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2015 (6) TMI 373 - CESTAT NEW DELHI

2015 (6) TMI 373 - CESTAT NEW DELHI - TMI - Duty demand - Clandestine removal of goods - Held that:- Entries regarding despatches of Saria II in the daily receipt and despatches sheets recovered from the factory premises have to be treated as clearances of TMT bars only as the price of Saria I and Saria II is same, while TMT Bar is much costlier that the CTD bar and, therefore, the appellants claim that Saria II despatches are the sales of CTD bar by M/s Meenakshi Steel made from the appellants .....

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imation had been given by the appellant company to the Jurisdictional Central Excise Authorities regarding receipt of duty paid CTD bars from outside and their sale from the factory.

Appellants plea made long after the issue of show cause notice and even the after conclusion of the personal hearing that the despatches of Saria II, as reflected in the daily receipt and despatch sheets recovered from the factory, are the sales of CTD bars made by a group trading concern M/s Meenakshi S .....

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facture of TMT bars and after taking into account 8% burning loss, the bars estimated to have been manufactured are 202.888 MT on which the duty liability is ₹ 6,77,061/-. In view of this, we hold that duty demand of ₹ 6,77,061/- has also to be upheld.

Merely on the basis of power consumption norm which has not been determined by actual experiment, duty demand against an assessee cannot be confirmed when there is no corroboration experiment regarding receipt of unaccounted .....

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S., Member (Judicial),JJ. For the Appellants : Shri R. Santhanam and Bharat Agarwal, Advocates. For the Respondent : Shri Ranjan Khanna, Authorized Representative (DR) ORDER Per. Rakesh Kumar :- The facts leading to filing of these appeals are, in brief, as under. 1.1 M/s Shree Sharma Steel Rolling Mills Pvt. Ltd., Industrial Area, Jhotwara, Jaipur (hereinafter referred to as SSSRM) are manufacturers of TMT bars and rods chargeable to Central Excise duty under Chapter Heading 72.14 of the Centra .....

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which were taken over under a resumption memo detailing the taken over documents against Sl. No. 1 to 21. Subsequently, while taking round of the factory, some records kept in a lag were recovered from a room in the factory and these records appeared to be containing despatch sheets of bars and receipt of MS Ingots and also hand-written ledger books pertaining to the period from April 2005 to September 2005 (upto 08/09/05). These documents were also taken over by the Central Excise officers und .....

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d purchase of raw material and other different transactions. 1.2 During scrutiny and examination of the various records of the unit taken over by the Central Excise officers on 10/09/05 it appeared that a file containing pages from 1 to 517 mentioned at Sl. No. 21 of the resumption memo was containing delivery orders and date-wise details of receipt and despatch i.e. daily receipt/despatch sheets for the period from 01/08/05 to 31/08/05. The daily receipt and despatch sheets were containing the .....

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2005) and also for the months of April 2005, May 2005 and June 2005. The entry regarding despatch of Saria, whether Saria I or Saria II contained details like date of despatch, vehicle number in which despatched, quantity, customers name as well as the rate. On inquiry with Shri Ghasi Lal Sharma about the documents recovered from the factory consisting of delivery orders, daily despatch and receipt sheets, Nakal Bahi, Roz Namcha and private ledgers, he in his statements dated 10/09/05 and 12/09/ .....

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o stated that they do not manufacture big gauge Saria which they cannot manufacture and in case of supply orders for big gauge Sarias, they purchase the same from other manufacturers. He, however, stated that there has been no such purchase of big gauge Saria from other manufacturers during the last six months as per his knowledge. Inquiry was made with Shri Murari Lal Sharma, General Manager of the appellant company and he in his statement dated 10/09/05 corroborated the statement of Shri Ghasi .....

