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TMI Blog2021 (3) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... were employees of SWC and that there is no evidence placed by the Department to show purchase of the raw material, Oleum. Further, the important aspect that the appellant did not have sufficient storage facility for such huge quantity of LAB, was also noted to be a very relevant factor. Further, the Tribunal rightly noted that the Adjudicating Authority did not follow the directions issued by the Tribunal while remanding the matter for de novo consideration and it reiterated only the statements of persons with regard to the supply of LAB through SWC and failed to address the issue on the procurement of Sulphuric Acid/Oleum. The findings rendered by the Tribunal would clearly show that a thorough fact finding exercise has been done and the missing links have been pointed out by the Tribunal and we find the entire matter to be fully factual and no question of law would arise for consideration in the appeals filed by the Revenue. The onus was on the Department to prove that there was clandestine manufacture and removal by the assessee-firm and this having not been established to the extent required, there was no error or perversity found in the approach of the Tribunal warrant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be imposed under Rules 9(2), 173Q, 226 against the Partner of a firm when the entire duty demand against the firm has been set aside on merits? iv. Whether penalty under Rules 9(2), 173Q, 226 can be imposed on the appellant without even stating any commissions or omissions of the appellant which would constitute an offence under Rule 173Q of the Central Excise Rule, 1944? and v. Whether penalty under Rule 173Q can be imposed on the appellant when the appellant admittedly not the owner of the goods ordered to be confiscated an in is in no way connected with the manufacture, production or storage thereof? 5.C.M.A.Nos.2714 and 2715 of 2016 have been filed by the Revenue challenging the order of the Tribunal, insofar as it has set aside the entire duty demanded from the firm and reducing the penalty imposed on the appellant viz., the partner of the firm. 6.The Revenue has raised the following substantial questions of law, which were admitted on 15.12.2016:- 1.Whether the order of the Tribunal is perverse and contrary to the provisions of the Central Excise Act, 1944 with regard to the admitted facts and findings rendered by the Adjudicating Authority? 2.Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final product, which was seized. 10.In the show cause notice, the allegation was that the firm was manufacturing and clandestinely removing Acid Slurry from its factory in excess of the declared quantity by using LAB, purchased under fictitious names. The authorities proceeded on the basis that the assessee-firm had cleared Acid Slurry valued over ₹ 2 Crores during 1992-93 and 1993-94, which resulted in issuance of five show cause notices demanding duty for the period from October, 1993 to February, 1995 by denying the benefit of SSI exemption under Notification No.1/93 dated 28.02.1993. The total duty demanded in the five show cause notices was ₹ 5,94,012/-. 11.The show cause notice dated 19.04.1994, along with five show cause notices, was taken up for adjudication by the Commissioner of Central Excise Customs, Coimbatore (the then jurisdictional Commissioner), which culminated in an Order-in-Original No.146 of 1996, dated 10.09.1996, confirming the demand of excise duty on Acid Slurry and also confirming the demand of duty in the five show cause notices. The Adjudicating Authority imposed penalty of ₹ 50,00,000/- on the appellant-partner, penalties were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken note of the role played by SWC, who were the dealers of LAB for TNPL and the assessee-firm had procured LAB only through SWC and there were enough records to show that cheques were issued in the names of the employees of SWC and these persons encashed the cheques and taken up the jobs for supply of LAB from TNPL in the name of third parties to be ultimately supplied to the assessee-firm. 17.Further, the learned Senior Standing Counsel elaborately referred to the modus adopted while effecting payments for procurement of the raw material and submitted that the connection between the fictitious firms and the assessee-firm was established beyond doubt. Further, it is submitted that there was another company under the name and style M/s.Fintex Chemicals, which was floated by the close relative of the appellant-partner, who was the Managing Partner of the assessee-firm and this firm was utilized for making payments to TNPL through SWC. Further, it is submitted that even without making any purchase of LAB, M/s.Fintex Chemicals had issued cheques to TNPL through SWC and the payments were adjusted only for the supplies made to the assessee-firm in fictitious names. 18.It is furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Castings Pvt. Ltd., [2011 (269) E.L.T. 337 (All.)]; Commissioner of CGST and Central Excise vs. Wizard Fragrances [2019-TIOL-541-HC-ALL-CX.]; Commissioner of Central Excise, Agra vs. Aman Gupta [2016 (338) E.L.T. 28 (All.)] and Jubilant Agri Consumable Products Ltd., vs. CESTAT [2016 (41) S.T.R. 8 (All.)]. 22.We have heard Ms.L.Maithili, learned counsel appearing for the appellant-partner and the assessee-firm and Mr.V.Sundareswaran, learned Senior Standing Counsel for the Revenue and carefully perused the materials placed on record. 23.The present appeals are challenging the correctness of the order passed by the Tribunal, which reversed the Order-in-Original passed by the Commissioner of Central Excise, pursuant to an order of remand passed by the Tribunal in the earlier round of litigation. 24.In the first round of litigation, when the matter was dealt with by the Tribunal, there was a difference of opinion between the Hon'ble Judicial Member and the Hon'ble Technical Member. The Hon'ble Judicial Member opined that it is not sufficient for the Department to show the evidence of receipt of only one material and that too, through various sources said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner dated 10.09.1996 was a non-speaking order. 