TMI Blog2009 (12) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. The Commissioner has not been able to effectively rebut the claim of the assessee that it had not manufactured sacks in the absence of machinery, yet proceeded to confirm the demand finding that the assessee had been registered for manufacture of sacks - the authorities have not investigated the allegations against VPSL and gathered any evidence. The allegations raised in the show cause notice were not backed by any reliable or positive evidence. The notice was issued without finding a proper prima facie case against VPSL - demand set aside - appeal allowed. - E/1101-1102/1998 - Final Order Nos. 828-829/2010 - Dated:- 29-12-2009 - Shri M.V. Ravindran and P. Karthikeyan, JJ. Shri V.J. Sanakaram, Advocate, for the Appellant. Shri M.R. Rajendran, JDR, for the Respondent. ORDER M/s. Vijay Packaging Systems Ltd. (VPSL) is registered with the department for the manufacture of fabrics of HDPE/LDPE and sacks. Appeal No. E/1101 filed by M/s. Vijay Packaging Systems Ltd. seeks to vacate demand of Rs. 1,60,89,225.71 (BED) and Rs. 9,54,557.47 (SED) raised on VPSL towards clandestine clearances of excisable goods manufactured and cleared by it, penalty of Rs. One crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tements of stocks available in the factory on a day are filed with the branch on a monthly basis. On being questioned as to what is the basis for preparing the statements of stocks, he stated that VPSL maintained a stock register showing the stock position of various raw materials, intermediate products and finished products on a day to day basis and in this stock register VPSL enter the quantum of raw material consumed, the finished products manufactured. On being asked to obtain the stock registers maintained by VPSL, he stated that he has already made an attempt on 22-8-1994 during his visit to the factory but he was told by the production manager that stock registers have been seized by the Central Excise department on 1-7-1994 under panchanama. On being shown the copy of panchanama at the factory as well as at the Registered Office of VPSL, he stated that the Officers have seized only one stock register maintained w.e.f. 1-6-1991. On being shown the Form IV maintained by VPSL for accountal of raw materials and the stock statements filed by VPSL with the bank and to explain for the huge discrepancies of stocks in both the Form IV stock statements filed to the bank, he stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of stocks mentioned in the statements. To meet the working capital requirements, they often showed higher stock than what was actually received by them in respect of HDPE/LDPE granules. The figures of fabric also were inflated to satisfy the bank officials. The bank officials never verified the stock physically. By denying the appellant an opportunity to cross-examine his Accounts Officer Shri Ramachandra Reddy it had lost an opportunity to prove the stocks declared had no nexus with actual stocks as detailed in Form-IV and in RG-1 registers and that the stocks detailed in Form IV and RG1 account were the stocks which were actually available in the godown on the days when the entries had been made. In this factual background, the bank statements could not be relied on for appraising the relevant stock. Shri K. Hanumantha Rao, Chief Manager, SBI whose statements had been relied on had stated in regard to method of checks followed that the field officers visited for verification of stocks once in a month and the bank manager had to visit once in a quarter to verify the stocks, that the visits were intended to verify the stock and to see whether the working capital loans were prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E.L.T. 332 (Tri.-Bang.)] (i) Raam Tyres Ltd. v. CCE, Vizag [2005 (188) E.L.T. 408 (Tri.-Bang.)] (j) Shree Renuka Sugars Ltd. v. CCE, Bangalore [2007 (210) E.L.T. 385 (Tri. Bang.)] (k) Ram Gelkem Inds. Pvt. Ltd. v. CCE, Madurai [1997 (89) E.L.T. 178 (Tri.)] (l) DS Screen Pvt. Ltd. v. CCE [1990 (50) E.L.T. 475 (T)] (m) Dalmiya Vinyls (P) Ltd. v. CCE, Hyderabad [2005 (192) E.L.T. 606 (Tri.-Bang.)] 5. Heard both sides. 6. We have perused the records and considered the submissions made by both sides. The Commissioner found that the assessee had clandestinely cleared excisable goods manufactured by it on the basis of statements furnished by it to a local branch of SBI. The appellants had availed loan of Rs. 56 lakhs from the said bank and was required to maintain stock of raw materials, intermediate goods and finished goods to secure the loan. They furnished periodical statements of such stocks. The officers of the bank visited the factory to verify the particulars furnished in the stock statements. As regards the correctness of the figures furnished, the adjudicating authority relied on the statements given by the Chief Manager of SBI Shri K. Hanumantha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PE fabrics found to have been manufactured in excess of RG1 stock, we find that the assessee has been able to show that there was no short accountal of fabrics in their RG1 compared to the total quantity of fabrics in terms of the statements furnished to the bank. At the time of cross-examination, Shri Hanumantha Rao deposed that he had not seen any sacks in the factory premises. He did not state that he had arranged physical verification of the stock of granules and fabrics declared in the statement. During the cross-examination of Shri Hanumantha Rao, when questions were asked about excess granules of 88.76 MTs as indicated in the annexure to the show cause notice, he had wanted to see the monthly particulars. On perusing the statements furnished to bank, he submitted that during the material time he was not in the branch of the bank. In the circumstances, the assessee s plea that the statements of Shri Hanumantha Rao could not have been relied on to find clandestine clearances by the assessee carries considerable force. 7.1 We find that in a larger number of decisions passed by this Tribunal, it was held that clandestine clearance cannot be found without cogent and tangible ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials; the expenditure of actual amount on transportation of goods to the customers place, as per the requisition of the customer. Normally these are all the evidence required for confirmation of the charge of clandestine removal by the Department. We find that the instant case does not satisfy the above requirements in respect of even a single aspect. 7.3 As regards reliance on records maintained for arranging bank finances, in the case of T.M. Industries (supra), this Tribunal observed as follows in para 29 of the said decision :- 29. The records maintained for arranging finances from the Bank may or may not tally with the records maintained for excise purposes. There are specific provisions in the Central Excise Rules as at what stage and in what manner the excisable goods should be entered in the excise records. Banks are concerned with the security of the funds loaned by them to the manufacturer, and for that purpose they insist that the goods excisable or non-excisable, raw-materials, intermediate. or finished products - are pledged with them. They are concerned with the value of the goods pledged and their classification/nature/quality etc. are not much material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show that the appellants had capacity to manufacture the final 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 was 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 and final goods manufactured and supplied as had been held in a number of cases. The best evidence that could be relied upon by the Revenue was the consumption of power which was required for the manufacture of goods and which exercise had not been done. We find that the impugned demand fails this test. 10. We find that the allegations raised in the show cause notice were not backed by any reliable or positive evidence. The notice was issued without finding a proper prima facie case against VPSL. Notice mentioned excess stock of raw material to the tune of Rs. 6.2 lakhs over the Form IV balance with VPSL and finished goods i.e. branded laminated HDPE sacks of value Rs. 7.4 lakhs with the assessee s dummy sister concern M/s. Vijetha Sac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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