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TMI Blog2003 (12) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is neither unreasonable nor illogical. The practice itself has assumed the force of law by its usage in the trade for a long time and as such we do not find any justification on the part of the department not to have allowed wastage of 22%. Besides, we find that when the department has based his case on the statement of certain parties and when the statements were retracted in writing by them, it was imperative on the department to have brought corroborative evidence to substantiate the allegation of clandestine removal. The department having not done so, has lost their right to raise the demand merely on presumption/assumption. In a case of its kind the department was duty bound to have brought direct, tangible, corroborative and strict evidence to prove the clandestine removal beyond reasonable doubt. We do agree with the contention of the ld. SDR that mathematical accuracy cannot be expected in such a matter. However, it does not mean that the Department is absolved of its responsibility to bring on record the tangible, strict, positive, direct and corroborative evidence to prove clandestine removal beyond reasonable doubt as there is no evidence of actual excess production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a definite proportion to manufacture the Star Gutkha. He also stated that the raw material requirement to manufacture 2500 pouches (i.e. one carton bag in terms of which Star Gutkha is cleared in the wholesale trade in terms of carton bag containing 50 packets and each packet containing 50 pouches of 2.25 gm to 2.50 gm per pouch) varies from 5.625 Kgs to 6.250 Kgs. Raw material wise requirement for one carton as stated by him is as under :- (i) Supari : 5.100 Kgs to 5.200 Kgs (ii) Mg. Carbonate : 0.130 Kgs to 0.140 Kgs (iii) Tobacco : 0.430 Kgs to 0.450 Kgs. (iv) Menthol : 0.030 Kgs to 0.070 Kgs (v) Kimam : 0.050 Kgs to 0.070 Kgs (vi) Kattha : 0.420 Kgs to 0.440 Kgs (vii) Flavors : 0.090 Kgs to 0.105 Kgs (viii) Glyserene : 0.050 Kgs to 0.060 Kgs (ix) Spices : 0.001 Kgs to 0.0012 Kgs (x) Cardamon : 0.060 Kgs to 0.070 Kgs (xi) Lime : 0.070 Kgs to 0.090 Kgs The said CMD further stated that the proportion of the raw material consumption given above is inclusive of following losses occurred during manufacturing process, which is also subject to variations due to climatic conditions :- (i) Loss of weight during cutting and drawing process. (ii) Loss while grinding Kattha (iii) Fillin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 546 10. -do- 200 77.75 2572 11. Lamino Paper Prod. 200 86.30 2317 12. -do- 200 70.75 2826 13. -do- 200 103.20 1937 14. -do- 200 124.15 1610 that on the basis of the above exercise, it was further alleged that the appellant No. 1 have manufactured far more pouches than what were actually disclosed in the excise records; that the said data shows only a approximate pouches that could be generated per Kg. of PLR consumed during that year are worked out on the basis of PLR received by the appellants from major suppliers and No. of pouches that could be generated as stated by those suppliers; that the above exercise was used as on the basis of above yearly average pouches generated per kg. of PLR consumed which are compared to total pouches actually generated during the respective year, as contained in Annexure B-V to the show cause notice; that it is allegedly indicated that substantial quantity of pouches has not accounted and cleared without the payment of duty; that the appellant had manufactured and suppressed production of approximately 3443 carton bags during 1993-94, 21073 bags during 1994-95, 16853 bags during 1995-96 and 9396 bags during 1996-97 (upto 15-11-1996); that the CMD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part from perfume on which modvat credit is available and on which at the time of clearance as scrap and waste excise duty is payable, hence only these were accounted for and in respect of other raw materials like Supari, Kattha etc., no modvat is available; that manufacture of Gutkha is a continuous process industry. It is well established principle of accounting in such industries (both in cost accounting financial accounting) to treat normal process loss as the normal cost of the process and not to account for such normal loss separately. Only the abnormal loss or gain is counted, valued and brought to the accounts; that the raw material particularly Kattha, Supari, Tobacco, the accounting is not done in the manner of Industrial inputs. The receipt, issues, consumption, wastage, opening and closing stocks are all accounted for on a gross basis; that the allegations are based on assumptions and presumptions; that the losses of physical stock of raw material at the beginning of the financial year and closing stock of the same at the financial year, after adjusting raw material received during the year; that this gives the net raw material consumed during