9911796707
TMI Blog2025 (2) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.' - Demand not sustained. Demand of Rs.19,36,934/- was sought to be confirmed against the appellant on the basis of suppression of batch charges for production - HELD THAT:- 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. The explanation given by the appellant has not been verified or has not been taken up at the time of investigation, same had to be done to know how the batch charge has taken placed then it will be clear. Without any concrete evidence the charge of clandestine removal on the basis of batch charges cannot be confirmed held by this Tribunal in the case of Commr. of Cus., C.E. & S.T., Ghaziabad vs. Auto Gollon Industries P.Ltd. [2018 (1) TMI 307 - ALLAHABAD HIGH COURT] - The adjudicating authority sought to allege clandestine remov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- was denied on irregular availment of credit on the goods on the basis of some invoices which were not received in their factory - HELD THAT:- The contention of the Ld.Counsel for the appellant is that the appellant has received the goods containing those invoices which has been used in the manufacture of the final product which ultimately suffered the duty. The said fact has not been denied by the Revenue, in that circumstances, the demand of Rs.1,38,040/- is also not sustainable for denial of Cenvat credit and dropped. Demand on account of shortage of Acid Slurry of Rs.79,675.20 found on 22.11.2001 - HELD THAT:- The measurement of the said Acid Slurry was done only on eye estimation basis. No actual stock taking was taken, in that circumstances, the shortage cannot be alleged against the appellant on the basis of eye estimation, therefore, the said demand of Rs.79,675.20 is also not sustainable hence dropped. Demand of Rs.3,27,046/- has been alleged as short payment of Central excise on account of sale through consignment agent, on the value at which the goods were sold from the consignment agent's place - HELD THAT:- To find out how much is short payment on account of Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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 57-1 of Central Excise Rules, 1944. I also impose a penalty of Rs. 1.38.040.00 (Rupees one lakh thirty eight thousand forty only) on M/ s Sai Sulphonate Pvt. Ltd., 19, Sarsuna Main Road, Kolkata-61, under Rule 571 of the Central Excise Rules, 1944 read with Sec. 11AC of the Central Excise Act, 1944. (iv) I confirm the demand of Rs.40,707.00 (Rupees forty thousand seven hundred seven only) which has already been paid under Sec. 11A of Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch 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 quantity of assumed production as mentioned in the RG-1 Register and the demand of Rs.16,73,666.75 was made. * The Ld.Counsel for the appellant submits that as the said ratio of production has been arrived at taking the purity @88% when the appellant was supplying the goods to their only customer M/s. Hindusthan Lever Limited with 90% purity, which is the equivalent to the ratio of production as 1:1.45. The department relied on the theoretic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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 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 and against which it cannot at all to be proved that the activities were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 appellant and there is no corroborative evidence also in this regard. In support of this contention, he relied on the decision of Continental Cement Company vs. Union of India [2014 (309) E.L.T. 411 (All.)], Commissioner of Central Excise, Meerut-I vs. R.A. Castings [2011 (269) E.L.T. 337 (All.)], Arya Fibers Pvt.Ltd. vs. Commissioner of Central Excise, Ahmedabad [2014 (311) E.L.T. 529 (Tri.-Ahmd.)]. * There is a proposal for denial of Cenvat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment 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 remains silent for about 3 ½ years or more and it may be reasonably construed that nothing was found by the department for issuing any show cause notice. Thereafter on 22.11.2001 the officers of the department searched the factory again and records were seized and ultimately demand was raised on 30.10.2002 for the period from October 1997 to November 2001, as all the facts were known to the department. Therefore, extended period of limita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andestine 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. In the case of R.A. Castings Pvt. Ltd. v. CCE, Meerut - 2009 (237) E.L.T. 674 (Tri.-Del.), the Tribunal held that demand raised on the basis of electricity consumption as per technical Report given by Dr. Batra was not sufficient to hold that excess goods might have been manufactured by the assessee which could have been clandestinely removed without payment of duty. The important findings made by the Tribunal is reproduced below :- "20.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 premises, and non-accountal thereof in the statutory records; (ii) Utilization of such raw material for clandestine manufacture of finished goods; (iii) Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, discrepancy in the stock of raw materials and final products; (iv) Clandestine removal of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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, documents and transactions actually carried out and reflected in the books of accounts and records duly assessed, audited and accepted by other revenue authorities. 27. Since the incriminating statements of the share brokers etc. have been relied upon in the proceedings, it was incumbent upon the Revenue to produce them as well as the investigating officer for cross-examination by the appellants, as was repeatedly requested by them. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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, the batch in reactors the digested mass are placed into the separator and stored there for separation for a part period of time by adopting the process of layer separation, which is must in relation to the mixtures of two or more liquid material of different specific gravity and drained out by bottom discharge basis through which Spent Acid recovered first followed by mixed Spent Acid with LABSA. The mixed quantity required further operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 only on the basis of these print outs, it is alleged that there is a clandestine manufacture and removal of goods. But the said computer print outs are not admissible evidence without following the provisions of Section 36B of the Central Excise Act, 1944, therefore, the said computer print outs cannot be relied upon. The Tribunal in the case of Super Smelters Ltd. vs. Commissioner of Customs, Central Excise & Service Tax, Durgapur (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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. It has been clearly laid down in Para 15 of this judgment that all the safeguards, as prescribed in Section 65B(2) & (4), of the Act, is required to be met so as to ensure the source and authenticity, pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tempering, alteration, transposition, excision etc. without such safeguards, the whole trial based on proof of electronic records can l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 (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) and thereafterby the Supreme Court reported at [2011 (269) E.L.T. A-108] (iii) M/s. Triveni Engineering & Industries Ltd. v. C.C.Ex. 2016 (334) E.L.T. 595 (All). 19. Relying on these judgments, we hold that the charges of clandestine removal of the goods cannot be upheld merely on assumptions and presumptions, but has to be proved with positive evidence such as purchase of excess raw materials, consumption of excess electricity, employme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lties 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 it is the contention of the appellant that to manufacture such a huge quantity of LABSA, it requires a huge quantity of LAB and Acid Slurry, but no corroborative evidence is brought on record by the Revenue that the appellant has purchased so much of raw material to manufacture the said goods and the said allegation remains without any corroborative evidence. We find that in the case of Gupta Synthetic Ltd. vs. Commissioner of C.Ex., Ahmeda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 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 ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries 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 appearing in A-21 were in conformity with the details recorded in the Register titled as A-19. It is the contention of GSL that they had established during the adjudication proceedings that A-21 and A-19 did not correlate to another and thus, the details shown in A-19 being corroboration to the case made out by the Revenue on the basis of A-21 was totally illegal and incorrect. Even the document titled as A-20 did not support the case of the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thor. 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 the probative value of such evidence has to be established, especially when such a finding would lead to penal consequences. In our view, therefore, the present demand of Rs. 32,07,422/-, which has been confirmed against Nova by the impugned order, is not based on evidence which, as this Tribunal has repeatedly emphasized in cases of clandestine manufacture and clearance, would justify a finding against the appellant (GSL). Unless there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Note Book marked as A-23, it can be concluded that the details of drawing of samples reflected in the Note Book marked as A-23 is an unimpeccable evidence to support the contention that the yarn was produced on DT machine on which random samples were shown to have been drawn. The Adjudicating Authority has rightly concluded that the private records maintained by the assessee are sufficient for arriving at the figures of production and cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 entries needs to be established by independent corroboration, which is lacking in the present case. The long line of decisions referred to and relied upon by the ld. Senior advocate, appearing for Nova have laid down the parameters for a charge of clandestine manufacture and clearance to be established, which have not been satisfied in the present case. The present demand of Rs. 73,00,168/- is, therefore, unjustified and deserves to be set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and activities being carried on in the factory of production; etc. Needless to say, a precise enumeration of all situations in which one could hold with activity that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the appellant has received the goods containing those invoices which has been used in the manufacture of the final product which ultimately suffered the duty. The said fact has not been denied by the Revenue, in that circumstances, the demand of Rs.1,38,040/- is also not sustainable for denial of Cenvat credit and dropped. 23. A demand has been alleged on account of shortage of Acid Slurry of Rs.79,675.20 found on 22.11.2001. the measureme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 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 invoke the extended period of time for issuing demand. Respondent has relied on many case laws including the decision of the Hon'ble Supreme Court in the case of CCE v. Chemphar Drugs & Liniments [1989 (40) E.L.T. 276 (S.C.)]. In the said decision Hon'ble Supreme Court categorically held that conscious or deliberate withholding of information by manufacturer is necessary to invoke larger limitation of five years. In the present case, the Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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