TMI Blog1999 (2) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... On scrutiny of the records recovered, it is alleged that the officers were able to gather that the appellants had received certain quantities of concentrate of M/s. Pepsi Foods Ltd., New Delhi (hereinafter referred to as 'M/s. PFL') and it was used by them in the manufacture of aerated waters, which was said to have been removed without accountal and without payment of duty. It is alleged that the assessee had received 40 units of Pepsi concentrates and 80 units of 7-Up concentrates from M/s. PFL vide invoice No. 246 dated 29.4.91 and No. 276 dated 09.05.91 respectively. It is alleged that the verification was carried out in respect of purchase ledger maintained by the assessee for the year 1991-92 and it revealed that these two concentrates were not accounted in their books of accounts. The complete statement of account of the assessee for the year 1991-92 was obtained from M/s. PFL, wherein it discloses that the assessee had purchased the total quantity of 196 units of Pepsi, 376 units of 7-Up and 172 units of Miranda, giving the break-up of each consignment invoice-wise which is said to reveal that they had accounted for only 156 units of Pepsi, 296 units of 7-Up and 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the consignments was made by the assessee. Therefore, the show-cause notice presumes in the said paragraph In the circumstances, it appears that the said two consignments of concentrate were indeed received in the factory of M/s. SKBPL and considering the date of despatch and period of transit, the concentrates should have been received in the month of May, 1991 (emphasize supplied by us). In para 3.6 the modus operandi have been brought out, which is reproduced as under:- (a) The modus operandi was devised to cover the issues relating to preparation of excise gate passes, double transport of the goods by using the same set of documents, purchase of raw materials without bills, non-accountal of certain consignments of concentrate, the costing of various raw materials used in the manufacture of unaccounted production and the excise benefit on account of such scheme, etc., this scheme has been devised for the quantity of aerated waters to be manufactured out of 38 units of Pepsi and 111 units of 7-Up concentrates, besides 30,000 crates of Soda. (b) It is mentioned in the said letter that: (i) they have to open a godown or to have an understanding with a local dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concentrate we can get crowns, sugar, CO2 without bills. Regarding concentrate: (i) Every month we will get concentrate in two consignments. (ii) We will not enter one consignment in the books. And the same consignment can be used for the purpose (or) we have to show one consignment as Transit breakage. EXCISE BENEFIT ON 1,20,000 C/s + Flavour = 1,20,000 x 29=38=3525600 = 00 EXCISE BENEFIT ON 30,000 C/s Soda = 30,000 x 21=53=645900 = 00 Total = ₹ 41,71,500 = 00 Based on the above allegations, the computation of duty has been made and allegation brought out pertaining to the alleged manufacture and removal without payment of duty. 3. The appellants in their reply dated 10th August, 1996 stated that with effect from 20th March, 1996, the composition of shareholding of the company changed significantly and the management therefore passed into the hands of a new set of persons. They stated that there were no senior persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1991 and they produced proof in the form of report obtained from the labour department pertaining to declaration of lock-out and lifting of lock-out. They also replied that there was nothing incriminated in the statement of Sri Pradeep Jain and had given further clarifications vide letter dated 12.7.96 about the diversion of consignments to M/s. Universal Drinks Pvt. Ltd., Nagpur. They also explained that Sri Sivaji Babu could not be known about the diversion of consignments, as he was not in service during the relevant period and there was nothing he has stated about the manufacture or removal, as during the said period he was not in service at all. They had put to tests of allegation of clandestine removal about the manufacture for several years, which would never have happened without the knowledge of the excise officials and the excise officials could not have been blinded or silenced in the matter. They mentioned that they could not have purchased other raw materials which involved large number of persons and there was no evidence that the said plan could have been worked out. They stated that the plan is also alleged to have been contemplated and alternative of showing unacco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.1991 and 272 dt. 9.5.1991 during the period from 30.04.1991 to 25.05.1991 thereby establishing that diversion of the said two consignments of concentrates under the said invoices is not due to lock-out/anticipated lock-out of the Unit but by design and that in such a scenario the Unit had no necessity to take delivery of the goods viz. the two consignments of the concentrates of Pepsi 7-up covered under Invoices Nos. 252 dt. 30.4.1991 and 272 dt. 9.5.1991 of M/s. Pepsi Foods Ltd. during the material period and this adds strength to the argument of the Revenue that the two consignments of the concentrate covered under Invoices Nos. 246 dt. 29.4.1991 and 276 dt. 9.5.1991 were diverted to M/s. Universal Drinks Ltd., Nagpur is a concocted story fabricated by the Unit. Further, I also find that, as per the material evidence available on record, there was literal lull in the activities of the Unit during the period from April, 1996 to August, 1996 and that the Unit had come out with such a concocted story regarding diversion of the goods only in August, 1996 thereby adding strength to the suspicion that the goods were actually received in the Unit but were not accounted for. It is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 996 to August, 1996 is constraining me to believe that they had no explanation to offer on the spot/immediately for the discrepancies pointed out by the Revenue in as much as they are guilty of the offences charged/levelled by the Revenue and therefore, it took quite sometime for them to offer an explanation which itself is also not that convincing and therefore, I have no hesitation in confirming the allegations of the Revenue that the Unit had received the said two consignments of the concentrate covered under Invoices Nos. 246 dt. 29.4.1991 and 276 dt. 9.5.1991 that the Unit had manufactured the goods without accounting for the said raw materials and cleared the same without payment of duty as envisaged in the incriminating documents recovered during the course of the search of the Unit and as alleged in the Show Cause Notice. Despite non establishing of the authorship of the incriminating documents, I take cognizence of the documents and their availability in the Accounts Manager's file of the Unit and there by the contents/design/modus-operandi contained thereof, in as much as until and unless there is an intention for any such nefarious activities, the Unit had no need to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rates (at the rate of 560 crates per unit) were manufactured and removed without payment of duty. 25. Thus, the