = 70 As seen from the above table the 20 kg Esomeprazole was actually dispatched on 27.08.05 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and that it has nothing to do with dispatch of goods. Same is the case with entries in other records also. The argument of the Ld. Counsel that the buyers of the bulk drugs/intermediaries are Multi National Companies who follow ERP system has also to be considered especially on the background when the department has not conducted any enquiry at the end of such buyers of the products. The Ld. Counsel has heavily relied upon the judgment in the case of Ambika Chemicals Vs CCE, Chennai [2002 (148) ELT 101 (Tri-Chennai)]. The facts in the said case are almost similar since the evidence is mainly private records. The relevant paragraphs are worth reproducing: 15. We shall take each of the charges for consideration and see as to whether there is sufficient evidence on record to confirm the demands and also see as to whether the findings are sustainable. As regards the first charge is concerned, the Department is proceeding on the basis of eight small note books maintained by the Chemist of the firm with regard to production of various leather chemicals on a day-to-day basis. Ld. SDR was trying to show from the order that the entries are in batch wise and tallied with the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch removal of goods is not supported by purchase of excess inputs, source of funds, sale and receipt of consideration. 12. In the present case, there is no evidence of receipt of any excess quantity of raw materials for the alleged excess production which the department alleges to have been clandestinely removed by the appellant. Being bulk drugs/intermediaries the department has to establish the receipt of raw materials for the production of the goods. The raw materials of such specialized products cannot be considered to be easily available in local market. The sellers who supplied the excess raw materials are not in picture. There is no evidence of extra usage of electricity or any evidence for transportation of such clandestinely removed goods. There is no evidence for payment/receipt of money for excess inputs, extra labour and also payments made from the buyers end. Statements of some buyers of clandestinely cleared goods are recorded. But these statements are not supported by their accounts and no comparison has been made with the private records. They are not made party to the proceedings. The Tribunal in the case of CCE, Madurai Vs Madras Suspensions Ltd., [2003 (156) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination satisfied himself that the revenue did not establish clandestine removal. Even before us the revenue has not produced any document to support their charge of clandestine removal. They have only produced the copies of Order-in-Original and Orders-in-Appeal. There is no material available before the Bench also to come to a conclusion that there was material available for confirming the demands. In that view of the matter, Commissioner (Appeals) order is legal and proper. There is no merit in this appeal and hence it is rejected. In Dekon India Vs CCE, Kolkata-II [2004 (169) ELT 290 (Tri-Kol)] the Bench held that entries made in the plan diary cannot be basis to conclude that goods have been clandestinely removed. When the department is relying on private entries in some loose sheets/note books, the department has to complete the chain of purchase of inputs to production and removal in respect of the figures found in such private records. 13. It is settled law that allegation of clandestine production and clearance is to be made only when the department has concrete evidence of un-accounted receipt of raw materials, its consumption and un-accounted production. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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