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2015 (5) TMI 528 - CESTAT AHMEDABAD

2015 (5) TMI 528 - CESTAT AHMEDABAD - TMI - Clandestine removal of goods - Valuation of goods - enhancement of value of frit based on the pen-drive recovered from SANYO and writing pads recovered - Held that:- A precise enumeration of all situations in which one could hold with activity that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What one could, however, say with some .....

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nd. There should be corroborative evidence by way of statements of purchasers, distributors or dealers, record of unaccounted raw material purchased or consumed and not merely the recording of confessional statements.

A co-ordinate Bench of this Tribunal has, in another decision, once again reiterated the same principles, after considering the entire case-law on the subject [Hindustan Machines v. CCE [2013 (5) TMI 543 - CESTAT NEW DELHI]. Members of Bench having hearing initially diff .....

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3A of the Central Excise Act, 1944 where Compounded Levy has been prescribed and capacity of the unit is required to be fixed on gas consumption basis, as done by the Revenue. It is observed that Revenue has attempted to adopt an estimation method for demanding duty and proving clandestine removal which is not prescribed by law.

It has been admitted by Shri V.N. Thakkar (Superintendent) DGCEI in the cross-examination before the Adjudicating authority that when an article is seized, th .....

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d to have been taken out of a sealed cover when the first Panchnama never mentioned keeping the said pen-drive in a sealed cover. It is also observed that on 30.8.2008 the sealed cover was opened but contents of the silver pen-drive were not opened on 30.8.3008 but instead another black colour pen-drive was opened. On 06.9.2008 under a Panchnama the said silver pen-drive taken out of the sealed cover and on opening this pen drive in the Tally Folder, no data was found to be available.

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lso contended that Revenue had not followed the procedure as stipulated in Section 36B of the Central Excise Act, 1944. In view of the above discrepancies the authenticity and veracity of data retrieved by investigation from the silver pen-drive is not reliable and can not be accepted as a piece of evidence in deciding the case of undervaluation and clandestine removal against the present appellants.

Exact amount of such additional consideration was required to be determined for addit .....

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have flown back to the appellants.

In the absence of exact quantification of cash received by individual frit manufacturer, transaction value can not be enhanced even if there are half cooked circumstantial evidences to the proceedings indicating suspected undervaluation. It is now well understood that suspicion howsoever grave can not take the place of an evidence. Therefore, it may not be correct to hold that preponderance of probability should always be given to the Revenue, as Ho .....

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: Shri C. Harishankar, Senior Advocate, Shri S. Sunil, Shri J.C. Patel, Shri Willington Christian, Advocates For the Respondent : Shri P.R.V. Ramanan, Special Counsel ORDER Per : Mr. H.K. Thakur; Following appeals have been filed by the appellants with respect to orders-in-original passed by the Adjudicating authorities; viz. Commissioner of Central Excise & Service Tax, Ahmedabad, Vadodara and Surat; against the Frit manufactures of Gujarat, regarding under valuation and clandestine remova .....

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SUPREMEGLAZES/DBRH/COMMR/2010 vi E/1927/2010. Shailesh Dahyabhai Patel OIO-13/VDR-II/SUPREMEGLAZES/DBRH/COMMR/2010 vii E/1928/2010. Dhulabhai Motibhai Patel OIO-13/VDR-II/SUPREMEGLAZES/DBRH/COMMR/2010 viii E/534/2011. Vishwa Glass & Ceramics Private Limited OIO-32/VDR-II/MP/VISHWA/DBRH/ADJ/COMMR/2010 ix E/535/2011. Pradip P Patel OIO-32/VDR-II/MP/VISHWA/DBRH/ADJ/COMMR/2010 x E/672/2011. Prime Ceramics Pvt. Limited OIO-03/BRC-I/MP/2011 xi E/673/2011. Rasikbhai Gordhanbhai Kanani OIO-03/BRC-I/ .....

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OIO-09/BRC-I/MP/2011 xx E/1018/2011. Ramson OIO-09/BRC-I/MP/2011 xxi E/1019/2011. Mahendrakumar R Patel OIO-09/BRC-I/MP/2011 xxii E/11960/2013. Spire Cera Frit Pvt Limited OIO-51/COMMR/SURAT-II/2013 xxiii E/11961/2013. Angel Cera Coat OIO-51/COMMR/SURAT-II/2013 xiv E/11962/2013. Mahendra Virchand Patel OIO-51/COMMR/SURAT-II/2013 xv E/12386/2014. Zirconia Cera Tech Glazes OIO-AHM-EXCUS-003-COM-067-13-14 xvi E/12387/2014. Pravinbhai Narshibhai Patel OIO-AHM-EXCUS-003-COM-067-13-14 xvii E/13289/20 .....

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15 xxxiv E/13720/2014. Wellsuit Glass & Ceramic Pvt. Limited OIO-VAD-EXCUS-001-COM-24-14-15 xxxv E/13721/2014. Balkrishna M. Thakkar OIO-VAD-EXCUS-001-COM-24-14-15 As the issues involved in all these appeals, except Srl No. (xviii) to (xxi) above) are same therefore, the same are being taken up for disposal under this common order. Extension of stay applications and stay applications are filed by some of the appellants in these appeals. After allowing the stay applications, regular hearing w .....

