9911796707
TMI Blog2025 (2) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... pass the following order: (i) I confirm the demand of duty of Rs.2,44,04,352.00 (16,73,666.00+ 19,36,394.00 + 3,05,640.00+3,99,312.00 +2,53,260.00 + 4,45,786.00+ 1,93,90,294.00) (Rupees two crores forty four lakhs four thousand three hundred fifty two only) under proviso to Section 11A of Central Excise Act, 1944. I also impose a penalty of Rs. 2,44,04,352.00 (Rupees two crores forty four lakhs four thousand three hundred fifty two only) on M/s Sai Sulphonate Pvt. Ltd., 19, Sarsuna Main Road, Kolkata-61, under Section 11AC of the Central Excise Act, 1944. (ii) I also confirm the demand of Rs.2,77,850.00 (Rupees two lakhs seventy seven thousand eight hundred fifty only) under proviso to Sec.11A of Central Excise Act, 1944. I also impose a penalty of Rs.2,77,850.00 (Rupees two lakhs seventy seven thousand eight hundred fifty only) on M/s Sai Sulphonate Pvt. Ltd., 19, Sarsuna Main Road, Kolkata- 61, under Section 11AC of the Central Excise Act, 1944. (iii) I disallow the modvat credit wrongly availed and utilized to the extent of Rs.1,38,040.00 (Rupees one lakh thirty eight thousand forty only) and confirm the demand under Sec. 11A of Central Excise Act, 1944 read with Rule 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main input for the manufacture of LABSA was LAB and Sulphuric Acid. The LAB was being procured from M/s. Reliance Industries ltd. at Patalganga, Maharashtra, Indian Petrochemical Corporation Ltd. at Boroda, Gujarat and Tamilnadu Petro Products Ltd. at Chennai, Tamilnadu. The Salphuric Acid was produced mainly from Jahshree Chemical and Fertilizer, Khardah, West Bengal and The Phosphate Co. Ltd., Rishra West Bengal. 5. On 29.09.1998 a search was conducted by the department and seized almost all the documents of the company, but the department did not proceed against the company after about 3 ½ years more. On 22.11.2001, the department again searched the office of the factory of the appellant and the records were seized. Thereafter, on 30.10.2002 a show cause notice was issued alleging the following :- * The first allegation was suppression of production of Acid Slurry. Such allegation has been made stating that the appellant had shown less production in their RG-1 Register based on the ratio of 1:1.45 (LAB is to LABSA) when the actual should have been at the ratio of 1:1.475 and thus, the differential quantity of 2,80,944.22 kgs. of Acid Slurry being the differential quan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tom discharge basis through which Spent Acid recovered first followed by mixed Spent Acid with LABSA. The mixed quantity required further operation for separation and temporarily stored in the dedicated storage tank and subsequently processing take place, the re-processed batch again placed in a separator like normal batches recovered LABSA and Spent Acid as per norms. Thus, as per arithmetical calculation number of batches charges have been taken and assumed the total production which is erroneous and cannot be maintainable in law. To support this contention, Ld.Counsel relied on the decision Commissioner of Customs, Central Excise & Service Tax, Gaziabad v. Auto Gollon Industries (P) Ltd. (supra). * The demand of Rs.14,03,998/- has been alleged on account of suppression of production and clandestine removal as evidenced from computer print outs. The department calculated the clearance of 2,06,405 kgs. of Acid Slurry on which Central Excise duty of Rs.14,03,998/- was demanded. * The Ld.Counsel submits that whenever any Acid Slurry was cleared, those were cleared against Central Excise invoices on payment of duty. No invoice was prepared against refused water generated out of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of C.Ex., Ahmedabad-II [2014 (312) E.L.T. 225 (Tri.-Ahmd.)], K. Rajagopal vs. Commissioner of Central Excise, Madurai [2002 (142) E.L.T. 128 (Tri.-Chen.)], Commissioner of Central Excise, Jaipur-I vs. Nirmal Bhandari [2013 (289) E.L.T. 418 (Raj.)], Triveni Engineering and Industries vs. Commissioner of Central Excise, Allahabad [2016 (334) E.L.T. 595 (All.)]. * Another demand of Rs.2,27,850.62 has been demanded under the show cause notice on account of clandestine removal of Spent Acid of 25,23,658.40 kgs. This allegation has been made on the basis that Spent Acid is generated during the course of production of LABSA and no evidence has been given in the show cause notice to show that the disproportionate quantity of LABSA was produced during the period from October 1997 to 22.11.2001. * In reply to the said allegation, the appellant submits that the said allegation is not only hollow and baseless, but also not practicable. The clearance of Spent Acid depends all the production of LABSA. There is no evidence in the show cause notice to support the allegation. There is no evidence also in respect of disproportionate procurement of LAB/Sulphuric Acid illegally