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TMI Blog2022 (6) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... all the Concerned Officers have certified that EOUs have received the goods. In the said verification reports, officers, no-where pointed out that the EOUs have not received the materials form the Appellant. Further Authorized persons of EOUs units accepted the facts of receipts of materials and transporters and truck owners also accepted the transportation of goods from the factory of Appellant to EOU units - No statement of any buyer recorded to whom clearance was allegedly made, no transportation details provided, no evidence of any receipts of payment from open market buyers produced. Therefore, in the given set of facts and in absence of any adverse evidence, it cannot be said that finished goods were clandestinely cleared in open market. The entire case of the Revenue is based upon the surmises and conjectures. No concrete, positive and tangible evidence appears on record. The evidences brought into the record by the department are incomplete, inconsistent and not a reliable piece of evidence to prove charges of clandestine removal - the charges of clandestine removal of the alleged goods not sustainable in the present matter - the central excise duty liability cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such clearances claimed Advance Authorisation from DGFT Rajkot and also refund of TED from DGFT. Investigation were carried out in cases where Appellant had shown the deemed export clearances to the various 100% EOUs in terms of Para 8.3 of the FTP incorporating verification of these clearances and also recording of the statements of the concerned persons of the recipient EOUs. Letters were also written to the Jurisdictional Central Excise officers of recipient EOUs to ascertain the facts with regard to actual clearance of the Brass Rods and Copper Alloys Ingots. The investigation also include statements of some of the vehicle owners which were also recorded to ascertain the actual transportation whether made or not as shown by Appellant. Investigation revealed the fact that, the deemed exports clearances shown to the 100% EOUs were not genuine and were on paper only. It appear that Appellant is not eligible for advance authorization for duty free imports of Brass/Copper/Zinc Scraps against the deemed export clearances shown to the 100% EOUs namely M/s Shrijkrupa Exports, M/s Apple International, M/s Jakap Metind Pvt. Ltd. and M/s Srijan Exports. Appellant showed deemed export clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se penalty of Rs. 50,00,000/- under Section 112(a) of the Customs Act, 1962. (vi) Hold that the goods of 248204 Kgs. Brass Roads /Brass Hollow Rods/ Copper Alloys Ingots is liable for confiscation under Rule 25 of the Central Excise Rules 25 of the Central Excise Rules, 2002. Since the goods are not available either physically or released under bonds, refrain from the imposing any redemption fines under the provisions of Section 34 of the Central Excise Act, 1944. (vii) Confirmed the demand of Central Excise Duty amounting to Rs.90,59,957/- payable on 248204 Kgs. of Brass Rods/Brass Hollow Rods/ Copper Alloys Ingots under Section 11A(4) of Central Excise Act, 1944. (viii) recover interest at the appropriate rate, in respect of above Central Excise Duty under Section 11AA of the Central Excise Act, 1944. (xi) Impose penalty of Rs. 90,59,957/- under Section 11AC of the Central Excise Act, 1944. (x) Impose penalty of Rs. 10,00,000/- under Rule 26 of the Central Excise Rules,2002 In addition, he also imposed the penalties on co-notices under Section 112 (a) of the Customs Act 1962 and separate penalties under Rule 26 of Central Excise Rules, 2002. Hence, the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact of receipt of material in their factory premises and recorded that the said material is duly accounted for in their statutory record. The transporters and the truck owners have also supported the same. Officers had also requested jurisdictional Assistant Commissioner s to certify whether the material covered under the respective ARE-3 were physically verified by the Range Officer or not. On such inquiry, all the concerned officers have certified that the respective EOUs have received the materials from Appellant. 2.4 He also submits that Appellant has produced certificate of Chartered Accountant, certifying there in the use of materials imported as per the requirement of Policy. All the clearances are with payment of duty and therefore cannot be treated as clandestine removal. Further central excise duty demanded is equal to refund claimed from DGFT and since the refund is sanctioned by the DGFT, cannot be recovered by the Customs Department and therefore the show cause notice is beyond the scope of Jurisdiction. Further, the Assistant Commissioner of Jamnagar has also certified that no refund/ rebate of duty paid on supplies to EOUs has been granted by them. 2.5 He a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ELT 106 Commissioner of C.Ex. Vs. Saakeen Alloys Pvt. Ltd. 2014(308)ELT 655. 