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TMI Blog2020 (4) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... taken a decade back. In such circumstances, we decline to accept the vociferous submission of the learned standing counsel appearing for the Revenue that the appellants should not be permitted to have an undue advantage as the same would lead to a huge loss to the Revenue. The case of the Department, of clandestine manufacture and removal of the goods should be looked into having regard to the production capacity of the machine, installed in the factory premises - For any good reason, if the Department was unable to arrive at any final conclusion with regard to the production capacity of the machine on account of the same not in a working condition, then the Department owed a duty to examine the machine of similar type, which might have been installed in any other factory premises. This is what Rule 173(E) of the Rules, 1944, provides for. The principle of law, in this regard, is that the burden will be upon the Department to show that the entries in the Registers, etc. match with the production capacity of the machine. The impugned orders passed by the Tribunal are hereby quashed and set aside. The substantial questions of law are answered in favour of the appellants and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city on identical machine at any other factory? (iv) Whether or not the Hon ble Tribunal erred in law in not considering other legal submissions of production capacity under rule 173E? 6. Both the Tax Appeals are taken up for final hearing forthwith, as the notice was issued for final disposal. 7. The appellant of the Tax Appeal No.405 of 2018 is a Company, incorporated under the Companies Act, whereas, the appellant of the connected Tax Appeal is a Director of the Company. The appellants are in the business of manufacturing Texturized Yarn. The appellants are assessees under the Act, 1944. The appellants have a factory situated at Village: Karanj, District: Surat. They installed one Himson Rieter Scragg Draw Texturising Machine in their factory on February, 1994 Model SDS-3 with 144 spindles purchased from M/s.Himson Engg. vide invoice dated 21.04.1994. 8. The factory premises of the appellant was visited by the officers of the Department on 05.04.1995 and a search was carried out of the factory premises. The statements of the Directors were recorded in the course of the search. In the course of the search of the factory premises, the officers of the Department too ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n arrived at by Revenue is 3 to 7 times more than the actual capacity of the machine. The Certificate of M/s. Amson Techno Services, the annual maintenance contractor, had certified based on world known formulla, the production to be not more than 11,490 kgs for 28 working days or approximately 442.000 kgs. per day. The capacity as per the manufacturers is not more than 448 kgs. per day of 24 hours. The assessee had also produced Certificate from MANTRA (i.e Man Made Textile Research Association) certifying the formula adopted to be correct to arrive at production capacity. The appellants had made the following chart submission it before the Commissioner:- Date Production as per RG1 (Kgs) Illicit/excess production alleged (kgs) Total product (Kgs) 15.09.94 354.820 855.080 1209.900 24.09.94 398.150 1338.020 1736.170 05.10.94 390.020 2611.880 3001.900 06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual production unaccounted clearance thereafter with liability to penalty, if any. (e) Since we are ordering a Remand for redetermination of the production, we do not arrive at any findings on other issues, keeping them for both sides in the Denovo proceedings. 13. Thus, what weighed with the Tribunal in the first round of the litigation was the argument of the appellants with regard to the production capacity of the machine which had been installed in the factory. The Tribunal observed that the Commissioner was not justified in rejecting the certificates which were produced by the appellants with regard to the production capacity of the machine. The Tribunal indirectly conveyed that the burden is upon the Revenue to look into the production capacity of the machine and determine the liability accordingly. At the same time, the reasonings arrived at by the Commissioner did not find favour with the Tribunal. In such circumstances, the matter came to be remitted. 14. In the aforesaid context, we may observe that the remand was on a specific issue and the Commissioner was obliged to keep this issue in mind while re-determining the liability of the appellants. When th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to mention that as per Rule 173E of the Central Excise Rules, 1944, the determination of normal production of the factory was not done at the material time and now when the said machine is not in working condition, the same cannot be carried out. I find that the noticee advocating, production capacity of their machine to counter the packing slips and other private records seized during panchnama dated 05.04.95 is an attempt, contrived to mislead the adjudication proceedings in arriving at wrong production data when that particular machine is not in a working condition. Hence, I do not accpet noticee s request to run test production elsewhere on any machine and proceed to decide the case based on evidence available on records. 