9911796707
TMI Blog2015 (10) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... , office of M/s. Gautam Enterprises in Mumbai and office of M/s. Salasar Ispat in Nashik on information that the appellant is engaged in a large scale evasion of duty on clearance of their final product clandestinely. During the course of search, no incriminating documents were found. No unaccounted raw materials or finished goods were found in the premises. All entries in the statutory records tallied with the stocks of inputs and finished product found were as per the accounts books maintained by the appellant but the department recovered three documents namely Record Nos. 23, 24 and 26 from the office premises of Gautam Enterprises in Mumbai. The claim of the appellant is that the office at Mumbai does not belong to the appellant but on the basis of records seized, certain entry was found for the period 27.06.2006 to 16.12.2006 relating to purchase of M.S. ingots by the appellants and sale of TMT/CTD bars manufactured out of such ingots and also certain purchase and sale entries made by the trading firm M/s Gautam Enterprises and M/s. Shiv Ganesh Parvati. On the basis of these records, statement of Shri Parvesh Gautam on 18.12.2006 and statement of broker Shri Faruk Sheikh on 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s already cleared about 2600 MTs of TMT bars on payment of duty. Therefore, it is contended that the appellant has not manufactured the quantity in dispute as the appellant has no manufacturing capacity to manufacture those goods. It is also contended that no evidence of any change in the pattern of production or in the electricity consumption or the capacity of the plant has been examined by the investigating team and it is also pleaded that there is no change in electricity pattern. No evidence was found by the investigating team regarding the use of furnace oil for the purpose of heating the furnace. For transporting the goods alleged to have been purchased and sold clandestinely, the appellants would have required over 1000 trucks during the impugned period. He further submits that during the course of search, no incriminating documents were found in the factory and office of the appellants. No excess raw material were found on verification of the stocks. It is prayed that as there was no corroborative evidence to prove that the appellants have cleared the goods clandestinely therefore, no case can be made against the appellants but the adjudicating authority after granting cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that unless the exceptions carved out in Section 9D of the Central Excise Act, 1944 are clearly made out, the statements cannot be regarded as being relevant and therefore cannot form the basis of proving the truth of the facts contained in the statements unless the deponents thereof are produced for cross-examination as held by the Hon'ble Delhi High Court in the case of Basudev Garg v. CC - 2013 (294) ELT 353 (Del). 4.2 The learned Counsel further submits that installed capacity of production was fixed in the year 1998 which shows that the production capacity of the appellants plant was only 4441 M.T. per year when the factory runs for 24 hrs a day and thereafter no change in the manufacturing pattern till the investigation conducted in the factory of the appellant and they had manufactured/cleared 2600 MT of TMT bars during the impugned period. If the production capacity is taken then the production works out to 2221 MT whereas the appellant had manufactured/cleared 2600 MT on the strength of Central Excise invoices. If the quantity of clandestine removal is taken into account, the appellant should have manufactured atleast 10,000 MT TMT bars during the impugned period. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax department. It is also submitted that entries were made in the Record Nos. 23, 24 and 26 are nothing but on the purchase and the sale of the goods of these trading firms. In these circumstances, it is prayed on behalf of the appellants that the impugned order is required to be set aside. 5. The learned A.R. who appeared for the Revenue has also submitted a written submission. On the basis of these submissions, it is argued that the ingots were recorded as per the entries found in the private record seized during the course of investigation and they have admitted the supply of M.S. Ingots to the appellants. As per the Hon'ble Supreme Court judgement in the case of CCE Madras v. Systems & Components Pvt. Ltd. 2004 (165) ELT 136 (SC), what is admitted, need not be proved. He further submitted that retraction of statement recorded before the Central Excise officer cannot be discarded. To support his contention he relied on the judgments of the Hon'ble Supreme Court in the case of Surjeet Singh Chhabra vs. Union of India - 1997 (89) ELT 645 (SC) and Vinod Solanki v. UOI - 2009 (13) STR 337 (SC). 5.1 He further submitted that it was not essential for the department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erprises as claimed by the appellants are not in the handwriting of the appellants but in the handwriting of Shri R.L. Gautam but unfortunately no statement of Shri R.L. Gautam was recorded during the course of investigation to prove contrary to the claim of the appellants. 