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TMI Blog2024 (3) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... ating to production and clearance of the final products, in SAP system. Inter alia, the production as well as clearances of fruit pulp was accounted for on day-to-day basis in said SAP system and this fact was brought to the notice of the Officers, who conducted the stock taking, on the very first day of their visit to the factory and subsequently, by way of various correspondence exchanged by the Appellants with the Commissioner. It is found that despite repeated requests, the Department preferred to compare the physical stock with defunct RG-1 stock, even though correct stock, on day-to-day basis, was maintained by the Appellants in their SAP system - the records maintained in SAP system cannot be manipulated easily. For the reason best known to department, no attempt was made by department to cross check the veracity of averments made by appellant regarding maintenance of record on SAP systems was made. When the Dept. did not accept the records maintained by the Appellants in their SAP system while issuing the SCNs for confiscation of excess stock of finished goods claimed to be found by the Officers, then the Dept. cannot take an altogether different stand and rely upon the rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned Order, is not sustainable - Therefore, entire exercise also leads to revenue neutral situation and there was no inducement for the Appellants to undervalue the fruit pulp stock transferred by them to their sister units. Therefore, the demand confirmed on this count is not sustainable and deserves to be set aside. Penalties - HELD THAT:- In the absence of any conscious and deliberate suppression of facts or wilful mis-declaration and also in the absence of mens rea, penalty is not imposable. Therefore, the penalty imposed on the Appellant-company deserves to the set aside. Since Shri Sameer Sharma, Associate Vice President of the Company, has acted as an employee, in the ordinary course of discharging his assignments, and he could not have unduly gained anything personally, penalties imposed on Shri Sameer Sharma is not sustainable and deserves to be set aside. The impugned Orders are not sustainable on merits - Appeal allowed. - HON'BLE MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) And HON BLE MR. A.K. JYOTISHI, MEMBER (TECHNICAL) Shri M.H. Patil Shri T. Chandran Nair, Advocates for the Appellants Shri A.V.L.N. Chary Shri B. Sangameshwar Rao, ARs for the Respondent ORDER [ Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RG1 Register, after switching over to computerized accounting in their SAP system, and the production and clearance figures accounted in SAP system is the correct ones. The Appellants, by their letter dated 16.02.2013 also, informed the Commissioner that they are maintaining production and clearances record in SAP system, w.e.f. 15.8.2010 and do not maintain any manual records for Central Excise purpose and in fact, the internal private record which the officers referred to as RG-1 was for internal control. In fact, no such RG-1 register exists any more. 3.5. Thereafter, the Officers again visited the factory on 20.2.2013, verified stock of finished goods, compared the same with the stock reflected in SAP account and found certain shortage, instead of huge excess stock found on earlier visit on 2.2.2013. Similar visit and stock taking was done at Unit-II also. 3.6. Thereafter, few letters were written by the Appellants to the Department to bring on record various factual position and requesting for release of the seized goods, provisionally on execution of bond, etc. The Appellants also challenged the seizure of goods before the Andhra Pradesh High Court also. 3.7. After recording ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before this Tribunal, by filing separate appeals, referred to above. 4. The Appellants were heard on 20.12.2023, when Shri M.H. Patil, Shri Chandran Nair and Shri Viraj Reshamwala, Advocates, on behalf of both the Appellants. and Shri AVLN Chary and Shri B. Sangameshwar Rao, Ld. Authorised Representatives, attended on behalf of the Department. 5. On behalf of the Appellants, Shri M.H. Patil, Ld. Advocate, argued that impugned orders are not sustainable on merits as well as on limitation and in support, he made the following submissions: 5.1. That the sole ground based on which the demand has been confirmed by the Commissioner is that there was certain difference in quantity of fruit pulp accounted for in RG1 Register (defunct) and those physically available in the factory premises, when compared with the stock accounted for in SAP system and, accordingly, the differential quantity is presumed to have been cleared clandestinely without payment of duty; 5.2. That the Appellants were maintaining all their records, including statutory records relating to production and clearance of the final products, in SAP system. The production and clearances of fruit pulp was accounted for on day- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alies itself evidences that physical stock-taking, comparison of figures in manual RG1 Register and the production and clearances accounted in SAP system was not done by the Officers in a fair and reasonable manner; 5.11. That when physical stock verification carried out by the Officers was not fool proof and there were anomalies, the benefit of doubt should be extended to the assessee; 5.12. That clandestine removal of goods should not be alleged based on assumption or surmises. Department should prove clandestine removal with cogent and tangible evidences, in support of which reliance is placed on the following judgments: (i) Oudh Sugar Mills 1978 (2) ELT J-172 (SC) (ii) D.B. Electricals 2005 (188) ELT 470 (SC) (iii) Maan Aluminium Ltd. 2015 (322) ELT 