the year, from which the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se laws :- (a) Leather Chemical Industries - 1984 (15) E.L.T. 451 (b) Indian Metals Ferro Alloys - 1994 (69) E.L.T. 390 (T). (c) Kashmir Vanaspati - 1989 (39) E.L.T. 655 (T) (d) Prabhavati Sahakari Soot Girni - 1990 (48) E.L.T. 522 (T) (e) Ashwin Vanaspati - 1992 (59) E.L.T. 175 (T) (f) Roy Biri Factory - 1992 (59) E.L.T. 584 (g) Hindustan Fertiliser Corpn. - 1993 (63) E.L.T. 83 5. In the decision reported in 1997 (62) ITD 179, the ITAT has held that no addition of income can be made merely on the basis of alleged excess consumption of aluminium foil i.e. printed laminated rolls unless concrete proof of suppressed production and sale is available. The appellant No. 1 has declared such scrap of PLR in classification declaration, it has maintained RG-1 record of such scrap manufactured and also has paid duty on the scrap so generated; the total scrap of PLR manufactured on which duty has been paid during the period relevant from 1993-94 upto 15-11-96 is 6247.800 kgs and the duty paid thereon is ₹ 2387.70. The appellant has obtained the permission in the year 1994 for destroying PLR scrap. Therefore, the statistics of number of pouches per kg worked out in the show cause notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 15-11-96). Thus between the period from 1993-94 to 1996-97 they have consumed 22,64,590.425 kgs of raw material in the manufacture of Star Gutkha. In respect of PLR consumed between the period from 1993-94 to 1996-97 it has been already shown in Annexure B-V that out of PLR consumed 96,81,90,709 pouches were generated as packing material i.e. 3,87,274 carton bags were generated. Now Gutkha required to fill in these carton bags @ 5 kgs. Per carton bag (i.e. carton bag of 2500 pouches, each pouch of 2 gms. Weight) is worked out to 5x3,87,274 = 19,36,370 kgs. This weight is compared with the total raw material consumed it appears that 22,64,590.425 - 19,36,370 = 3,28,220.425 kgs. of raw material is waste which accounts for 14.49% for which no recorded evidence is available and out of the principal raw material by weight viz. Supari, PLR etc. 19% to 20% weight is lost due to various natural and normal reasons. 8. The learned consultant Shri. Z.B. Nagarkar appearing on behalf of the appellants contended that there is no evidence supporting the case of the department that an excess quantity of Star Gutkha were removed clandestinely without payment of Central Excise duty. He contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Star Gutkha is merely based on assumed arithmetical calculation of the department and the department neither has any direct nor indirect evidence in this regard. With regard to the confessional statements given by Shri Raju Bardiya dated 12-7-1997 and 16-11-1996, before the Excise Officer he submitted that in letter dated 18-11-1996 addressed to the Superintendent with a copy to the Asst. Commissioner, Central Excise, Pune, he has categorically stated that he was interrogated upto 3.30 AM on 17-11-97. His two sons aged 7 years and two years who had high temperature and he wanted with the children. In order to avoid tension he ultimately stated that some of the entries related to the Star Gutkha which were sent to him without bill and without payment of excise duty. He stated that all these as per the directions of the investigation officer. He denied that these statement and stated that Star Gutkha pouches were received accounted properly. As regards R.K. Transport, the main transporter, who admitted in his statement that they delivered 4/5 gunny bags per consignment free of cost said to have been containing advertisement material received from the Appellant No. 1 which were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been relied on by the department had been retracted immediately by the persons who made such statements. The department neither brought any primary evidence nor any other proof in the form of sale proceeds; cash etc. to support their contention of clandestine removal. He contended that the impugned order is against the evidence if any available on record and as such the same is not sustainable. To support his contention he relied on the following case laws:- (1) Carona Cosmetics Chemicals P. Ltd. - 1993 (48) E.L.T. 223 (sic) (2) Prabhavati Sahakari Soot Girni Ltd. - 1990 (48) E.L.T. 522 (T) (3) Oundh Sugar Mills Ltd. - 1978 (2) E.L.T. (J-172) (4) M/s Ebnezer Rubber Ltd. - 1986 (26) E.L.T. 997 (5) Ambica Metal Works - 1990 (29) ECR 549 (6) Ganga Rubber Ind. - 1989 (39) E.L.T. 650. 