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TMI Blog2019 (5) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... in M/S. PRINCE TMT STEELS PVT LTD, M/S. PRINCE ROLLINGS (P) LTD., SRI ANUB SHA, DIRECTOR, SRI. C.K. ABDURAHIMAN, GM, SRI AHMED FAIZAL SHA, DIRECTOR, SRI T.K. ABDUL KARIM, MD VERSUS C.C.,C.E. S. T- CALICUT [ 2018 (10) TMI 893 - CESTAT BANGALORE] and set aside the impugned order by allowing the appeals filed by M/s. Prince TMT Steels (P) Ltd., M/s. Prince Rollings (P) Ltd. and other co-noticees on merits. Penalties were dropped - The present proceedings are also based on the same facts, statements and documents recovered during investigation. Further, it is well settled legal position that the allegation of manufacture and clandestine removal of goods without payment of duty being a serious charge, the burden of proof is on the Revenue. The charge must be proved by producing cogent / positive material evidence of procuring raw materials, manufacture of goods, removal of goods from the factory, receipt of the goods by the buyer and receipt of consideration etc. Thus, the Learned Commissioner has given careful consideration to the facts of the case and has given reasoned findings which are similar to the case, based on same set of facts and investigation, decided by this b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 10,000/- 6 Shri Anub Sha -- -- ₹ 50,000/- 7 M/s. Prince TMT Steels Ltd. -- -- ₹ 10,000/- 2.1. Briefly the facts of the present case are that the respondents M/s. Prince Alloys (P) Ltd., Palakkad (main respondent)are manufacturers of MS ingots, M/s. Prince TMT Steels Ltd. are the manufacturers of TMT bars / rods and M/s. Bee Path Casting Pvt. Ltd. are manufacturers of CTD bars and MS Rods. The Preventive Unit, Calicut conducted a search of the common office and factory premises of M/s. Prince Alloys Pvt. Ltd. and their sister concern M/s. Prince Rollings (P) Ltd. and seized several documents. Some incriminating private documents evidencing receipt of unaccounted MS scrap, unaccounted production of ingots and clearance of MS ingots without payment of excise duty by the said unit was also recovered. Statements of Shri C.K. Abdurahiman, General Manager and Shri Sibira ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner(Appeals) and there was no consensus among the members of the Committee and the matter was referred to the Chief Commissioner who directed that the appeal be filed before the Tribunal. Hence the Revenue filed the present appeals. 3. Heard both sides and perused records. 4.1. Learned AR appearing for the Revenue has submitted that the impugned order passed by the Commissioner(Appeals) setting aside the Order-in-Original is not sustainable in law as the same has been passed without properly appreciating the documentary evidences on record and without appreciating the law and the binding judicial precedent. He further submitted that the Revenue has filed the present appeals against the impugned order mainly on the following grounds:- a. Note Books allegedly maintained by Shri Anbu, Cashier pertaining to payments made to the production contractor, maintenance contractor and maintenance supervisor and note books allegedly maintained by one of the Chemists and seized under Mahazar dt. 12/07/2006. b. Retracted statements of Shri V.R. Sibiraj, one of the Chemists, and Shri Anbu, Cashier, Shri C.K. Abdurrahiman, GM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Zaki Ishrati Vs. CCE, Kanpur [2010(255) ELT 545 (Tri. Del.) and this decision was affirmed by the High Court which is reported in 2013(291) ELT 161(All.). He also relied upon the following decisions:- i. CCE, Coimbatore Vs. Acufil Machines [2004(177) ELT 326 (Tri. Chennai)] ii. Surjeet Singh Chhabra Vs. UOI [1997(89) ELT 646 (SC)] iii. Naresh J. Sukhawani Vs. UOI [1996(83) ELT 258 (SC)] 4.3. He also submitted that the Department has recorded the statements of the employees who were related to production and clearance and also recovered private records which can be considered to arrive at a finding of clandestine removal. He further submitted that clandestine removal can only be proved by circumstantial evidence and it is not possible to establish every link in chain without any break. He also submitted that the Revenue has also relied upon the statements of the dealers to prove the clandestine removal. He also submitted that the details are recorded in the mahazar and its annexures and the same have not been challenged and therefore the same can be taken as sufficient evidence. it is his further submission that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iv. Paras Laminates (P) Ltd. Vs. CCE, Jaipur [2005(180) ELT 73 (Tri.)] ii. He also submitted that this fact of denial of cross-examination has been recorded by the Commissioner(Appeals) vide the impugned order that the statements were retracted immediately and even the subsequent statements were also retracted. He also submitted that it is a settled legal position that the charge of clandestine manufacture and removal of goods without payment of duty cannot be established based on the uncorroborated statement of a person. This has been held in the case of CCE C, Surat Vs. Suresh Synthetics [2016(332) ELT 385 (SC)] . He also submitted