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ments the daily receipt and despatch sheets were being prepared by Shri Murari Lal Sharma and the delivery orders were being signed by Shri Ghasi Lal Sharma. On the date of search on 10/09/05, the Investigating Officers were told by Shri Murari Lal Sharma that the private ledger/Nakal Bahi had been written by Shri Shiv Charan who is not present and that he will be produced the next day. Though the officers repeatedly asked Shri Ghasi Lal Sharma and Shri Murari Lal Sharma to produce Shri Shiv Cha .....

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Since, there was no explanation from Shri Ghasi Lal Sharma or Shri Murari Lal Sharma as to why there are no bills or invoices in respect of these clearances and since there were no Central Excise invoices issued in respect of these despatches, the officers were of the view that these goods had been cleared clandestinely without payment of duty. The Chart A, pertains to the clearances during the month of July 2005, Chart B, pertains to the clearances during August 2005, Chart C, pertains to the c .....

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duty which in respect of these goods was ₹ 7,22,15,192/-. The total value of the goods which appeared to have been cleared clandestinely was ₹ 45.55 crores. 1.5 From the daily receipt and despatch sheets and the private ledger book, the officers also compiled the details of the receipt of MS Ingots during the period from 1st April 2005 to 08/09/2005 and in this regard they prepared two charts Chart G and Chart H. While Chart G, is for receipt of MS Ingots during period from 1st Apri .....

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MS Ingots from various suppliers without any invoices and it appeared that this receipt of MS Ingots had not been accounted for. However, the Department does not demand duty on the basis of unaccounted receipt, but this unaccounted receipt is being used by the Department as an evidence in support of its allegation of unaccounted manufacture and clandestine removal of Saria by the appellant company during the period from April 2005 to 08/09/2005. 1.5.1 It was found that even after the search of t .....

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uring July 2005 and August 2005 the production of MS Bars (Saria) as recorded by the appellant company was 1682.6 MT and 2307.7 MT respectively and during these months their electricity consumption was 393188 units and 534874 units respectively. However, since in terms of the seized daily receipt and despatch sheets, during months of July 2005 and August 2005 there were unaccounted sales of 2529.86 MT and 2570.14 MT respectively of Saria, according to the Department the actual production during .....

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tion norm for the period from April 2002 to March 2005 and accordingly divided the total power consumption during the period from April 2002 to March 2005 by 102.09 MT and on this basis estimated the production of Saria, and on comparing the production estimated in this manner with the production of Saria during April 2002 to March 2005 period, as recorded by SSSRM in their records, it has been alleged that the balance amount not recorded in the Central Excise records had been manufactured and c .....

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appellant company under Section 11AC of Central Excise Act, 1944 and imposition of penalty under Rule 25 of the Central Excise Rules, 2002 on Shri Ghasi Lal Sharma and Shri Murari Lal Sharma. Since, the appellant company had paid an amount of ₹ 60 lakhs during investigation, the show cause notice also sought appropriation of this amount against the above-mentioned duty demand. 1.8 The above show cause notice was adjudicated by the Commissioner vide order-in-original dated 04/02/09 by whic .....

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penalty of ₹ 5,00,000/- was imposed on Shri Murari Lal Sharma under Rule 26 of the Central Excise Rules. Against this order of the Commissioner, these three appeals have been filed alongwith stay applications. 1.9 In respect of stay application filed by the appellants, the Tribunal vide order dated 08/12/11 had directed the appellant company to pre-deposit an amount of ₹ 6 crores for compliance with provision of Section 35F within the period specified in this order and report compli .....

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ing for the vacation of the stay on recovery. Honble Rajasthan High Court vide order dated 01/12/14 directed the Tribunal to decide the appeals as expeditiously as possible, preferably within the period of six months from the date of the order. In accordance with the above order of Honble Rajasthan High Court, these appeals were heard on 20th May, 2015 and 21st May, 2015. 2. Heard both the sides. 3. Shri R. Santhanam, Advocate and Shri Bharat Agarwal, Advocate representing the appellants made th .....

