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TMI Blog2024 (1) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained or on mere statements of some persons, may even be responsible officials of the manufacturer or even of its Directors/partners who are not even permitted to be cross-examined, as in the present case, without one or more of the evidences referred to above being present. There is absolutely no evidence that NIPL had received unaccounted raw material from the parties whose names have been mentioned in the various charts drawn by the Department or any details about the transportation of the said raw material or that the payments were made either to the suppliers of unaccounted material or to the transporters. Similarly, there is no evidence on record that NIPL had supplied unaccounted finished goods to various parties or about the receipt of the unaccounted payments from these buyers of the unaccounted finished goods. Nor there is any evidence of transportation of the unaccounted finished goods - in the absence of any such evidence, the allegations of clandestine removal are unsustainable. Private /Third Party Records - sole basis of allegations of clandestine clearance of goods have been made on the notebooks recovered from the residential premises of Sri Sarma - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi vs. Vishnu Company Pvt. Ltd., [ 2015 (12) TMI 593 - DELHI HIGH COURT] , Delhi High Court reiterated the principle that it was for the department to explain why the entries in the documents were not further investigated by them and why someone in a responsible position in the company was not examined to establish the link between such evidence and the respondent there. Having held that the department did not carry its investigation to their logical end, the Court concluded that the charge against assessee was not proved. Burden to proof - HELD THAT:- It is a settled principle of law that the burden to prove the allegations of clandestine removal lies on the department as the charge of clandestine removal is a grave charge. The submission of the revenue that by the recovery of the notebooks, they have discharged the burden and the onus to prove thereafter shifts on the assessee is erroneous as it has been repeatedly observed that merely on seized records, the charge of clandestine removal is not sustainable unless the same is corroborated by other substantive and independent evidence. The seized record from the residence of Sri S.V.S. Sarma cannot be related to the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33 of 2019 (DB) With Excise Condonation of Delay Application No.50072 of 2023 and Excise Cross/50073/2023 ORDER The present appeals have been filed by the department, challenging the Order-in-Original no. RPR/EXCUS/000/COM/CEX/007/2019 dated 9.01.2019 passed by the Commissioner whereby substantial portion of the duty demand was dropped. 2. The respondent company namely, M/s. Nutan Ispat Power (P) Ltd. (NIPL) is engaged in the manufacture of Iron and Steel products, namely Sponge Iron, Mild Steel Ingot, Rerolled products falling under chapter 72 of Central Excise Act 1985. The group companies having three units ,i.e., Indo Lahari Bio Power Ltd, (ILBP), Nutan Ispat Power Pvt. Ltd (NIPL) and Lahari Laminates Pvt. Ltd (LLPL) of which Shri Pradeep Kumar Agrawal is a common Director. The Melting Division of M/s. Indo Lahari Bio Power Ltd was merged with M/s. Nutan Ispat and Power Pvt. Ltd. with effect from 1.12.2010. 3. On receipt of an intelligence that NIPL is engaged in suppression of production and removal of excisable goods, the team of Preventive Offices of Central Excise visited and conducted search on 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rma was not authorised to sign the documents relating to the Central Excise Department, he looked after the administrative work and after his resignation from director-ship, he is still doing the same job. He was not involved in the purchase of material and sale of finished goods. With regard to the notebooks number 1, 2, 6 and 7, he stated that they are not authentic records of the company and were not prepared under his instructions and therefore he has no knowledge in that regard. 6. To ascertain the transportation of clandestine clearance during the period July 2010 to June 2011 from ILBP and NIPL, transport company, namely, M/s Amar Freight Carrier was visited by the Officers of Preventive Branch on 27.07.2012, where some Loading advices and some Builties were recovered. The proprietor of the transport company, Shri Amarnath in his statement recorded on 27.07.2012 stated that they have transported material from M/s ILBP and NIPL. 7. Accordingly, show cause notice dated 30.09.2013 was issued to NIPL, Sri Sarma, Shri Pradeep Kumar Agrawal and ILBP. The demand raised in the show cause notice was affirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight Hundred Two Only) on 2772.88 MT of MS ingot. v. I order recovery of interest at appropriate rate on the amounts of Central Excise duty of Rs.1,47,514/- and Rs.76,871/-, total amounting to Rs.2,24,385/- (Rupees Two Lakh Twenty Four Thousand Three Hundred Eighty Five only) from M/s. NIPL, the notice no.1 under Section 11AB/11 AA of the Central Excise