TMI Blog2013 (5) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... year, 1988-89 and thereafter. In as much as the brand name owner M/s Hindustan Machines has been held to be entitled to the benefit of Notification, the other units using the said brand name would become entitled to the benefit of SSI exemption Notification as they are not hit by para 7 of the Notification. Thus, conformation of demand against the M/s Hindustan Machines as also other manufacturing units by denying them the benefit of SSI Notification is unsustainable. The said part of the demand is accordingly set aside along with setting aside of the penalties on the said ground. Clandestine removal of the good – Held that:- charges of clandestine removal cannot be made on the basis of assumptions and presumptions and on the basis of documents recovered from third person’s premises, without their being any evidence of actual manufacture of the excess quantity, which required corroboration of procurement of raw material, the labour as also electricity consumption etc. - In a case of clandestine removal the department should produce positive evidence to establish the same. In the absence of same, a finding cannot be based on the contents of loose chits of uncertain authorship. De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hines, Konark Industries, Dynamic Engineers (I) (II) and Konark Industries and Asiatic Engineers P. Ltd. are the units engaged in the manufacture of various household products under the brand names of Maharaja and Maharaja Whiteline. All the units were availing the benefit of SSI exemption Notification No.175/86-CE. M/s Hindustan Machines were manufacturing toasters, irons, mixer grinders w.e.f. 1975 onwards. M/s Dynamic Engineers were engaged in the manufacture of mixer grinder of different models and came into existence in the year 1986. M/s Dynamic Engineers-II was a manufacturing unit set up by Dynamic Engineers-I for the manufacture of triple jar mixers for supply to manufacturers of mixer grinders etc. and came into existence in 1990. M/s Konark Industries was manufacturing juicer mixer, grinders and jar attachments w.e.f. 1988. M/s Asiatic Engineers were set up in 1988 for manufacture of washing machine and centrifugal dryers. Demand of duties stands confirmed against the manufacturing units by denying them the benefit of Notification No.175/86-CE, dtd. 01.03.86 in respect of the excisable goods manufactured by them for the period upto 31.03.90 as also on the charges of cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Harish Kumar and one Shri R. K. Arora were the Directors of M/s Maharaja Kitchen Aid P. Ltd., which came into existence in 1983. However, the said firm subsequently closed its operations. M/s Technocrat Marketing P.Ltd., another marketing firm came into existence on 09.05.88. One Smt. Sunita Bhatia, w/o Shri Hariom Bhatia, C.A. was the Director in the said company along with Shri R.K.Arora, which was formed to market the household appliances. It is seen that the allegations of excess clandestine clearances and the consequent denial of small scale Notification are primarily based upon the recovery of one document titled as sale statement and some other documents recovered from the business premises of M/s Technocrat Marketing P. Ltd. and the residential premises of Shri H.O. Bhatia read with the statements of various persons and the other evidences collected during the course of investigation. 5. In as much as M/s Hindustan Machines, was availing the benefit of SSI exemption Notification, all other manufacturing units, manufacturing the goods under brand name of Maharaja, were also availing the benefit of Notification No.175/86-CE. It may be observed here that in terms of para 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances sold during the 12 months period from January to December, 1987, in respect of some of the dealers. According to the said statement, total quantity of goods sold during the said period of 12 months worked out to be 23,709. In as much as the dealers whose names appeared in the said statement were dealers of Maharaja Household Appliances, Revenue entertained a view that the statement reflects upon the clandestine clearances of the said goods from the factory of M/s Hindustan Machines, without reflecting in any statutory documents. Another documents being a letter dtd. 30.08.89 addressed to Shri R. K. Arora was recovered wherein the sales figures for the first 6 months were reflected. In another communication addressed to Shri Satish Bhatia dtd. 29.01.86 recovered from the residence of Shri Hari Om Bhatia communication about the despatch of the goods was made. 9. Based upon the above seized documents, the Revenue calculated the clandestine removal made by the said Maharaja Group of Companies. In para 8.5 of the impugned order of the Commissioner, it stands recorded that in as much as the said sales statement recovered from the premises of marketing company reflected only the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any of their authorised representative. As such it stands strongly argued that to connect the said statement with the goods manufactured by M/s Hindustan Machines is neither proper nor appropriate. 