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TMI Blog2025 (1) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... ter, etc. No evidence regarding buyers of such alleged clandestine manufactured goods or any receipt of consideration against such alleged clandestinely manufactured goods. Thus, without adducing any evidence in support of such facts, a charge of clandestine removal cannot be sustained merely on assumption and presumption due to such alleged higher amount of royalty recorded by M/s KIL, where even correctness and truthfulness of such recording itself is not established. Reliance in this regard is placed upon the following judgment of the Hon ble Allahabad High Court in M/S. CONTINENTAL CEMENT COMPANY VERSUS UNION OF INDIA OTHERS [ 2014 (9) TMI 243 - ALLAHABAD HIGH COURT] , wherein the Court categorically stated ' no case is made out for extra so-called clandestine sale of the Portland Cement to the said parties. We are satisfied that the first appellate authority has rightly deleted the addition and cancel the penalties.' The above-mentioned judgment of the Hon ble High Court has been relied by the Tribunal in the matter of M/S GIRIRAJ IROSTEEL COMPANY PVT. LTD., SHRI SUNIL KUMAR AGARWAL, SHRI PURUSHOTTAM RATHI VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2019 (12) TMI 542 - CES ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were issued to the Appellant under Section 14 of the Central Excise Act, 1944. The DGCEI, Kanpur in most cryptic manner simply to fulfil their formalities, recorded a statement of the person, who did not even have any authority letter even from Mr. Navin Jain, who was main director looking after overall work. Penalty on Appellant No.3 - HELD THAT:- The clinching evidence of the nature of purchase of raw material, use of electricity, sale of final products, clandestine removal and the more flowback of funds are required to be established in the case of clandestine removal. Such aspects have not been investigated into and therefore, the judgement of Hon ble Allahabad High Court in the case of M/S. CONTINENTAL CEMENT COMPANY VERSUS UNION OF INDIA OTHERS [ 2014 (9) TMI 243 - ALLAHABAD HIGH COURT] is applicable to the facts of the present case. The penalty imposed is set aside. Conclusion - Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. The demands and penalties cannot be based on assumptions or insufficient evidence. The entire demand alleging clandestine removal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under Chapter Sub-heading 72149990 of the First Schedule to the Central Excise Tariff Act, 1985 under the brand name Kamdhenu owned by M/s Kamdhenu Ispat Ltd., [KIL] Bhiwadi District-Alwar, Rajasthan. As per the franchise agreement entered into with M/s KIL the Appellant No.1 are paying royalty to them for manufacture of TMT Bars under the brand name Kamdhenu . The Appellant No.1 are availing the cenvat credit facility and discharging the central excise duty in accordance with law. M/s KIL has their manufacturing premises at A-1114, RIICO Industrial Area, Phase-III, Bhiwadi, District Alwar, Rajasthan for the manufacturing of steel products namely MS Ingots, CTD/TMT Bars. M/s KIL have appointed several other manufacturers of CTD/TMT bars as their franchises throughout the country under agreement authorizing them to manufacture and sell CTD/TMT Bars using/applying Kamdhenu brand or trademark on their product. 3. The Department received an intelligence that M/s KIL is indulged in clandestine activities and allegedly evading huge amount of tax by suppressing the amount of royalty paid by the franchisee units and also allegedly indulged in suppression of production of finished product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in her statement dated 12.11.2008 drawn under Section 14, ibid, inter-alia stated that entries of group sale accounts, institutional sale, royalty amount etc. were made on the direction of Shri Sunil Aggarwal, one of the Director of M/s KIL. Further on verbal direction of Shri Sunil Aggarwal, she entered certain amount for incoming receipt as royalty amount from different franchisees of M/s KIL and cash receipt was further debited to expenditure and shown as transferred to Sh. Ravi Saini, an employee of M/s KIL. 8. The Show Cause Notice issued by the DGCEI to M/s KIL along with printouts of data retrieved from the electronic data storage devices seized from M/s KIL were forwarded to Additional Director General, Delhi Zonal Unit, New Delhi for taking further necessary action against the Appellant, M/s Shree Radhey Radhey Ispat Pvt. Ltd./ franchisee of M/s KIL among others. The entries pertaining to Appellant have been extracted from the data retrieved by GEQD, Hyderabad showing payments towards royalty/publicity by the franchisee unit to M/s KIL during the period 01.04.2008 to 08.10.2008. The Details of which are as under: - Sr. No Date Journal Voucher No. Debit Amt. /Inwards Qty. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also submitted the copy of agreement dated 14.05.2008 entered into with M/s KIL and also submitted the attested copy of bills raised by M/s KIL and party ledger of M/s KIL for the period of May, 2008 to Sep, 2008. Further going through the entries recovered by GEQD, Hyderabad and alleged to be related to his unit, he expressed his inability to explain difference between aforesaid two accounts/ ledger. He stated that payments of royalty to M/s KIL had been made through Cheque only and he is unable to give any explanation regarding cash entries given in data recovered by GEQD, Hyderabad. 10. Subsequently, SCN dated 03.06.2013 was issued to the Appellant No.1 proposing demand of wrongly availed cenvat credit of Rs.1,86,15,736/- alongwith equivalent amount of penalty and a separate penalty of Rs.50 lakhs each on Appellant No.2 Appellant No.3. The sole basis of the allegation of clandestine clearance upon the Appellant No.1 and other Appellants was the difference shown in the GEQD report and the invoices raised by M/s KIL upon the Appellant No.1 alongwith ER-1 filed by the Appellant No.1. It is the case of the Department that the increased value of royalty shown in the GEQD report are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order and requested to dismiss the appeals filed by the Appellants being devoid of any merits. 