that it is a settled proposition of law that retracted statements cannot be relied upon without corroboration of independent evidence. for this submission, he relied upon the following decisions:- a) Vinod Solanki Vs. UOI [2008(233) ELT 157 (SC)] b) KI Pavunny Vs. Asst. Collector of CE, Cochin [1997(90) ELT 241 (SC)] c) Pascoal Dias Vs. ACC(P), Goa [2003(157) ELT 132 (Bom.)] iii. He also submitted that para 3 of the show-cause notice refers to physical stock verification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o discrepancy in the physical stock of goods as on 12/07/2006. Regarding the capacity of the furnace as per the Department, the capacity of induction furnace was 8 MT instead of 6 MT. This allegation regarding the capacity of the furnace was also against the sister concern M/s. Prince Rollings (P) Ltd., which has also procured the furnace simultaneously in 2005-06. This fact was considered by the Tribunal in the case of M/s. Prince Rollings (P) Ltd. and has examined this issue in its order dt. 05.10.2018 wherein the Tribunal has concluded that there is no report of any action taken by the jurisdictional Central Excise authorities against M/s. Inductotherm (India) Pvt. Ltd. for suppression of capacity and thus understandably the value of the furnace cleared by them and in the absence of any proof, one cannot conclude simply on the basis of drawings attached to the invoice. Further regarding the electricity consumption, the Revenue has not carried out any tests or trail in the factory of the assessee to determine the average electricity consumption for manufacture of one MT of MS ingots. This issue has also been examined by this Tribunal in the case of Prince Rollings (P) Ltd. in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs (P) Ltd. and other co-noticees on merits. Penalties were dropped. Further we we find that the present proceedings are based on the same facts, statements and documents recovered during investigation. Therefore it is pertinent to reproduce the findings of the Tribunal which is based on the same evidence as relied upon by the Revenue in the present appeals. 4. Heard both sides and perused the records of the case. The brief issues which require consideration in the present case are: (i) Whether the allegation of clandestine manufacture and removal of steel ingots by the appellants is sustainable? Whether the Department relied on uncorroborated statements and documents whose ownership was not established? (ii) Whether seizure and confiscation of 4.544 MT of MS ingots in the factory of M/s. Prince TMT Steels Pvt. Ltd. is maintainable? 4.1 We find that the impugned order has mainly relied upon the following: (i) 3 Note books/pads allegedly maintained by Shri V.R. Sibiraj, Chemist and 4 Note books maintained by Shri Anbu, Cashier. (ii) Statements of various persons of the company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not correct in law. Moreover as there was no discrepancy found either in the raw material, stock or finished goods stock, the allegation of unaccounted purchase of scrap, clandestine manufacture and removal would not sustain. Recovery of unused invoices do not call for any adverse inference. We find that the appellants had made valid points. However, though the learned Commissioner has mentioned the above in the brief facts but has not given any findings countering the same. 4.3 Moreover, we find that there are certain inherent discrepancies in the approach of the Revenue in the instant case. The impugned order has found in no uncertain terms that most of the unaccounted clearance was made to their sister concerns i.e. M/s. TMT Steels Pvt. Ltd. and M/s. Bee Path Castings Pvt Ltd. The appellants have brought to our notice that a show-cause notice 18/2007 dated 23.05.2007 to M/s. BPCPL was issued alleging that M/s. PRPL had removed 140 Ingots weighing 11.260 MT under invoice No. 409 on 11.07.2006 and that M/s. PAPL have cleared 275 Nos. of MS Ingots weighing 11.030 MT under invoice No. 362 on 11.07.2006. It is not understood as to how 275 Ingots and 140 Ingots wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Contractor Shri Aftab and Maintenance Contractor. As per the records allegedly maintained by Shri Anbu, Cashier the production and the payments to the contractors was found to be as follows and as discussed in para 128/142 of the Order-in-Original. Month Production Payment to Production contractor (@175/MT) Payment to Management contractors (@42/MT) March 2006 1588 2,77,900 1,32,762 (66696 on account of M/s. PAPL) April 2006 1115 1,95,125 46,830 May 2006 1176 2,05,800 -- M/s. PRPL and the amounts shown to have been received by him were quite different from above and as under: Month Amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crepancy was found in the raw material, finished goods stock in the premises of the appellants. It is not a case of pre-announced audit of the unit by authorities. It was a surprise visit/raid by the preventive unit. If the appellants were engaged in clandestine procurement of raw materials and clandestine manufacture, as alleged some discrepancy would have been found either in the raw material or in the finished goods stock. The only discrepancy that was found by the officers was in case of M/s PTSPL where an excess stock of 4.544 MT of MS Ingots. That shortage too was on the basis of an estimate. Looking at the Ingots (690.080MT) lying in the premises discrepancy comes to around 0.65%, which is much less than the variation that occurs in such products. When such low variation is found on approximation and not actual weighment, excess cannot be alleged. 