TMI Blog2022 (1) TMI 1302X X X X Extracts X X X X X X X X Extracts X X X X ..... rter who, during cross-examination has confirmed that these are merely tentative entries and do not reflect actual transportation of the goods. Reliance upon the electricity consumption - HELD THAT:- The next submission of the Revenue is that electricity consumption by the assessee on Sundays was the same as on the other days which implies that there was, indeed, clandestine manufacture because no production was recorded on their registers on Sundays. Learned Counsel for the appellant is correct in pointing out the readings of AVVNL, Ajmer pertain to May, June and July 2012 whereas the booking registers on the basis of which this part of the demand is raised pertains to a period of almost two years earlier. Therefore, the report from the AVVNL does not substantiate the allegation of clandestine removal based on the booking registers of the transporter. No prudent man can on the basis of these pieces of evidence, assume that the assessee has manufactured goods valued at about Rs. 50 crores and cleared them clandestinely. Appeal of the revenue rejected. - Excise Appeal No. 50072 of 2016, Excise Appeal No.53549-53551 of 2015, Excise Appeal No. 53572-53574 of 2015, Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - a partnership firm of Shri Manohal Lal Ghai and Shri Amit Ghai-manufactures TMT bars of brand name BRN and also angles and channels. It also trades in iron and steel items. Officers of Directorate General of Central Excise Intelligence [ DGCEI] searched the premises of the assessee, some dealers and transporters and seized a large number of documents. They also recorded statements of various persons. After completing the investigation, the Additional Director General, DGCEI issued the SCN dated 2.1.2013 to the assessee and others alleging that the assessee had clandestinely manufactured and removed finished goods totally valued at Rs. 53,21,78,463/- thereby evading duty of Rs. 6,09,34,430/-. The SCN proposed to recover the duty allegedly evaded under Section 11A along with interest under Section 11AA and 11AB and to impose penalties. This allegation of short payment was on various counts on the basis of various sets of documents details of which were as follows: S. No. Period Quantity Value (in Rs) Duty amount of Rs) Remarks A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Service Tax) inasmuch as all these provide for recovery of duty/tax. However, this power is given to 'the proper officer' under Section 28 of the Customs Act while it is given to 'the central excise officer' under section 11A of the Central Excise Act and section 73 of the Finance Act, 1994. Proper officer under the Customs Act is defined under section 2(34) as the one who has been assigned the functions by the Board or by the Commissioner. In respect of Customs Act, the power under Section 28 has been held by the Supreme Court to be one of re-assessment of duty already assessed in Commissioner vs. Sayed Ali 2011 (265) ELT 17 (SC). The relevant extract as follows: 16. In the present cases, the import manifest and the bill of entry having been filed before the Collectorate of Customs (Imports) Mumbai, the same having been assessed and clearance for home consumption having been allowed by the proper officer on importers executing bond, undertaking the obligation of export, in our opinion, the Collector of Customs (Preventive), not being a proper officer within the meaning of Section 2(34) of the Act, was not competent to issue show cause notice for reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt' or 'any agreement' for or in relation to such export and in the context the expression 'the agreement' would refer to that agreement which is implicit in the sale occasioning the export. 16. The scope of the article 'the' was again examined by the Supreme Court in Shri Ishar Alloy Steels Ltd. vs. Jayaswals Neco Ltd. (2001) 3 SCC 609 and it was held as follows: 9. The is the word used before nouns, with a specifying or particularising effect as opposed to the indefinite or generalizing force of 'a' or 'an'. It determines what particular thing is meant; that is, what a particular thing we are to assume to be meant. 'The' is always mentioned to denote particular thing or a person. 17. Thus, the settled legal position is that when the legislature uses the definite article 'the' it refers to a particular thing or particular person. This brings certitude as to who can issue a Show Cause Notice to demand duty or tax not levied short levied, not paid, short paid, etc. in all these three Acts viz., Customs Act, Central Excise Act, and the Finance Act, 1994. We also find legislature has also used definite article in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been held that if the department is able to prima facie establish a case of clandestine removal, violation of excise procedure, the burden shifts on the assessee to prove that he is innocent. The SLP against this judgment has been dismissed by the Supreme Court. iii) Power Control Corporation vs. CCE ST Jaipur-I 2019 (369) ELT 471 (Raj) In which it was held that the statement before the tax authorities is admissible evidence and cannot be discarded summarily on ground of subsequent retraction. iv) N.R. Sponge Pvt. Ltd. vs. Commissioner of Central Excise, Raipur 2020 (372) ELT 321 (Chhattisgarh High Court) in which a vague averment by the assessee that the statement was made by the appellant on threat and coercion from the Revenue was rejected. v) Nipon Zip Industry Pvt. Ltd. 2009 (236) ELT 554 (Tri-Mumbai) in which the Tribunal held that demand based on confessional statements is justified. vi) Peers Technologies Pvt. Ltd. 2019 (27) GSTL 701 (Tri-Hyd) in which the contention that the statement was made under threat, coercion and duress was not accepted because they never