6.1 We further find that the statements of certain ingots supplier and broker were recorded. Out of 31 persons whose statement sought to have been relied upon in the show-cause notice, the adjudicating authority granted cross examination of only 5 persons and out of which only four persons appeared and all the four have denied the charges that they purchased goods without Central Excise invoices and have stated that no activity has been dealt with the appellant without any Central Excise documents. Revenue has not proved any contrary to these evidence with support of any documents on record. 6.2 Further, we observed that the department has alleged that the appellant has purchased 7474.305 MT of ingots and received in their factory. As the factory of the appellant is located in Dindori, Nasik and the ingots manufacturers situated at Sinnar, Nasik. Between the factory of the appellant and the supplier, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er:- "14. The Division Bench also observed that though it cannot be denied that the right of cross-examination in any quasi judicial proceeding is a valuable right given to the accused/Noticee, as these proceedings may have adverse consequences to the accused, at the same time, under certain circumstances, this right of cross-examination can be taken away. The court also observed that such circumstances have to be exceptional and that those circumstances have been stipulated in Section 9D of the Central Excise Act, 1944. The circumstances referred to in Section 9D, as also in Section 138B, included circumstances where the person who had given a statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay and expense which, under the circumstances of the case, the Court considers unreasonable. It is clear that unless such circumstances exist, the Noticee would have a right to crossexamine the persons whose statements are being relied upon even in quasijudicial proceedings. The Division Bench also observed as under:- "29. Thus, when we examine the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid down by the Hon'ble Delhi High Court in the case of J & K Cigarette Ltd. (supra) and Basudev Garg (supra) has not been followed. Therefore, we hold that principles of natural justice have been violated by the adjudicating authority. In the circumstances, the statements recorded during the course of investigation cannot be relied on to prove the charge of clandestine removal of the goods by the appellants in this case. 6.8 We further find that the appellants have contended in reply to the show-cause notice as well as before the adjudicating authority that their production capacity was fixed in the year 1998 under the scheme of compounded levy and the production capacity was fixed @ 4441 MT per year and thereafter there is no change in pattern of production. The capacity was fixed for 24 hrs of working by the appellant in their factory. In these circumstances, when the production capacity has not been increased as claimed by the appellant and has not disproved by the adjudicating authority in the adjudication order, moreover, the electricity consumption remains the same prior and after the impugned period, therefore, without ascertaining the fact whether the electricity has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as claimed that entries pertains in private records are of trading activities which has not been discarded by the revenue but the appellants have produced some evidence for these trading activities by way of IT Returns and Balance Sheets. We also note that the Central Excise duty payable on the manufacture of the goods, as the goods in question can't be produced by the appellant, the demand of excise duty is not sustainable. 6.10 The case laws relied on by the learned A.R. are not concerned to the facts of this case as the appellants have retracted the statements recorded on the first available opportunity. In the case of Shri Surjeet Singh Chobbra (supra), the corroborative evidence was available. The circumstantial evidences go in favour of the appellants. 7. With these observations, we find that when the department has failed to prove the manufacturing of excess quantity of alleged clandestine removal by the appellant therefore Central Excise duty cannot be demanded. Moreover, when the claim of the appellant is that these activities pertain to trading activity. In these circumstances, we hold that the Revenue has failed to prove their case of manufacturing of excess quanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.01.07, Shri Naresh Oza on 11.01.07, Shri Rajeshwar Goya on 16.01.07, Shri Ajay Baheti on 22.01.07 confirmed the said transactions regarding the clandestine sale of M.S. Ingots to SSIPL in cash and without bills. Then the manufacturers of M.S. Ingots, who had supplied the Ingots through the brokers, namely Shri Amit Burakia (Bhagwati Steel Cast Ltd.) vide his statement on 22.01.07, Shri Suresh Mittal (M/s. Ishu Super Steel Pvt. Ltd.) on 23.01.07, Shri Mohit Satbir Sarlia (M/s. Silver Ispat Pvt. Ltd.) on 23.01.07, Shri Jayprakash Mittal (M/s. Silver Ispat Pvt. Ltd.) on 16.01.07 and Shri Stbir Sarlia (M/s Sarlia Steel Pvt. Ltd.) on 23.01.07 also corroborated the transactions of clandestine sale. Mr. Manek Shah of MITC Rolling Mills in his statement dated 23.07.2007 identified the entries in Record No. 23 regarding sale of ingots without bills and without payment of duty to SSIPL through broker Shri Harish Gandhi. Finally the customers whose names appears on the seized records and who had purchased the TMT bars from SSIPL namely Shri Arvind S. Shah on 18.12.06, Shri Jinesh V. Parekh, Proprietor of M/s. Chetan Steels on 12.01.07, shri Mukesh J. Gupta, Proprietor of M/s R.J. Steel Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods and payment details. With reference to this records Shri Faruk Shaikh confessed that the clearances effected by the manufacturers of TMT bars as recorded in the two collection books covering the period 2005-06 and 2006-07 were clandestine in nature. The sample pages are shown below to understand the nature and extent of clandestine activities The sample pages of the seized records depicted above reveal the intricate details of clandestine receipt, production and clearance of goods by SSIPL. 