Act, 1944. vi. I impose penalty of Rs.2,24,385/- (Rupees Two Lakh Twenty Four Thousand Three Hundred Eighty Five only) on M/s. NIPL, the notice no.1 under Section 11 AC/11 AC (1)(a) of the Central Excise Act, 1944. vii. I do not impose any penalty on M/s.ILBP, the Noticee No.4 under Section 11 A C of the Central Excise act, 1944. viii. I do not impose any penalty on M/s. NIPL, the Noticee No. 1 and on M/s. ILBP, the Noticee No.4 under Rule 25 of the Central Excise Rules, 2002. ix. I do not impose any penalty on M/s. NIPL, the Noticee No. 1 under Rule 27 of the Central Excise Rules, 2002. x. I do not impose any penalty on Shri S.V.S. Sarma, the Noticee No.2 under Rule 26 of the Central Excise Rules, 2002. xi. I impose penalty of Rs.20,000/- (Rupees Twenty Thousand only) on Shri Pradeep Kumar Agrawal, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statement of Sh Amarnath Jha, Proprietor of the transport company is not admissible without following the procedure prescribed under section 9D of the Central Excise Act, 1944. No reliance can be placed on the Loading advices and the Builties recovered from the transporter. 11. We have heard the learned authorised representative for the Revenue and the learned Counsel for the respondent and have perused the records of the case. A. Clandestine Removal of Goods 12. The case of the Revenue is that the respondents have indulged in clandestine removal of raw material and finished goods and this allegation is based on the 4 notebooks recovered from the residential premises of Sri Sarma. The issue of clandestine removal of goods have been considered by the Tribunal in the case of Arya Fibres Pvt. Ltd. vs. CCE, Ahmedabad - 2014 (311) ELT 529, laying down the parameters to prove clandestine removal of goods, which are quoted below: 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-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oils Ltd 2022 (372) ELT 632 while affirming the view of the Tribunal that onus to prove clandestine removal must be discharged by sufficient, cogent and unimpeachable evidence, dismissed the department s appeal. The same has been further affirmed by the Apex Court in 2021(377)ELT 87. On applying the parameters as referred above, we find that there is absolutely no evidence that NIPL had received unaccounted raw material from the parties whose names have been mentioned in the various charts drawn by the Department or any details about the transportation of the said raw material or that the payments were made either to the suppliers of unaccounted material or to the transporters. Similarly, there is no evidence on record that NIPL had supplied unaccounted finished goods to various parties or about the receipt of the unaccounted payments from these buyers of the unaccounted finished goods. Nor there is any evidence of transportation of the unaccounted finished goods. Needless to say that manufacture of excess goods involved higher consumption of electricity, employment of labour, payment of wages but there is neither any such allegations in the show cause notice nor any evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earance cannot be readily inferred from few documents and statements unless the allegations are also corroborated and established on evidences, relatable to or linked with actual manufacturing operations. As far as the present demand is concerned, there is no such evidence forthcoming in the records before us to suggest clandestine manufacture and clearance by the appellant. Mere reliance on notebooks/diaries or statements cannot be considered as enough evidence for clandestine manufacture and clearances. (Emphasis laid) In M/s. Sada Shiv Steel Mills vs. CCEx, Chandigarh 2017 (357) ELT 481, the Tribunal once again observed that no corroborative evidence in support of the claim has been produced by the Revenue to allege clandestine removal of goods and only thirdparty records have been relied which does not have any evidentiary value in the light of the decision of Raipur Forging Pvt. Ltd. vs. CCE, Raipur - 2016 (335)ELT 297. The Principal Bench in M/s. Anjani Steel Ltd vs. Commissioner of Central Excise Service Tax, Raipur - 2022-TIOL-947-CESTAT DEL on the point that third-party evidence cannot be relied upon to confirm the allegations as that of clandestine removal, not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icated to take revenge from the company. Though he was the trusted employee of NIPL and was working for the last 20 years but with the joining of nephew of the main director in 2007 08, his importance in the company got reduced and even the facilities which were extended to him were also curtailed and his salary was also not increased. The cross examination of Sri Sarma was conducted on 19.03.2015 and the relevant part thereof is reproduced below:- Q.No.7. Whether during the period you were director of the company, any goods were ever cleared without payment of duty. Ans. No. Q.No.8 Whether the note books withdrawn from your residence and marked as Sr.No.1,2,6 and 7 of the Panchnama dated 09.12.2011 depict actual sales, clearance of goods or payment received or raw materials purchased. Ans. The figures mentioned in these note books do not show the actual sale or clearance of the goods or payment