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g regarding large scale Central Excise duty evasion by Ceramic/vitrified tile manufactures of Gujarat, located in Morbi and Himmatnagar. (ii) That as per the investigation conducted, these tile manufactures were indulging in large scale undervaluation and clandestine removal of the tiles manufactured. (iii) That huge amount of extra cash was alleged to be received by the manufactures of Frit through Shroffs and Angadias. That this extra cash was generated by selling the Ceramic tiles at much hig .....

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roffs and Angadias. (iv) That the most common method used for collecting cash was through bank accounts of ICICI and HDFC Banks. That certain Shroffs opened bank accounts in the name of large number of fictitious trading firms upon the instructions of Shroffs and these amounts used to be handed over either the manufactures directly or to their dedicated persons. (v) That in order to keep the manufacturing cost of Tiles low in the sale invoices, the manufacturers of tiles were also procuring a nu .....

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l hold that appellants have cleared/sold the frit prior to February/March 2008 by using different product codes to make it appear that there were various varieties of frit and these varieties were sold at different prices. That the same quality of frit was sold to lesser known tile manufactures at lower price but was sold at higher prices to reputed tile manufactures. (xiii) That the Adjudicating authorities have relied upon one unofficial ledger recovered from M/s. Comet Ceramics (Comet)(A cera .....

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y the investigation that the extra cash/amounts so collected were paid directly to the appellants on behalf of Comets dealers. (xv) That Revenue has also placed reliance on two Pen Drives recovered from M/s. Sanyo Cera Tilesrecorded (SANYO), which are stated to have been opened in the presence of Director of SANYO Cera Tiles under various Panchnamas. That one of these pen drives contained a folder AJTAK which is stated by the adjudicating authorities to include extra cash payments made to variou .....

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. Revenue relied upon the statements of the manufactures of frit that for manufacturing 1MT of frit a specific quantity of Natural gas is required by frit manufacturers which is claimed by lower authorities to have been admitted by frit manufacturers. Applying the average quantity of Natural gas consumed it is estimated by Revenue that there is also huge clandestine removal of frit by the Frit manufactures which is claimed to be supported by the Ajtak Ledger maintained by SANYO. (xvii) That it i .....

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impugned orders-in-original and remand order dated 31.3.2014 in appeal Nos. E/893 & 894/2011 of this bench, Learned Senior Advocate appearing on behalf of the appellants made the following submissions during the course of hearing as well as through written submissions filed from time to time:- (i) That all the statements of the witnesses relied upon by the Adjudicating authority should be tested under an examination as per the express language of Section 9D (1) of the Central Excise Act, 194 .....

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tion of the key witnesses is not given as per Section 9D and the above judicial pronouncements, than those statements can not be relied upon documents and have to be discarded as having any evidentiary value. (ii) That the statements given by the appellants were retracted later by affidavits during adjudicating proceedings and can not be relied upon. (iii) That clandestine removal can not be held to be established if no enquiries are conducted regarding unaccounted raw materials purchased and ut .....

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amination of Shri S.K. Katiyar, Superintendent, DGCEI before the Adjudicating authority in remand proceedings of Wellsuit Glass & Ceramics Pvt. Limited vs. CCE & ST, Vadodara [2014 (304) ELT 618 (Tri. Ahmd.)]. (v) That data contained in the folder AJTAK cannot be used for loading value of all the frit manufacturers due to improper Panchnama as held by Apex Court in A. Tajuden vs. UOI [2015 (317) ELT 17]. (vi) That cross-examination of the third parties like, Tile Manufacturers has not be .....

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authorities. (viii) That corroboration of an evidence can only be done on the basis of evidences which itself is credible and conclusive. That no inference can be drawn on the premises which are themselves inconclusive and based on conjectures, in view of:- (a) Sitaram Sao vs. State of Jharkhand [2007 (12) SCC 630] (b) R.K. Tomar vs. CC [2008 (228) ELT 232 (Tri.)] That evasion of duty cannot be worked out on the basis of Natural Gas Consumption only by making presumptions and assumptions as hel .....

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es obtained from pen-drives SANYO stands discredited by the facts which have emerged in cross-examination in the case of appeal filed by Wellsuit Glass & Ceramics Pvt. Limited. Learned Senior Advocate made the bench go through the cross-examination of Shri M. Patel, Director of M/s. Sanyo Cera Tiles Pvt. Limited, held on 29.10.2014 that he was only 12th standard pass and not very well conversant with English Language. That as per cross-examination of Shri V.M. Thakkar, Superintendent, DGCEI .....

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le manufacturers to the frit manufacturers. Learned Senior Advocate brought to the attention of the bench contents of Para 9.3.3 of the adjudication order in the case of Belgium Glass & Ceramics Pvt. Limited to highlight that ₹ 38,95,868/- has been calculated by the investigation to have been collected and sent by Shroffs and Angadias for various frit manufacturers but it is not further determined as to how much was given to each frit manufacturer, which is a pre-condition for making a .....