complained about such the alleged threats, etc. at the earliest opportunity. vii) Collector ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e onus shifts on to the person who was found to be in the possession of contraband and similar provisions do not exist in the Central Excise Act. (iii) Ambika Organics vs. Commr. Of C Excise Cus Surat-I 2016 (334) ELT (Tri-Ahm) in which a learned Member of this Tribunal doubted the accuracy of the statements considering the cross-examination. Computer printouts were not accepted as evidence in the absence of certification as required under Section 36B(4) of the Central Excise Act and this decision was upheld by the High Court of Gujarat 2016 (334) ELT A 67 (Guj). (iv) R A Castings Pvt. Ltd. vs. Commissioner of C EX Meerut 2009 (237) ELT 674 (Tri-Del) in which this Tribunal rejected the allegation of clandestine removal in the absence of evidence based on the Balance sheets and electricity consumption. This decision was upheld by the High Court of Allahabad 2011 (269) ELT 337 (All) and the Supreme Court. 2011 (269) ELT A 108 (SC) (v) Continental Cement Company vs. UOI 2014 (309) ELT 411 (All) in which High Court held that clinching evidence is required for alleging clandestine removal and found several aspects which were not investigated by the Department. (vi) Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be clandestine. It can only be deduced from the records and other evidence collected during the investigation including the statements and cross examination. The totality of the evidence must be considered in each case to decide. 23. We now proceed to examine in detail the evidence produced to support the allegation of clandestine removal in this appeal. A. Demand of Rs. 5,70,44,458/- 24. This part of the demand was raised for the period 1.12.2007 to 14.09.2010 demanding duty on 16,043.50 MT of final products alleged to have been clandestinely manufactured and cleared which were said to be worth Rs. 49,39,94,027.50/- on which a duty of Rs. 5,70,44,458/- has been demanded. This part of the demand is made on the basis of booking registers 2/1 to 2/6 recovered from the transporter, New Vikas Transport Co., Ajmer and the statements of its proprietor Shri Moin Khan. Based on the entries in these registers, it was concluded that goods were manufactured clandestinely and cleared without issuing any invoices and without paying duty and that the clandestine removals of goods were reflected in the Booking Registers. 25. Learned Commissioner in the impugned order dropped this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the GRs. (e) The booking registers do not indicate against which booking and which truck number available on the left side of the page of the register were supplied to M/s. Bansiwala. (f) The show cause notice and the table annexed thereto do not indicate the GR numbers of the transporters and the truck numbers but only alleged goods were clandestinely cleared and actually transported. (g) The investigation has also not brought on record any other corroborative evidences which can authenticate the original statement of Shri Moin Khan. This could have easily been done by recording statements of the truck drivers/owners who were the persons who are said to have actually transported the allegedly clandestinely removed goods. The names of the drivers as well as their mobile numbers were available in the booking registers. There was no reason why those drivers could not have been asked whether they actually transported the goods. (h) As the truck drivers also maintain date-wise log book and detail and duplicate copy of consignment book duly receipted by the company, the fact of transport could have been verified. (i) The GRs resumed from the transporters vide Panchna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory by the assessee. (ii) Shri Moin Khan, proprietor of the transport company has admitted in his statements before the officers during investigation that in respect of all entries made in the booking registers, trucks were provided to the assessee. (iii) Shri Moin Khan in his statement 20.07.2012 also admitted that he provided trucks for 'Kachche ka Sariya' (clandestinely cleared bars) to the assessee. Therefore, the trucks so provided by the transporter company for which no corresponding invoices has been raised have been used for removal of the finished goods without raising invoices and without paying duty. (iv) The goods seized at M/s. Rajasthan Enterprises, Chittorgarh also prove that the assessee has indulged in clandestine removal of its finished goods. (v) Loose attendance sheets recovered from the factory premises were not reflected in their official records such as wages register. These loose sheets show normal work and attendance on Sundays, but no production was shown in their RG-1 registers on Sundays so that the production on Sundays can be used for clandestine removal. (vi) Shri Hussain Khan, Labour Contractor, has, in his statement dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e were two types of registers one for booking orders and another for actually supply of trucks for transport of the goods. All the bookings made do not necessarily result in transport of goods. The company may book a truck of the transporter company and may decide not to dispatch the goods subsequently. The only reliable document is another register called the GR register. Along with the GR register there are GRs which are issued by the transporter acknowledging receipt of the goods. The GR registers and the GRs which have been issued match with one another. In fact, during the course of investigation the GR registers of Shri Moin Khan were resumed by the Department but they were not relied upon but were returned to him. (iv) The entire case has been booked on the basis of booking register which contains entries which may