received or raw material purchased. In these note books, I have fabricated certain entries. Q.No.9. I am showing you your statement dated 9.12.2011 wherein in respect of Q.No.9 you stated that note books at Sr.No.1, 26 and 7 were party wise finished good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s some fabricated entires. Q.No.13 . Please explain which are you correct statements, i.e. the first statement dated 9-12.2011 or subsequent statements dated 10.04-2012 and 11.04.2012 in respect of entries contained in note book no.1,2, 6 and 7 seized from your residence on 9.12.2011. Ans. The statements recorded on 10-04-2012 and 11-04-2012 are my correct statements and I stand by the same. 16. On the basis of the statement and cross examination of Sri Sarma, the adjudicating authority rightly concluded that during the period under consideration he was only a paid director in NIPL on salary of Rs. 25,000/ per month and not a promoter director. While working as director, he used to look after work of accounts of incoming of raw materials, verification of sales invoices and banking related matters but there was no permission to him by the company to take the account books at home. We would like to quote the findings of the Commissioner in the impugned order as under :- 34.4.3 . Considering the above facts, I would not be out of place to conclude that the statement rendered by Shri S.V. Sarma, the Noticee No.2 on 9.12.2011 was incorrect and false and was tendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces, it would also not be proper and justified to charge the Noticee No.1 and 4 with the allegation of clandestine purchase and removal of raw materials as well as clandestine manufacture and removal of finished goods without payment of duty, as alleged in the impugned show cause notice. In Commissioner of Central Excise, Delhi vs. Vishnu Company Pvt. Ltd, 2016 (332) ELT 793, the Delhi High Court was faced with a situation where the department relied on the statements made by third parties, which were subsequently retracted or relied from and it was held that it becomes necessary for the department to produce other evidence, which is of an independent nature, which corroborates the retracted statements and further observed as under: 41. What the above submission overlook is the reliability of such statements. Once it is shown that the maker of such statement has in fact resiled from it, even if it is after a period of time, then it is no longer safe to rely upon it as a substantive piece of evidence. The question is not so much as to admissibility of such statement as much as it is about its reliability . It is a latter requirement that warrants judicial authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtages themselves, the charge of clandestine removal cannot be imputed in absence of independent investigation to corroborate the allegation. As rightly observed by the Commissioner (Appeals), the investigations have failed to bring the charge of clandestine removal by leading evidences in the form of statement of buyers, transporters, flow back of funds, extra use of electricity, etc. He has rightly concluded that huge quantity of sponge iron would require a large fleet of lorries/trucks for their transportation and in the end in the absence of any such evidence on record, the findings of clandestine removal cannot be upheld. I also note that the Revenue has not produced any evidence for procurement of such a huge raw material to manufacture the said quantum of assessee s final product. Before the final product is removed, the same is required to be manufactured. As such, heavy onus is placed upon Revenue to establish the manufacture of the said goods. There are no statements on records, either admitting the manufacture of the said goods or removal of the same in clandestine manner. As such, I fully agree with the Commissioner (Appeals) that the findings of clandestine removal bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Loading advices and Bilities which were recovered from their office premises. There is no explanation by the department as to why they had chosen only one of the transporter and did not take the pain to investigate the other transport companies. None of the truck owners/drivers of the truck numbers found mentioned were interrogated. 20. We also find from the discussion in the impugned order that Shri Amarnath Jha, Proprietor of the Transport Company has stated that he did not directly deal with NIPL but only through Shri Gunjan Bhai, however, the Department has not interrogated him. Statement of Amarnath Jha is not sufficient to prove the charges of allegation that clandestine removal. Reliance placed on the decision in CCE Vs. Motabhai Iron Steel Industries 2015 (316) ELT 374 (Guj.) to say that demand cannot be made only on the basis of third party statements, is absolutely correct. The allegation that consignments were cleared by NIPL as per the Notebooks, is not substantive as merely issuing of Loading advice does not mean that goods were actually transported on that basis. 21. The Adjudicating Authority has dealt in detail the entries made in the statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X
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