4.8 The impugned order considers electricity consumption as an additional evidence for the clandestine manufacture and clearance by the appellants. The learned Commissioner finds that the average power consumption from March to June 2006 between accounted/unaccounted production works out to 988.652 and 697.132 resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he department has to meticulously prove the purchase of main Raw material and other inputs; manufacture of final goods; clandestine removal of the same; transportation; receipt of the same in the customer's premises and the financial transactions. We find that Tribunal in the case of Mahesh Silk Mills vs. CCE, Mumbai: 2014 (304) E.L.T. 703 (Tri-Ahmd.) held that: 8. Similarly, in the matter of Nova Petrochemicals Vs CCE, Ahmedabad-II, this Tribunal in its Final Order Nos. A/11207-11219/2013, dated 26-9-2013 this bench has held as under in Para 40: After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenues which mainly are the following: (i). There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii). Evidence in support thereof should be of: (a). Raw ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve. That is unaccounted production based on the records alleged to have been maintained by Shri Sibiraj, Chemist and Shri Anbu, Cashier and statements of some persons. Shri Sibiraj, Chemist claimed that he did not maintain those records but one Shri Armugham may have maintained. All the statements were retracted twice once during the investigation and once during the cross examination. Production was estimated on the basis of certain numbers, mentioned in the slips which were taken to be number of ingots, with average weight of an Ingot. It was alleged that the appellants have manufactured and cleared about 2014 MT of MS ingots and have cleared the same mostly to their sister concerns M/s PTSPL and M/s BCPL. Though the SCN alleges that most of the goods are cleared clandestinely to their sister concerns, the findings in OIO start by alleging that entire product was sold to their sister concerns. Names of other firms to which the appellants may be alleged to have cleared the goods are not forthcoming. It is interesting to see that not even one more unit than sister concerns are found during investigation or mentioned in the SCN and findings. The only discussion was about unaccounted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. AR argued on the basis of certain case law that the department need not prove clandestine clearances with mathematical precision. Though, We accept the same in principle, as per the discussion above the allegation was mainly on the production; the authenticity of the records not being proved; statements being retracted during investigation and cross examination; findings on the basis of records not being corroborated by other parameters; transportation not being clearly established and financial trail not being investigated we find that the ratio of case laws submitted by Ld AR is not applicable as facts are distinguishable. We find that in terms of the ratio of the case mentioned above at para 4.10, we find that the recordings in private diaries have not been corroborated by other evidence, rather it was controverted in proceedings against other parties, in view of the discussion above. 4.12 The edifice of the allegation in the show cause notice was sought to be built mainly on four pillars. (i). Production records alleged to have been maintained by Shri Sibiraj, Chemist (ii). Production records alleged to have been maintained by Shri Anbu Cashier about payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the notice Shri Bhagwat Singh received ₹ 98,000/- for the month of May 2006, ₹ 81,000/- for June 2006 and ₹ 1,44,000/- for the full month of July 2006. As per the impugned Order, the Production Contractor is paid ₹ 175/- per M.T. of M.S. Ingots produced. In such a case, the production figures are to be 560 MT 'and 463 M.T. for May 2006 and June 2006 respectively, whereas, as per the impugned order, the figures are 1142 M.T. for May 2006 and 1139 for June 2006.On perusal of the impugned order, it is evident that the contents of the note pads/note books were revealed through the statements of the witnesses. As statements were retracted, the documents were not proved and cannot be relied upon. I find that there are no concrete corroborative evidences to substantiate the reliance placed in the impugned order on the retracted statements and consequential authentication. (ii). It was alleged that the appellants have adopted a modus operandi of purchasing M.S. Scrap without bill against cash payment and without accounting for the same used in the production of MS. Ingots and cleared the M.S. Ingots so manufactured without payment of Central ..... X X X X Extracts X X X X X X X X Extracts X X X X
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