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2015 (7) TMI 458 - CESTAT AHMEDABAD

2015 (7) TMI 458 - CESTAT AHMEDABAD - TMI - Clandestine manufacture and removal of goods - documents recovered from the third party, which are not accepted by the appellant - Held that:- For the purpose of clandestine removal, there has to be clandestine manufacture. We find on perusal of the record, that the Revenue authority, despite having engaged themselves in massive investigation, has not brought on record a single evidence of procurement of other major raw materials required for manufactu .....

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nor is there any evidence to indicate that other raw materials were also procured without recording them in books of accounts.

There has to be an illicit manufacture of goods to indulge in clandestine removals for which extra raw-material, extra manpower, transportation of finished goods, cash payments etc are required to be established with a reasonable degree. In the absence of any corroboration on above factual details, the case of clandestine removals cannot be held as establishe .....

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ded in favour of the main appellant. - Decided partly in favour of assessee. - Appeal No. E/126-127/2009 - ORDER No. 10910-10911/2015 - Dated:- 30-6-2015 - Mr. H.K. Thakur, Hon ble Member (Technical),J. For the Petitioner : Shri Deven Parikh, Sr. Advocate, Shri P P Jadeja, Consultant For the Respondent : Shri Govind Jha, Authorised Representative ORDER Per : Mr. H K Thakur; These appeals have been filed by the main Appellant M/s Zircon Plastics (P) Ltd, Ahmedabad and its Director against Order-i .....

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facture and Removal of HGPE/LLDPE bags of Chapter 39 during the period of 1999 to 2000. During visit of the Central Excise officers on 3.7.2001 to the factory of the main appellant, 23 sets of blank invoices (out of a book of 50) were found which were treated as parallel invoices . After investigation of the case and recording of statement of customers; who were all Limited Companies situated outside Gujarat, department issued a show cause notice dt. 5.12.2003 alleging clandestine removals under .....

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of litigation, Commissioner (appeals), Ahmedabad passed OIA NO 184 to 185/2006 on 20.6.2006 and allowed benefit of cum-duty price which reduced demand of Central Excise duty to ₹ 22,10,997/- from ₹ 25,96,596/- and also reduced penalty under Section 11AC to ₹ 22,10,997/-. This Tribunal Bench in the first round of litigation under Order No. S/89&90/WZB/Ah bad/07 and A/126&127/WZB/ Ahbad/07 dated 2.1.2007 directed original authority to decide the issue afresh after provid .....

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2009, which is challenged here by the appellants in these two appeals. 3. Shri Deven Parikh, Senior Advocate, appeared alongwith Shri PP Jadeja, Consultant on behalf of the Appellants and submitted that the revenue has not provided copies of the relied upon parallel invoices, despite Hon ble CESTAT s order dt 27.1.2007. That after this Bench s Order No I/128-129/2015dated 27.3.2015 some documents (pages 1 to 100) were provided, which are also not sufficient to establish the serious charge of cla .....

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tained as per 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 sales of such goods to identified parties. e) Receipt of sales proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorised by him. f) Use of electricity for in excess of what is necessary for manufacture of goods otherwise man .....

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use Notice. That the alleged clandestine clearances cannot be confirmed as there is no tangible evidence to prove receipt of excess raw material, clandestine manufacture of goods, removal of goods from factory, documents to support transportation of such clandestinely cleared goods from the factory or receipt of cash payments for such goods. No such parallel invoices, forming the basis of demand, have been found from the factory of appellant. That transporters have not accepted having transporte .....

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e buyers on the same and hence such documents cannot support the duty demand; that the most important aspect could be the receipt of payments for such alleged clandestinely removed goods which according to department was made by the said 3 buyers by demand drafts but the investigation has not found any such payments received in the two accounts of the main appellant which is reflected in Para 5.5 of the SCN; that although appellant has accepted only shortage of finished goods found and paid duty .....

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applicable in cases of clandestine manufacture and clearance of goods based upon insufficient evidences, recovery of documents from their party, corroborative evidence, confessional statements etc : i) 2008(226)ELT.701(P&H) CCE Vs Nand Mangal Steels Ltd ii) 2012(278)ELT.641(Tri.Ahd.) Pet Metals Pvt Ltd Vs CCE iii) 2014(308)ELT.655 (Guj) CCE vs Saakeen Alloys Pvt Ltd iv) 2011(274)ELT.94 (Tri.Del.) CCE vs Renny Steel Castings Pvt Ltd v) 2011(274)ELT.271.(Tri.Del.) CCE Vs L B & Sons vi) 20 .....

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co Products Ltd Vs CCE xiii) 2014(302)ELT.435 (Tri.Ahd) CCE Vs Gopi Synthetics Pvt Ltd xiv) 2014(310)ELT.299 (Guj) Jai Bhavani Metal company xv) 2014(309)ELT.698 (Tri.Ahd) Centurian Laboratories Vs CCE 3.2 Sr Advocate also relied upon the following decisions to argue that unsigned documents cannot be relied upon. i) 2007(216)ELT.659(SC) CC vs Bussa Overseas Properties Ltd ii) 2007(217)ELT.561(Tri.Mum) Sunder Brothers The Sr Advocate further relied upon the following decisions regarding non-appli .....

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rty etc. or uncorroborated statement unless there is tangible, independent, proof like financial flow back, actual manufacture and clearance, excess purchase of raw material, electricity consumption, statements of workers, actual transportation of goods, statement of purchasers. That as per basic Rule of Evidence, unsigned copies of documents or documents recovered from third party cannot be considered as evidence at all. Learned Senior Advocate also argued that the case against the appellant is .....