or may not result in booking of dispatch of the goods and their transportation. It is for this reason that booking register has entries against which there are invoice numbers in some but not in others. Shri Moin Khan is the proprietor of the as transport company but does not own the trucks that he provides. He, in turn, liaises with various trucks owners and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erused the records. In so far as this part of the adjudication is concerned, the demand has been made based on the booking registers by the transporter supported by the statements of the transporter Shri Moin Khan recorded during investigation. It is further supported, according to the Revenue, by the fact that the consumption of power on Sundays to the same extent as on any other day by the factory as reported by the AVVNL, Ajmer but no manufacture was recorded on Sundays by the assessee. It is further supported by the statement of Shri Hussain Khan, Contractor, who in his statement before the authorities, explained that the production continues as usual on Sundays and for Sundays he gets paid in cash by the owners. 30. Any statement made before an adjudicating officer of Central Excise is relevant for the purpose of proving a fact subject to the provisions of section 9D of the Central Excise Act which reads as follows: 9D. Relevancy of statements under certain circumstances.-- (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tched. Whenever the goods are received he makes the entry in the GR register and he would also make a corresponding entry of invoice number, etc. in the booking registers. It is for this reason that is in the booking register, against some entries there are invoice numbers while against others they are not. So far as the GR register is concerned, it matches with the GR issued by the transporter and the corresponding invoices. There is no dispute so far as the goods cleared under GR are concerned, the invoices match the GRs and GRs match the GR register. GR registers taken from the transporter by the Department were returned and have not relied upon in the show cause notice. This part of the demand is made considering that all entries in the booking register have actually resulted in transport of goods by the trucks of numbers given in the register and therefore, there was clandestine manufacture of the goods. Even in cases, where the entries in the booking registers show corresponding invoice numbers (evidencing payment of duty), a demand has been made. 33. We find it impermissible to allege clandestine manufacture and removal and demand duty from the assessee merely because the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Revenue also admits that there were invoice numbers against some entries in the booking registers. However, the demand has been raised against all entries in the booking register whether or not there were any invoice numbers against the entries (which show duty paid clearances of goods). Revenue has not established that what Shri Khan explained during cross examination was not correct and that their understanding of how Shri Moin Khan maintained the register is correct and that every entry in the booking register implies clandestine removal of goods. 36. The next statement Revenue relies upon in its appeal is that of Shri Hussain Khan, Labour Contractor who said before the officers that production continues as usual on Sundays also and he gets paid in cash for labour on Sundays. This is a very serious allegation. However, as discussed above, for a statement made before an officer of Central Excise to be relevant, the procedure Section 9D of the Central Excise Act has to be followed. Learned Counsel for the assessee submits that they sought cross-examination of Shri Hussain Khan but it was denied. Therefore, it is impermissible to solely rely on the statement of Shri Hussain Kh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss examination so as to make his statement admissible as evidence as per Section 9D of the Central Excise Act. We do not see why any of these obvious actions were impossible for the officers. At this stage, what is required by us is to determine, if there is sufficient material and evidence so as to convince a prudent man to believe in the probability of the fact of clandestine removal. In the factual matrix of this appeal, we find that the main basis of the demand are the booking registers supported by the statements of Shri Moin Khan, Shri Hussain Khan and the electricity consumption. The registers and the statements of Shri Moin Khan and his cross examination do not support the case of the Revenue that there was clandestine manufacture and removal. 39. As the statement of Shri Hussain Khan, Labour Contractor was not passed through the procedural rigour of Section 9D of the Central Excise Act and the appellant was not allowed to cross-examine him during adjudication, his statement is not relevant to prove the fact of clandestine removal. There is a third piece of evidence relied by the Revenue, namely the electricity the consumption on Sundays being the same as on some other d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, therefore, the demand of duty on the quantified value in the table to the Show Cause Notice which is based upon 42 GRs of New Vikas Transport Company, Ajmer alleging clandestine clearance of 536.69 MT of excisable goods valued at Rs. 1.83 crores is maintainable. The argument given by the notice that demand is raised on technical defect in triplicate/office copy of GR and minor variation in truck numbers due to typographical and other error is an afterthought and therefore, no satisfactory answer is given to production on Sunday and to the statements of Shri Hussain Khan Labour Contractor and Shri Vasudev Bherwani who is noticee's part time employee, I hold that duty on the amount of value of Rs. 1,83,33,257/- amounting to Rs. 20,12,479 is maintainable and consequential interest along with penalty is justified. 