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TMI Blog2002 (6) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... isters Part I and II and periodically filing with the Excise Department RT 12 returns along with all the records and documents relating to the procurement of raw materials and production of final products, revealing all those aspects to the Department. 2.A Show Cause Notice dt. 11-6-98 leading to the present proceedings was issued to the appellant, their Managing Director Sri L.S. Mittal and two other persons, proposing demand of Excise duty of Rs. 91,15,488.00 under Proviso to Section 11A of the Central Excise Act, 1944 ("the Act" for short) and imposition of penalty under Rule 173Q(1) of the Central Excise Rules, 1944 ("the Rules" for short) against the appellant, besides imposition of penalty under Rule 209A of the Rules against Sri L.S. Mittal and the two other persons, Corrigendum dated ... 10-98 issued sought to make an arithmetical correction in respect of the show cause notice and further proposed imposition of penalty on the appellant under Section 11AC of the Act. The allegations as it appears from the show cause notice (and "Statement of Facts" appended thereto), are :- (i)(a) The 3rd Noticee identifying himself as the proprietor of M/s. Sri Bajarangabali Steel C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual supply of goods, for which he used to receive Rs. 20,000/- to Rs. 25,000/- from the 2nd Noticee through the 3rd Noticee. He will deposit the cheques issued for the invoices in M/s. C.E.'s Bank Account. After two or three days, entire amount will be withdrawn and returned to the 2nd Noticee through the 3rd Noticee. He indulged in this activity without being aware of the consequences for paltry remuneration. (b) Following are the points regarding M/s. C.E. from the letter dtd. 10-11-97 by the Assistant Commissioner of Commercial Taxes addressed to Joint Commissioner of Commercial Taxes and as per the report of the Assistant Commissioner dtd. 27-12-97. The 4th Noticee had obtained Sales Tax Registration for M/s. C.E. in the name of one Sri Srinivas (an employee in M/s. Trilok Chand Agency of which the 4th Noticee is the proprietor). The 4th Noticee had witnessed the sales tax registration application filed by Sri Srinivas on 4-12-92 in the name of M/s. C.E. for trading in Iron and Steel Products in the premises taken on lease from Sri Pawan Kumar Gupta. M/s. C.E. have filed Sales Tax Returns for 1993-94 (Turnover of Rs. 70,86,532.44) 1994-95 (Turnover of Rs. 4,05,02,22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that M/s. B.T.C., M/s. C.E., M/s. M.T.C. and B.T.C. have existed for the sole purpose of issuing invoices to the appellant to clear the excisable goods clandestinely without payment of duty, in the guise of trading. M/s. B.S.C. and M/s. C.E. have admitted the fact of mere issuance of invoices to the appellant against some consideration, without any supply of goods. Investigations have conclusively established that M/s. M.I.S., M/s. M.T.C. and M/s. B.T.C. did not factually exist and transact the business for which they are registered with the authorities. (vii)(a) The entries in the Finished Goods Register show that the appellant have procured M.S. Rounds, M.S. Defective Rounds, M.S. Squares from M/s. Pankaj Enterprises (for short M/s. P.E.) during 1993-94. None of the invoices of M/s. P.E. have been produced. (b) The abstract made in the finished goods stock register of 1993-94 shows receipt of M.S. Rounds shown to have been purchased from M/s. P.E, issue of 105.275 Mts and closing balance of Rs. 172.605 Mts in August 1993, and abstract for September 1993 shows receipt of 18.800 Mts issue of 1,83,835 Mts and closing balance of 8.580 Mts of M.S. Rounds. There were no pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave purportedly effected purchases of 2,77,880 MTs. It is not as if the entire activity of trading was based on fictitious bills, but it was found that the appellant had indeed procured goods from the open market, which was found to be genuine. It is only in respect of the above cited firms and others listed the transactions were found to be fictitious. The appellant have failed to establish the genuineness of at least a few of his suppliers (if not all) which the Department has charged to exist only on paper, while the department has sufficiently established the non-existence of these purported suppliers by way of mahazar drawn at the sport, sales tax records and the like. (iv) The department has not discharged the burden of proof, is not accepted as the Hon'ble Supreme Court in D. Bhoormall's case (equally applicable to Central Excise cases) has held that the prosecution or the department is not required to prove its case with mathematical precision to a demonstrable degree. (v) It is wrong to claim that the statements of representatives of suppliers are unreliable without any basis or any evidence. There appears no ground or any reason for the 3rd and 4th Notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 4th Noticees. 