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TMI Blog2017 (12) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... nable. We find merit in this contention. There are any number of decisions by higher appellate courts that adjudication proceedings gets vitiated for not extending cross-examination of concerned persons - clause (9) of section 9D, the person from whom statement have been recorded by the department during an investigation has to be examined by the adjudicating authority before admitting the statement recorded as evidenced against the notice-appellant - the allegation concerning quantity of removal of 1219.80 MTS of CTD bars and the demand confirmed in the impugned order of ₹ 31,96,509/neither do have any sound basis or adequately supported by any corroboratory evidence - demand set aside. An amount of ₹ 11,48,044/- is raised as duty demand for 445.17 MTs of CTD bars clandestiney cleared by M/s. DSRM to M/s. Anand. The evidence in this regard is the chits recovered from the residential premises of Shri M.C. Nagarathinam, Partner of M/s. Anand and also his statement. Shri Nagarathinam was cross-examined. He has identified the chits. Further, M/s. NHS and M/s. Anand are conoticees to these proceedings. Therefore, it cannot be said that they are third parties. Thus, we do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eevi C.S, Member (Judicial) and Shri Madhu Mohan Damodhar, Member (Technical) For the M/s. DSRM : Shri A. Jayakumar, Adv. For the Respondent : Shri B. Balamurugan, AC (AR) ORDER The issue involved in all these appeals being connected they were heard together and are disposed by the common order. Brief facts are that appellants, M/s. DSRM are engaged in manufacture of CTD bars and rods. Based on information that M/s. DSRM are engaged in unaccounted manufacture and clandestine removal of CTD bars, the officers of DGCEI searched the premises of the M/s. DSRM's factory, the residence of the Managing Director of the Company, residential premises of material supplier, dealers premises simultaneously on 29.07.2003 and seized incriminating documents. During the search, the physical stock was verified and found that production records/RG-I register tallied with physical stock of CTD bars. However, on verification of raw material accounts i.e., showed 707.940 MTs of MS Ingots, whereas, only 83.085 MTs. of Ingots were physically available. Thus, there was apparent shortage of 624.855 MTs of MS Ingots [main raw material]. The Managing Director of the Company Shri Rama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llicitly cleared 445.17 MTs of CTD bars to ANAND and their group of concerns during 04/2003 to 07/2003 (as per Annexure-IV to show-cause notice); The initial admission statements and voluntary payment of ₹ 35 lakhs by T.R.-6 Challans supports the fact of illicit clearance made by M/s SSRM. 3. On behalf of the M/s DSRM, the learned counsel Shri A. Jayakumar, inter alia, submitted the following grounds. 3.1 Though, department detected shortage of raw materials, the demand is not raised on the basis of such shortage. Instead, the department conducted search of the premises of the suppliers of raw material and demand in the show-cause notice is quantified on the basis of documents recovered from them. 3.2 Though, physical stock taking was conducted by the officers and ascertained shortage of 624.855 MTs of Ingots as on 29.07.2003, the demand of duty proposed in the above notice has been quantified as follows:- (Amt. in Rs.) Sl. No. Name of the party Period Duty demand 1 2 3 4 01. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of M/s. J.K. Cigarettes Ltd. Vs Collector of Central Excise as reported in 2009 (242) E.L.T. 189 (Del.). In view of the above provisions, in all other cases other than clause (a), the person from whom the statements have been recorded by the department during an investigation have to be examined by the adjudicating authority before admitting the statement recorded as an evidence against the notice/M/s DSRM. In this regard, reliance is placed on the recent decision of the Hon'ble High Court of Punjab and Haryana in the case of M/s. Jindal Drugs Pvt. Ltd., Vs Union of India reported in 2016 (340) E.L.T. 67 (P H). 3.6 With regard to the demand of duty on 615.28 MTs. Allegedly received by M/s. MMSD on the basis of statements recorded from various dealers, it is submitted that the investigation has come to conclusion that M/s. MMSD has received the final products from the M/s. DSRM clandestinely for the reason that the dealers were not existing in the addresses mentioned in the invoices issued in their name and there is no other evidence to substantiate that the M/s. DSRM have supplied their final products clandestinely to M/s. MMSD. It is also very much relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of raw materials, payments for such purchases, transportation of such purchased materials to the factory of manufacture, details of labour utilized for such manufacture, electricity consumed, capacity of production, clearance of excisable goods clandestinely, transportation of such excisable goods, receipt of payment for such clearances etc., are required. The M/s. DSRM wish to place reliance on the following recent decisions, in this regard:- (i) A.R. Shanmugasundaram Vs. Commissioner of Central Excise, Salem reported in 2016 (333) E.L.T.158 (Tri.-Chennai); (ii) Commissioner of Central Excise, Chennai-I Vs M/s. Indian Steel and Allied Products reported in 2016 (344) E.L.T.292 (Tri.