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ral steps to reduce the consumption of gas on the lines stated in Para 3.2 to 6 of the order passed this bench in the case of Wellsuit Glass & Ceramics Pvt. Limited vs. CCE & ST, Vadodara - (supra). Learned Senior Advocate made the bench go through the relevant paras of CESTATs order dated 31.3.2014 of this order to bring home the point that in Para 6 of this case law, CESTAT has already opined that the manner of calculating frit quantity manufactured based on gas consumption was not cor .....

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there is no basis in presuming that electricity consumption would be uniform per MT of frit manufactured when appellant is manufacturing different verities of frit which need different rounds of firing. Learned Senior Advocate also pointed to the data in annexures to show cause notices that there is vide variation in use of electricity and gas consumption even as per records maintained by appellant, which gives authenticity to the gas consumption records of the appellants. (xiv) That method of e .....

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be discarded as proper piece of evidences. (xvi) That in the realm of transaction value under Section 4 of the Central Excise Act, 1944, there could also be different sale prices for the same product, depending upon the quality of finished goods contracted, long term association with the buyers etc. That slight variation in selling prices can not be made as the basis for enhancing assessable value of transaction and that too at the highest of such transaction value. (xvii) That no excess/ short .....

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uniformity in the language/ contents of the statements. (xviii) That allegations are wrongly made by the Adjudicating authorities that only 7 to 8 raw materials are major and that only these major raw materials effect the price of the product. It was his case that the cost of minor materials (more than 20) used in making of frit can not be ignored as a minor raw material could be very costly and make a difference in the price of the finished frit and the ceramic tiles manufactured. (xix) Based .....

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dditional consideration to M/s. Wellsuit Glass. In this regard appellant relied upon the case law, A.Tajuden vs. UOI [2015 (317) ELT 177 (SC)] (c) That evidential value of AJTAK printout taken from pen-drives of SANYO and CD can not be admitted as per cross-examination done in the de-novo proceedings of Wellsuit Glass and the facts which came into light. (d) That quantity of natural gas consumed for making 1MT of frit was based only on a single days experimentation when only one product code was .....

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tion as mentioned in Para 3.2 and 6 of the remand order dated 31.3.2014, in the case of Wellsuit Glass & Ceramics Pvt. Limited vs. CCE & ST, Vadodara (supra). It was specifically submitted by the Advocate of the appellants that such modernization/ changes were also undertaken by other manufacturers to reduce the gas consumption for better market competition, profitability and survival. It was strongly argued by the learned Senior Advocate that quantity for clandestine clearances can not .....

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e Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. That for determining the capacity of frit manufacturing Kilns, no notification under Section 3A of the Central Excise Act, 1944, has been issued to calculate deemed clearances as attempted by the investigation. (h) That remand order in the case of Wellsuit Glass & Ceramic Pvt. Limited vs. CCE - [2014 (304) ELT 618 (Tri.)] has not been challenged by the Revenue in any manner. 2.2 Shri J.C. Patel (Advocate) app .....

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garettes Limited vs. CCE [2009 (242) ELT 189] in the written submissions to argue that cross-examination of witnesses was not given as per Section 9D of the Central Excise Act, 1944 which is akin to Section 138B of the Customs Act, 1962. That the increase in the price of frit after April 2008 was because appellants started manufacturing DFFF (Double Fast Firing Frit) which is higher quality frit. That, same product code can also be sold at different transaction values depending upon the market c .....

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Shri Willingdon Christian (Advocate) on behalf of his clients adopted the arguments made by other advocates and also filed written submission. In the written submission it was argued that the records of M/s. Prime Ceramics Pvt. Limited [Appeal No. E/672-674/2011] ware audited in February 2006, June 2007, September 2009 and no irregularity in the records and documents was ever noticed. 3. Shri P.R.V. Ramanan (Special Counsel) appearing on behalf of the Revenue, during the course of hearings as w .....

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verted by the traders of ceramic tiles to the frit manufacturers and that such tile manufacturers also used force against the departmental officers for which police cases were also registered against the tile manufacturers separately. (ii) That the tile manufacturers were also purchasing raw materials at lower prices to keep the cost of tiles low. That Frit was one such raw material for tile manufacturers which was obtained at lower invoice price and frit manufacturers were compensated by cash p .....

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g the course of investigations that they were receiving frits at a lower invoice price and the differential amounts over and above the invoice price were sent to frit manufacturers through hawala etc. That frit manufacturers have also admitted undervaluation and clandestine removal and receipt of cash over and above the invoice prices. That statements of dealers, Shroffs and Agandias also corroborate that excess cash was handed over to the frit manufacturers either through Shroffs/ Angadia or di .....

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es took an inordinately long time to file their reply thus delaying the adjudication process. iii) No satisfactory case was made out justifying cross examination o the individual witnesses. iv) In most of the cases, the witnesses produced the records maintained by them or their firm and merely explained the entries made therein. Thus, they were only providing information on true facts relevant to the cases. v) No counter evidence was produced to rebut such documentary evidence. vi) Statements of .....