4.We have heard both sides and considered the material and find: - (a) Even according to the Show Cause Notice, M/s. B.S.C. and M/s. C.E have filed Sales Tax returns during the relevant period and as regards M/s. B.S.C. Assessment order dtd. 8-7-96 has been passed for 1993-94 seeking to levy Sales Tax (on a turn over of Rs. 1,38,13,904.85) after denying the exemption claimed on the ground of the sales being second sales. This affirmation by the Sales Tax Department of the sales by M/s. B.S.C. cannot be ignored accepting the unreliable statements of the 3rd Noticee, who could be motivated to give the statements to the Excise Department disowning the sales in an attempt to avail it for taking the stand with the Sales Tax Department for evading Sales tax liabilities. Same is the position regarding M/s. C.E., who, even according to the show cause, filed Sales Tax return declaring a total turnover of Rs. 5,49,54,226.19 for 1993-94, 1994-95 and 1995-96, and M/s. C.E. are also evidently resorting to the same practice as M/s. B.S.C. namely, disowning the sales in an attempt to evade Sales Tax. As regards M/s. B.T.C. the only averment in the show cause notice is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the appellant to clear the goods clandestinely without payment of duty in the guise of trading at the same time alleging subsequently that M/s. M.T.C. and M/s. M.I.S. did not factually exist. Therefore no reliance could be placed on the recorded statements of the 3rd and 4th Noticees who are in a position of co-accused and on the statements and letters of the officials of the Sales Tax and Central Excise Departments, unless the appellant are permitted to cross-examine them. This was not done merely because the said officials have reported that they were not able to trace M/s. M.I.S., M/s. M.T.C. and M/s. B.S.T. no conclusion can be drawn that those concerns have never existed and the procurements from them by the appellant as per their records were clandestinely manufactured by the appellant, when assessments of the sales made by them to the appellant company have been assessed by the order of the proper officer of Sales Tax to be a fact. (b) For 1993-94, the show cause notice has quantified at Rs. 94,40,759/- the sale proceeds of the appellant's trade transactions (alleging them to be fraudulent on misconceived premises). At the same time, in another place the show c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Register Part I and Part II clearly revealing the details of purchase of raw materials and of goods manufactured by the appellant with the result that the Department was very well aware of all those figures, but never disputed them. Taxable event under Section 3 of the Act is manufacture and there cannot be levy of excise duty on the appellant unless it is established that the goods sold by the appellant under the trading account from their stock yard/ godown were in fact manufactured by them. In the present case there is not even an iota of evidence or investigation made by the Department in that regard. No material is bought out to allege that the raw materials necessary for the manufacture of such goods were clandestinely procured by the appellant or the raw materials shown to be consumed are in excess as compared to the final products shown to have to be manufactured in the statutory records. The show cause notice does not dispute the production figures and consumption of raw materials or the input-output ratios declared in the statutory records by the appellant during the period in question nor is there any allegation of the power consumed in the factory and the quantity of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or the department is not required to prove its case with mathematical precision to a demonstrable degree. Absolute proof being unattainable, the law accepts for it, probability as a working substitute. The law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent person, may on its basis, believe in the existence of the facts at issue" - are totally inapplicable to the facts of the present case and cannot at all be relied upon by the Department. The well settled principles laid down in a catena of case laws namely, where excise duty is sought to be levied on a person on the ground of clandestine manufacture of certain goods by the person, the burden is squarely on the Department to prove beyond doubt the said fact of manufacture of those goods by that person cannot be ignored. Without evidence of the production alleged as unaccounted, clearance would be only in the realm of presumption. Notices based on presumption cannot be supported by relying on Bhoormulls case. The appellants herein have been carrying on their manufacturing activity in their factory in due observance of Central Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appear then the adjudicating authority is entitled to proceed with the adjudication, however, in such adjudication he shall not rely upon the statement of such witnesses who failed to appear for cross examination. This principle of law is clearly laid down by the Tribunal in the case of Arsh Castings Pvt. Ltd. [1996 (81) E.L.T. 276 (Tri.)]. Relying on the rulings of the Hon'ble Mysore Court in A.I.R. 1966 Mysore 154, and of the Hon'ble Punjab and Haryana High Court in 1972 (30) S.T.C. 211 and of the Hon'ble CEGAT, Madras - 1990 (48) E.L.T. 289. (f) The CEGAT in the case of Swarna Polymers Pvt. Ltd. [2000 (120) E.L.T. 148 (Tri.), on the question of clandestine removal has held as follows : - "It is for the Revenue to show that the appellant had the capacity to manufacture the finished goods and after establishing this, the investigating authority should have brought out the manner of purchase of inputs, and manufacture and clandestine removal of the goods surreptitiously without payment of duty. The link is required to be established by proper investigation and seizure of records from the appellants including the source from where the inputs could have been purchased an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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