TMI Blog2001 (6) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... e payments already made by the firms are to be adjusted against the above demands. I impose a penalty of Rs. 1,27,000/- on M/s. DC, Rs. 2,80,000/- on M/s. VC and Rs. 1,89,000/- on AMC in terms of Rule 173Q of the C.E. Rules, 1944. I also impose a penalty of Rs. 2,93,130/- on D.C., Rs. 5,96,334/- on V.C. and Rs. 5,82,289/- on AMC in terms of Section 11AC of the C.E. Act, 1944. I further demand interest on the above amounts in terms of Section 11AB of the Act. I impose a penalty of Rs. 1,00,000/- each on M/s. Aksol Chemicals, Ranipet, and Shri A. Murugesan and Rs. 50,000/- on Shri M. Chakravarthy in terms of Rule 209A of C.E. Rules, 1944." 2.The facts of the case in brief are that Officers of the HPU made a surprise visit to the factories of the appellants on 11-9-97 and found an excess stock of goods valued at Rs. 5,66,629/- and a shortage of goods valued at Rs. 7,68,640/-. The excess goods were seized and the officers also recovered 8 small note books from the Chemist Sri R. Settu and monthly production statements prepared on the basis of small note books. The proprietor of M/s. Dinesh Co. (DC) Sri A. Murugesan is also a partner in M/s. Vidya Chemicals (VC) along with his wif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of duty as per (a) above; and (d) why a penalty in terms of Rule 173Q of C.E. Rules, 1944 r.w.s. 11AC of the C.E. Act, 1944 should not be imposed on them, either individually or collectively for the contravention of Rules mentioned above. 3.Appellants denied the allegations brought out in the show cause notice. We have noticed from the impugned order that the entire case against the appellants has been made out on the basis of seizure of private note books and production details recorded therein maintained by the Chemist Shri R. Settu. The Department has taken recorded statements from (i) Shri M. Chakravarthy, Manager for entire group of firms (ii) Shri R. Ganesan, Chemist, Dinesh Co., (iii) R. Settu, Chemist, ACP, (iv) K. Rajenderan, Chemist, ACP and (v) S. Petchi Raj, Chemist, DC. Finally, the statement of partner of Vidya Chemicals Shri A. Murugesan was recorded. There is no recording of statement from any of the partners of other firms on whom the Commissioner has proceeded to confirm duty. 4.Shri M. Chakravarthy, whose statement was recorded on 19-9-97 which according to him was taken under duress and coercion and by force at 1 o'clock in the night, immediately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ister while in the note book, no entry is found. There are large number of entries which do not tally with the allegation in the SCN presuming those entries to be of certain goods which they did not manufacture at all. There is also entry of unpacked goods which have not reached R.G.1 stage and therefore entries in various diaries did not represent the clearances but only about certain other details pertaining to the manufacture and therefore it is pleaded by the appellants that total reliance on these small note books maintained by the Chemist without any corroborative evidence and without any evidence of any nature does not prove the case of the Department. In this regard, appellants had relied on large number of judgments to contend that mere entries in private note books cannot be the basis for confirming the demands. However, the said contention has not been accepted in terms of judgments by the Commissioner except to say that said judgments are distinguishable. A finding on this aspect is found in paras 35 36 which are reproduced below :- "35. Now, to refer to some of the other citations made, I find that the following decisions have been cited to claim that clandestine r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done from other sources to corroborate the entries." 1997 (23) RLT 707(9) (CEGAT) Ratio "Allegation based on entries in a private diary maintained by authorised: signatory - no correlation with entries in statutory records done - entries not corroborated by other evidence case is remanded for de novo adjudication." I observe that the ratio emerging from all the36. above decisions is that clandestine removal cannot be established merely on the basis of private records maintained by the employees of the manufacturing firm unless supported by other corroborative evidences and that when R.G.1 entry shows more production than in the private records, such private records cannot be relied upon. I find that in this case, although on certain dates, the RG1 entries showed more production than the private records when the entire financial year's production month wise was taken vis-a-vis the production entered in the small note books and the monthly statements prepared by R. Settu, Chemist, the production as recorded in the private registers was much more than that recorded in the statutory RG1 registers. Further, in addition to the private note books, it has also been established by cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the diaries, it goes to clearly disclose that the entries do not lead to the conclusion that there was suppressed manufacture or clandestine removals without payment of duty. 8.The further charge was that M/s. Aksol Chemicals, who were marketing agents was a related person and therefore the price adopted by the Aksol Chemicals for sale of goods of four units should be adopted for the purpose of valuation. On this point, appellants pointed out that during the period in question, the marketing unit had reorganised itself, and the partnership deed was reconstituted by taking independent partners in said marketing agencies, who had independent sales to various persons and also several products manufactured by other persons. There was no change in the price and the price was constant throughout the period, hence they cannot be considered as a related person. However, on this aspect, no clear finding has been given by the Commissioner. The Commissioner has also not given any clear cut finding on the details of entries in the note book vis-a-vis R.G.1 entries and merely has upheld the allegation in terms of the findings recorded in para-36 which has already been reproduced. 