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all the despatch entries under the heading Saria II and in respect of which, according to the Department, there are no invoices, as clandestine removal of Saria. This allegation of the Department is without any basis, as all the despatch entries pertaining to Saria II are actually the sales of CTD bars which were not being manufactured by the appellant company, but were being purchased from other manufacturers. The sales of the CTD bars were being made by M/s Meenakshi Steels, a Proprietary conc .....

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d clearly stated that they do not manufacture the Saria of higher gauges and that whenever they receive an order for supply of such Sarias, the same are purchased from outside ; (d) from the very beginning, the stand of the appellant company had been that the its manufacturing capacity is 5 M.T. per hour. The appellant companys factory normally works in two shifts and, therefore, assuming that the factory has worked every day during the month, in two shifts its maximum production capacity would .....

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neers certificate certifying that the appellant unit manufactures only TMT bars and TMT bars are different in their physical properties from CTD bars and that the appellant unit has no facility to manufacture CTD bars. The despatch of Saria II mentioned in the despatch sheets are the clearances of CTD bars which had not been manufactured by the appellant, but had been procured from the outside and sold by the trading of M/s Meenakshi Steels ; (f) The Department alleges that during the period fro .....

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o September 2005 had received 5050 MT of unaccounted MS Ingots which had used on unaccounted production of Saria ; (g) The Apex court in the case of Kishin Chand Chela Ram vs. Commissioner of Income Tax reported in AIR 1980 SC 2117 and also in the case of Shalimar Rubber Industries vs. Collector of Central Excise, Cochin reported in 2002 (146) E.L.T. 248 has held that oral statement of the supplier regarding supply of certain goods to an Assessee cannot be used against that assessee without perm .....

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to the Commissioner for denovo adjudication as in respect of number of other allegations based on the statements of raw material supplier their cross examination had not allowed and certain records on which this duty demand is based have not been supplied and have not been verified for corroboration. (j) With regard to the duty demand of ₹ 16,38,63,265/- for the period from April 2002 to March 2005 based on the power consumption ratio of 102.09 MT, he pleaded that this power consumption ra .....

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ths, for which there is no justification. Moreover when the allegation of clandestine removal during July 2005 and August 2005 is without any basis, there is no justification for backing into account the clandestine clearances during these two months for determining the power consumption ratio. He also pleaded that other than the assumed power consumption of 102.09 MT, there is absolutely no evidence of any unaccounted purchase of raw material or evidence of clandestine removal for the period fr .....

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atches of Saria II to be the TMT bars manufactured by the appellant while Saria II sales are Sales of CTD bars purchased appellant company from M/s Meenakshi Steels from outside and supplied to various parties and, therefore, in respect of sales of Saria II there would be no service tax liability. He also pleaded that number of transactions of Saria II on commission basis, wherein the supply of CTD bars had directly supplied to the customers of M/s Meenakshi Steels and M/s Meenakshi Steels had o .....

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ning details of the despatch of the goods had been recovered from the custody of the Murari Lal Sharma, General Manager of the appellant company and on further examination various documents lying in the factory office of the appellant company had been recovered. These documents marked 1 to 21 had been taken over under a resumption memo. Subsequently while taking round of the unit with the Director a lag was found in one of the rooms of the factory and that lag was found to be containing the rece .....

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manufactured in the factory and purchase of raw material i.e. MS Ingots, beside several other documents. Both the statements dated 12/09/05 of Shri Ghasi Lal Sharma and Shri Murari Lal Sharma have not been retracted till date. These statements are admissible as evidence in view of judgment of the Apex court in the case of CCE, Mumbai vs. Kalvert Foods India Pvt. Ltd. reported in 2011 (270) E.L.T. 643 (S.C.). (2) The duty demand of ₹ 7,28,92,253/- against the appellant company is based on t .....