by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant. The total realization was Rs.2,68,582/- and as cum-duty price out of which Rs.40,707.05 is payable as Central Excise duty and not Rs.3,26,046/- as claimed by the department. The said amount of Rs.40,707/- as accepted by the department has been paid through Cenvat Credit. * The Ld.Counsel for the appellant further submitted that the entire period of search, there were only three suppliers of LAB i.e. Reliance, IOCL and TPPL. The department could not produce even a single document in support of their assumptions and presumptions to prove that excess purchase had been made than as per actual record of the appellant. The department could not produce the evidence of excess electricity consumption for production of such a huge quantity of LABSA and Spent Acid, therefore, the entire demand of the department is based only on assumptions and presumptions, which is not sustainable. * He further submitted that the demand is barred by limitation as all the facts were known to the department since 29.01.1998 when the first search was conducted. The appellant was issued with Spot Memo, which was duly replied to by the appellant vide their letter dated 05.06.2000. The department remain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds have been procured to manufacture goods for clandestine clearance. No evidence for extra production or unaccounted cash or statement of buyers or transporters has been obtained. It is a settled legal position that charge of clandestine clearance is a serious charge and the onus to prove the same is on the Revenue by adducing some evidence. The Tribunal has taken consistent view that in absence of corroborative evidence, the charge of clandestine clearance cannot be levelled against the assessee. Some of the decisions are as below : * * Ghodavat Pan Masala Products Ltd. v. CCE - 2004 (175) E.L.T. 182 (Tri.-Mumbai) * CCE v. Supreme Fire Works Factory - 2004 (163) E.L.T. 510 (Tri.-Chennai) * CCE v. Suvidha Limited - 2009 (236) E.L.T. 675 (Tri.-Del.) 8. We further find that the whole basis of applying the input-output ratio of 1:1 to arrive at the quantity of final products alleged to be clandestinely cleared by the appellant is solely based on the production pattern of other assessee in the same Commissionerate. We are of the view that the Learned Commissioner made a fundamental error in making such assumption to raise demand on the allegation of clandestine clearance. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption of various inputs, requirements of labour, material, power supply and the conditions for running the plant together with the attendant facts and circumstances. Therefore, there can be no generalization nor any uniform norm of 1046 units as sought to be adopted by the Revenue especially when there is no norm fixed under Rule 173E till date by the Revenue and notified by it. The electricity consumption varies from one unit to another and from one date to another and even from one heat to another within the same date. There is, therefore, no universal and uniformly acceptable standard of electricity consumption, which can be adopted for determining the excise duty liability that too on the basis of imaginary production assumed by the Revenue with no other supporting record, evidence or document to justify its allegations. In the following case laws, it has been held that the consumption of the electricity alone is not sufficient to determine the production : ........... 22. The clandestine manufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to : (i) Receipt of raw material inside the factory pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case not having conducted any experiment whatsoever cannot be permitted to justify the demands raised. It will be appropriate on the part of the Revenue to conduct experiments in the factory of the appellants and others and that too on different dates to adopt the test results as the basis to arrive at a norm, which can be adopted for future. The impugned demand based merely on assumptions and presumptions cannot, therefore, be sustained nor could be justified both on facts and in law. 24. The law is well settled that in every case of alleged clandestine removal, the onus is on the Revenue to prove what it alleges with positive and concrete evidence. In the absence of any positive evidence brought by the Revenue to discharge its onus, the impugned order cannot be sustained. 25. The law does not entitle the Revenue to disregard all the statutory excise records as well as audited financial accounts and records of the assessee-company, which have been duly verified and accepted by the competent authorities from time to time not only for central excise but also for purposes of income-tax, etc. ................. 