28.Further, with regard to the allegation of receipt of important item clandestinely and clandestine manufacture and removal of final product, it was held that it is for the Department to show that the assessee had received and clandestinely manufactured with all the raw material and it is not sufficient for the Department to show the evidence of receipt of only one material and that too through various sources said to have been received without establishing the quantum said to have been removed by TNPL. Further, it held that it was for the Department to establish that the entire quantum of raw material was removed and supplied through SWC directly or indirectly and the evidence cannot be oral and it has to be shown through proper documentary evidence. Further, the Tribunal faulted the Commissioner for not giving detailed findings as to how the assessee-firm have received that much quantity of LAB and as to how the assessee-firm had made arrangements to purchase the raw material LAB to the extent of ₹ 8 Crores, as according to the assessee, they neither had funds, nor they had manufacturing facility, nor manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interference. Thus, we are required to see as to whether the Commissioner, on de novo adjudication, had taken note of the directions issued by the Tribunal, while remanding the matter or merely confirmed the earlier proposal by slightly revising the demand. This aspect of the matter has been elaborately brought out by the Tribunal in the impugned order. 32.Mr.V.Sundareswaran, had elaborately taken us through the entire order of adjudication dated 03.08.2005, in order to impress upon us that there was evidence of clandestine manufacture and clandestine removal and the Tribunal erroneously reversed the elaborate findings rendered by the Adjudicating Authority while demanding duty from the assessee-firm and imposing penalty on the appellant-partner as well as other co-noticees. 33.Per contra, Ms.L.Maithili, learned counsel would contend that the Tribunal had considered the entire matter holistically, re-appreciated the evidence, which was placed on record and has granted full relief to the assessee-firm, but only partial relief to the appellant-partner. 34.We have carefully gone through the show cause notice, the Orderin- Original dated 10.09.1996, as well as the Order-in- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a proof for the Revenue to arrive at a conclusion that huge quantity of Acid Slurry was manufactured and cleared clandestinely. 37.Further, the Tribunal faulted the Adjudicating Authority for having computed the quantity and value purely on mathematical formula and worked out the total quantity of Acid Slurry by adopting the ratio of raw materials, LAB and Oleum without being supported with any evidence. Further, the Tribunal noted that there is no link between the payments made to three employees of SWC with that of the supply of LAB to the assesseefirm and mere statements that those three persons are related and controlled by the assessee-firm is not enough to hold the assessee-firm guilty of having received LAB. Further, the Tribunal also noted that if the assessee had to manufacture such huge quantity of Acid Slurry, it would require huge storage capacity of not only the raw materials, but also the finished products and the spent acid, which is a by-product, which is released during the manufacturing process and the same cannot be thrown out without clearance. Therefore, the Tribunal held that based on statements and private records, the demand of excise duty of clandesti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding exercise has been done and the missing links have been pointed out by the Tribunal and we find the entire matter to be fully factual and no question of law would arise for consideration in the appeals filed by the Revenue. 40.In the decision of this Court in the case of Commissioner of Central Excise, Salem vs. CESTAT, Chennai (supra), the Court held that the burden of proof, in a case of clandestine removal, is undoubtedly on the Department. However, at times, in such cases of clandestine removal, clinching documents will be available and if the Department is able to prima facie establish a case of clandestine removal, violation of excise procedure, the burden shifts on the assessee to prove that he is innocent. 41.In the preceding paragraphs, we have noted as to how the matter has proceeded before the Adjudicating Authority and before the Tribunal on both occasions and we find that there is a clear missing link between the allegation of clandestine manufacture/removal with that of the assessee-firm. This is further established by the fact that duty has been demanded based on a notional fixation by adopting a formula that X amount of raw material would res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. That apart, we find from the Order-in-Original more particularly, the order dated 03.08.2005, that there is no clinching evidence to link the appellant-partner with that of the allegation made against the assessee-firm except to state that some of them were close relatives and the appellant-partner had control over them. This finding, even in the first round before the Tribunal, was held to be bad and it was pointed out that there should be sufficient evidence to link the assessee-firm with the alleged transaction. In more or less identical circumstances, in the case of Aman Gupta (supra), the penalty imposed on the partner was set aside, as the demand against the assessee-firm was set aside. 48.Thus, the Tribunal ought to have granted full relief to the appellant-partner, instead of restricting the penalty to ₹ 2,00,000/-. That apart, we find that no reason has been assigned by the Tribunal as to why it did not vacate the entire penalty and thought fit to reduce it to ₹ 2,00,000/- , though the Tribunal had exonerated the assessee-firm entirely. Therefore, the order passed by the Tribunal, insofar as sustaining the penalty to the tune of ₹ 2,00,000/- cal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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