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aran who has written Nakal Bahi/Roz Namcha and private ledger but he has not been produced so far. Based on the entries regarding despatch of Saria II and scrap/ rejects in the daily receipt despatch sheets for which there are no invoices, the Investigating officers have prepared for the charts A, B, C and D. In these charts those entries have been included which are in respect of despatch of Sarias II and scrap/rejects in respect of which there were no invoices issued by the appellant company a .....

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of alleged clandestine removals during period from 1st September 2005 to 8th September 2005. Shri Murari Lal Sharma in his statement dated 02/8/06, after stating that he fully agrees with his statements given by him on 10/9/05, 21/9/05 and 28/9/05, on being asked about the Charts A, B, C and D stated that he fully agrees with the same and that he has compared the charts with the day book/delivery orders. As regards Shri Ghasi Lal Sharma, he in his statement dated 27/4/06 stated that he has seen .....

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of Saria despatches from the factory during September and the chart G & H are in respect of receipt of the MS Ingots during April 2005 to 08/09/2005 period. Shri Ghasi Lal Sharma in his statements dated 27/4/06 and 15/5/06 never stated that the despatch of Saria II on the basis of which the charts A, B, C and D have been prepared, pertain to the sales of CTD bars traded from the factory and similarly in the statements of Shri Murari Lal Sharma also while agreeing with the Charts A, B, C and .....

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nowledge there is no purchase of Saria during last six months and thus Shri Ghasi Lal Sharma in his statement has denied any trading activity in the factory during last six months. The Saria II sales are during this period only. (4) As regards the appellants plea that the production capacity of their rolling mills is 5 MT per hour, that they normally operate in two shifts and on this basis they cannot manufacture more than 2400 MT in a month, this plea had never been made before the original Adj .....

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search of the appellant companys premises on 10/9/05 it was found that M/s Nirmal Inductomelts Pvt. Ltd., Jaipur had despatched certain quantity of MS Ingots without any invoices out of which, after taking into account the burning loss, the appellant company would have manufactured 202.88 MT of MS Ingots. The duty demand of ₹ 6,77,061/- out of total duty demand of ₹ 7,28,92,253/- based on the documents recovered from the factory is on this basis. M/s Nirmal Inductomelts Pvt. Ltd. in .....

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table and is an afterthought for the reason that (a) both Shri Murari Lal Sharma and Shri Ghasi Lal Sharma in their statements recorded on 10/9/05 have stated that the documents recovered from the factory pertain to the goods manufactured and cleared from the factory and (b) in their subsequent statements Shri Ghasi Lal Sharma had admitted trading only in respect of the bigger gauges of the TMT bars which they do not manufacture and had also stated that there has been no purchase of any higher g .....

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more than CTD bars. Therefore, the claim of the appellant company that the despatch of Saria II are, in fact, the sales of CTD bars purchased by M/s Meenakshi Steels from other manufacturers is totally incorrect. (7) Shri Khanna also pointed out to the statements of Shri Shri Murari Lal Sharma and Shri Ghasi Lal Sharma wherein on being shown the charts A, B, C & D prepared on the basis of daily receipt and despatch sheets for the month of April 2005 and 08/09/2005 they had stated that these .....

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ted 23/5/07 and at the time of personal hearing on 19/6/07, 31/10/07, 27/5/08 the appellants never mentioned that the despatches of Saria II mentioned in the daily receipt and despatch sheets for the period from April 2005 to 08/09/2005 are actually the sales of CTD bars traded by the trading firm M/s Meenakshi Steels owned by Shri Ghasi Lal Sharma. Shri Khanna, therefore, pleaded that the duty demand of ₹ 7,28,92,253/- is on sound footing as it is based on concrete evidence on record. (9) .....

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05 is not disputed, the appellant had under reported the production of Sarias during these two months and actual production of Saria during these two months had been determined on the basis of the documents recovered from the factory i.e. daily receipt and despatch sheets. He, therefore, pleaded that on the basis of the actual production of Saria during July 2005 and August 2005 the power consumption ratio of 102.09 units per MT had been correctly determined and therefore there is no infirmity i .....

