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TMI Blog2017 (5) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... e and considering the shortage which detected in six years is miniscule to 0.42% without any corroborative evidence for clandestine removal of the goods, the duty on shortages cannot be confirmed. Further taking into consideration the shortages of finished goods are not sustainable consequently the demand of duty on finished goods is not sustainable - demand set aside. Demand of ₹ 58,72,851/- confirmed on account alleged clandestine product - Held that: - the demand is not sustainable on the basis of difference between production slips and RG-1 register - it has not been coming out form the facts of the case that for manufacturing these quantities from where the raw material procured, how much electricity used and how the payment of these goods have been received, how the goods have been transported, therefore, in the absence of any corroborative evidence the demand sought to be confirmed on the bass of assumption and presumption is not sustainable - We further find that the demand has been confirmed on the basis of private registers and RG-1 register, the department did not raise any demand in the show cause notice dated 4.4.2008. Therefore, this demand cannot be confirme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein the demand of duty has been confirmed against the main appellant alongwith interest and penalty and penalty on both the appellants have also been imposed. 2. The facts of the case are that the appellants are engaged in the manufacture H.B. Wire and Mild Steel (winding wire). On 9.10.2007, the premises of the appellants were visited wherein certain receipt, dispatch and production registers maintained by Shri S. Vasudea Rao as well as excise records recovered under panchnama on 4.7.2007. On physical verification, an alleged shortage of 710.155 Mt of wire rods, which is a raw material, 176.325 MT of HB wires an 3.060 MT of MS wire, both finished was found and excess of 5.030 MT of MS Wire mesh also found. The goods were seized, the statement of Shri S. Vasudev Rao was recorded on the next day. The statement of Shri Kailash Aggarwal, Director/appellant No.2 was recorded. On the basis of investigation, various statements were recorded and show cause notice was issued on 4.4.2008 wherein the appellant was asked to show cause as to why the duty on shortage of raw material and finished goods should not be demanded from them, the demand for default in payment of duty, cash amount se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no entries in the private records accounting receipt of the inputs. Therefore, the case of the Revenue is that the goods were actually disposed of without bringing it into the factory. (c) The demand of ₹ 83.09 lakhs proposed to be confirmed on account of that they have removed certain quantity of inputs which were entered in their private records without reversal of the credit. The matter was adjudicated, the demand of duty as proposed in the show cause notice was confirmed and penalty on both appellants were imposed. Aggrieved from the said order, the appellants are before us. 4. Learned Counsel for the appellant submits that the appellant has not disputed the amount of ₹ 38,87,713/- which was confirmed as per show cause notice dated 4.4.2007 and discharged their duty liability with a delay is not in dispute. He submits that the dispute in the show cause notice is that when the said show cause notice is not legally maintainable as the show cause notice has been issued by invoking the extended period of limitation which cannot be issue on the same evidence on which the first show cause notice issued on 4.4.2008, therefore, the second show cause is not maintai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M.S. Wire/binding wires. 7. It is his submission that the production slips would reveal on numerous dates the quantity shown in RG-1 register was more than the quantity shown in daily production slips. In this regard, kind attention is invited to chart-1 where on several days quantity mentioned in production slips was less than the quantities entered in RG-1 register or in other words the quantity of both HB wire and binding wire was more than production slips. The reason for recording of less production in RG-1 register on some days than the production slips is that the appellant No.1 is manufacturing HB wire of various gauges running from gauge 6 to gauge 24. When H B wire is further processed and made t 18-20 gauge, the same is known as MS/Binding wire. The wire of gauge 6 is the thickest wire of 5 gauge and 20 is the thinnest. These would always be a mismatch of production slips vis-a-vis RG-1 register as the wire of one gauge can be a raw material for HB wire of another thinner gauges such as 8,10 or 12 gauge. The appellant No.1 applied multiple operations on a wire of a particular gauge. In the production slip, the appellant would record the production of a particular gaug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion in M-8 register. In his statement, Shri Kailash Agawal had categorically stated that the records seized from the premises of M/s. Kwality Steel were related to their all sister concerns which included the manufacturing concerns as well as the trading concerns. Further, the names of the alleged buyers were also mentioned along with the vehicle numbers in the said M-8 register. Neither the statements of the purported buyers were recorded nor that of transporters to corroborate or substantiate the allegation that the appellant had cleared 669.985 MT of HB wire and 669.96 MT of MS/Binding. 10. Further, director has categorically stated that they were purchasing their raw material from M/s.R.R.Ispat, Raipur, M/s.Godwari Power Steel, Raipur and M/s.Hira Steel, Raipur and the entire quantity of raw material was purchased on the strength of central excise invoices. It would mean that even during the investigation the department failed to bring any evidence on record that the appellant No.1 had procured any extra material from the raw material suppliers without payment of duty or without invoice. The said register does not show the entire quantity which the appellant had cleared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not asked about the reason for non-entry of certain consignments in register No.6 who prepared the register. No question was asked by the investigating party for diversion of any quantity of wire rods which were not found entered in Register-6 to the supervisor. There is no evidence of diversion of quantity of 2172.67 MT of wire rods. It is his contention that merely because some entries of wire rods were not made in private record that will not mean that the appellant did not receive the same whereas the receipt of raw material i.e. wire rods is duly reflected in RG-23A Part-I and II and form-IV register, the private record cannot prevail over the statutory record. The department is not disputing the factum of manufacture of finished goods shown in RG-1 register from the raw material which were issued for production and factum of payment of duty on the said quantity of finished goods. The department did not explain in the show cause notice as to how the appellant could manufacture the finished goods if they have not received wire rods to the extent of 2172.67 MT during the period January 2007 to September, 2007. To support this, he relied on the decision of Hon ble Gujarat High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be presumed that they had taken credit in respect of such goods claimed to be traded. 