18. Heard both the sides and perused the appeal records. 19. We find that the fact that the Appellant ever paid a higher amount of royalty to M/s KIL is not factually correct and established, the fact that the Appellant manufactured and cleared the higher quantity of goods corresponding to such alleged higher payment of royalty is not established or proved. 20. Further, there is neither any evidence of any excess consumption of electricity nor any evidence whatsoever and howsoever with regard to any clandestine procurement of raw materials or of production of any excess TMT Bars, use of labour, transporter, etc. No evidence regarding buyers of such alleged clandestine manufactured goods or any receipt of consideration against such alleged clandestinely manufactured goods. Thus, without adducing any evidence in support of such facts, a charge of clandestine removal cannot be sustained merely on assumption and presumption due to such alleged higher amount of royalty recorded by M/s KIL, where even correctness and truthfulness of such recording itself is not established. 21. Reliance in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity has rightly deleted the addition and cancel the penalties. Hence, we hereby set aside the impugned order passed by the Tribunal and restore the order passed by the first appellate authority, along with the reasons mentioned herein. 22. The above-mentioned judgment of the Hon ble High Court has been relied by the Tribunal in the matter of Giriraj Irosteel Company Pvt. Ltd. v. CCE, Meerut- II, 2019 (370) ELT 1649 (Tri. Alld), wherein the facts were similar to the present case framed based on the same facts of alleged recording of higher royalty by M/s KIL and the Tribunal set aside the demand by holding as follows : Examiner of questioned documents only establishes that such data was maintained by M/s. KIL. We note that such maintenance of data by representative of M/s. KIL does not establish actual payment by the appellant . No evidence of actual payment has been brought on record by Revenue. Further, as held by Hon ble Allahabad High Court that clinching evidence of the nature of purchase of raw material, use of electricity, sale of final products, clandestine removal and the more flowback of funds are required to be established in the case of clandestine removal. Such aspects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in the matter of CCE, Patna v. M/s Dadiji Steel Limited, 2023 (6) TMI 1241 - CESTAT KOLKATA has upheld the following finding of the impugned order in which the Adjudicating Authority has specifically held, in the same set of facts where demand was raised based on the same documents which were related to the alleged royalty received by M/s KIL: From the above, it is manifest that Section 36B of the Act stipulates that a statement contained in a document and included in a printed material produced by a computer (computer printout) shall be deemed to be a document for the purpose of the Act and Rules made thereunder and shall be admissible in any proceedings thereunder, if the conditions mentioned in sub-section (2) and the other provisions contained in this Section are satisfied in relation to the statement and the computer in question. Further Section 36B(2)(a) of the Act provides the conditions with respect to the computer printouts that the computer printout containing the statement has to be produced by the computer during the period over which the computer was used regularly to store or process information for the purpose of any activities regularly carried on over tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atements were recorded and relied upon to issue the show cause notice, are liable to be examined at that stage. If the Revenue choose not to examine any witnesses in adjudication, their statements cannot be considered as evidence. However, if the Revenue choose to rely on the statements, then in that event, the persons whose statements are relied upon have to be made available for cross-examination for the evidence or statement to be considered. 33. The Principal Appellant was regularly filing ER-1 Returns and all the facts were within the knowledge of the Department. Further, SCN has not shown any act done by the Appellants, which proves the intention of evasion of Duty. Further there is not a murmur as to what were the various commission or omission on the part of the Appellants in Order to invoke in the First proviso to Section 11 A(1) of the Central Excise Act, 1944.That on the basis of record recovered from the third party and without confronting the same from the person, who has prepared the same, extended period has wrongly been invoked against the Appellants in absence of any positive proof of alleged clandestine removal. 34. Further the Show Cause Notice is clearly barred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Continental Cement Co. (Supra) is applicable to the facts of the present case. The penalty imposed is set aside. 38. The invocation of penal provisions against Appellant being only an empty formality, also warrants judicial scrutiny as the whole plank of allegation is hanging on a very slender thread and also devoid of any iota of evidence against the Appellants. The whole burden is on the DGCEI to prove as to how provisions of Rule 26 have been invoked against Appellant, when Appellant has no role to play and moreover no statement is even otherwise forthcoming, which could be determined to be of the company in any manner. 39. The essential criterion for invoking the provisions of Rule 26 is the presence of mens rea on the part of the person referred to in the provision. In the present case, no evidence has been adduced to show that the Appellant was having the belief that the goods were liable to confiscation. For establishing knowledge there must be some positive evidence which is missing in the present proceedings against the Appellant No.2. Reliance is placed on the following judgments: - Anil Kumar Saxena vs. CCE - 2000 (129) EL T 351 Laurel Organics ..... X X X X Extracts X X X X X X X X Extracts X X X X
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