25. It is seen from the Show Cause Notice that the entire amount of duty to be demanded and recovered from the factory had been worked out in Appendix-I to IV prepared on the basis of documents/records seized vide Annxure C to the panchnama dtd 05.04.95. A summary sheet as per the Appendix I to IV has been prepared. All these Appendix I to IV were alleged to be related to the illicit production of texturised yarn illicitly cleared by the factory and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2,99,749.62 + Addl/ Duty ₹ 44,962.24) leviable on seized goods which were provisionally released and subsequently cleared by the factory on payment of duty due thereon, under the provisions of Rule 9(2) of the Central Excise Rules, 1944. 03. I determine Central Excise duty amounting to ₹ 66,87,285/-(₹ 58,15,030/- BED + ₹ 8,72,255/- Addl. Duty) leviable on the illicit production and clearance of texturised yarn weighing 92,302.078 Kgs. valued at ₹ 96,91,717/- (as detailed in Appendix-I to IV of Show Cause Notice) under Rule 9(2) of Central Excise Rules, 1944 read with Section 11A(2) of Central Excise Act, 1944. M/s. Trinetra Texturusers (P) Ltd., Karanj, Dist. Surat, forthwith will pay the duty so determined under provisio to Section 11A(1) of Central Excise Act, 1944. The interest is also payable for the delayed payment of the duty demanded above as stipulated under Section 11 AB of Central Excise Act, 1944. 04. I, order confiscation of land, building, plant, machineray etc belonging to M/s. Trinetra Texturusers (P) Ltd., Karanj, Dist.Surat, and used in the manufacture, strong and removal/clearance of exercisable goods involved i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g personal hearing they showed their inability to run the same machine i.e., HIMSON Scragg Draw Texturising Machine, Model SDS-3, with 144 Spindles, as the said machine is in junked condition and could not run. He requested for conducting a trial run at any factory having machine as M/s Trinetra Texturisers is closed since long and the machine is not in working condition. I find that in absence of the machine in question, the redetermination of production capacity is not possible. Moreover, after 14 years in the exercise of gathering records of raw materials, oil and electricity consumption etc., is also not possible as the unit is closed since long. I find that, the assessee s request for running trial production on any machine will be beyond the scope of CESTAT s directions, because production capacity of the particular machine has to be redetermined which the assessee possessed at the material time. Further, there cannot be a fixed norm for earning production of texturised yarn, the production may differ from machine to machine. It is pertinent to mention that as per Rule 173E of Central Excise Act, 1994, the determination of normal production of the factory was not done at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal is erroneous, and on the face of it, not tenable in law. 23. Mr.Parikh, further submitted that the impugned order, in fact, runs contrary to the order passed by the Tribunal in the first round of the litigation. The impugned order completely dilutes the idea with which the matter was remanded by the Tribunal to the Commissioner, in the first round of the litigation. 24. Mr.Parikh, submitted that when the appellants put forward a positive case that the allegations of clandestine removal of goods are not sustainable in view of the production capacity of the machine installed, then the burden shifted upon the Department to establish that the production capacity of the machine tallies with the records and the goods seized and thereby, the allegation of clandestine removal gets fortified. According to Mr.Parikh, the entire burden has been shifted upon the appellants to establish with regard to the production capacity of the machine. 25. Mr.Parikh further submitted that the law with regard to examining the production capacity of the machine is well settled. Mr Parikh invited our attention to Rule 173(E) of the Central Excise Rules, 1944 (for short the Rules, 1944 ). Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions saying that once the issue of production capacity goes in favour of the appellants, the other issues would pale into insignificance. 28. In such circumstances referred to above, Mr.Parikh prays that there being merit in the Appeals, those be allowed and the impugned order be quashed and set aside. Submission on behalf of the revenue: 29. Mr.Nirzar Desai, the learned standing counsel appearing for the Department, has vehemently opposed both these Appeals. Mr.Desai would submit that no error, not to speak of any error of law, could be said to have been committed by the Tribunal in passing the impugned order. 