2.8 He submits that demand cannot be confirmed, since the advance authorization issued are still valid. He placed reliance on the following decisions. C.C. (Export Promotion), Mumbai v. Koatex Infrastructure Ltd., 2015 (323) E.L.T. 169 (Tri. - Mumbai), Collector of Customs, Bombay v. Sneha Sales Corporation, 2000 (121) E.L.T. 577 (S.C.) Titan Medical Systems Pvt. Ltd. v. Collector of Customs, New Delhi, 2003 (151) E.L.T. 254 (S.C.) Commissioner of Customs v. Rajnarayan Jwalaprasad, 2014 (306) E.L.T. 592 (Guj.); Simplex Infrastructure Ltd. v. Union of India, 2016 (342) E.L.T. 59 (Del.) Bianani Cement Ltd. Vs. Commissioner of Customs, Kandla 2010(259)ELT 247 3. Shri Vinod Lukose, Learned Superintendent (AR) reiterated the findings of the adjudicating authority and submit that DRI investigation revealed that Appellant had clandestinely disposed of the goods in the open market instead of actually supplying the goods to EOUs and had fraudulently showed clearance of brass/copper alloys rods to EOUs and availed the benefit of deemed export in the form of advance authorization. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment itself defective, the proper allegations are very important for foundation of any case. If the allegation itself is defective, any decision rendered would not be correct. In the present case from the perusal of the Bills of entry it is clear that for exemption of custom duty appellant claimed the Notification No. 96/2009-CUS dated 11.09.2008, department has not issued impugned show cause notice for denial of benefit of notification claimed by the Appellant, therefore, clearly the show cause notice itself is defective and the proceeding is vitiated , Consequently, the demand was not maintainable. We also find support from the judgment of Hon ble Supreme Court in the matter of COMMISSIONER OF C. EX. CUSTOMS Vs. SURESH SYNTHETICS 2007 (216) E.L.T. 662 (S.C.) which held as under: Before the Tribunal the short point raised by the assessee was that duty to be paid by a 100% export oriented unit for clearance in the Domestic Tariff Area is the duty of excise and not customs duty. There is merit in the above contention. The duty in question is excise duty and not customs duty. Even the investigations were made under the Central Excise Act, 1944. Therefore, the show cause notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no merit in these Civil Appeals filed by the Department. Accordingly, the same are dismissed with no order as to costs. 4.1 In the case of Bhor Industries Ltd. v. UOI - 1991 (51) E.L.T. 284 (Bombay - HC) the Hon ble High Court observed that if the show cause notice does not fulfill the requirement of show cause notice (required as per correct rules) wrong mention of correct rule will be bad in law and notice can be set aside. 4.2 In the matter of Commissioner of Customs, Bangalore Vs. Bharavi Laboratories (P) Ltd. 2006 (201) E.L.T. 41 (Tri. Bang) , the Tribunal held as under : The infringement arises on account of the Explanation given in Rule 6. These provisions have not been properly brought out in the show cause notice. Therefore we cannot fault with the findings of the lower authority given the way the show cause notice has been drafted. In other words, the show cause notice is defective as the same has neither invoked Section 11A nor Rule 6 of the above-mentioned Rules. Under these circumstances, we have no other option but to reject the Revenue s appeal. 4.3 It is also significant to note that the Appellant were granted Advance Authorization by the DGFT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials if the export obligation is completed. Here, Appellant also produced the certificate of chartered accountant certifying that the use of the material imported as per the requirement of policy. Therefore, demand of customs duty not sustainable and on the above ground. 