12.4 The above records indicate that the explanation of the persons involved were commensurate with the contents of the said documents. The details mentioned in the records have been deposed by the said persons in their statements to be true. The acts of SSIPL have been corroborated by documents resumed from other persons who were connected with the transactions such as the supplier of raw material or the purchaser of the finished goods. Simply because some of the persons retracted their submissions will not nullify and abrogate the submissions with reference to the records seized. The private records seized and deciphered cannot be brushed away as evidence without substance. The records s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leged to have been cleared clandestinely based on Annexure II(a), II(b) and II(c) to Show Cause Notice Total quantity ought to have been declared in ER-1 Returns as production 1 July, 2005 173.120 31.110 204.23 2 Sept.2005 245.360 39.485 284.845 3 Oct.2005 223.160 18.925 242.085 4 Nov.2005 195.250 16.935 212.185 5 Jan.2006 Not available 61.240 6 Feb.2006 Not available 21.085 7 April, 2006 219.580 21.940 241.520 8 May, 2006 366.410 40.785 407.195 9 June, 2006 273.120 18.975 292.095 10 July, 2006 364.020 895.865 1259.885 11 Aug, 2006 372.850 1074.425 1447.275 12 Sept, 2006 349.495 1580.750 1930.245 13 Oct, 2006 401.050 1751.555 2152.605 14 Nov,2006 534.920 1437.180 1972.100 15 Dec, 2006 511.210 686.755 1197.965 The above table shows that the variation in production between the months of July 2005 and December 2006 is almost 300%. Similarly the electricity bills produced by the appellant show massive variation which is inexplicable for a unit (rolling mill) whose consumption per MT is expected to be in the range of 100 units only. Therefore, in my view no sanctity is to be attached to the declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The case was finally heard on 18.11.2009. Shri Singh appeared on the said date. Thus no fresh cross-examination was requested by Shri Singh. 14.1 From the above it is clear that adequate opportunity for cross-examination was given. In any case, the evidence is based on private records seized which have been corroborated by the persons involved. 15. Regarding on 4 th piece of evidence, it has been very strongly argued by the learned Counsel that the private Note Books recovered from the premises of Gautam Enterprises was not written in hand writing of any of the Directors viz. Shri Prevesh Gautam and Pravin Gautam and it is in the hand writing of Shri R.L Gautam, their father. Further he contended that a number of entries had not been taken into consideration as they were not applicable to the appellants. The plea is that the entire quantity of 7447 M.T. is purchased as a part of the trading activity of that firm. The fact that only entries pertaining to appellant which were suspect and in respect of which corroborative confessions were made by persons involved in the transactions needed to be considered. This shows that Revenue was just and fair. Also, I find that the Directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d one Note Book containing bills and receipts of payments) reflected the clandestine transactions done by Shri Pravesh Gautam and Shri Pravin Gautam. Shri Pravesh Gautam had confessed to the Panchas that the said premises was used as office premises for SSIPL and M/s. Gautam Enterprises (his father R.L. Gautam being Proprietor). In the face of all the private records seized, the appellants have not succeeded in their belated pleas as they have not explained the various entires which indicate clandestine production and removal. 15.3 It has been argued by appellants as to how more than 1,000 trucks which would have been required to transport the alleged production, could have been used without any other incriminating evidence. I find that 1000 trucks used in six months would only mean 5 to 6 trucks every day which is easily possible. Lack of evidence regarding the truck No. etc is explained by the fact that the clandestine records did not reveal any details of trucks used. It is not always not possible to provide all the evidence in cases of clandestine activity which can, at best, be established only by circumstantial evidence as held by the Tribunal in the case of Gulabchand Silk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... athematical precision to establish clandestine removal as held by the Hon'ble Supreme Court in the case of Collector and ors. vs. D. Bhoormull - 1983 (13) ELT 1546 (SC). The Hon'ble Supreme Court also held that "If t he Collector had given the fullest