30. According to Mr.Desai, although in the first round of the litigation the Tribunal thought fit to remand the matter so as to give an opportunity to the Department to look into the production capacity of the machine, yet as the machine installed in the factory premises of the appellants was not found in a working condition, the Department was not able to verify the production capacity. 31. According to Mr.Desai, in such circumstances, no fault could be found with the Department. According to Mr.Desai, the Tribunal has rightly taken the view that as the machine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place, the Department should have agreed to do so. Having not done so, the Department now cannot take shelter of the order passed by the Tribunal, which is not tenable in law. 38. By now, this litigation is almost two decades old. It will be too much for this Court to once again remand the matter for the very same exercise, which could have been undertaken a decade back. 39. In such circumstances, we decline to accept the vociferous submission of the learned standing counsel appearing for the Revenue that the appellants should not be permitted to have an undue advantage as the same would lead to a huge loss to the Revenue. 40. We shall now look into the Case-law, which has been pointed out by Mr.Parikh, the learned senior counsel appearing for the appellants. In the case of R.K.Mill Board (P) LTD. Versus Commissioner of Central Excise, Meerut, reported in 2001 (135) E.L.T.1296 (Tri-Del.), the Tribunal has observed as under: 15. Heard the rival submissions. We have considered the evidence on records and the statements of the various persons. We have perused the chart prepared by the counsel for assistance showing comparative yield and calculating the production on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad reason to believe that they were liable to confiscation and, therefore attracted the provisions of Rule 209A. 41. The aforesaid decision of the Tribunal came to be affirmed by the Hon ble Supreme Court. The Hon ble Supreme Court s decision, affirming the Tribunal s order is reported in 2002 (139) E.L.T.A85 (S.C.). 42. Our attention has also been drawn to the decision of a Co-ordinate Bench of this Court in the case of Shivam Casting Versus Commissioner of Central Excise reported in 2018 (359) E.L.T. 16 (Guj.), wherein, this Court has observed as under: 1. The assessee is in appeal against the CESTAT dated 16.05.2017 raising following questions for our consideration: 1) Whether the CESTAT is correct in remanding the case to the Original adjudicating authority, for reappreciation of Chartered Engineer s Certificate on the basis of the direction given in para 6 of the order? 2) Whether the CESTAT is correct in remanding the matter to the Original adjudicating authority, ignoring the fact that the department has not produced any evidence to prove that the order of the Honourable Commissioner is perverse? 3) Whether the CESTAT is correct in remandi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 15 days a month and the total production capacity per day could be assessed at 2000 to 2750 Kg. per day. Considering the observation of the Chartered Engineer, and average estimated production of 2500 kg., the total production of the Noticee, per year could come to only 4,50,000/- and for the period under consideration could come to only 10,50,000/kg. whereas the department has worked out 29,42,722 kg which is almost three times of the capacity worked out by the chartered engineer. 3.6.2 In this regard, I find that no manufacturing unit can manufacture the goods beyond their capacity. Since, installed capacity of machinery viz. copola furnace used for casting of goods have capacity of 2000 Kgs to maximum 2750 Kgs per day no more casting can be takes place as in no case work of furnace for melting of metal can be carried out by any other means. Hence as per the Chartered Engineer factory work for full efficiency then turnover of the company could come to about of ₹ 75,00,000/- and the said turnover being less then exemption limit of ₹ 1,00,00,000/-. However the said production includes rejection which is again melted in furnace for re-casting. Thus, Noticee No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the Respondent is also disposed of accordingly. This judgement the assessee has challenged in the present appeal. 