4.5 Without prejudice to the above finding, we also find that revenue has confirmed the demand of Custom duty on the raw material imported duty free on the ground that the appellant have cleared the goods in DTA without complying the provision of FTP and in contravention with the condition of the exemption notification of customs. There is no dispute in the facts that the imported Raw material has been consumed in the manufacture of Final Product and the excise duty demand was also raised on the finished goods. In such a situation the demand of Custom duty on the Raw material is not legal and proper. Therefore, in our view in the facts of the present case. Since, excise duty demand raised on the Finished goods no duty of customs can be demanded on raw material. The issue has been considered in various judgments as cited by the appellant. In the case of COMMISSIONER OF CUSTOMS Vs. SURESH SYNTHETICS 2007 (21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Customs Act, 1962 on like goods imported into India. It also provides that where such duties are ad valorem the value shall be determined in accordance with the provision of the Customs Act, 1962 and Customs Tariff Act, 1975. The measure, therefore, in the statute for the calculation of duty is the customs duty payable on such goods if they were imported. The levy and collection of duty is covered to be governed by the provisions of enactments relating to Central Excise. The provisions of the Customs Act, 1962 and Customs Tariff Act, will have no application in this regard. 3. On this point, without going to the merits of the issue, we hold that the show cause notice demanding duty and proposing penalty under the Customs Act is not maintainable, set aside the order confirming this notice and allow this appeal. We however make it clear that the department is at liberty to proceed to recover excise duty, if any, payable in the goods and initiate facts for contravention of the Central Excise Act and the rules there under in accordance with law. The above judgment has been upheld by the Hon ble Supreme Court reported in 2015 (316) A29 (SC) 4.7 The identical issue ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gree with this view. In this case, it cannot be said that the raw materials have not been used for the intended purpose. Even if there was clearances in excess of permissible limit it may amount to be case of diversion of finished goods, the duty shall be payable in respect of finished goods and no duty become demandable on the raw material used in the manufacture of such diverted goods. 6 . Therefore, the appeal by the department is rejected. The above decision of the Tribunal was maintained by the Hon ble Supreme Court by dismissing the revenue s appeal reported at COMMISSIONER V.SANJARI TWISTERS- 2010(255) ELT A15 (S.C) 4.8 In view of the above judgments, it is settled that once in the 100% EOU the raw material imported duty free is used in the manufacture of final product and final product is cleared on payment of duty in DTA, for any reason the customs duty on the raw material which was used in the finished goods cannot be demanded therefore, the demand of Customs Duty on this ground also is clearly not sustainable. 4.9 As regard the demand of Central Excise duty, we find that the case of the department is on the ground that deemed export clearance were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manufacture and surreptitious removal of finished final product, the same is required to be proved beyond doubt by the Revenue. One has to keep in mind that, though being the main ingredient, betel-nut is not the only raw material which is used in manufacture of Pan Masala. That apart, since the investigation has been carried only at the transporters end, no presumption could be drawn with regard to manufacture and removal of the final product. Presumptions and assumptions cannot take place of positive legal evidence, which are required for proving the charge. Even if, it is assumed that some raw materials were received at the factory of the respondent during the said period, the same cannot become conclusive proof of production and clandestine sale to different parties. Due to lack of positive evidence, benefit of doubt will always go in favour of the assessee. 10. Accordingly, we answer the reference against the Revenue and in favour of the assessee and it is held that the receipt of one of the raw materials, does not conclusively prove clandestine manufacture and surreptitious removal of finished final product. Further, since the charge is regarding clandestine manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the stock received from M/s. Sakeen Alloys Pvt. Limited, but on verification of the stock with the invoices, the stock was found to have tallied with the documents available with M/s. Sunrise Enterprise. When the stock lying in the stockyard of M/s. Sunrise Enterprise was found to have tallied with the invoices available with M/s. Sunrise Enterprise then the request of the appellants for cross-examination of Shri Mukeshbhai V. Patel of M/s. Sunrise Enterprise was necessary to bring out the truth whether the records/pen-drive maintained by M/s. Sunrise Enterprise pertained to same stock which is received under duty paid invoices or otherwise. 