26. The Central Excise authorities cannot ignore the facts, records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hortage of finished goods for which no explanation was offered by the assessee which meant that the assessee had admitted the shortage and paid the duty accordingly. Based on the said finding, the High Court observed that the method of clandestine removal of the goods is not required to be explained. Therefore, the said decision has no application to the facts of the present case. In fact, in the instant case, no shortages of goods were ever found which fact is on record and not in dispute. In any case, since we have already noted hereinabove, that the whole basis of allegation of clandestine removal is the production pattern of other assessees, which has no legal or scientific basis, the impugned duty demand cannot be sustained." 12. Therefore, we hold that the demand of Rs.16,73,666.75 is not sustainable. 13. A demand of Rs.19,36,934/- was sought to be confirmed against the appellant on the basis of suppression of batch charges for production. The appellant in reply to the show cause notice has given the explanation with regard to that and submitted that number of batch charges have been taken into consideration without taking note of the fact that after charging one batch, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity sought to allege clandestine removal on arithmetical calculation of the number of batches charges which is not sustainable under law. Accordingly, the demand of Rs.19,36,934/- is dropped. 15. Further a demand of Rs.14,03,998/- sought to be confirmed alleging suppression of production and clandestine removal as evidenced from computer print outs. In response to that the Ld.Counsel has submitted that whenever any Acid Slurry was cleared, those were cleared against Central Excise invoices on payment of duty. No invoice was prepared against refused water generated out of plant waste and other related activities considering the same as non-excisable and non-dutiable. The vehicles were used by the appellant and their associated unit, M/s. A.R. Stenchem (P) Ltd. and the tanker movement was maintained in the computer referring invoice number. The data in the computer print outs are nothing but movement chart of the respective hired tanker. On the basis of this, the Revenue sought to allege that there is clandestine removal of goods. The computer print outs as explained by the appellant have not been verified by the adjudicating authority from M/s. A.R. Stenchem (P) Ltd. also and it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered the judgments cited by the Learned Advocate and hold that search and seizure proceedings are made in violation of Section 100 of Cr PC read with Section 18 of the Act, for the reason that department has failed to follow the provisions of Section 36B of the Act. We also agree with the contention of the Learned Advocate that at the time of sealing and desealing of the external data storage device as well as the time of obtaining printouts therefrom, a certificate should have been obtained as per the provision of Section 36B of the Act. No such certificate has been brought on record without which the evidentiary value of these printout get vitiated. As no certificate from the responsible person of the Appellant was obtained by the department, the credibility of the computer printout gets vitiated. Hon'ble Apex Court in case of M/s. Anwar P.V. v. P.K. Basheer reported at 2017 (352) E.L.T. 416 has held that the computer printout can be admitted as evidence only if the same are produced in accordance with the provisions of Section 65B(2) of the Evidence Act. A certificate is also required to accompany the computer printouts as prescribed under Section 65B(4) of Evidence Act, 1972. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court in case of C.C.Ex. v. Vishnu & Co. Pvt. Ltd. [2015-TIOL-2792-HC-DEL-CX = 2016 (332) E.L.T. 793 (Del.)] has also held that merely on the basis of statement made by the third party including transporter, agents and employees are not sufficient to prove the charges of clandestine removal in absence of independent corroborative evidence. The Hon'ble P & H High Court in case of M/s. G-Tech Industries Ltd. v. Union of India [2016 (339) E.L.T. 209 P&H] has held that Section 9D of the Act has to be construed strictly, as mandatory and not merely directory. We have seen that the learned Commissioner denied the request of cross-examination on the ground that it would further complicate the issue. We have also considered the following judgements cited by the appellant :- (i) M/s. Sakeen Alloys Pvt. Ltd. v. C.C.Ex. 2013 (296) E.L.T. 392 (Tri.) which was upheld by the Gujarat High Court [2014 (308) E.L.T. 655 (Guj.) and subsequently by the Supreme Court reported at [2015 (319) E.L.T. A-117 (S.C.)]. (ii) M/s. R.A. Casting Pvt. Ltd. v. C.C. Ex, 2009 (237) E.L.T. 674 (Trib). This judgement was firstly upheld by the Allahabad High Court reported at [2011 (269) E.L.T. 337 (All) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, we set aside the demand. 