45. Learned counsel submits that the Adjudicating authority has accepted whatever was alleged in the SCN and brushed aside their entire submissions before him with respect to this part of the demand as 'an afterthought' and held that no satisfactory explanation was given for the production on Sunday and to the statements of the Labour Contractor Shri Hussa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided by the learned Authorised Representative of the Department, there were no discrepancies between the invoice and the original GRs for this reason. He further submitted that GR is not a document under the Central Excise law and cannot be held against them. Learned Departmental Representative supports the impugned order and submits that the GR is the document which evidences that the goods were cleared from the factory and transported to the customer. There is no reason for two copies of the GR (original and triplicate) to have different details. This only supports the finding that the goods were removed twice-once with the invoice as reflected in the original copy of GR and again as per the details in the triplicate copy of the GR for which there is no corresponding invoice. This inference is further supported by the facts that the factory's electricity consumption on Sundays was the same as on any other day but no production was recorded on Sundays in the RG-1 register (Production register). It is further confirmed by the statements of the labour contractor Shri Hussain Khan and the part time accountant. 47. We have considered the arguments on both sides. We find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice to leave details of the consignee and the actual quantity while preparing the GRs which details are filled in the GRs after the goods are loaded at the factory. He obtains these details on phone from the driver and fills in the triplicate copies. Thus, the triplicate copies have all details filled using a carbon paper except the quantity and details of the consignee which are filled in with a pen later. Sometimes, errors are made in noting them so. If a third party document such as GR and the discrepancies therein are to be relied upon to hold that the assessee has clandestinely manufactured and removed goods from the factory, we find it impermissible that the clarifications by the person who prepared the third party documents may be ignored or brushed aside lightly. It is not unlikely that over a period of almost four years, if GRs are prepared and in 42 GRs some errors may have crept in. Nine of the consignees were cross examined and they confirmed that they received only duty paid goods and some of the rest filed affidavits to that effect. The assessee itself asserts that no goods were clandestinely cleared. Thus, according to the consignor, consignee and the transporter, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this regard is based on upon the admission of the co-noticees, contained in their statements and corroborated with the said documents, etc. there appears no need for further inquiry from the authors of the GR or from the truck drivers. I therefore, hold that the demand of duty amounting to Rs. 2,97,846/- made vide impugned table of the show cause notice, is recoverable from the notice, under proviso to erstwhile section 11A(1) now Section 11A(4) of the Act, and the notice is liable to penal action under section 11AC ibid. 51. Learned departmental representative supports the above findings. Learned Counsel for the appellant contested this part of the demand. Firstly, he submits that all the three persons whose statements were relied upon by the Commissioner were cross-examined and have denied having received consignments separately against the GRs and Invoices. The differences were minor clerical errors which do not lead to a conclusion that two separate consignments were cleared one against the invoice (on which duty is paid) and another against the GR without paying duty. Out of the hundreds of GRs issued by the transporter during the period, there were some discrepancies i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat having found that there were discrepancies in the GRs, learned Commissioner found that it was unnecessary to ask those who prepared the GRs about the discrepancies and concluded that separate consignments were cleared on the strength of the GRs without paying duty. He also found it unnecessary to ask the drivers if they had actually carried the consignments. He said that since the consignees have admitted to receiving the consignments, any inquiry with the drivers or authors of the GRs is unnecessary. But the consignees have denied receiving consignments during cross-examination. He found it unnecessary to even mention let alone discuss details of cross examination and record as to why he did not trust the statements during the cross examination. The least that could have been done by the officers was to check whether the trucks with the numbers mentioned in the GRs existed and if so, who they belonged to and if they carried goods from the consignor to the consignees on those dates. Truck movements could also have been checked from the toll gates and RTOs. We find that this part of the demand is based merely on typographical errors extrapolated to imply clandestine removal supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee without giving corroborative evidence. No efforts were made by the investigating officers to track the transporters to ascertain if the goods were delivered and if so, from whom to whom. The assessee had, obtained a report from National Highways Authority of India (NHAI) regarding the movement of trucks of the numbers mentioned in the slip which showed that they moved from Kota (where M/s. Bagherwal was located) to Chittorgarh (where M/s. Bajrang was located) and not from Ajmer (where the assessee was located). Learned counsel took us through the report which he received from NHAI. Learned Departmental representative supports the impugned order. 