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period from 1st April 2005 to 08/09/2005, is based on the documents recovered from the appellants factory on 10/09/05 which consist of (a) delivery orders (b) daily receipt and despatch sheets and (c) Nakal Bahi, Roz Nama and private ledger. There is no dispute that the delivery orders are signed by Shri Ghasi Lal Sharma, Director of the appellant company or his nephew Shri Sharvan Sharma. The daily receipt and despatch sheets have been prepared by/signed by Shri Murari Lal Sharma, the General .....

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ch no invoices have been prepared are clandestine removal of the finished goods. The plea of the appellant is that the despatches of Saria II mentioned in the daily receipt and despatch sheets are in fact the sales of CTD bars made by a trading company M/s Meenakshi Steels owned by Shri Ghasi Lal Sharma and that Saria II are not the goods manufactured by the appellant. In this regard they refer to the bills/cash memo issued by M/s Meenakshi Steels which according to them had been recovered from .....

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their subsequent statements recorded on different dates over a period of about one year have never claimed that Saria II mentioned in the daily receipt and despatch sheets are CTD bars being traded by M/s Meenakshi Steels and on the contrary both Shri Ghasi Lal Sharma and Shri Murari Lal Sharma in their several statements, which have given on different dates, and which have not been retracted have accepted that they have seen the Charts A, B and C prepared by the Investigating officers and the .....

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rom the factory premises have to be treated as clearances of TMT bars only as the price of Saria I and Saria II is same, while TMT Bar is much costlier that the CTD bar and, therefore, the appellants claim that Saria II despatches are the sales of CTD bar by M/s Meenakshi Steel made from the appellants factory is difficult to accept. Moreover both Shri Ghasi Lal Sharma and Shri Murari Lal Sharma in their statements given over a period of one year and which have not been retracted, have stated th .....

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en that the claim that the clearances of Saria II mentioned in the daily receipt and despatch sheets are clearances of CTD bars made by M/s Meenakshi Steels as trading activity, was for the first time about 1= year after the issue of show cause notice and even after personal hearing before the Commissioner. No such claim had been made during investigation. Even if the appellants plea that the bills issued by M/s Meenakshi Steels regarding sale of CTD bars had been recovered from the factory but .....

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actory, are the sales of CTD bars made by a group trading concern M/s Meenakshi Steel cannot be accepted. In view of this, we hold that the duty demand of ₹ 7,22,15,192/- based on the Chart A, B, C and D, which, in turn, have been prepared on the basis of daily receipt and despatch sheets and delivery orders recovered from the factory premises has to be upheld. 7. As regards the duty demand of ₹ 6,77,061/- for the period from 10/09/05 to 01/10/05, this duty demand is based on the rec .....

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bility in respect of the goods clandestinely cleared by them to the appellant company as well as to a number of other rolling mill and their matter had been settled by the Settlement Commission. In view of this, it has to be held that during the period from 10/09/05 to 01/10/05 the appellant company received certain quantity of MS Ingots from Nirmal Inductomelts Pvt. Ltd. without any accountal which has obviously been used for manufacture of TMT bars and after taking into account 8% burning loss .....

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having been recovered from the factory showing any despatches without any Central Excise invoices. This demand is purely based on the Departments stand that for production of 1 MT of rolled products, 102.09 units of electricity is required. On this basis, the production during the period from April 2002 to March 2005 has been estimated by dividing the total power consumption by 102.09 MT and by comparing this estimated production with the production of rolled products as recorded by the appellan .....

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uly 2005 and August 2005 by adding to the recorded production of 3990.30 MT during these two months, the alleged production of 5100 MT based on the unaccounted sales of this quantity as per the records. Thus according to the officers during July 2005 and August 2005 the total production of the appellants factory was 3990.3 + 5100 MT i.e. 9090.3 MT. The power consumption ratio of 102.09 MT has been determined by dividing the total power consumption of 9,28,062 units during July 2005 and August 20 .....

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