21. We have considered the submissions made by the other appellants as regard penalty imposed against them. We find that no material evidence was brought on record to prove the charges to attract penalty against them, except the statements which were relied upon by the department without following the mandate of Section 9-D of the Act. Under the circumstances we also set aside the duties and penalties imposed on the other appellants as well." In view of the above, the demand of Rs.14,03,998/- is not sustainable, hence dropped. 16. The demand of Rs.1,93,90,293/- was sought to be confirmed on the basis of diary notes recovered from a diary seized during the course of investigation containing some entries which the department assumed that they are relating to manufacture of Acid Slurry, making the theoretical calculation suppressed production of Acid Slury had been inferred in comparison to the Acid Slurry recorded in the RG-1 Register during the period from 01.01.2001 to 22.11.2001 involving duty of Rs.1,93,90,293/-. But private diary belongs to their employee Shri Debasis Ghosh, who was maintaining the same in his personal capacity and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iaries privately 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. In fact, this Bench has considered some of the case law on the subject in Centurian Laboratories v. CCE, Vadodara, 2013 (293) E.L.T. 689. It would appear that the decision, though rendered on 3-5-2013, was reported in the issue of the E.L.T. dated 29-7-2013, when the present case was being argued before us, perhaps, not available to the parties. However, we have, in that decision, applied the law, as laid down in the earlier cases, some of which now have been placed before us. The crux of the decision is that reliance on private/internal records maintained for internal control cannot be the sole basis for demand. There should be corroborative evidence by way of statements of purchasers, distributors or dealers, record of unaccounted raw material purchased or consumed and not merely the recording of confessional statements. In yet another decision of a co-ordinate Bench of the Tribunal [Pan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarifies that the demand of Rs. 32,07,422/- was based only on Register titled as A-21 and not based on any documents namely A-19 and A-20. The expression used in the document titled as A-21, like "A.P total", "A.P Production total", "A.P", etc. was never clarified by V.N. Parab as no such question has been put forth to him for clarification of the expression mentioned in the entries during the course of recording of the statement. The entries made on each page of the document titled as A-21 i.e. details of machine stop time on a particular day and machine stop time total was also written which indicated that the machine was not operated and was stopped on a particular day for how many hours and what was the total and which machine was not operative. Despite this evidence being available on record, the demand has been worked out in the show cause notice on the basis of optimum production of 1876 Kgs of DT Yarn. It was further submitted that even the statement of Mohan Lal Gupta does not substantiate the case of the Revenue that A-21 was a register maintained for recording the actual production. Neither Mohan Lal Gupta's statement nor any evidence indicated that the details appeari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nova for production of POY in such huge quantities, or of payments effected by GSL to Nova for the excess quantities of POY, clandestinely manufactured and cleared by Nova and sold to GSL, or even of payments made by the buyers of DTY from GSL made out of quantities alleged to have been purchased by GSL from Nova. The only basis of the demand is the figures contained in A/19 and A/21, seized from GSL premises, of which V.N. Parab is the author. Even if the figures in the seized documents tally (which is disputed by GSL, since V.N. Parab has not, when he was being examined during the investigation, stated that they tally), that by itself/cannot prove clandestine manufacture and clearance, the tests for which have been adequately explained by this Tribunal in the decisions cited earlier, amongst several others. Submission made by ld. Senior Advocate, who had addressed arguments, on behalf of Nova also supports the case of GSL that where the demand is based on clandestine production, clearance and sale of excisable goods, mere entries in note books or diaries cannot establish the same. Proof of actual production, whether by direct evidence or corroborative evidence is a 'must', and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any person. It is the further contention of GSL that no admission has been made by Mohan Lal Gupta or by V.N. Parab as regards the optimum production having been achieved on all days in the factory or average production having been achieved for all days. It was further submitted that the drawing of samples would not necessarily mean that the machine was operating on that very particular day and