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firm and merely explained the entries made therein. That witnesses were only providing information on true facts relevant to the cases and in such circumstances, grant of cross-examination was really not necessary. 3.2.2 That notwithstanding the above submissions, a reference to the Order dated 31/3/2014 of this Honble Bench in the case of Wetsuit Glass and Ceramics P Ltd. Would be relevant here. In that case with similar facts, the matter was remitted for de novo adjudication after affording t .....

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ly entire request for cross examination of witnesses is without any substance. 3.2.3 That it is pertinent to note that during the hearings held on 3/7-4/2015, the appellants did not press for remanding the matters for the purpose of affording cross examination. It was suggested that the statements are to discarded. There is no legal or factual justification for the same. As argued below. 3.2.4 That Adjudication authorities have held that the statements given by various witnesses, including Notic .....

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related to frit were never retracted. (iv) There is no dispute as to the recovery documents from the Noticees, wherever such recovery was made. (v) No evidence has been produced to establish that the statements were given under threat or duress. That in response to some inconvenient questions, the manufacturers maintained silence and in some cases, the deponents refused to offer any explanation to a fact which stared at their face. This clearly indicated that they were not under duress or threa .....

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There is no specific allegation of threat/coercion. (vi) Statements were recorded by different officers and on different dates spread over a long period of time. (vii) Facts as brought out in the statements find corroboration in the documentary evidence. (viii) It was purported in quite a few cases that affidavits stating the inculcator portions of the statements were not true and were given under duress, were executed/affirmed soon after the statements were given. Such purported retractions, i .....

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2.5 That the following case laws support the argument of the Revenue that retractions made by the appellants in the present proceedings are not acceptable. (a) M/s Agarwal Overseas Corporation vs. Commissioner of Customs, Mumbai, reported in [2009 (248) ELT 242 (T-Mumbai)]. (b) M/s Em Pee Bee International Vs Commissioner of Central excise, Chennai, reported in 2008 (229) ELT 704 (Tri. Chennai), (c) CCE, Mumbai vs. Kalvert foods India Pvt. Limited 2011 (270) E.L.T. 643 (S.C.), (d Thermotech vs. .....

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gs, Section 9D can be utilizedby the adjudicating authorities. This provision makes it clear that a statement given by a person who is dead or who cannot be found or who is incapable given evidence or who is kept out of the way by the adverse party or whose presence cannot be secured without unreasonable delay or incurring unreasonable expense. Thus, this is essentially a facilitating measure to help achieve finality as well as justice in any proceedings given the specified set of circumstances. .....

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as relevant is not sound. It is well accepted that in adjudication proceedings there is no requirement of examination-in-chief and admission of each piece of evidence. (iii) In the instant cases, Section 9D has not been invoked. But for reasons recorded in the Orders the adjudicating authorities have formed an opinion to deny cross examination of witnesses. While this opinion may be set aside by the appellate authority for violation of principles of natural justice but denial of cross-examinatio .....

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014 (3090 ELT(165) have remitted the case for fresh consideration by the Commissioner/ Tribunal but have not eschewed consideration of the evidence. Therefore, if denial of cross examination is the bone of contention, the appellant can seek a remand but there is no case for discarding the statement as not relevant. 3.3 That an important issue common to all the Appeals is the admissibility of the Ledger called Ajtak maintained by the manufacturer of tiles, namely, Sanyo Cera Pvt. Limited, (SANYO) .....

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be with lac. It may also be conceded that some confusion has arisen in the name of the Panch witness but an important fact to be reckoned with is that when cross examined in the de-novo adjudication proceedings, relating to Wellsuit Glass and Ceramics Pvt. Limited, Shri Mital Bhikabhai Patel, Director of SANYO, did not specifically dispute the recovery of the Pen-drive from SANYO or raise any doubt about the Pen-drive having been substituted or dispute the content of the Pen-drive. Nor has he s .....

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learly a record kept by Sanyo in the normal course of business. Comparison with invoices issued by Frit manufacturers establishes the authenticity of Ajtak. Thus, the AJTAK Ledger retains its evidentiary value. Further, incriminating private records were recovered from 8 out of 14 frit manufacturers. Entries therein corroborated the practice of undervaluation and clandestine activity as revealed by the AJTAK ledger. In respect of 2 other frit manufacturers records similar to AJTAK were seized fr .....

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essee, for delivery at the time and place of the removal, the assessee and the buyer are not related, and the price is the sole consideration for the sale, be the transaction value. By definition, a necessary concomitant of the transaction value is that the price should be the sole consideration for the sale. Thus, where additional consideration by way of cash flowed from the buyer to the assessee and the same was required to be paid by the buyer to the assessee, over and above the invoice price .....

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tional consideration and added to the invoice process as has been done in the individual cases herein. 3.4. That the question of estimating actual production of frit by taking natural gas consumption per 1 MT of frit as the norm came up for consideration in the case of Wellsuit. Significantly enough, this Honble bench has, in its order dated 31.03.2011 [2014 (304) ELT 618 (Tri.-Ahmd)] expressed no objection to consider the norm of gas consumption to arrive at the production of frit. The Honble b .....