56. We have considered the submissions advanced from both sides on this part of the demand and have examined the records of the case. We find it rather strange that the Commissioner refused to accept the cross examination before him and the invoices produced before him on the ground that they were third party documents and were not accompanied by an affidavit. The hand written slip, on which the demand was made, itself was a third party document and was not issued by the assessee and was accepted by the Commissioner without any af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o one invoice dated 5.7.2012 was found and the quantity found physically was in excess of what was indicated in the invoice. When questioned, Shri Abdul Hafiz, the owner said that he had received the excess quantity from the assessee without invoice and that it was transported from the assessee's factory to his business premises in his family owned vehicle RJ 09 G1536 about five days before the issue of the above invoice (i.e., about five days before 5.7.2012). Thereafter, the goods were seized and the demand of duty has been raised on the assessee. 58. The assessee contested the demand on various grounds. Firstly, it was contested that the Panchnama does not disclose how the stock was taken. Secondly, it was contested that the goods were available in the market in Chittorgarh itself and also in other places and they could have been procured from anywhere. Thirdly, it was contested on the ground that the Panchnama was drawn in English and Shri Abdul Hafiz has, during cross-examination, explained that he does not know English. Fourthly, it was contested on the ground that the goods were, as per the statement of Shri Hafiz, cleared from the assessee's factory about five da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el on the ground that it was done through visual inspection and actual weight was not taken. However, it is not always necessary to weigh each piece in stock taking. For instance, if a bag of cement weighs 50 kg and 1000 bags are found somewhere, the weight can be calculated by just multiplying. TMT bars and rods are of standard widths and lengths. Since the specific gravity of iron and steel does not vary with the product, stock can be taken by simply counting how many rods of what thickness are available in stock. Therefore, there is no force in the submission of the learned counsel that unless the entire stock is individually weighed the stock taking exercise is defective and tainted. 62. It is also undisputed that the panchnama was drawn in English and that Shri Hafiz said that he did not know English; however, his statement was written by him in his own handwriting in Hindi in the Panchnama. Therefore, the suggestion of the learned counsel that Shri Hafiz did not know what was written cannot be accepted. 63. It is also undisputed that during cross examination, Shri Hafiz gave another explanation for the excess stock which was seized and said that he had obtained them in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding entry in the purchase ledger. Treating this as clandestine manufacture and sale, the demand was raised. The assessee's explanation was that these were the goods which they had manufactured and cleared on payment of duty on 29.1.2010 to M/s. ACCME (Urvashi Pumps) Engineers Pvt. Ltd. Jaipur but they were rejected by this buyer and returned under the cover of buyer's invoice No. S/36/10-11 dated 19.4.2010. Instead of bringing them back into the factory, they left them at the transporter's premises and resold them to another buyer under trading invoice No. 47 dated 11.11.2010. This trading invoice had a cross reference to the invoice under which the first buyer had rejected the goods. This explanation has not been accepted by the Commissioner and the demand was confirmed. 66. The Commissioner observed that the goods said to have been returned by the first buyer on 19.4.2010 were only entered in the books of accounts of the assessee on 11.11.2010 seven months later. The goods were said to have been kept this long in the premises of the transporter. However, the details of the transporter or where they were stored for this long nor was there any evidence of demurrage/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of Commercial tax department of the State Government took stock of the assessee's premises, they found shortage of goods weighing 39.835 MT. The assessee agreed and paid Commercial tax on this shortage. The officers also found some slips of paper on the premises of the assessee which were not entered in the books of account. The assessee paid Commercial tax on these quantities as well. Thereafter, the assessment order issued by the Assistant Commissioner of Commercial Tax in this regard was appealed against by the assessee and the appeal was dismissed on 17.5.2011. Based on these shortages and slips based accepting which the assessee has paid VAT, this part of the demand of Central Excise duty was made by the Revenue. 69. The assessee's contention was that the weighment was done correctly by the Commercial tax officers and that there were no panchas. Therefore, the stock verification report is incorrect. It is also its contention that they not only manufacture but also trade in goods and both manufactured and traded goods are subject to VAT and excise duty can be levied only on manufactured goods. The mere fact that the assessee paid VAT does not establish that the g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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