average production of 1560 Kgs was achieved on the said day when the sample was drawn. In reply to the submission made on behalf of GSL, it was submitted by the learned Special Counsel Mr P.R.V. Ramanan that the Adjudicating Authority has carefully considered the relevancy of the documents titled as A-23 and the statement of Mohan Lal Gupta, Director of GSL. In paras 90 to 92 of the impugned order, the Commissioner has discussed as to how the seized records marked as A-23 containing 83 pages substantiates the case of the Revenue. Further, in the said paras, the Adjudicating Authority has carefully considered the statement of Mohan Lal Gupta. It is further submitted that the Adjudicating Authority has rightly concluded that on a combined reading of the statement of Mohan Lal Gupta and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... totally a different thing to assess the probative value of the contents of the document. As repeated by this Tribunal, clandestine manufacture and clearance cannot be readily inferred from documents and statements. They have to be established on evidence, relatable to or linked with actual manufacturing operations. As far as the present demand is concerned, there is no such evidence forthcoming in the record before us. Mere reliance on note books or statements cannot justify a finding of clandestine manufacture and/or clearance. Investigation into the sources of supply of raw material would have revealed the actual facts. Apparently, no efforts seem to have been made in this behalf by the investigating authorities. Of equal importance would have been investigations into the transportation of the raw materials (in huge quantities, as alleged) to GSL and of DTY allegedly manufactured from the factory of GSL to its buyers, and payments for such raw materials and for the clandestinely cleared DTY. In the absence of all such evidence, a finding that excisable goods have been clandestinely manufactured and cleared by GSL cannot justifiably be arrived at. The probative value of the entrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) discovery of such finished goods outside the factory; (d) instances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of buyers with some details of illicit manufacture and clearance; (h) proof of actual transportation of goods, cleared without payment of duty; (i) links between the documents recovered during the search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions cited before us now, considered them, and come to the above conclusion. In yet another decision of a co-ordinate Bench of the Tribunal [Pan Parag India v. CCE, 2013 (291) E.L.T. 81], it has been held that the theory of preponderance of probability would be applicable only when there are strong evidences heading only to one and only one conclusion of clandestine activities. The said theory, cannot be adopted in cases of weak evidences of a doubtful nature. Where to manufacture huge quantities of final products the assessee require all the raw materials, there should be some evidence of huge quantities of raw materials being purchased. The demand was set aside in that case by this Tribunal." 21. As no such effort has been made by the Revenue and brought in any evidence in support of their allegation and the demand is raised on assumption and presumption only, therefore, demand of Rs.2,27,850.62 is not sustainable. Accordingly the same is set aside. 22. The Cenvat credit of Rs.1,38,040/- was denied on irregular availment of credit on the goods on the basis of some invoices which were not received in their factory. But the contention of the Ld.Counsel for the appellant is that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the appellant on 05.06.2000 and no investigation further took place. Thereafter, all on a sudden on 22.11.2001, the department again searched and on 31.10.2002, a show cause notice was issued. 28. We find that in such cases extended period of limitation is not invocable as the allegation made in the show cause notice for reasons already known to the investigating authority and spot memo was issued which was clarified by the appellant, therefore, extended period of limitation is not invocable as held by this Tribunal in the case of Perfect Boxes Pvt.Ltd. vs. Commissioner of Central Excise & Service Tax, Indore, cited supra. Relevant para of the said order is reproduced as under:- "11. Now I turn to the assessee's claim of the demand being hit by time-bar. A perusal of the show cause notice reveals that the demand has been raised by mechanically invoking the proviso to Section 11A of the Act. I find no discussion or even a murmur of any evidence or allegation that the respondent has indulged in the act of suppression of facts or wilful misstatement, contravention to the provision of the said Rule. In the absence of any of the ingredients, there can be no justification to inv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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