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TMI Blog2017 (5) TMI 1248X X X X Extracts X X X X X X X X Extracts X X X X ..... y of remand. - E/1370, 1404-1406/2008-EX (DB) - A/53382-53385/2017-EX[DB] - Dated:- 22-5-2017 - Mr. (Dr.) Satish Chandra, President And Shri V. Padmanabhan, Member (Technical) Sh. Naveen Mullica, Kumar Vikram Advocate for the Appellant Sh. R.K. Manjhi, DR for the Respondent ORDER Per: V. Padmanabhan These appeals are against the impugned order no.14/2007-08 dated 31.03.2008. In the year 1985, under the proprietorship of Sh Lalit Babbar (Appellant No 2), the Appellant started manufacturing wires and cables. In the year 1991, it was taken over by a Private Limited Company i.e. M/s Rolex Electro Products Pvt Ltd, wherein Sh Lalit Babber has been a Director. Besides manufacturing Armoured Cables of various specifications, PVC Cables (Housing Wires), Electric Lead/Cord till the year 2002, the said Appellant also started undertaking trading in Braiding Thread since the year 1994-95, apart from using the Braiding Thread procured from the open market for manufacture of Electric Cord/Lead. 2. It is pertinent to point out that the Electric Cord/Lead having use of Braiding Thread, Rubber, Copper Wire and 3 Pin Plug, are also used with an Electric Iron. On the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : a. Respective description of the raw material allegedly found short. b. Respective weight of raw material allegedly found short. 7. The shortage was allegedly worked out not by weight but by value in Rupees. The value of finished goods and value of semi-finished goods were reduced by 10% towards pre and post manufacturing expenses to work out the cost of the raw materials and also for working out the value of the shortage of the raw materials. 8. The statement of Sh. Mahender Pal Upadhyay was recorded on 04.06.2003 who was Production Incharge in the Armoured Cables section. During recording of his statement he was never enquired in respect of the contents of the Panchnama drawn. 9. The statement of Sh. Upender Mishra, Assisant Production Incharge and also looking after the Housing Wire of PVC was also recorded on 04.06.2003. He was also not confronted with the contents of the Panchnama for his explanation nor about the production of Electric Cord/Lead carried out on the Second floor where use of Braiding Thread,3 Pin Plug, Rubber, and Copper Wire was being undertaken. 10. In his statement dated 16.06.2003 Sh Lalit Babbar, Director of the Appellant unit when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the open market without any bills in cash. The period for alleged clandestine clearance was mentioned to be 2001-02. b. It was further alleged that 1,68,655 Kgs of Braiding Thread and the raw material valued at ₹ 93,52,653/- was found short and further after procuring the other raw materials like Copper Wire, Rubber, the same were used for clandestine manufacture of 84,32,750 number of cords/electric leads. c. It was also alleged that raw materials valued at ₹ 93,52,653/- (found short) had been removed for clearance involving duty of ₹ 14,96,424/-. 15. After the due process of law, the adjudicating authority passed the impugned order as follows: a. Demand of Duty of ₹ 3,06,95,210/- on clandestine manufacture and clearance of 84,32,750 number of cords/electric leads valued at ₹ 19,18,47,063/- under Section 11 A of the Central Excise Act. b. Central Excise Duty amounting to ₹ 14,96,424/- confirmed for - removal of raw materials valued at ₹ 93,52,653/- during 2002-03 under Section 11A of the Central Excise Act r/w Rule 14 of CENVAT Credit Rules, 2004. c. Interest to be charged on the above demands. d. Equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid raw materials. iv) There is absolutely no evidence of the stocks of raw materials having been clandestinely removed by the Appellants, to whom they were cleared and by which transport. There was no investigation into these aspects. v) The Appellants placed on record the value of the raw materials purchased by them for the period from 1994-95 to June 2003, which amounted to ₹ 75,03,61,159/-. If the figure of ₹ 93,52,653/- allegedly shortage is considered against the total procurement of raw materials, the difference comes to be about 1.25%. Such marginal difference is usual also in the units manufacturing as there occurs various invisible processing losses, there could be marginal difference of weights of the materials when different weighing scales are used and like such factors. In the absence of there being any evidence for clandestine removal, confirmation of demand by the Ld Commissioner has no legal sanctity. The burden to prove the charge of clandestine removal is on the Department and the same is not discharged. 