-Chennai); and (iii) M/s. Arya Fibres Pvt. Ltd. Vs Commissioner of Central Excise, Hyderabad-II reported in 2014 (311) E.L.T. 529 (Tri.-Ahmd.). 4. Against this, the learned Authorised Representative, Shri B. Balamurugan reiterated the findings in the impugned order and made the following main submissions. 4.1 It is submitted that the clandestine removal in the name of M/s. MMSD in the show-cause notice and Order-in-Original) have been established in the investigation that M/s. MMSD h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the same persons (paras 10.1 10.2 of the show-cause notice) and confirmed by the adjudicating authority in para 56 of the Order-in-Original. 4.5 Moreover, it is submitted that the CESTAT, Eastern Regional Bench, Calcutta, in the case of M/s. A.N. Guha Co. Vs Commissioner of Central Excise, Bhubaneshwar reported in 1996 (86) E.L.T. 333 (Tri.) had held that in all such cases of clandestine removal, it is not possible for the department to prove the same with mathematical precision . The adjudicating authority had relied on the case Of Collector of Customs, Madras Ors. Vs D. Bhoormull reported in 1982 (13) E.L.T. 1546 (S.C.) wherein it is held that the department is not required to prove the case with mathematical precision, but what is required is the establishment of such a degree of probability that a prudent man may on its basis believe in the existence of facts in issue. 4.6 In Annexures - 1, 1A 1B of the show-cause notice: The details of quantity of 1219.89 MT and assessable value of ₹ 1,99,78,180/- involved in the clearances effected to M/s. NHS are as per the notebook maintained by them. The said notebook was recovered as per Sl. No.8 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Undisputedly, at the time of physical verification done on 29.07.2003 there was shortage of 624.085 MTs. of Ingots/raw materials. Interestingly, the quantification of duty demand is not based on this shortage of raw materials. Instead, department conducted search operations at the premises of buyers of finished products (M/s. NHS, M/s. Anand Steel, M/s. MMSD) and suppliers of raw materials (M/s. MMSS) and the quantification of duty is based on the evidences like note book, chits etc., recovered from the premises of the above and also the statements. The other evidence relied upon is the power consumption pattern given by a Chartered Engineer on the basis of conduct of trial production. The learned counsel for M/s. DSRM has strongly opposed the quantification of duty demand whereas Revenue relies upon the findings in the impugned order. 6. As narrated in the table in para 3.2, the demand of ₹ 31,96,509/- is on the basis of note book recovered from M/S. NHS. According to department as per this note book a quantity of 1219.890 of finished products/CTD bars was removed from M/s. DSRM to M/s NHS without payment of duty. Apart from the note book, the evidence relied by d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record that even all or any of the alleged chits which were supposedly retained by M/s. NHS were recovered by department during the course of investigation. In any case, M/s. DSRM has contended that no cross-examination was extended to Shri Natarajan in terms of section 9D of the Central Excise Act, 1944, hence the allegations made in the impugned proceedings would thus not be sustainable. We find merit in this contention. There are any number of decisions by higher appellate courts that adjudication proceedings gets vitiated for not extending cross-examination of concerned persons. We also find merit in the arguments of the learned advocate that provisions of section 9D would equally apply to adjudication proceedings as held by the Hon'ble High Court of Delhi in the case of J.K. Cigarettes Ltd. Vs Collector of Central Excise reported in 2009 (242) E.L.T.189 (Del.) . In all other cases, clause (9) of section 9D, the person from whom statement have been recorded by the department during an investigation has to be examined by the adjudicating authority before admitting the statement recorded as evidenced against the notice-appellant. Merit is also found in the learned advocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Proprietor of M/s. MSSD, M/s. SSS, Trichy etc., to conclude that M/s. MMSD (the related Unit of the M/s. DSRM) has not purchased CTD bars from M/s. MSSD, M/s. SSS, Trichy etc. Based on this, they arrived at the conclusion that M/S. DSRM had cleared unaccounted CTD bars to M/s. MMSD (the related Unit) through which the said goods were sold to buyers. That M/s. DSRM had obtained bogus bills from M/s. MMSD, M/s. SSS, Trichy etc., showing purchase of CTD bars by M/S. MMSD (the related Unit of M/s. DSRM) and gave cheques to such traders, who would give back the money by cash showing it as for his personal use. Shri A. Jaimulabdeen was cross-examined and he has denied these allegations. Instead, he has stated that M/s. MSSD had purchased CTD bars from M/s. MMSD. To the discrepancy in lorry numbers, he has stated that he used to check only the weight and noted the vehicle number as stated by the person. Similar retraction is seen to be done by other traders in their cross-examination. The other evidence which department relies upon to demand duty on this count is the electricity consumption pattern. This evidence of electricity consumption cannot be made the basis for establishing clandes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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