184 (SC) 5.13. That when the stock verification carried out by the Officers suffered certain anomalies, as aforesaid, the benefit of doubt should be extended to the assessee, in support of which reliance is placed on the following judgments: (i) Bhushan Strips Ltd. 2005 (179) ELT 419 (T) (ii) Bhushan Ltd. 2005 (186) ELT 197 (T) (iii) Nilesh Steel Alloys 2008 (229) ELT 399 (T) 5.14. That the Dept. has not brought in any independent e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble on the second visit on 20.02.2013 (within a matter of 20 days), and the Dept. has not adduced any plausible evidences of clandestine removal of such a huge stock. This itself proves that the stock verification was not done in proper and justifiable manner, but in a biased manner; 5.18. That in support of the contention that there was no excess or shortage of fruit pulp when the physical stock is compared with the stock accounted for in SAP system and each and every kg of fruit pulp was cleared on payment of duty, the Appellants submitted date-wise inventory of opening stock, production and clearance on daily basis, during the disputed period, through their letter dated 22.6.2016. 5.19. That documentary evidences would prevail over oral statements, based on the settled law on the issue; 5.20. That, in any case, non-maintenance of statutory records/RG1 alone cannot be a ground to allege clandestine removal of goods; 5.21. That, in any case, the computation of demand is also not proper, as the Dept. has taken the total production accounted in SAP system, subtracted the quantum of production accounted in RG1 so called quantity physically found in the factory at the time of stock ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suppression of facts and/or mis- statement based on the following judgments: (i) Nestle India - 2009 (235) ELT 577 (SC) (ii) Continental Foundation - 2007 (216) ELT 177 (SC) (iii) Chemphar Drugs Liniments - 1989 (40) ELT 276 (SC) (iv) Padmini Products - 1989 (43) ELT 195 (SC) 5.28. That when Returns (ER1) were filed, from time to time, the Dept. was aware of the facts and, hence, extended period is not invocable, in support of which reliance is placed on the following judgments: (i) Swastik Engineering 2010 (255) ELT 261 (T) (ii) -do- Upheld by Karnataka High Court 2014 (302) ELT 333 (Kar) (iii) Accurate Chemical 2014 (310) ELT 441 (All.) (iv) Tinplate Company 2013 (289) ELT 414 (Jhar) 5.29. That when the records were audited, the Dept. is aware of all requisite information and, hence, extended period is not invocable, in support of which reliance is placed on the following judgments: (i) Pragathi Concrete Products 2015 (322) ELT 819 (SC) (ii) Rajkumar Forge Ltd 2010 (262) ELT 155 (Bom) (iii) MTR Food 2012 (282) ELT 196 (Kar) 5.30. That there was inordinate delay in issuance of the present SCN, as way back in February 2013, the Dept. was aware of the so called stock discrepancies a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be accepted; 6.4. that the contention of the assessees that non-maintenance of statutory records/ RG-1 alone cannot be a ground to allege clandestine removal of goods based on settled position of law on the issue and that documentary evidences would prevail over oral statements, is also not sustainable; 6.5. that the Department has brought in independent evidence by way of statements, Panchnama, etc.; 6.6. that the claim of the assessee that the burden of proof of clandestine removal is on the Department and the same has to be proved with cogent and tangible evidence and not mere suspicion, cannot be accepted, as admitted facts need not be proved; 6.7. that there was undervaluation of the fruit pulp stock-transferred by the assessee to their sister units; 6.8. that extended period is invocable in view of suppression of facts and misstatement and for the very same reasons penalties are also sustainable. 6.9. that the claim of the Appellants that the limitation starts from the cause of action is not stainable in view of Hon ble Supreme Court judgment in the case of Mehta Co., reported in 2011 (264) ELT 481 (SC). 6.10. Based on the above submissions, Ld. ARs prayed for dismissing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mattulal vs. Radhe Lal - (1974) 2 SCC 365 (ii) Union of India Another vs. K.S. Subramanian (1976) 3 SCC 677 7.6. that Hon ble Tribunal in the case of Abaris Healthcare [2018 (362) ELT 153 (T)], has held that Dept. having failed to issue SCN within one year from filing of declaration, and issued SCN only after three years of filing such declaration, the same was barred by limitation. While coming to the above conclusion, the Hon ble Tribunal has referred to the said judgment in Mehta Co. also. 7.7. that the contention that demand is barred by limitation also gets substantiated from the fact that the Appellants were making persistent requests to consider the stock accounts maintained in their SAP system, instead of defunct manual Daily Production Account (RGI Register), on various dates, including on the date of visit of the Officers, date of stock taking, recording statements, etc. on 02.02.2013/ 06.02.2013/ 20.02.2012, vide their letters dated 16.02.2012, 20.02.2013, 27.02.2013, 13.03.2013, etc. Over and above this, the Appellants substantiated that not only there was no excess stock of Fruit Pulp in both of the units, as wrongly claimed by the Officers, but also there was no shor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific and the litigation was inter se the party, although that case has acquired finality, in view of dismissal of Dept. s appeal in Pawan Gupta s case. For arriving at this conclusion, Hon ble Supreme Court referred to and discussed the following two judgments: (i) Kunhayammed and Ors (2000) 6 SCC 359 (ii) Khoday Distilleries Ltd. (2019) 4 SCC 376 7.13. that in the in case of Kunhayammed Ors, 3-Judge Bench of Hon ble Supreme Court has held (in para 44) that statement of law contained in the order is declaration of law by the Hon ble Supreme Court under Article 141, even by dismissing a Civil Appeal in limine by a speaking order. In such cases, the lower Court s order gets merged with the Hon ble Supreme Court s order. This judgment has been followed by Supreme Court in various subsequent judgments, including in Khoday Distilleries Ltd. (supra). 