3. Learned counsel Mr. Sheth for the assessee submitted that the Tribunal committed an error in remanding the proceedings enabling the department to controvert the contents of the Chartered Engineer s certificate produced by the assessee. After a long gap of time it will not be possible for the assessee to produce further material in support of its stand that the annual production capacity of the unit could not have exceeded ₹ 10.50 lakh kilograms whereas the department had worked out clearance of ₹ 29.42 lakh kilograms. Counsel further submitted that the Tribunal erred in appreciating the order of the Commissioner as being passed solely on such Chartered Engineer s certificate. The Commissioner had referred to and taken into account other evidence also. 4. We do not find that the Tribunal understood the Commissioner s order as being passed solely on the Chartered Engineer s certificate. According to the Tribunal, this was one of the important grounds which weighed with the Commissioner in dropping the proceedings. The perusal of the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs, Excise Service Tax Appellate Tribunal, while passing Order No. A/108171820/ WZB/ AHD/2013 dated 15.07.2013, was correct in admitting the evidences for the past clearance and ignore the evidences for the remaining clearances ? {d} Whether the Customs, Excise Service Tax Appellate Tribunal, while passing Order No. A/108171820/ WZB/ AHD/2013 dated 15.07.2013, was correct in holding that the statement has been retracted even though the same person has admitted the depositions made in the retracted statements in his statement recored subsequent to the retraction ? 3. We have heard learned counsel Ms. Amee Yagnik for the Revenue and with her assistance, examined the material on record. In the following factual background, these appeals arise. 4. Messrs. Saakeen Alloys Private Limited, which is engaged in the manufacture of CTD/Round bars, is situated at Visnagar Mahesana Road, District Mehsana. On the premises of Messrs. Saakeen Alloys Private Limited and Messrs. Sunrise Enterprises, Mahesana simultaneous searches were carried out wherein three notebooks and one pendrive were recovered containing details of illicit clearances made by the said M/s. Saakeen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the purchase of excessive raw material, shortage of finished goods, excess consumption of power like electricity, seizure of cash, etc., the Tribunal noted and held that there was nothing to bank upon except the bare confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time of their recording. The Tribunal also noted the fact that the requisite opportunity of cross examination was also not made available so as to bring to the fore the true picture and therefore, it concluded against the Revenue observing that not permitting the cross examination of a person incharge of records of M/s. Sunrise Enterprises and absence of other cogent and positive evidences, would not permit it to sustain the demand of ₹ 1.85 Crores raised in the Demand notice and confirmed by both the authorities below. 8. As could be noticed from the material on record that for the remaining amount of ₹ 8.25 lakhs from the transporter s premises, the parallel invoices were recovered which not only were confirmed by the proprietor of the said transporter but independent evidences also affirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or in excess in the factory premises of the appellant or at any other place. As per the Panchnama drawn at the factory premises it is shown that there was no excess/shortage of the raw materials or finished goods found. The documentary evidences collected from the business premises of M/s.Sunrise Enterprise and the statements recorded by investigation, can at the most raise a reasonable doubt that some clandestine removal activities are undertaken by the appellant. However, such a suspicion or doubt has to be strengthened by positive evidences which seem to be lacking in this case. Any suspicion whosoever cannot take the place of evidence regarding clandestine removal of excisable goods. Moreover, after having positive evidences, qualification of duty on clandestinely removed goods also becomes essential. As already mentioned above, the stock lying in the stock yard of M/s. Sunrise Enterprise, Mehsana was found containing the goods received from M/s.Sakeen Alloys Pvt. Limited under proper invoices. When the goods received under proper invoices are found in the stock yard of M/s. Sunrise Enterprise, then it is possible that out of such goods certain quantities were sold to various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entries in the Registers, etc. match with the production capacity of the machine. 47. We may remind the Revenue of the observations made by the Supreme Court in the case of Parashuram Pottery Works Co. Ltd. v. Income Tax Officer, Circle I, Ward A, Rajkot, reported in (1977) 106 ITR 1 , which read thus : It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. 48. In the overall view of the matter, we are convinced that the impugned order of the Tribunal is not sustainable in law. Once again, at the cost of repetition, we state that we could have remanded the matter once again but, for the obstinate attitude of the Department, we decline to grant any further opportunity to the Revenue. 49. In the result, both the Appeals succeed and are hereby allowed. The impugned orders passed by the Tribunal are hereby ..... X X X X Extracts X X X X X X X X Extracts X X X X
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