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14 frit manufacturers units estimation on the basis of natural gas consumption/ PMT has been applied only with respect to 10 appellants as follows:- S No. Appellant Criteria adopted per 1 MT of frit 1. Supreme Consumption norm of 350 SCM (Lowest Avg.) based on data furnished was considered. This matched with the norm suggested by the management. 2. Vishwa Consumption norm of 273.8 SCM as suggested by the management was considered. Consumption norm SCM (Lowest Avg.) based on data furnished howev .....

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suggested by the management was 500. 7. Futura Consumption norm of 307.34 SCM based on observing a days production in respect of selected varieties of frit was considered. The norm suggested by the management was 310. 8. Wellsuit Consumption norm of 389 SCM based on test run in respect of selected varieties of frit. This was accepted by the management. Lowest Average consumption as per data furnished was seen to be 318 SCM and the same was taken as the norm. 9. Zirconia Consumption norm of 438 S .....

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suggested by the management was applied. In all other cases, Lowest Average consumption as per data furnished was applied; in fact in respect of S. Nos. 1,2,5,6,7 and 10, this norm matched with the estimate given by the management or was close to it. Apparently, the factors applicable to each factory have been taken into account since reported consumption was as per verifiable data obtained from GAIL/ONGC etc. If one uniform criterion is to be applied then the Lowest Average consumption as per .....

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Manilal Bhanabhai Patel vs. UOI [1992 (60) ELT 99 (Guj.)] (v) Rishikesh Singh vs. The State of Uttar Pradesh - [AIR 1970 All 51] (vi) Gulabchand Silk Mills vs. CCE, Hyderabad-II [2005 (184) ELT 263 (Tri. Bang.)] 5. Heard both sides and perused the case records and the written submissions filed by either sides. The issues involved in appeals No. E/1016 to 1019/2011 mentioned at Sr. No. (xviii) to (xxi) of Para 1 is regarding clubbing of clearances of more than one units on the basis of consumpti .....

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order for fixing another date for hearing by issuing notice to both sides. 5.1 Appeals Nos. E/1926 to 1928/2010, E/534 to 535/2011, E/672 to 674/2011, E/751 to 752/2011, E/796 to 798/2011, E/13289 to 13290/2014, E/13646 to 13647, E/13720 to 13721/2014 and E/12386 to 12387/2014 are those where clandestine clearance of goods have been worked out on the basis of average consumption of natural gas used in the manufacture of Frits. In addition, value of grit manufactured by these manufacturers is pr .....

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ng pads recovered but no clandestine clearances have been estimated by investigation on the basis of average consumption of natural gas as done in the case of appeals mentioned in Para 5.1 above. 6. In these proceedings the following issues are required to be deliberated upon:- (i) Whether the appellants mentioned in Para 5.1 above have indulged in clandestine manufacture and clearance of Ceramic Glazed Mixture (Frit), in view of the adjudication orders passed the adjudicating authorities on the .....

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9D of the Central Excise Act, 1944 read with the judicial pronouncements on the issue? 7. For the purpose of point No. 6(i) above and clandestine removal of frit by the frit manufacturers adjudicating authorities have mainly relied upon average consumption of natural gas for manufacturers one MT of frit by taking data either from the appellants or by conducting some gas consumption studies. Besides certain studies/ data with respect to average packing time taking for filling of finished goods ( .....

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63 SCMs to 484 SCMs were fixed for different appellants and were considered by the Adjudicating authorities for calculating/ confirming the demands and imposing penalties. Following observations have been made by the Adjudicating authority in the case of Belgium Glass & Ceramics Pvt. Limited (Appeal Nos. 796 to 798/2011) in paras 24.4.4, 24.5.4 and 24.5.5 while passing OIO No. 05/VRC-1/MP/2011 dated 23.03.2011 and justifying the calculations/ estimations made by Revenue:- 24.4.4. Thus, even .....

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1333.200 MTs. 24.4.5. The above production of M/s. Belgium is fully substantiated from the Annexure F referred supra, wherein it is observed that during a period of 18 months out of the total 65 months covered therein, they have reported production of frit exceeding the quantity of 1300 MTs. In fact, during the month of July 2005, the recorded production quantity was 2574.500 MTs with a total gas consumption rate of 370.557 SCM per MT, which clearly reveals that the aforesaid calculated capacity .....

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red for manufacturing 50 Kgs of frit was 8 minutes, i.e. 100 Kgs in 16 minutes and 1 MT in 2 hours 40 minutes. This reveals that one Kiln can manufacture 10 MT of frit per day of 24 hours, which means that the total quantity of frit produced by M/s. Belgium with their 5 Kilns is 50MTs per day. Thus, it is observed that normal quantity of frit which could be produced in the factory of M/s. Belgium by using 5 Kilns at a time, would be 1500MT per month. 24.5.5 Comparison of the monthly production o .....

