TMI Blog2011 (2) TMI 566X X X X Extracts X X X X X X X X Extracts X X X X ..... ry premises of M/s. Shree Nathjee Industries - Decided in favor of the assessee - E/720-726/2008 - A/215-221/2011-WZB/AHD - Dated:- 4-2-2011 - Ms. Archana Wadhwa, Shri B.S.V. Murthy, JJ. REPRESENTED BY : Shri Willingdon Christian, Advocate, for the Appellant. Shri Rajendra Nagar, SDR, for the Respondent. [Order per : Archana Wadhwa, Member (J)]. All the appeals are being disposed off by a common order as they arise out of the same impugned order passed by Commissioner, vide which he has confirmed the duty of Rs. 5,00,85,745/- against M/s. Shree Nathjee Industries along with confirmation of interest and imposition of penalty of identical amount. In addition, penalties of varying amounts stand imposed upon other appellants along with confiscation of seized goods with an option to redeem the same on payment of redemption fine. 2. As per facts on record, M/s. Shree Nathjee Industries is a small scale unit engaged in manufacture of binders, printing paste (khadi) and adhesive at a unit located in Pandesara (Surat). The other 4 appellants i.e. M/s. S.N. Enterprises, M/s. Bhatia Colour Co., M/s. S.E. Corporation, and M/s. Shreeji Dyestuff, are the group companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch was also conducted at the premises of M/s. Shree Nathjee Industries on 4-4-06. Verification of records maintained by the said appellant and the details of machinery and equipments installed in the factory were made. Shri Rajesh Bhatia, partner of the said unit explained that they were engaged in manufacture of binders of various grades, white khadi and adhesives. They also explained the process of manufacture of goods and quantity of various raw materials used in the manufacture of their final product. The officers seized records along with water bills and electricity bills under the Panchnama drawn on the spot. 6. Further, the premises of Plot No. A-16/17, Sardar Patel Road No. 1, Udhna Udyognagar, Surat were kept under surveillance. On 5-4-06, a mini-truck loaded with textile chemicals was intercepted. The driver revealed that the truck was loaded with various chemicals from the above Plot No. for delivery at various dyeing mills in Pandesara. The driver also produced 9 delivery challans of M/s. S.N. Enterprises, issued to various Dyeing and Printing Mills, mentioning their description like dyeing and textile chemicals. The said truck was brought back to the above premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various grades, adhesives, pigment pastes like white khadi paste, silver paste, metallic silver paste, super khadi, white paste etc. having a factory at Plot No. 307/2, GIDC, Pandesara, Surat and having manufacturing facility for manufacture of various pigment pastes through M/s. S.N. Enterprises and M/s. Shreeji Dyestuff and M/s. S.E. Corporation. (b) That the statement dated 9-3-06 of Shri Ramesh Bhatia, proprietor of M/s. S.N. Enterprises deposing that all the 6 stirrers were initially installed in M/s. Shree Nathjee Industries and subsequently transferred to their Udhna unit and the seizure of 46 drums of binders, 17 drums of Zari binder of Udhna unit, revealed that the goods were manufacture in the factory of M/s. Shree Nathjee Industries, Pandesara and were delivered at Udhna unit for further delivery to various textile units. (c) M/s. Shreeji Dyestuff and M/s. S.E. Corporation have been shown as purchaser of stirrers at Udhna unit through M/s. Choksi Engineering Works and M/s. Ami Varsha Traders, to simply prove that they were also manufacturing khadi/paste at Udhna, but so-called supplier denied that they are the manufacturer of said goods. (d) From the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of different chemicals raised by different companies of Bhatia Group of Companies. (l) That the expert opinion of MANTRA and Prof. M.A. Shenoy, Mumbai University, Mumbai unit Institute of Chemical Technology Mumbai obtained by Revenue clearly opined that the chemicals traded under the invoice are fast evaporating and inflammable liquids and cannot be used as such or by mixing in other chemicals. They have to be polymerized before use. This fact corroborates that the raw materials were never sold by various trading companies, but in fact, goods manufactured at Pandesara factory were sold. (m) Inasmuch as all the trading firms are the family concerns of Shri Brijlal C. Bhatia, they have been used for giving the coverage to the clandestine manufacturing activities of M/s. Shree Nathjee Industries. (n) That if the traded value of all the group companies is added to the clearance value of dyestuff, the same would exceed small scale exemption limit, requiring the said appellant to pay Central Excise duty. 10. On the above basis, proceedings were initiated against the appellant by way of issuance of show cause notice, which resulted in passing of impugned order by Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is neither justified nor proper inasmuch as the Revenue, based upon the said expert opinion, has concluded that the process of manufacture has been carried out in their factory. They also relied upon the independent expert opinion from the Institute of Chemical Technology, University of Mumbai which stated that Butyl Acrylate, and Ethyl Acrylate did show stain removing property as goods as any other stain removing agent formulations vinyl acetate did exhibit desired stiff finish property with no nail marking Acrylic Acid did give desired colour value and better depth of dyeing and Styrene Monometer and Mehyl Methacrylate were found to be working well giving desired resisting effect. They also submitted that in almost all the 9 processing units, reactor vessels, mechanical stirrers and boilers are installed and as such, raw materials sold by the trading unit, can be used for in-house manufacturing by the said unit. They also filed all the documents of the trading unit showing purchase of materials, sales invoices, LR transport receipt and octroi receipt. As such, they contended that inasmuch as the documentary evidence showing purchase and sales of chemicals does not stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst M/s. Shree Nathjee Industries for the period 1-4-02 to 31-3-06 on the allegations and findings of clandestine manufacture and removal of their final product. Revenue s case is essentially based upon the fact that trading units, which are a group companies of Bhatias, have actually cleared the final product manufactured by M/s. Shree Nathjee Industries under the guise of clearance of chemicals. The differential duty is demanded at the value of Rs. 30.12 crores, which value is of the quantity, description and value of raw materials i.e. chemicals purchased and sold by the aforesaid four trading concerns. The Commissioner in his order has no where spelt out as to which final product (inasmuch as M/s. Shree Nathjee Industries are manufacturing different products) has been manufactured and cleared clandestinely. Further, neither the quantity of any product so cleared stands specified by him. The value, quantity and description on which the duty is being demanded is the sum total of the value of chemicals traded by all the 4 trading houses. 