11. We find that there is no dispute about the fact that the said marketing firm was started in May, 1988. The sale statement recovered from its premises showing clearances from April, 1987 to July, 1987 in respect of 18,988 pieces. The appellants contention that when company itself was not in existence, any document recovered from its premises pertaining to past period would have no bearing, seems to carry weight. There is no denial of the fact that the said sale statement showing the clearance of goods was recovered from the premises of M/s Technocrat Marketing P. Ltd. Apart from above, we have seen said statement appearing at page 1104-1105 and form Annexure-IV of paper book filed by the appellants. In this document, there is no description of the goods and no name of the manufacture is appearing. The said statement only shows some figures of clearances made in 1987. We really fail to understand as to how the Revenue has connected the figures as available in the statement to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such assumption as regards the value of Rs.900 per piece is without any basis, in the absence of any clarification as to what were the goods actually sold as reflected in the sale statement. Further, while calculating the duty demand, the Revenue in Annexure-D-IV (i) has itself adopted value of the said appellant s goods as Rs.800 per piece. The appellant s contention is that such adoption of enhanced value of Rs.900 per piece is admitted on the higher side and without any basis in the absence of any indication of the description of the goods. As we have already held that the sale statement recovered from M/s Technocrat Marketing P. Ltd. cannot be related to M/s Hindustan Machines for reasons recorded in the relevant paragraphs, we find that the said plea of the appellants as regards adoption of higher value of the goods become redundant. 15. Further, it is seen that M/s Hindustan Machines have taken a stand before the adjudicating authority that they do not have capacity to manufacture such huge quantity of finished goods. The said plea of the appellants does not stand either considered or rebutted by the lower authorities. There is also nothing on record to show that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct or in terms of Notification No.175/86-CE. In any case, we find that all the units being registered separately, manufacturing different goods though identical and located at different places, having complete machinery to manufacture goods cannot be held to be related parties, merely because the Directors or partners or proprietors are relative of each other. 18. We also note that the Commissioner has relied upon the Hon ble Supreme Court s judgement in the case of Modi Alkalies Chemicals Ltd. reported in 2004 (95) ELT 617(SC) as also in the case of Rukmani Packwel Traders reported in 2004 (165) ELT 481 (SC). However, we are of the view that the ratio of law declared in the said judgements are not applicable to the facts of the instant case. In the case of Modi Alkalies, the clearances of various units were to be clubbed by the Revenue when there was evidence showing creation of front companies by the Directors of Modi Group of Companies by appointing their employees as Directors of front companies. The fact that the profit earned by these front companies loans was going back to M/s Modi Alkalies was also taken into consideration. It was in these circumstances, clearance made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Hindustan Machines as also other manufacturing units by denying them the benefit of SSI Notification is unsustainable. The said part of the demand is accordingly set aside along with setting aside of the penalties on the said ground. Clandestine Removal 22. As regards the finding of clandestine removal of the goods by the four manufacturing units, we find that the Commissioner in his impugned order has not dealt with the various issues raised by the appellants, as also the various evidences relied upon in the SCN stands. He has, in a very generic term observed that documents recovered from the marketing company M/s Technocrat Marketing P.Ltd. and the role of Shri Hariom Bhatia in the affairs of the company have specifically established the fact of clandestine removal and lead to the indication of clandestine clearances of the manufacturing units. 23. After hearing both the sides, we find that the charges of clandestine removal are based upon the sale statement of 1986-87 recovered from the premises of M/s Technocrat Marketing P. Ltd. In addition a letter dtd. 30.08.88 stands recovered from the said premises. The letter was addressed to Shri R.K. Arora who was Partner/Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd can be confirmed on the findings of clandestine removal. We have also taken into account the latest decision of the Tribunal in the case of Kuber Tobacco wherein by majority of decision, it was held that even when the documents are recovered from the guesthouse of the company, when the same are of doubtful nature, demand of duty on the findings of Clandestine removal cannot be upheld against the assessee. Apart from the sale statement recovered from marketing company, a reference stands made to a letter dtd. 30.08.88 recovered from the marketing company. The said letter is addressed to Shri R.K.Arora, Director of the company and refers to sale figures from January to June, 1988. 26. M/s Technocrat Marketing P. Ltd. came into existence in May, 1988, the document referring to the sale figures prior to date of birth cannot be taken into account for upholding the finding of clandestine clearance of manufacturing units. The identity of the person who has authored the said letter is not available. There is no reference to the goods manufactured by the manufacturing unit in as much as the same only mentions the sale figures without any reference to any goods or manufacturer. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e jars sold to consumers of mixers, Revenue has interpreted that the said statement as if the same are sales of triple jar mixers of the said companys, whereas according to the deponent, same is sale of triple jars to the consumers of Maharaja brand mixers who already have the brand mixers with them. Candy Home Appliance and Western Engineers with whom the marketing company was dealing were the manufacturer of the said jars. 29. The appellants have also contended that they never had the facility to manufacture such huge quantity of goods. Their factory was located in a residential area operating in two shifts and was working from first floor of the building measuring around 990 sq.ft. Total number of workers were 20 and electricity bill was only Rs.1,013/- He also produced a certificate of Shri S.K.Bansal, Engineer who studied the installed capacity of the noticee with the available finance. After studying the process of manufacture, he certified that during the relevant time, the appellants were not having the production capacity to produce the alleged manufactured clearance of goods. 30. Apart from above, we note that M/s Hindustan Machines have made a police complaint as re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fail to understand the basis of such apportionment. 32. At this stage, we also note that a part of the demand stands confirmed against the appellants on the basis of some documents seized from the premises of M/s Dynamic Engineers. Such documents are in the shape of production targets, Production Manager s report etc. When the entries made in the said documents were compared with the entries made in RG-I register, there were differences which have been held to be on account of clandestine clearances. We find that the said documents were signed by one Shri N. S. Sohal whose statement was recorded on 05.02.91 and 07.02.91. On being queried about these documents, he deposed that no records for maintaining day-to-day production are being maintained by them. The various documents seized from the premises were the only records which were being made by him in his personal capacity so as to exercise some sort of control over the workers. Shri Sohal clearly deposed that such figures in the documents do not reflect the actual production of the goods but the same refers to the number of pieces handled by the workers at various stages of manufacture. The documents are for internal use and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recovered either from third party s premises or documents recovered from M/s Dynamic Engineering which are in the nature of production target etc. 35. We find that the duty demand also stands confirmed against M/s Asiatic Engineering P. Ltd. (AEPL) on the basis of some documents seized from their premises, the said documents are in the nature of internal GRs, daily performance report, security register etc. On comparison of the figures appearing in the said documents with the entries made in the RGI-I register revealed that the excess figure in the documents related to centrifugal dryers and washing machine manufactured by M/s AEPL. The security register also seized showed clearances of these products. The appellants have contended that the duty of Rs.14,97,576/- stands confirmed against the said unit on the ground that they have clandestinely removed 1674 number of washing machines and 67 number of centrifugal dryers during the period 1989-90 and 1990-91. Our attention stands drawn to a chart appended as annexure-A to the SCN. According to the ld. Advocate, perusal of the said chart show, a difference of 42 number of products whereas the duty stands confirmed on much higher numb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eloped by them which resulted in high defects and the same were dismantled or assembled or repaired in which case of all the documents showing internal movement of the goods would be available in the factory. We find that presence of said documents does not positively reflect upon the fact of clandestine clearance of the final product. They may relate to internal movement of goods, invoices may belong to repairing of the goods. Such documents cannot be held as the basis for concluding the allegation of clandestine removal against the appellants. 37. While dealing with the various contentions raised by the appellants, we find that Commissioner has dismissed the same by making very general observations that there is no rebuttal or proof submitted by the assessee by which they can negate the department s allegation of clandestine clearances by the manufacturing units. He has simplicitor observed that the recovery of incriminating documents showing clearances of Maharaja brand goods from the persons/premises concerned with the manufacturing units is sufficient to hold that the appellants have been engaged in actually manufacturing the goods in excess of recorded and clearing the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants premises. The said documents which have been made basis for confirmation of demand stands recovered from the third party and cannot be made the basis part for clandestine removal. The authenticity of said document is in doubt as nobody has confirmed the same. Further, even though the names of the buyers were mentioned in the said documents, no efforts have been made by the Revenue to carry on the investigation at their end and to record their statements. In the absence of investigation said conducted from the buyers end, even though their names are