9. He also submitted that no demand can be raised on assumed sale value of the PLR as the same is totally not supported by any corroborative evidence or any tangible evidence at all. In support of his contention he relied on the following decisions :- (1) M/s. Jagan Nath Dalip Singh - 1990 (47) E.L.T. 369 (T) - No clandestine removal unless borne by any tangible evidence. (2) CCE. V. Pawar Trading Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... packed. (10) Bi-Metal Bearing Ltd. - 1990 (45) E.L.T. 285 (T) - In the absence of any evidence of sale of the goods in the open market the charge of clandestine removal cannot be sustained. (11) Lilli Foam Indi. P. Ltd - 1990 (46) E.L.T. 462 (T) (12) Samatha Metal Ind. - 1991 (53) E.L.T. 341 (T) (13) Ashwin Vanaspathi Industries Pvt. Ltd. - 1992 (59) E.L.T. 175 (T) (14) R.G. Electronics - 1992 (60) E.L.T. 121 (T) - No fact or evidence has been brought on record to show that any goods in excess of the production had in fact been removed. No analysis has been done of the raw materials used by the respondents in the past. No evidence has been produced for the supply of blank cassettes and other raw materials of the record. For this background charge of clandestine removal is not established. (15) T.M. Industries - 1993 (68) E.L.T. 807 (T) - It is held that the charge of evasion of Central Excise duty has to be based on the (tangible evidence) as observed by the Hon'ble Supreme Court in the case of Oudh Sugar Mills Ltd. V. Union of India, 1978 (2) E.L.T. (J-172). The Hon'ble Apex Court has held that the findings based only on inferences inviting unwarranted assumptions were vit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the present case, it is crystal clear that the burden of establishing clandestine removal wholly and solely lies on the department which the department has miserably failed to prove. It was for the department to prove that so much quantity was manufactured by the appellants, tallying with the figures given to the Deptt., with the corroborative evidence. In the absence of proof for having manufactured so much qty. reliance only on the figures furnished to department at the best lead to the inference, but no substantial proof is available on records. In the facts and circumstances of the case, the department is not justified in arriving at the conclusion that the appellants have clandestinely removed the goods in question based upon assumptions/presumptions and conjectures. The demand for differential duty is not justified and the impugned order is liable to be set aside. 12. The ld. DR appearing on behalf of the Revenue at the outset fairly conceded that there is no direct, positive or corroborative evidence available in the case. The whole case of the department is based on circumstantial evidence, statements and conduct of the appellant. The ld. DR contended that the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord any documentary or oral evidence to substantiate their allegation. The whole case of the Department is based on presumption. The presumption cannot take the place of proof which is a well settled legal position. The statutory records maintained by the appellant cannot be belied by presumption or oral evidence. He also contended that since there is no suppression, the demand is time-barred. 14. After hearing rival submission, perusal of the records and the case laws relied on by both the sides, we find that the demand of the department is based only on theoretical calculation of PLR which is not the main input of the appellants. The main product of appellant is Star Gutkha and as mentioned in the preceding paragraphs for preparation of Gutkha the main raw materials such as Supari, Katha, Tobacco, Menthol, Cardamom, lime etc. are needed. As contended by the ld. Consultant of the appellant, the wastage was claimed around 22% as against 14.69% allowed by the department. Though there is no statutory permissible limit fixed under the law, however, the ld. Consultant has contended that as per the trade practice the wastage of 22% is easily allowed in the manufacture of Pan Masala whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be based on solid and acceptable evidence (v) D.S. Screen Pvt. Ltd. - 1990 (50) E.L.T. 475 (Tri.) In the absence of any corroborative of circumstantial evidence fraudulent removal not inferable. (vi) V.K. Thampy - 1994 (69) E.L.T. 300 Investigation not done to ascertain whether the parameters like electricity consumed - Raw materials used. (vii) K. Harinath Gupta - 1994 (71) E.L.T. 980 Clandestine removal burden on dept - Sources of raw materials not contacted buyers not contacted - Receipt of sale proceeds not established. (viii) Icy Cold - 1994 (69) E.L.T. 337 Clandestine removal a positive act not provable on mere assumptions and presumptions. (ix) Madhu Food Products - 1995 (76) E.L.T. 197 No evidence of actual removal from factory without payment of duty. (x) LML Ltd. - 1997 (94) E.L.T. 519 Clandestine removal cannot be proved by office memo - Not a direct evidence nits evidentiary value extremely limited. (xi) Swarna Polymers (P) Ltd. - 2000 (120) E.L.T. 148 (T) 2000 (92) ECR 325 Inflated figures submitted to bank are not sufficient grounds to allege clandestine production removal should be co-related - Raw materials power consumed. (xii) 2000 (40) RLT 1077 (T) - Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X
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