20. It is further seen that trader s stand that all the purchases and sales of chemicals are supported by item to item purchase/sale bill/lorr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te/khadi as per the statements of proprietors of the trading units, the buyers who admitted having received paste/khadi, have received from the trading unit and not from M/s. Shree Nathjee Industries. Apart from the above, we also note that on the face of fact that 12 buyers admitted having purchased chemicals from the trading unit, the Revenue was not justified in concluding that the chemicals traded by the said unit were actually paste/khadi manufactured by M/s. Shree Nathjee Industries. Apart from the above, we note that statement of some of the buyers are to the effect that various chemicals purchased by them from trading concerns were being further processed by their company inasmuch as six stirrers and cooking pans were installed for the process for preparation of final product to be used by them. In this regard, reference can be made to statement of director of M/s. Suprabhat Prints Pvt. Ltd., wherein some quantities of white khadi, silver paste were recovered. Other two buyers M/s. Bhavin Textiles and M/s. Payal Dyeing and Printing Mills stated that the goods were received by them from trading units and not from M/s. Shree Nathjee Industries. In any case, we find no details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even if accepted to be correct, cannot advance Revenue s case. Admittedly, various raw materials i.e. chemicals have a market (i.e. how they are being traded in the market). Merely because such chemicals cannot be used as such by processing houses, by itself cannot be an evidence to be used against M/s. Shree Nathjee Industries for upholding finding of clandestine manufacture and removal. At the cost of repetition, it may be noted here that neither statement of proprietors of various trading units, nor statement of partner of M/s. Shree Nathjee Industries nor statement of processing houses, support the Revenue s case, inasmuch as neither of the deponents have admitted the manufacture, clearance or receipt of final product from M/s. Shree Nathjee Industries via trading houses. As such, on the basis of such statements, which are exculpatory, Revenue s reliance of distant possibility of use of chemicals either as such or after processing, cannot be made the basis for arriving at the finding of clandestine removal. 23. Similarly, statement of one of the drivers of the transport company in respect of lorry receipts shown to him cannot be accepted as a conclusive evidence of clandestin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said vessel cannot be considered for all the 4 years i.e. prior to July 2004. (b) Secondly, the capacity of reactor vessels for preparation of binders is not 2 Tons, as stated by the learned Commissioner but one vessel is of 1.2 T and the other is of 0.6 Ton and thus the total capacity is 1.8 Tons. (c) Thirdly, the learned Commissioner has also erred in considering 2 shifts per day and 300 working days in a year since only one batch can be taken in one day because after taking the said batch, the vessel has to be cooled and thereafter, cleaned on the next day. Further, in every week, there are 2 holidays, one being Sunday and other being a staggering day, wherein there is a power cut and hence, the working days works out to around 260 days. (5 days per week x 52 weeks). Now, considering production on every alternate day after cleaning the vessel, the actual production days of the year works out to 130. (d) It is significant to note that the learned Commissioner has held that the content of binders in printing paste is around 25% and accordingly, he has come to a conclusion that production of printing paste would be 4 times the production of binders. However, in maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calculation by the Commissioner is, on the face of it, incorrect, in view of the various factors, as enumerated above. 27. We further note that all the trading units have separate premises, separate composition and are registered with various departments separately. There is absolutely no evidence of movement of raw materials to the factory of M/s. Shree Nathjee Industries or any evidence to show any manufacture and clearance of final product from their factory. Not a single paper of incriminating nature was found in the factory premises of M/s. Shree Nathjee Industries. In absence of evidence to prove the use of other materials like power, water, labour also weakens the Revenue s case. There is no evidence of any flow back of money either from process house or from the trading unit to M/s. Shree Nathjee Industries. 28. It may be mentioned here that the allegations and findings of clandestine removal are required to be proved beyond doubt by Revenue. The present order seems to have been passed on the basis of doubts being entertained by the Revenue. The evidence required for arriving at finding of clandestine removal, should not be the one which raises the doubt against an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court of Punjab Haryana as reported in 2010 (254) E.L.T. 205 (P H), laying that even if some records recovered during raid and corroborated by some supportable evidence for attempt of clandestine production and removal, it is necessary to have some positive evidence of clandestine production and removal. Similarly, in the case of M/s. Shingar Lamps Pvt. Ltd. v. CCE, Chandigarh as reported in 2002 (150) E.L.T. 290 (Tri.-Del.), it was held that in the absence of any evidence of excess consumption of raw material or of electricity to support the allegation of excess production and their removal, the demand cannot be upheld on the basis of clandestine removal. The said decision was again upheld by Hon ble High Court of Punjab Haryana as reported in 2010 (255) E.L.T. 221 (P H), reiterating the necessity of production of positive evidence of clandestine removal. To the similar effect are the Tribunal s decisions in case of M/s. Chemco Steels Pvt. Ltd. v. CCE, Hyderabad-I as reported in 2005 (191) E.L.T. 856 (Tri.-Bang.), M/s. Andra Cements Ltd. v. CCE, Guntur as reported in 2005 (191) E.L.T. 1046 (Tri-Bang.), M/s. Ruby Chlorates (P) Ltd. v. CCE, Trichy as reported in 2006 (204) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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