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ementary invoices recovered from the factory of main appellant corroborating clandestine manufacture and removal of finished goods. 5. Heard both sides and perused the case records. The Revenue s case of clandestine manufacture and removal of HDPE/LLDPE bags of Chapter 39, without payment of duty, by the Appellant is based mainly on the account of a search. Panchnama dt 3.7.2001 at appellants factory show the following discrepancies: * Shortage of 1946 kgs Finished Goods involving duty of ₹ .....

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rtage. However, he agreed with the said shortage and agreed to pay the Central Excise duty leviable thereon within 2 days. When shortage of finished goods manufactured is not satisfactorily clarified, adverse presumption of its clandestine removal can be taken. As regards shortage of raw material, he has stated that the same has been used for manufacture of goods in appellant s factory. Thus, I find that the appellant has paid duty on alleged shortages but has not accepted clandestine removals. .....

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stated to have prepared only 7 invoices during his one year working. It is not forthcoming from his statement as to which were those 7 invoices referred by him when there is nothing to show that goods were actually cleared against those alleged parallel invoices. 5.2 It is also observed that demand of duty is worked out on the basis of parallel invoices referred to in Annexure A-1, B-1, and C-1to in SCN, but none of these parallel invoices have been found from the factory of the main appellant .....

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so find that 3 buyers have stated to have purchased the goods in question against payments made by demand drafts. Investigation shows that there were two bank accounts of the main appellant (one in Corporation Bank and the other in ICICI Bank), but it is not coming out as to how and where the appellant has received the sale proceeds of such goods in question. The evidence of flow back of money from the buyers to appellant ought to have been a crucial evidence to establish link of goods cleared b .....

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s only been admitted that there were shortages of finished goods involving total duty of ₹ 24,905/- in these proceedings. I also find that huge quantities of finished goods are alleged to have been manufactured and removed clandestinely during the period in question, but in the absence of no corroborative evidence of excess receipt and consumption of inputs, electricity, manpower requirement, transportation etc. 5.4 I also find that demands are also based on unsigned documents found from t .....

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the case law relied upon by the appellant. 6. Main appellant, inter alia, has relied upon the case law Vishwa Traders Pvt Ltd Vs CCE reported in 2012(278)ELT.368 (Tri.Ahd) where it was held that in the absence of any tangible evidence, which would indicate that there was clandestine manufacture and clearance of the goods from the factory premises, charges of clandestine manufacture and clearance cannot be upheld. This order passed by Larger Bench is upheld by Gujarat High Court and supreme Cour .....

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inable. On the issue of clandestine removal based on parallel invoices it has been held by courts that demands so raised are not sustainable. Few other such case laws relied upon by the appellant are CCE Ludhiana vs Nand Mangal Steels Ltd (supra). Pet Metal Pvt Ltd vs CCE, Vadodara (supra), Shree Industries Ltd vs CCE, Ahmedabad (supra). In the present proceedings no evidence has been brought forward from the transporters that such clandestinely cleared goods were sent through any transporting a .....

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rd to indicate that the appellant had purchased the Quartz, Feldspar, Zinc, Borax Powder, Calcium and Dolomite and without accounting them used for the manufacture of Frit for clandestine removal. There is also nothing on record nor there is any statement of the suppliers of other raw materials, which would indicate that the appellant had received unaccounted raw material from the suppliers of these raw materials. There is a solitary evidence in the form of statement of supplier of one of the ra .....

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books of accounts, we are unable to accept the contentions of the ld. AR appearing for the Revenue and the findings of the adjudicating authority, that there was clandestine manufacture and clearance of the finished goods. The investigation has not proceeded further to bring on record unaccounted purchases of all the raw materials required for manufacturing of Frit . 14. In the case of Dhanavilas (Madras) Snuff Co. - 2003 (153) E.L.T. 437 (Tri-Chennai), we find that in Para 6, the Tribunal has .....

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er case in the case of S.T. Texturisers - 2006 (200) E.L.T. 234, this Bench, in respect of clandestine removal, very clearly held as under : 6. Considering the above arguments of the appellant in the light of the various decisions of the Tribunal, it is seen that it has been consistently held by the Tribunal that entries in rough register cannot be made the sole basis for arriving at finding of clandestine manufacture. Reference in this regard be made to the Tribunal decision in the case of Essv .....

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ls, shortage, excess use of electricity, flow back of funds and purchase of final products by customers etc. Admittedly no such evidence has been produced on record by the Revenue, the evidentiary value of the statements relied upon by the Revenue already stands discussed by me in the proceedings paragraph. The said statements having been made under Section 108 of the Customs Act, 1962 are not comparable to the confession recorded under Section 164 of CRPC before Magistrate, and as such are requ .....

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the extracted portion of the Commissioner s order that Revenue is solely relying on the exercise note books mainly balance sheets. The Tribunal in large number of cases which have already been noted above in the tabulated list of citations furnished by the Counsel has held that unless there is clinching evidence on the nature of purchase of raw materials, use of electricity, sale, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of note book .....

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pressed by the Tribunal in the other judgments noted supra. The citations placed would directly apply to the facts of this case. Hence, following the ratio of the cited Judgments, the assessee s appeal is allowed. All the above reproduced ratio would lead to a conclusion that the charge of clandestine manufacture and removal has to be proved beyond doubt and in the case before us, as already discussed, there is nothing on record that instils confidence in our mind that the appellant had clandest .....

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er of the other major raw materials. It is undisputed that for manufacturing of Frit (the final product) major raw material is Quartz which is approximately 45% of the total inputs going in the manufacturing of Frit . We find from the records that Revenue has not produced a shred of evidence, to indicate that the appellant had been procuring Quartz without accounting them in books of account nor is there any evidence to indicate that other raw materials were also procured without recording them .....

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