9.We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation of demands. One of the partners Shri Murugesan's statement also is not incriminating in nature. Although the note books are not denied but the same were not maintained for the purpose of making any entry of production or for the purpose of clandestine removal. They were maintained only to keep record of certain test of materials of intermediate product and other details pertaining to items which did not reach the R.G.1 stage. He has produced comparative detailed chart pertaining to each of the unit in which clearances vide R.G.1 register were made and compared with production note book to show that on large number of days, the production figure in the R.G.1 register were much more higher than in the private note book. Ld. Counsel refers to said comparative chart to submit that even on number of days, where there were clearances in R.G.1 register which were shown as NIL in the private note book. He submits that there is no independent evidence to implicate the appellants with regard to purchase of inputs, manufacture and sale by clandestine removals. Hence, basing the case only on this production note book and on the first statement of Chakravarthy, the demands cannot be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts noted in para-35 (which has been extracted supra) are not applicable to the facts of this case, and only the private books, which did not reflect the true and correct facts could be relied for confirming the demands, ld. SDR submitted that the Commissioner has given findings on this aspect which could be relied. He points out that the argument of appellants have been taken as a theoritical one and it does not show the truth of the matter. On a further specific query to explain with regard to details of R.G.1 clearances being more on various dates in each of the company as reflected from R.G.1 compared to the production book, and in such circumstances how the production book could be accepted, ld. SDR pointed out to the finding of the Commissioner who had taken the total average of the clearances from both the registers to show that clearances in the note books were more, hence leading to the conclusion of clandestine removal of goods without payment of duty. 12.Countering the arguments, ld. Advocate pointed out from the finding itself that the ld. Commissioner had clearly upheld their plea for non-clubbing of clearances and also about non-mutuality of interest in each of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch circumstances, we are not inclined to accept the entries to be reflecting the 'gospel truth' and reflecting the correct picture of quantum of manufacture and of clandestine removal of various items. We notice from the deposition of Settu, Chemist before the Commissioner on 16-7-98 that he has stated that he was interrogated between 11.30 a.m. 10 p.m. in the night of 29-9-97. He was asked to explain regarding the enclosures to the SCN and was asked to identify the in-process products. His reply is as follows :- "Saltan Black - There is no such product manufactured Saltan Gel Black - -do- In-process materials - Binder SMPCMDBismark Brown Salt AK - No such product Salt V - -do- Fat lac - -do- Any product which has been manufactured if it fails in the test, will be subjected to further processing or reprocessing. The status of that product while in reprocess is also known as inprocess material. I had seen only few samples and had stated that they tally with the production note book. From my experience I can say that the figures noted in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked, he was not prompted to compare the figures of production. He also submitted that there were sales made and most of the sales were through cash and without bills. He stated that he is not in a position to give further details and he does not know the quantity, value and excise duty involved on such sales without bill (or) bills with Solfat-V names in the past years, and he has stated that details of which may be enquired from Mr. A. Murugesan. On a perusal of this statement, we do not see any incriminating nature in it, which the ld. Commissioner holds this statement as sufficient to uphold the charges. Ld. Commissioner has not given any finding as to how this statement is helpful to department to lead to a conclusion of clinching nature regarding production and clearance of specific quantity of each of the materials. Shri Chakravarthy had only stated that he was depending on the note book to know the production. This would not lead to a conclusion that so much quantity of final products were manufactured and it was in the packed condition, and they were removed by not entering in R.G.1 registers. Although Chakravarthy has stated that there were sales without cash receipts, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without coming out with his finding as to how it is distinguishable. The law on private diary being maintained by the workers or employees being not a reliable evidence is well settled from the judgments noted. In order to take a departure from such a finding, there has to be corroborative and substantial evidence which should be clinching in nature. In this case as noted, the investigation stopped with the seizure of note books and recording of statements from Sri Chakravarthy, Settu and Murugesan and other customers. Except the initial statement of Chakravarthy, there is nothing on record to confirm the demands. Even from the statement of Chakravarthy, the details of production and sale does not come out clearly. Therefore, there is nothing in his statement to say that there was production and clearance individually by each of the units. Further, as noted, the investigation agency has not examined any responsible person/partner of the other four units. Revenue has miserably failed to prove the case in this regard. 19.As regards the charge pertaining to removal of dutiable goods in the guise of exempted goods, scrutiny of invoices which were shown to us, proves that the duty ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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