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awn in respect of their production capacity is factual. In order to have an idea on the quantum of the suppression of production by M/s. Belgium Col. No. 7 has been added to the Annexure-F which indicates the difference of quantity accounted for in the official records as against the average production of 1500MT per month. The chart indicates that except during a period of 7 months, the monthly average production noticed during the aforesaid Panchnama dated 26.09.2009 exceeded the quantity accou .....

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s also been fairly mentioned by the adjudicating authority that in certain months the production of this appellant was also more than 1500MT. Adjudicating authority has only seen one side of the coin that a production of more than 1500MT is possible, therefore a capacity of around 1300MTs is justified. The other side of coin will be that appellant has also reflected a quantity of more than 1500MTs of Frit manufactured per month in the records. Such a depiction in the books of accounts gives a ce .....

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9, gas consumptions of 383.715SCM and 321.959 SCM for manufacturing one MT have also been indicated in the records of the appellants alongwith higher consumption of gas. It is not understood as to why an arbitrary figure of 450SCM per MT is required to be taken for estimating the production/ clearance of finished goods Frits. In the same Annexure-F the units of electricity consumed in certain months is less than 55 units and is even as low as 40.153 units. The above data of the appellant contain .....

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alleged to have been transferred to the appellants across the country. There is also no evidence of excess procurement of raw materials. It is also claimed by the appellants that calorific value of the gas supplied by GAIL vary in GCV (Gross Calorific Value) and NCV (Net Calorific Value) which also effect consumption of gas alongwith the type of frit grade manufactured. It is observed from the ground (d), of the grounds of appeal filed by M/s. Belgium Glass & Ceramic Pvt. Limited, in the ca .....

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xamination of the witnesses is extended to the appellants. 8.2 In the remaining cases also where clandestine clearances have been estimated on the basis of natural gas consumption, there is no evidence of excess raw material purchased by the appellants. No shortages/ excess of raw materials or finished goods have been detected any where during the investigations. In none of the cases there is any seized cash or seizure of clandestinely removed finished goods during transportation from the factor .....

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e Revenue, this Tribunal and Honble High Court of Gujarat had taken a view that there was no need to prove such clandestine clearance with mathematical precision. These were cases where evidence was available regarding unaccounted duty paid goods being found, shortage of finished goods found and evidence regarding supply of raw materials and receipt of commission by brokers, which were all tangible evidence of clandestine clearances. It was further submitted by the ld. Senior Advocate that the c .....

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which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) Raw materials, in excess of that contained as per the statutory records; (b) Instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) Discovery of such finished goods outside the factory; (d) Instances of s .....

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ts recovered during the search and activities being carried on in the factory of production; etc. Needless to say, a precise enumeration of all situations in which one could hold with activity that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of note .....

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3-5-2013, was reported in the issue of the E.L.T., dated 29-7-2013, when the present case was being argued before us, perhaps, not available to the parties. However, we have, in that decision, applied the law, as laid down in the earlier cases, some of which now have been placed before us. The crux of the decision is that reliance on private/internal records maintained for internal control cannot be the sole basis for demand. There should be corroborative evidence by way of statements of purcha .....

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ed, the matter was referred to a third Member, who held that clandestine manufacture and clearances were not established by the Revenue. We are not going into it in detail, since the learned Counsels on either side may not have had the opportunity of examining the decision in the light of the facts of the present case. Suffice it to say that the said decision has also tabulated the entire case-law, including most of the decisions cited before us now, considered them, and come to the above conclu .....

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hould be some evidence of huge quantities of raw materials being purchased. The demand was set aside in that case by this Tribunal. 8.3 Appellants have also relied, inter-alia, on the judgment of Allahabad High Court in the case of CCE, Meerut-I vs. RA Castings Pvt. Limited [2012 (26) STR 262 (All.)], which is upheld by the Hon'ble Supreme Court as reported in 2011 (269 ELT A108. The facts of this case and the orders of the Allahabad High Court is as follows:- [Order]. - These appeals under .....

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the returns and paying the central excise duties. The Superintendent issued the show cause notices dated 1-12-2006 asking the respondent to show cause why the demand towards central excise duty may not be confirmed for the period from 2001-02 to 2004-05 by invoking the proviso to Section 11A(1) of the Act and why the penalty should not be imposed under Rule 25(1) of the Central Excise Rules, 2002 read with Section 11AC of the Act. Various allegations have been made in the show cause notices and .....

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by the impugned orders, the respondents filed appeals before the Customs, Excise & Service Tax Appellate Tribunal, New Delhi. The Tribunal observed that it is settled principle of law that the electricity consumption can not be the only factor or basis for determining the duty liability, that too on imaginary basis, especially when Rules 173E mandatorily requires the Commissioner to prescribe/fix norm for electricity consumption first and notify the same to the manufacturers and thereafter .....

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from one heat to another and from one date to another and even from one heat to another within the same date. Therefore, no universal and uniformly acceptable standard of electricity consumption can be adopted for determining the excise duty liability that too on the basis of imaginary production assumed by the Revenue with no other supporting record, evidence or document to justify its allegations. The Tribunal has also considered the report of Dr. Batra, which has been relied upon for making .....

