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TMI Blog2018 (1) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... on and in absence of corroborative evidence the demands cannot be confirmed. In absence of any evidence of diversion of good and any other contrary evidence, credit cannot be denied to the Appellant. In case of alleged shortages we find that Ms Hema Lakhpatwala in her statement dt. 27.05.2004 had explained the shortages found during physical verification and the reconciled stock account were also produced before the adjudicating authority which was not denied by him. Further no evidence of non receipt of such alleged short found inputs or their diversion/ clandestine clearance has been brought on record - the allegation of shortages against Appellant is not sustainable and the demands are not sustainable. In case of seizure of 500 kgs of Coumarin the submission of the Appellant is that the same were cleared mistakenly but duty liability , interest, penalty and confiscation on such clearance is sustainable. Appeal allowed - decided in favor of appellant. - Appeal No. E/1016,1023,1033,1035,1053,1222/07 & E/1128,1129,1131,1133/08 - A/91672-91681/2017 - Dated:- 29-12-2017 - Shri Ramesh Nair, Member ( Judicial ) And Shri Raju, Member ( Technical ) Shri J.H. Motwani Advoca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 25 kgs each in the guise of Sodium Sulphate without payment of duty out of which 16 boxes were seized in transit and 4 boxes were seized from godown of Sai Roadways. The show cause notice relied upon the statement dt. 17.02.2004 of dealer Shri Jaimin Uday Thakore who stated that after meeting Mr. Sanwal, Managing Director of M/s AFC, it was decided that M/s AFC would clear the goods without payment of duty. Shri Vilas Laxman Darde of M/s Sai Roadways in his statement dt. 23.01.2004 stated that the 20 boxes were handed over to them out of which delivery challan for 10 boxes were given for M/s Mihir Enterprise and challans for 6 boxes for M/s Max Aromas was given and for remaining 4 boxes no delivery challan was given. That the said challan shows the description of goods as Sodium Sulphate and Organic Acid however the goods were found to be Coumarin. Even though the goods were consigned by M/s AFC but the name of the consignor and consignee on goods was shown as Mihir Enterprise and Aromas. In respect of demand on 72,400 Kgs of Coumarin it was alleged that the M/s AFC has been removing Coumarin under delivery challans of either Mihir Enterprises, Adarsh Aromas or Mak Aromas and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice alleged that the statement of Mr. Sawale shows that though the process loss was only 3% but M/s AFC has shown the process loss of 17.36% which has resulted into non accountal of 1,47,111 Kgs of Coumarin and out of this non accounted quantity some quantity has been removed without duty. Shri Alok Kumar T Singh, Excise clerk in his statement dt. 10.06.0224 stated that invoices of Sodium Suplhate were prepared in place of Coumarin and the consignments were removed to M/s Adarsh Enterprise, Mak Aroma and Mihir enterprise. He also stated that whatever excess quantity of Coumarin was obtained was sold in market to the above parties without duty payment. Reliance was placed upon email conversation between Shri S.N.Sanwal from USA to Mrs. H.A. Lakhpatwala to allege that the material imported by AFC was nothing but Coumarin with some odour which was removed after washing. That though Managing Director Shri Sanwal and General Manager Mrs Lakhpatwala mainly explained that they are removing Sodium Sulphate but the consignee accepted that they are receiving Coumarin. That the consignment removed on similar documents and seized during transit and in the transporters godown proved beyond do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were less used than required which shows that there is no process loss of 17.36% and the quantity of Coumarin was diverted partially by clandestine removal and partially as domestic production. Reliance was also placed upon statement dt. 10.02.2004 of Shri Natwarlal H. Bathia, Proprietor of M/s Adarsh Aromas Mumbai wherein he stated that name of his company was misused and they have never issued such documents. Shri Makrand Prabhakar Ghate, Manager of Mak Aromas in his statement dt. 17.02.2004 stated that they were concerned with their sales commission on Coumarin which was paid to them in cash and the goods were sold to purchaser as directed by the AFC. 4. It was alleged that 1-2 Benzopyrone is nothing but Coumarin as properties of both are same and no chemical process is required. That in order to get the technical information in respect of Coumarin and 1-2 Benopyrone a letter was written to the Prof. K.D. Deodhar of IIT, Mumbai who vide letter dt. 06.05.2004 informed that both the products are same. The assay report of foreign supplier and as confirmed by AFC shows that the purity of the product ranges from 97 to 99.6% which shows that imported 1-2 Benzopyrone was pure. Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the acceptability by customer depends upon its odour and purity. They were manufacturing Coumarin by two different process i.e (i) the Phenol Route which involves perkin reaction and (ii) the o- Cresol route which involves rashing reaction. The Coumarin produced by these two routes has same physical and chemical characteristics and use. The dispute in the present case is regarding Coumarin produced manufactured from 1-2 Benzopyrone (crude) and not from phenol method. The 1-2 Benzopyrone was imported by them and in order to avail the benefit of Advance Licence scheme the application was made to DGFT for fixation of norms. The norms was fixed by the ALC and communicated to them which was in the ratio of one kg Coumarin in the ratio of 1.21 Kgs of 1-2 Benzopyrone crude (78 84%) average 82%. The imported quantity and description under 11 Bill of entries through which imports were made by them was declared in supplier invoice alongwith certificate of analysis where the olfactory character was mentioned. In all the cases the olfactory strength of was within the range of 78% or higher but lower than 84%. It supports the Appellant stand that in trade parlance 78 84% mentioned in 1-2 B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Report of Prof. K.D. Deodhar, Deptt. Of Chemistry, IIT Bombay. He submits that they were also issued addendum dt. 08.03.2006 to first SCN raising allegation of misrepresentation of facts before DGFT for obtaining advance licence. Even the department approached the DGFT for cancellation of licence and to believe that 78 84% referred to in the description of the product was the GLC purity of 1-2 Benzopyrone and not the olfactory strength. However since the facts were otherwise the DGFT did not initiat any proceedings against the Appellant for cancellation of licences and even redeemed 3 licences post correspondence Between the excise department and DGFT. 6.1 He submits that the determining factor for product quality is olfactory strength of the product as in absence of same the customers have not accepted the consignments. He relies upon the rejection notes of the customer annexed to the appeal on this aspect. He also relies upon the British Patent 1443406 for purification of crude Coumarin which shows the process loss as claimed by the Appellant. He further relies upon the DGFT SION Serial No. A2935 showing the ratio for Coumarin. 6.2 He submits that before the adjudicatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the officers in subsequent statement by Ms. Hema Lakhpatwala and the same has not been controverted in impugned order. He submits that the DGFT even after the revenue s communication to the DGFT that the process loss is not correct as shown by the Appellant redeemed all the licences. He submits that the SION Norms fixed by the DGFT ought to be considered. That the Appellant never cleared any Coumarin in the guise of Sodium Sulphate and only once due to mistake the Coumarin was removed in place of Sodium Sulphate. That the demand on clandestine is not based upon any evidence and it is also not disputed that Sodium Sulphate was manufactured by them. That the third party evidence cannot be relied upon. He submits that as may be seen from the statement of Ms. Hema Lakhpatwala and Shri Sanwal nothing inculpatory has been noticed. That the statement of dealers Shri Makrand and Shri Jaimin were contradictory hence called for cross examination however they did not appear hence their statements cannot be relied upon. He submits that the entire demand is based upon assumption as not a single consignee of goods was found and no corroborative evidence of production and clearance of Coumari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Appellant firm and the said firm does not manufacture Coumarin. His job responsibilities were limited only to research and he has no connection with product or process of manufacture of Coumarin ; he had given wrong statement to excise department. Further in case of Mr. Alok Singh his statement dt. 10.06.24 has been relied upon wherein he stated that only process of washing and drying of imported goods were undertaken and that the excess Coumarin was sold in the market without payment of duty. However in his cross examination he stated that he is a commerce graduate with no technical knowledge or background in process connected with imported goods ; he is not qualified for understanding any production process and did not personally attend to any dispatch of Coumarin; his statement given to the officers in respect of production process, inputs used, wastages etc is not based on his personal knowledge but is entirely hearsay. Shri Avinash Moore in his statement dt. 16.07.2004 had stated about the process loss of 3%. However in cross examination proceedings he admitted to be ignorant of manufacturing process or process loss. He was also unable to produce any technical literature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice number is mentioned on another BOE 8248. We also find that the letter of M/s Jiangyin Changshou Phosphate Chemical plant it mentions only strength as 78 84% and not the GLC purity. Thus the contention of the SCN about purity being 97 to 99.6% cannot be relied upon for the quality/ purity of the goods imported by Appellant. The Appellant has also submitted copies of 20 bills of entries alongwith the invoices and assey report (i.e analysis report) which shows the GLC as 80 81% or 91 93%. Hence even if assuming that one of the consignment had purity level of 96% all other consignments cannot be held to be of same purity as no evidence to contrary has been shown either in SCN or the impugned order. In such view of facts the process loss shown by the Appellant supra cannot be doubted upon. The Adjudicating authority has refused to accept the submission of the Appellant that the Olfactory strength of the goods is basis of sale and on the other hand is himself of view that olfactory strength and purity of Coumarin are two different aspects. We find that Appellant has submitted sample copies of invoices where the goods were rejected on the ground of olfactory strength being weak even t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notice the show cause notices for the subsequent periods were also issued to the Appellant. Further the report of Professor V Balasubhramanin is based upon the practical test conducted at the Appellant s factory and has reported that the process of purification of 1,2 Benzopyrone undertaken by the Appellant is more of an olfactory and colour upgradation rather than chemical purity and the loss in such process of in the range of 18 20% Nothing contrary to such opinion including the expert opinion of Prof. Deodhar s opinion is appearing on records. We also find that the opinion of Shri Deodhar does not state about the process loss and it only says that the 1,2 Benzopyrone and Coumarin is same which is not disputed. Prof. Deodhar though called for cross examination but did not appear. We also find from the Appellant s submission that there is no dispute about the claim of the Appellant as regard quality of imported goods since the samples of imported goods at the time of importation were tested by the Customs for specification and the goods were found as per the declared description which shows that as far as claim of Appellant on olfactory strength is concerned the same is not disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iews are based upon the judgments in case of Titan Medical Systems Pvt. Ltd 2003 (151) ELT 254 (SC) and Autolite (India) Ltd 2003 (157) ELT 13 (BOM.). Since the process loss claimed by the Appellant is correct as per SION Norms it cannot be said that there has been excess production of Coumarin which was removed without payment of duty. 9.1 The SCN Adjudicating authority has also confirmed demand on the ground that the Sodium Sulphate was not recorded in the books by the Appellant which shows that the same was not produced. Further the revenue has also relied upon the consignment of Coumarin seized by them and it was alleged that the Appellant in similar fashion had cleared Coumarin under the cover of invoice of Sodium Sulphate. The Ld. Counsel for the Appellant pointed out that since the Sodium Sulphate was a by-product having no considerable value, hence the same was removed mostly free to dealers without payment of duty. The demand thus has been raised on the basis of LRs of M/s Sai Roadways and statement of brokers that the Appellant has cleared Coumarin in the guise of Sodium Sulphate and the LRs has shown the Clearance to self by the brokers. We find that except seizure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant Units are not sustainable as held in case of Nutech Polymer Ltd. Vs. CCE, Jaipur 2004 (173) ELT 385, Western Metal Caps Ltd. Vs. CCE, Ahmedabad 2004 (170) ELT 451 (TRI), India Forge Drops Stampings Ltd Vs. CCE, Pune 2005 (183) ELT 453 (TRI), Swati Polyester Vs. CCE, Surat I 2005 (183) ELT 453 (TRI), Brims Products Vs. CCE, Patna 2001 (130) ELT 719 (TRI), Kothari Synthetic Industries Vs. CCE, Jaipur 2002 (141) ELT 558 (TRI) and Oudh Sugar Mills Ltd. vs. UOI 1978 (2) ELT (J172) (SC). We also find that based upon same investigation the show cause notices for the subsequent periods were also issued on Coumarin which has culminated in present appeals before us. We are of the view that once the department had discovered the unearthed modus operandi of the Appellant Unit to clear goods clandestinely in the guise of Sodium Sulphate, it is obvious that for the future period the revenue should have made investigation and bring on record some evidence to support their charges on same grounds. It cannot be assumed that the asessee might have cleared the goods clandestinely in subsequent period without making any investigation. We find that no investigation has been undertaken and based ..... X X X X Extracts X X X X X X X X Extracts X X X X
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