7 . It is also observed from Para 14.4 of the show cause notice that names and address of M/s. Siddhi Industries Pvt. Limited and M/s. Mahavir Alloys, Dabhol, Nani Daman are manufactured who were alleged to have supplied the excess raw materials to the appellants from which clandestinely removed goods were manufactured. Their addresses were made available to the department but no enquiry was conducted at the supplier s end to establish that excess materials in fact were supplied to the appellants. Similarly, no investigation has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven by the Director of the Company. Similarly, in the case of CCE v. Arsh Casting Pvt. Limited [2010 (252) E.L.T. 191 (H.P.)], the Hon ble High Court of Himachal Pradesh held that the private records maintained by the staff of the company cannot be made as the sole evidence to hold that clandestine removal of the goods is established and accordingly, the following point of law was decided in favour of the assessee:- Whether on the basis of private records, the Central Excise duty can be demanded or not when these private records show higher production than that reflected in the statutory records resulting into removal of the excess stock clandestinely i.e. without issue of invoice and without making entries of production and clearance in the statutory records? 10 . Similarly, in the case of CCE, Chandigarh-1 v. Shingar Lamps Pvt. Limited [2010 (255) E.L.T. 221 (P H)], the Hon ble High Court held that the private records which have been discovered during the raid may not be sufficient for holding clandestine production and removal but there should be some positive evidence suggesting clandestine production and removal. The Hon ble Supreme Court in the case of Shalimar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, the name of the Applicant No. 1 on one GR No. 34 had been written not by Shri Sanjay Garg, but by his brother, whose statement has not been recorded and on GR 187, there is no mention of the name of the Appellant No. 1 at all. No statement of the drivers concerned has been recorded by the Revenue to establish that the finished goods manufactured by the Appellants were removed without payment of duty. The other transporters have not been produced for the purpose of cross-examination nor the statements of drivers who might have actually carried the goods, had been recorded. Moreover no statement of any of the recipients of the goods had been brought on record. Thus the statements of the transporters have remained uncorroborated and also suffers from the shortcoming of being not being cross-examined by the Appellants. It has been the settled law that the liability cannot be fastened on an assessee on the strength of documents seized from the possession of third party. There should be some corroborative evidence/material. The Tribunal has in the case of Emmtex Synthetics Ltd., supra, when the charge of clandestine removal was made against the Appellants therein out of yarn receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a conclusive proof of clandestine receipt of goods from that transport company for want of corroboration from any tangible evidence. Following the ratio of these decision, the duty demand cannot be upheld solely on the basis of uncorroborated statements and records of transporter. The statements tendered by the labourers can also not be relied upon by the Revenue as these persons were not produced for being cross-examined. Moreover, there is no corroboration of their statements with regard to the Trucks by which the goods were allegedly removed or the persons who received the goods. The Truck driver Shri Shiv Bahadur Yadav has also not been cross-examined and cleaner Shri Rakesh Kumar had deposed that the Bills/Invoices are supposed to be with the Driver and he being cleaner had no knowledge. 10. The confirmation of duty in respect of 149 consignments is also based on the records seized from the premises of M/s. Chitra Traders and not on the basis of any record seized from the premises of the Appellant-company. The Revenue has not been able to adduce any corroborative evidence to show the movement of goods from the premises of the Appellant-company to the premises of M/s. Chi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndestine removal activities, it is very likely that some cash would have been seized. There is not a single instance where either seizure of cash is made or any clandestinely removed goods are seized or raw materials/finished goods were found either short 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, quantification 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 go ..... X X X X Extracts X X X X X X X X Extracts X X X X
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