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tly contested by the appellants that frit manufactured is not covered by any notification issued under Section 3A of the Central Excise Act, 1944 where Compounded Levy has been prescribed and capacity of the unit is required to be fixed on gas consumption basis, as done by the Revenue. It is observed that Revenue has attempted to adopt an estimation method for demanding duty and proving clandestine removal which is not prescribed by law. 8.5 In the case of appellant M/s. Wellsuit Glass & Cer .....

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upra) are reproduced below:- 3.2 With regard to consumption of gas, learned Advocate relied upon the statements of Shri Balkrishna M. Thakkar, Managing Director, that the consumption of gas would vary on the quality of frit, raw material used, condition of Kiln, gas pressure, fluxes used, etc. It was thus argued that there are various factors which affect the consumption of gas and there cannot be a fixed ratio of consumption of gas for a specific frit output. He also argued that in October, 200 .....

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and generating set. It was due to these efforts that the ratio of gas consumption from 2008-09 onwards went down from 844 SCM/MT to 286 SCM/MT as indicated in Para 13.2 of order-in-original dated 10-5-2011. That before 2008 there was no generator available with appellant and every time there was a power failure, large quantities of gas was used in re-firing the Kiln. He produced documents relating to installation of DG Set. He referred to the purchase bills to show superior quality of refractor .....

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lass is very high and other materials called fluxes are added, as per expert consultations, to lower melting point such as borax, boric acid and zinc oxide, etc. That when fluxes are used, the melting point required for manufacture of frit is reduced. Learned advocate referred to extracts from the book, Industrial Ceramics by Felix Singer and the book Glassing and Decoration of Ceramics Tiles by Autorivari and extracts from the journal. Ceramic Industry, January, 2000 as well as various extracts .....

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(292) E.L.T. 580] 4 .. 5 .. 6. On the issue of clandestine removal of frit, based on the gas consumption of the main appellant, it is observed from Para 13.2 of the order-in-original dated 10-5-2011 that records maintained by main appellant show the gas consumption for making 1 MT of frit from 844 SCM to 286 SCM. It has been contested by the appellant that gas consumption varied from season to season, from one quality of frit to other quality of frit, use of better technology, etc. It has also b .....

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y the main appellant. Under the above factual matrix, the method used by the investigation cannot be a sound method to demand duty on assuming 318 SCM of gas required for manufacturing one MT of any quality of frit. The improper method adopted by the Revenue for calculating duty was agitated by the appellants before the adjudicating authority as per Para 4(xi) to (xxxiii) of the order-in-original dated 10-5-2011. It is observed that during conducting of gas consumption studies on 23/24-2-2010 by .....

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tions made by this Bench it has already been held that method adopted by the investigation to estimate clandestine removal of finished goods is not sound and has to be discarded. However, Revenue was given an opportunity to strengthen their case by corroborating evicence with some more factual data from additional studies. No appeal has been filed by the Revenue against the above order passed by this Bench. It is also observed from 3.2 of the remand order that appellant has made certain changes .....

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by other appellants. No findings have been given by the Adjudicating authorities in countering the claims of the appellants, justifying the modernization done to reduce consumption of gas from time to time. No expert opinion has been obtained by the Revenue to challenge the gas consumption pattern adopted by the appellants to indicate that claim of the appellants was wrong. 8. In view of the above observations and judicial pronouncements, methodology adopted by the Adjudicating authorities in e .....

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nufacturers. Appellants have argued that the print-out taken from the pen-drive AJTAK XYZ are not admissible as a piece of evidence as the same are not the documents admissible as evidence under the relevant Section of the Central Excise Act, 1944. It was also argued by the appellants that the number of Panchnamas recorded and the opening of the said pen-drive clearly suggest that the data recovered from the pen-drive is highly objectionable, suspicious and not acceptable. It is observed from th .....

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mitted by Shri Thakkar that as he remembers the seized pen-drive was placed in a paper cover and sealed with adhesive tapes. It is the claim of the appellants that the way the said pen-drive was handled, it is possible that the same could be tempered with as the same was kept in the paper cover sealed with adhesive tapes. A second Panchnama was made on 30.8.2008 where the said pen-drive was mentioned to have been taken out of a sealed cover when the first Panchnama never mentioned keeping the sa .....

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in Tally Folder which is the relied upon as Aajtak XYZ. There is a strong force in the arguments made by the appellants that when no data was found in Tally folder on 06.9.2008, how the relied upon documents got generated on 12.09.2008. Shri V.N. Thakkar, Superintendent in his cross-examination explained the reason for non retrieval of data on 06.9.2008 to be due to operational lack, but he admitted that no mention of any operational lack is made in the Panchnama dated 06.9.2008. Further, it is .....

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ended that Revenue had not followed the procedure as stipulated in Section 36B of the Central Excise Act, 1944. In view of the above discrepancies the authenticity and veracity of data retrieved by investigation from the silver pen-drive is not reliable and can not be accepted as a piece of evidence in deciding the case of undervaluation and clandestine removal against the present appellants with respect to point mentioned in Para 6 (ii). 10. So far as the question mentioned at Para 6(iii) regar .....