quantity of production/clearance was worked out from the quantity of raw-material/concentrate received/utilised and the formula arrived at regarding production yield for one unit of concentrate/essence. Therefore, the allegations were levelled against the assessee based on the essence consumption. In this connection, it is to be stated that the Hon'ble Supreme Court of India in the case of Triveni Rubber and Plastics Vs. CCE, Cochin reported in 1994 (73) ELT 7 (SC), observed that demand arrived at by assessing normal production on the basis of Electricity consumed and confirmed by the Collector and Tribunal, cannot be faulted and that Rule 173E of the Central Excise Rules, 1944 does not require that all the factors mentioned therein viz., installed capacity, raw-material utilisation, labour employed, power consumed and any other relevant factor be present simultaneously. The ratio of the Supreme Court Judgment is aptly applicable to the facts of this case also. Despite the change in the Management of the Unit, the Unit can not escape the liability in respect of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Supreme Court in the case of BHORMAL held that it is not possible to prove the cases of clandestine removal or smuggling with mathematical precision. He submits that circumstances leading to possibility is to be accepted, and here the possibility is only in the nature of the statement of Sri Pradeep Jain stating that the concentrates were delivered to appellants. He submits that even if there is a lapse in the investigation with regard to the transporter not being examined as witness, even then its delivery is admitted and the value of the goods paid, which is sufficient to establish the delivery of the concentrates to the appellants. He submits that major link in the investigation stands proved. The other factors of manufacture is proved by inferences from circumstances. There would be no records for payments to labourers or receipt of value of goods which are always kept in different in private account books. On a particular query from the Bench, as to how the concentrate could have such a long shelf life, the Learned D.R. pointed out that this point has not been addressed to by the learned Commissioner and there is no technical evidence placed by the assessee to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iverted to M/s. Universal Drinks Pvt. Ltd., Nagpur. This was corroborated with challans and consignment notes of M/s. Premier Transport of India, Nagpur showing the transit from Delhi to Nagpur and the consignment of the concentrates covered by two invoices in the G.P.1s. They have also produced the two invoices addressed to them of the two consignments with endorsement of receipt of the concentrates by M/s. Universal Drinking Pvt. Ltd. The Extracts from the journal voucher dated 30.6.91 from their accounts showing debit entry against M/s. Universal Drinking Pvt. Ltd., and credit entry against M/s. PFL and extracts from sundry creditors ledger showing the credit in the name of PFL for ₹ 6,76,000/- and bank books showing the payments made to PFL were also produced. These material evidences have been rejected by the Commissioner on a flimsy finding, unfortunately, holding that this was an after thought. How could this be an afterthought is not explained. When there is material evidence in the from of transportation received by the consignee, M/s. Universal Drink Pvt. Ltd., Nagpur through the transporters namely Premier Transport of India, Nagpur and there are clear indications ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave logic. It should have some basis. Nothing is coming out from this letter . It concludes with the exclamation that to execute such a plan, we have to manage the local central excise department'. This piece of typed information cannot be taken as piece of material evidence. If it is considered as an incriminating document, then full and complete effect is required to be given. If this extracted information is to be given any credence, it follows that to put the scheme into execution the local central excise department are to be involved in the affair. If that be so, the investigation Officers ought to have proceeded and examined about its possibility and as to whether it could have been brought into execution. The contents of this extracted letter , which is heavily relied in the show cause notice is nothing but a fiction of imagination and no credence could be placed on it. It does not have evidentiary value and no credence can be attached to it. 9. We notice that to manufacture the final goods it is not sufficient to have only the input 'concentrates' alone for alleged manufacture of alleged quantity of the final product. The department has furnished tabulated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of flavoured aerated water was linked to the allegation of receipt of concentrates thereof. The production of soda does not require any concentrates. No details are available either in the show cause notice or the Order-in-Original impugned as to what is the material and in what manner these 30,000 cases of plain soda were clandestinely manufactured. 12. This is what precisely held by the Hon'ble Supreme Court in the case of Oudh Sugar Mills Ltd. Vs. Union of India as reported in 1978 ELT (J 172) wherein it is laid down that the show cause notice issued on the basis of average production and no evidence for removal of goods without payment of duty having been placed, then the charges should fail. It has been further held that human element plays a significant part in the process of manufacture and further held that average production cannot be made basis for issue of show cause notice. It has been further held that findings based on such a show cause notice without any tangible evidence and based only on inferences involving unwarranted assumptions are vitiated by an error of law. 13. In the case of Kashmir Vanaspati (P) Ltd. Vs. Collector of Central Excise as reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is supported by other evidence, such as, raw material consumed, goods actually manufactured and packed etc. There is no such evidence on record. There is also no co-relation between the consumption of raw materials, vegetable product manufactured, packed and cleared. In the circumstances, it cannot be held that 956 tins of vegetable products were actually manufactured by the appellants and clandestinely removed from the factory without payment of duty. 14. On a reading of the above ratio, it is clear that mere seizure of private books maintained by labourers containing unauthenticated entries or over-writings are not dependable record to establish the clandestine removal unless same is supported by other evidences such as raw materials consumed, goods actually manufactured and packed etc. It is very significant to point out that this judgment of Kashmir Vanaspati (P) Ltd. has been the basis for large number of judgments in the Tribunals and this ratio has been based on the basis of judgment rendered by Hon'ble Allahabad High Court in the case of Lalit Kumar Vs. Asst. Collector, Meerut as reported in 1983 ELT 2203 (All.). Applying this judgment, we hold that the extracted p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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