7.14. that in the case cited by Ld. AR, although Hon ble Supreme Court had dismissed the Civil Appeal filed by the Dept., vide its judgment dated 19.07.2020, the same was not invoked in Experion Developers on the ground that the Architect s certificate was not produced and relied upon in Pawan Gupta s case, while the same was the basis i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not have binding effect, since the later judgment is passed ignoring/without considering the earlier judgments. If the later Bench refers to earlier judgments and distinguish the same, the later one will have binding effect; 7.20. that the judgment of Hon ble Supreme Court in Mehta Co. was passed ignoring/not considering the 3-Judge Bench judgment in Gammon India and, hence, ratio in Gammon India would prevail over the ratio in Mehta Co., although it is later in time; 7.21. that based on 3-Judge Bench judgment in Gammon India would prevail over 2- Judge Bench judgment in Mehta Co and, therefore, the SCN dated 07.05.2015, issued after over two years from the cause of action is barred by limitation; 7.22. that in connection with the valuation of stock transfer of Fruit Pulps from the Appellants Chittoor Units to their Jalgaon Unit, it was submitted that, considering the amendment to Rule 8 of Valuation Rules and Point 5 of CBEC Instructions dated 01.07.2002, the Hon ble Tribunal has held that payment of duty on 110% of cost of production on clearances to sister units/own units is correct, even if part of the production was sold to other independent buyers, in support of which re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for on day-to-day basis in said SAP system and this fact was brought to the notice of the Officers, who conducted the stock taking, on the very first day of their visit to the factory and subsequently, by way of various correspondence exchanged by the Appellants with the Commissioner. We find that despite repeated requests, the Department preferred to compare the physical stock with defunct RG-1 stock, even though correct stock, on day-to-day basis, was maintained by the Appellants in their SAP system. We understand that the records maintained in SAP system cannot be manipulated easily. For the reason best known to department, no attempt was made by department to cross check the veracity of averments made by appellant regarding maintenance of record on SAP systems was made. 11. We find that when the Dept. did not accept the records maintained by the Appellants in their SAP system while issuing the SCNs for confiscation of excess stock of finished goods claimed to be found by the Officers, then the Dept. cannot take an altogether different stand and rely upon the records maintained in SAP system and compare it with so called RG-1 for confirming demand on the alleged shortage of good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal verification and method adopted by them for comparison of figures shown in RG1 Register/ER1 Returns and in SAP system, which appears to be not a correct method, when the Dept. was taking different stand at different points of time. 13. Further, we find that for manufacture and clearances of such a huge quantity of fruit pulps clandestinely, enormous quantity of raw materials and packing materials were required and the Dept. did not find any evidence of unaccounted purchase of raw materials or packing materials required for manufacture of fruit pulps alleged to have been clandestinely removed. Based on the settled law, the burden of proof of clandestine removal is on the Dept. and the same has to be proved with cogent and tangible evidence and not mere suspicion and the ratio of judgments relied upon by the Appellants in their support are applicable. 14. We find that the anomaly in the stock taking conducted by the visiting Officers is evident from the stock position on the day of first visit of the Officers to the Unit No.1 on 2.2.2013, as given below: S. No. Particulars Quantity/kgs (i) Stock of fruit pulp accounted for in SAP system during the disputed period 1,36,78,029 (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f demand is not proper, as the Dept. has taken the total production accounted in SAP system, subtracted the quantum of production accounted in RG1 so called quantity physically found in the factory at the time of stock verification, and the differential quantity was claimed to be shortage and alleged to be cleared clandestinely, which is not correct, as the Dept. should have compared physical stock with the details accounted in SAP system. Taking all the aspects of the case and the evidences, we find that the Department has not been able to conclusively prove clandestine removal of goods. Therefore, duty demand confirmed on alleged clandestine removal by Unit No.1 and Unit No.2 is not sustainable and deserves to be set aside. 16. So far as valuation adopted by the Appellants for stock transfer of fruit pulp to their sister unit is concerned, we find that the same is correct, as they have adopted comparable price and no favoured treatment was afforded and, hence, differential duty confirmed in the impugned Order, is not sustainable. We further find that fruit pulp stock transferred to sister unit was used by them for manufacture of their final products which were ultimately cleared ..... X X X X Extracts X X X X X X X X Extracts X X X X
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