available in the documents relied upon by the department, the charges of clandestine removal cannot be upheld. There has to be some corroboration to the allegations of clandestine removal. Admittedly, onus of proof is on the Revenue and can be shifted to assessee only when the assessee is confronted with such documentary evidences which indicate the clandestine activities on his part. We note that even the theory of preponderance of probability is not applicable in the present case in as much as we have virtually not found any document reflecting upon any clandestine activity on the part of the manufacturing unit. This has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. Moreover, these documentary evidence were not recovered from the office or factory premises of the appellant manufacturer company, and there is no tangible evidence on record to conclusively relate the same with the appellant manufacturer company, except the retracted oral evidence. There isn t any untainted, undisputed admission by the concerned Director of the company that these records relied by the department were of companys unaccounted production and removal thereof. The entire accounted production of the appellant manufacturer for the relevant period is not recorded in these Kachha records besides the alleged unaccounted production. The Hon ble Member (Technical) was persuaded to assume that Shri Bothra would have keys to premises at 4130, Gali Barna, Sadar Bazar, Delhi, and although Panchnama drawn at this premises nowhere records the name of the appellant company, he was persuaded to further assume that it was a guest house of the appellant company. Although the names of the consignors on GR/RR were found fictitious, the Hon ble Member (Technical) was persuaded to assume that the same related to the Appellant company. As rightly observed by the Hon ble President, ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw materials. 22. In a case of clandestine removal the department should produce positive evidence to establish the same. In the absence of corroborative evidence, a finding cannot be based on the contents of loose chits of uncertain authorship. Department has not produced evidence of use of inputs to prove that there was manufacture of unaccounted finished product. Moreover, in the case of Atlas Conductors (supra), this Tribunal has taken a clear view that the demand cannot be on presumption of manufacture but on the basis of actual manufacture which is the basis to come to conclusion as recorded by Hon ble President in para 47 onwards that the findings of the adjudicating authority are without any evidence and is not correct view and is liable to be set aside. 31. My above views are fortified by a recent case in the case of Viswa Traders Pvt.Ltd. others Vs. CCE Vadodara being Final Order No. A/1846-1851/WZB/AHD/2011, dt.01.11.2011, a similar issue of clandestine removal was decided by co-ordinate Bench of Tribunal in Ahmedabad, wherein it is held that unless clandestine manufacturing is brought on record, there cannot be any allegation of clandestine clearances, un-co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffice premises or anywhere else in the control of the appellant company, backed by any confirmation oral or written from the person giving such cash against goods removed in clandestine manner without payment of duty from the factory of appellant company. 42. The entire law on the issue of clandestine removal stands discussed in the above paragraphs and it stands concluded that charges of clandestine removal cannot be made on the basis of assumptions and presumptions and on the basis of documents recovered from third person s premises, without their being any evidence of actual manufacture of the excess quantity, which required corroboration of procurement of raw material, the labour as also electricity consumption etc. No efforts stands made by the Revenue to establish the excess manufacture of the goods in the present case. Having already discussed the various evidences relied upon by the Revenue as not being relevant and sufficient for the purpose of upholding the findings of clandestine removal and by following the above majority decision of the Tribunal in the case of M/s Kuber Tobacco Products P. Ltd., we hold that the confirmation of demand against the appellants on the al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Juice Extractor 450 watts Blender/ Grinder- 369 33 2,72,840 8,899 KI Mixers 261 14,440 - 45. The appellants have taken a specific stand before the adjudicating authority that the said goods were in semi-finished condition and were yet to be recorded in the RG-I register, that is why some of the goods were only detained and not seized. We find while dealing with the said issue, the adjudicating authority has not dealt with the above plea of the appellants. He has accordingly confiscated the said goods seized from the premises of various manufacturers with an option to them redeem the same on payment of redemption fine. We find that the order of the Commissioner is very cryptic and does not taken into consideration the various pleas raised by the appellants. It seems that the order has been passed with pre-determined mind to confiscate the goods. The statements of various authorised representatives of the manufacturing units are only to the effect that the said goods were in excess than the recorded balance in the RG-I register. There is no statement appearing that the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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