17. Towards Demand Of ₹ 3,06,95,210/- On 84,32,750 Number Of Cords/Electric Leads, the main grounds are: i) There has been no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 27 of Show Cause Notice) is for the year 2001-02 and as against the same, the trading in Iron and Steel products by the Appellants was only started from December 2002. Therefore, the statement of Sh Satpal Goyal has no relevance as far as the demand against the Appellants stand concerned. Detailed submissions have already been placed in the Grounds of Appeal for consideration by this Hon ble Tribunal. 19. It is prayed that the appeals may be allowed. 20. Heard both sides and perused the records. 21. The demand for Central Excise Duty has been raised mainly on two grounds. An amount of ₹ 14,96,424/- has been demanded for the period 2002-2003 on the allegation that raw material valued at ₹ 93,52,653/- on which Cenvat credit has been availed, was found short at the time of search of the appellants factory and stock taking. Further, Central Excise duty amounting to ₹ 3,06,95,210/- has been demanded on the ground that the appellant has surreptitiously manufactured and cleared 84,32,750/- numbers of electrical cords valued at about ₹ 19 crores. 22. A demand of about ₹ 15 lakhs has been made on the raw materials found short at the time of stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red clandestinely was estimated at ₹ 19,18,47,063/- involving Central Excise Duty of ₹ 3,06,95,210/- during the year 2001-2002. 24. By way of supporting evidence to the allegation of clandestine manufacture and clearance, Revenue has recorded the following: i. The assessee has employed more no. of employees than what is recorded in their books. ii. It has been alleged that the employers who were not on the rolls of the assessee were paid in cash. iii. The Revenue officers at the time of search noticed that additional machinery were installed compared to what was received. iv. In the trading activity of braided thread, the assessee was found to have bought such items at the rate of about ₹ 160 per kg and sold the same after substantial mark up, at the rate of ₹ 267/kg. It has been alleged that, such sales shown in the books were fictious sales and have been used to account the sale proceeds of clandestinely cleared electrical cords. v. In the activity of trading of braided thread, the assessee has recorded that they have sold the goods totally valued at ₹ 2.69 crores. These have been shown as sold through 4,730 sale invoices e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every witness whose statement has been recorded under section 14 of the Central Excise Act has retracted the same just one or two days after such statement was recorded by Panch witnesses. It has also been argued on behalf of the appellant that Revenue cannot rely upon any of the statement of witnesses who has not been produced for cross examination. 28. The adjudicating authority has brushed aside such arguments by taking a view that not allowing of cross examination has not violated principles of natural justice. He has further cited the fact that Shri Lalit Babbar, M D has expressed satisfaction with the way the stock taking was conducted. 29. The law regarding cross examination has been the subject matter of a lot of litigation. Hon ble High Court of Punjab and Haryana in the case of Jindal Drugs Pvt. Ltd. vs. Union of India reported in 2016 (340) ELT 67 (P H) has laid down the law with regard to the cross examination in connection with the adjudication of show cause notice. The relevant portion is reproduced below:- 25. In the light of the above, respondent no.2 is directed to adjudicate the show cause notice issued to the writ petitioners by following the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been expressed by the Hon ble High Court in the case of G Tech [2016 (339) ELT 209 (P H)] . From the above case law, it is evident that before the adjudicating authority can admit the statement of any witness as evidence, the same has to be done only after summoning the makers of the statement and after examining each witness. After that the witnesses should be offered for cross examination. In the present case, we note that this is a serious lacuna in the adjudication process adopted by the learned Commissioner. The requirement of cross examination becomes even more significant in the light of the fact that every witness whose statement has been recorded has retracted them soon thereafter. 31. We also note that the adjudication proceedings leading to the demand of duty on allegation of clandestine removal is built upon the shortage noticed in various items, in particular that of braded thread. In the light of above, we are of the view that the impugned order deserves to be set aside and the matter remanded to the adjudicating authority for offering witnesses whose statements are being relied upon, for cross examination and thereafter to readjudicate the case. The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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