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TMI Blog2023 (9) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... erein it has been shown that they have received royalty over and above as declared by the appellants to the Department. Admittedly, no efforts were made by the Revenue regarding production and sale of the goods, realization of sale proceeds, identification of customers and what is the production capacity of the appellants. In the absence of of those evidences, merely alleging that franchisee has received over and above as declared by the appellants, the charge of clandestine removal is not sustainable as held by this Tribunal in the case of Giriraj Irosteel Company Private Limited. The demand alleging clandestine removal on the basis of payment of royalty recorded in the books of M/s KIL, is not sustainable. Certain shortage of 72 MT of MS Bars was found on 01.04.2013 at the time of visit - HELD THAT:- The shortage found during the course of stock taking on 01.04.2013, we find that more than 32000 bundles were lying in stock and on the basis of one bundle of each size, it is taken the basis for weightment, but it is not coming out from the facts that how more than 32000 bundles were counted? These are only an eye estimation as no counting has been placed on record by the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture of iron and steel products, namely, MS Ingots, MS Bars, MS Wires. 2.1 During the material period, the appellants were manufacturing MS Bars under brand name Kamdhenu in terms of License User Agreement dated 15.10.2007, wherein the appellants were permitted to use the Kamdhenu Trade Mark for sale of TMT Bars in the State of Jharkhand on a royalty of Rs.150/- per MT + Service Tax. 2.2 The appellants intimated the same to the Revenue vide letter dated 23.02.2008 with a copy of Agreement. 2.3 On 12.11.2008, a search was conducted on the premises of M/s Kamdhenu Ispat Limited (KIL) including the purported secret accounts office at J-1200, Palam Vihar, Gurgaon resulting in recovery of various incriminating records along with three laptops and two pen drives showing evasion of Central Excise duty as well as Service Tax, which, inter alia, showed that royalty was being collected by KIL from their franchise unit by use of Kamdhenu brand name without declaring it in their accounts. The receipt of such royalty amount from the Franchisee Manufacturers of KIL in the name of a firm, Jai Ambey, which is not existing and fictitious. 2.4 The statement of employee of KIL was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has paid the amount in cash and the payment particulars towards royalty by the franchisee and not able to explain it. It was his submission that they have made all the payments of royalty through cheque only. 3.2 Thereafter, he submits that on the basis of third party record, the demand against the appellants is not sustainable. 3.3 He submits that in case one of the other franchisee of M/s KIL, the identical matter came for consideration before this Tribunal in the case of Giriraj Irosteel Company Private Limited Vs. Commissioner of Central Excise, Meerut II reported in 2019 (370) ELT 1649 (Tri. All.). In the said case, this Tribunal has dropped the proceedings against franchisee holding that the charge of clandestine removal is not sustainable on the basis of the records recovered from the possession of KIL. 3.4 With regard to shortage of 72 MT of M.S.Bars, it is his submission that on the date of visit, around more than 32000 bundles of MS Bars were found in stock and on the basis of one bundle of each size has been weighted and on the basis of it, it has been alleged that there was a shortage of 72 MT whereas whole of the stock as per books was 1704.28 MT and as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad record of the royalty charges recovered by M/s. KIL from the franchisee users including the present appellant. Therefore, Officers of Central Intelligence initiated investigation in respect of the appellant. The manufacturing unit of the appellant was visited by the officers on 5-5-2012. At the time of visit statements of Shri Jagdish Prasad Jindal, Manager and Shri Deepak Maheswari, Accountant were recorded. In his statement dated 5-5-2012 Shri Jagdish Prasad Jindal, Manager stated that they used the brand Kamdhenu since 2007-08 and paid royalty @ Rs. 200 per MT after the end of the month and the payments were made through cheques and no payment was ever made in cash. In respect of the difference between the details of royalty payment provided by him and available in the retrieved data, he informed that he had no knowledge about the same and stated that the appellant had paid royalty and service charge as per the chart provided by him which tallied with their ledger and bills raised by M/s. KIL. In his statement dated 5-5-2012 Shri Deepak Maheswari, Accountant stated that the payments to M/s. KIL were made through bank only and no cash payment was ever made in respect of roya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of royalty charges paid by the appellant as reflected in their books of account, it appeared to Revenue that the royalty payment as reflected by retrieved data was more than actually reflected in the books of appellant. Therefore, on the basis of alleged excess payment of royalty charges, Revenue has calculated the quantity of goods on which such royalty charges were paid and compared the said quantity with the quantity reflected in the records of the appellant and on the balanced quantity demanded Central Excise duty. For demand of such Central Excise duty, Revenue has not produced any evidence about the excess production of final product nor produced any evidence in respect of procurement of excess raw material. There is no evidence on record about the dispatch of excess quantity of goods through the transporters. Further, customers were also not identified and the consumption of power was also not taken into consideration. We note that Hon ble Allahabad High Court in the case of Continental Cement Co. (supra) in paras 12 13 has held as follows :- 12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has been shown that they have received royalty over and above as declared by the appellants to the Department. Admittedly, no efforts were made by the Revenue regarding production and sale of the goods, realization of sale proceeds, identification of customers and what is the production capacity of the appellants. In the absence of of those evidences, merely alleging that franchisee has received over and above as declared by the appellants, the charge of clandestine removal is not sustainable as held by this Tribunal in the case of Giriraj Irosteel Company Private Limited (supra). 9. Therefore, following the decision of this Tribunal in the case of Giriraj Irosteel Company Private Limited (supra), we hold that the demand alleging clandestine removal on the basis of payment of royalty recorded in the books of M/s KIL, is not sustainable. Issue (b) 10. The shortage found during the course of stock taking on 01.04.2013, we find that more than 32000 bundles were lying in stock and on the basis of one bundle of each size, it is taken the basis for weightment, but it is not coming out from the facts that how more than 32000 bundles were counted ? These are only an eye estim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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