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ts relied upon the following case laws:- (i) J.K. Cigarettes Limited vs. CCE [2009 (242) ELT 189 (Del.)] (ii) CCE, Allahabad vs. Govind Mills Limited - [2013 (294) ELT 361 (All.)] (iii) Basudev Garg vs. CC [2013 (294) ELT 353 (Del.)] (iv) Swiber Offshore Construction Pvt. Limited vs. Commissioner of Customs, Kandla [2014 (301) ELT 119 (Tri. Ahmd.)] 10.1 Section 9D of the Central Excise Act, 1944 is reproduced below:- 9-D. Relevancy of statements under certain circumstances - (1) A statement made .....

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r expense which, under the circumstances of the case, the Court considers unreasonable; or (b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. (2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceedings under this Act, other than a proceeding before a Cou .....

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ar ground, as stipulated in the said Section, exists and is established; (iii) such an opinion has to be supported with reasons; (iv) before arriving at this opinion, the authority would give opportunity to the affected party to make submissions on the available material on the basis of which the authority intends to arrive at the said opinion; and (v) it is always open to the affected party to challenge the invocation of provisions of Section 9D of the Act in a particular case by filing statuto .....

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the provisions of Section 9D (1)(b) of the Central Excise Act, 1944, read with the judicial pronouncements relied upon by the appellant every adjudicating authority should call the witnesses when requested by the party against whom those statements are to be used. If by making efforts for a few occasions the witnesses summoned do not appear than automatically the case could be mature for accepting the statements as admissible evidences under Section 9(D)(1)(a) of the Central Excise Act, 1944. H .....

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arettes case (supra) has also been followed in series of other judgments. No such rejection orders were given by the adjudicating authorities separately. Hon'ble Supreme Court in the case of UOI & Anr. vs. GTC India and Ors in order dated 03.01.1995 arising out of SLP (C) No. 218131/1994 has already laid the following ratio: Special leave granted. Heard. The impugned order dated 05.9.94 has to be read alongwith Section 9D of the Central Excise and Salt Act, 1944. SO read, there is no inf .....

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x court very recently held as follows on admissibility of statements and cross-examination:- 16. Having given our thoughtful consideration to the aforesaid issue, we are of the view that the statements dated 25-10-1989 and 26-10-1989 can under no circumstances constitute the sole basis for recording the finding of guilt against the appellant. If findings could be returned by exclusively relying on such oral statements, such statements could easily be thrust upon the persons who were being procee .....

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h are now sought to be relied upon by the Enforcement Directorate, to substantiate the charges levelled against the appellant. We shall now endeavour to examine whether there is any independent corroborative evidence to support the above statements. 17 & 18 .. .. 19.? We shall now deal with the other independent evidence which was sought to be relied upon by the Enforcement Directorate to establish the charges levelled against the appellant. And based thereon, we shall determine whether the .....

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azar was attested by two independent witnesses, namely, R.M. Subramanian and Hayad Basha, would not led credibility to the same. Such credibility would attach to the mahazar only if the said two independent witnesses were produced as witnesses, and the appellant was afforded an opportunity to cross-examine them. The aforesaid procedure was unfortunately not adopted in this case. But then, would the preparation of the mahazar and the factum of recovery of a sum of ₹ 8,24,900/- establish the .....

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recovery of ₹ 8,24,900/- from his residence, but that acknowledgment would not establish the violation of Section 9(1)(b) of the 1973 Act. In the above view of the matter, we are of the opinion that the execution of the mahazaron 25-10-1989, is inconsequential for the determination of the guilt of the appellant in this case. In view of the above, by not allowing the cross-examination of the relied upon witnesses under Section 9D of the Central Excise Act, 1944, the evidentiary value of suc .....

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ested in Central Excise Valuation Rules even if all the statements/ documents relied upon by the Revenue are presumed to be correct admissible as evidences. 12. Before giving observations on this argument raised by the appellants, it will be relevant to glance through the relevant portion of the provisions of Section 4 of the Central Excise Act, 1944 alongwith definition of transaction value:- 4. VALUATION OF EXCISABLE GOODS FOR PURPOSES OF CHARGING OF DUTY OF EXCISE. (1) Where under this Act, t .....

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escribed. (2) . (3) . (a) . (b) . (d) transaction value means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to , or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertise or publicity, marketing and selling organi .....

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ather the case of the Revenue on valuation is that certain additional consideration coming to the appellant by way of cash flow from the tile manufacturers to the frit manufacturers is required to be added to the assessable value. In the present circumstances and factual matrix the exact amount of such additional consideration was required to be determined for addition to the transaction value even if all the statements and documents were held to be admissible evidence and satisfied the test of .....

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/13720/2014 and E/534/2011 have also not admitted during investigation that they have received any additional consideration. In other appeals on the issue of undervaluation investigation attempted to show the flow back of such additional cash flow through the statements of ceramic tile manufacturer and the statements of Shroffs and Angadias. The amount so worked out has been worked out to be ₹ 38,95,860/- as per the statement of Shri Jayesh Patel, Prop. Of M/s. Kevel mentioned in Para 9.3. .....

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