15. Heard both sides and considered the submissions. 16. On careful consideration of the submissions made by both sides, we find that the demand has been confirmed against the appellant on the following grounds: (a) on account of shortage of inputs and some finished goods (b) the demand of ₹ 58.72 lakhs on account of entries made in the private records compared to RG-1 register, therefore they have cleared the goods clandestinely. (c) the demand of ₹ 83.09 on the allegation that the inputs have not been received by the appellants and have been diverted without reversal of the credit. (d) the credit of ₹ 1,34,67,629/-, sought to be denied on clearances of raw materials as such without reversing the credit. 17. We also find on the same investigation and after completion of enquiry, a show cause notice dated 4.4.2008 was issued to the appellant to demand duty on the basis of alleged shortage and non payment of duty and cash recovered during the course of investigation. Thereafter, subsequent show cause notice dated 30.3.2008 was issued to the appellant. We fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of H.M.Pipes Pvt.Ltd.-2015 (325) 924 (Tri.-Del.) wherein this Tribunal has observed as under: 6. In this case, it is admitted fact that during the course of verification of stock of inputs, there was shortages and have been explained by the Director that these shortages were due to the reason that they have not taken their stock position since long. It is also a fact that process of manufacturing of appellant is like that where HDPE granules goes waste. The appellant has paid duty on the shortages at the time of investigation itself. But the contest done by the appellant on issuance of show cause notice shows the intent of the appellant. In these circumstances, burden lies on the Revenue to prove that the shortages were due to reason of clandestine removal of the goods. To that effect, no evidence has been brought on by the Revenue. Moreover, the learned AR relied on the decision of Hon ble High Court of Allahabad High Court in the case of Sarin v. Sarin (supra) wherein the facts of the case were that during the course of investigation, the shortages of material was found as well as unaccounted cash was also found in the premises of assessee. In these circumstances, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e demand sought to be confirmed on the basis of production slips and RG-1 register. When the appellant is processing wire 6 gauge to 8 gauge definitely in private records it will be found mention but as it is not sold and has to be further processed, therefore, the same did not find mention in RG-1 register. As the appellant applied multiple operations on a wire of a particular gauge, therefore, on the production slip, the appellant would record the production of a particular gauge but if the said wire of a particular gauge is converted into another gauge the same will again figure in the production slip. But in the RG-1 register the wire of only a particular gauge which is being sold or cleared from the factory was being recorded. If the same is taken into consideration, the demand is not sustainable on the basis of difference between production slips and RG-1 register. Moreover, it has not been coming out form the facts of the case that for manufacturing these quantities from where the raw material procured, how much electricity used and how the payment of these goods have been received, how the goods have been transported, therefore, in the absence of any corroborative evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticulars 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. 13. Thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department. 23. We further find that the demand has been confirmed on the basis of private registers and RG-1 register, the department did not raise any demand in the show cause notice dated 4.4.2008. Therefore, this demand cannot be confirmed by invoking the extended period of limitation. 24. In view of above observation, we hold that the demand of ₹ 58,72,851/- is not sustainable. 25. With regard to the credit of ₹ 83,09,894/-, the allegation of the department is that although the goods have been entered in RG-1 register and they did not find mention in the private records, therefore, it is alleged the appellants have diverted the quantities of goods without reversal of the credit. We find that the goods entered in RG-1 register have been used by the appellant on paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 94/- is not sustainable against the appellant. 27. With regard to the disallowance of the credit of ₹ 1,34,67,629/-, the contention of the Revenue is that the appellant has cleared goods without reversal of the credit. The contention of the appellant is that they have not availed the credit on these quantities which have been cleared as such being a trading activity. We find that it is admitted fact that the appellant is engaged in trading activity of wire rods and it is also fact on record that the quantities of wire rods cleared as such, the appellant has not taken the credit. In that circumstance, the question of reversal of credit does not arise. The sole contention of the Revenue is that as the inputs received in the books of accounts cleared as such, therefore, they are required to reversed the credit. The Revenue has not produced any evidence for the Cenvat Credit taken on this quantity of goods, therefore, the question of reversal of credit does not arise. In that circumstance, the demand of ₹ 1,34,67,629/- is not sustainable. 28. In the result, the following order is passed: (a) As the show cause notice dated 30.3.2009 was issued by invoking the extend ..... 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