opportunity to accused to establish the alleged acquisition of the goods in the normal course of business. In doing so, he was not throwing the burden of proving what the Department had to establish, on Bhoormull. He was simply giving him a fair opportunity of rebutting the first and the foremost presumption that arose out of the tell-tale circumstances in which the goods were found, regarding their being smuggled goods, by disclosing facts within his special knowledge". In the present case, evidences in the form of diaries recovered are corroborated by the confessional statements of various persons. Therefore, the department has discharged its burden whereas the appellants have not come up with any creditable evidence to explain away the various entries in the diaries and to prove that these entries only related to trading. They have not come up with the invoices of manufacturers or the Books of Accounts of purchaser to conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra). (Prononuced in Court in 28.01.2015) ORDER NO.M/4569/15/EB Appeal Nos.E/483 to 485/10-Mum Date of Hearing: 15.6.2015. 6.7.2015 & 10.7.2015 For the Appellants : Shri D B Shroff, Senior Adv., Shri Ashok Kumar Singh & Ms Mahi Lalka, Advs. For the Respondent : Shri V K Agrawal, Additional Commissioner (AR) Per P K Jain 19. The brief facts of the case are already elaborated by both the Member (Judicial) and Member (Technical) in the order recorded by them and, therefore, I am repeating the same for sake of brevity. The case was heard in detail on 15.6.2015, 6.7.2015 and 10.7.2015, wherein the learned senior advocate and learned advocate for the appellants explained the facts in detail. The learned AR also reiterated and explained in detail the various points made in the order-in-original as also by Member (Technical). 20. The first point referred to me is as under:- 1. In the facts and circumstances of the case whether Member (Judicial) is correct in holding that the appellant is not having the production capacity to manufacture 10,000 tons of TMT/CTD bars during the impugned period. Therefore, on the basis of records seized during the course of investigation are for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acity claimed by the appellant is not as per the original manufacturer of plant. The appellant has not produced any catalogue, literature or correspondence with the original manufacturer which would indicate the production capacity of the plant. Similarly, no authentic literature on subject is produced to support the production capacity. As far as the determination of annual production capacity as per the compounded levy scheme which was introduced in 1998 and abandoned after 2-3 years, not much credence can be given. First of all, compounded levy scheme is introduced generally for evasion prone commodities. Further, rules for determining the annual production capacity are framed in such a way that the trade/manufacturer have no cause of grievance and generally the capacity determination is done in favour of trade/manufacturer and actual production is far higher than the production so determined even in worst circumstances. In some cases the capacity may be determined with reference to certain parameters of the original manufacture. For example, in the case of induction furnace capacity of the crucible which determines the quantity of goods produced in one round which can be fairly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to prove the charge of clandestine removal as held by Member (technical)." 21.1 Details of various evidences which are available have been discussed in detail by Member (Technical) and also by Member (Judicial) to some extent. It is seen that in the present case there are two portions. The first portion is purchase of MS ingots by the appellant without bills from various manufacturers of MS ingots and the second part is the production of MS bars from such ingots and selling the same clandestinely. As far as the first part is concerned, the quantity of MS ingots which has been clandestinely purchased by the appellant is based upon the record Nos. 23, 24 and 26 recovered from office of the appellant in Mumbai. This office was a combined office of the appellant and two other firms controlled by the same family. One of these was Gautam Enterprises whose proprietor is Shri R. L. Gautam, father of the directors of the appellant company. The other firm is Shiv Parvati Enterprises which is again a partnership company and is looked after by Shri Parvesh Gautam who is director in the main appellant company. A lot is being made by the appellant that the records were common for the three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . These are factual matters based upon documents. If there is any incorrectness in these, the same could have been pointed out either during investigation or at the time of original adjudication. No such thing was done even before this Tribunal. No such infirmity has been pointed out. In view of this position, retractions of statement of Shri Pravesh Gautam and Shri Pravin Gautam are required to be totally ignored. 21.2 I also note that clandestine purchase of MS ingots was not from one source but from number of sources and at times through brokers. Suppliers of MS ingots as also brokers had confirmed the correctness of the information indicated in the diaries recovered from the appellant's office in Mumbai. It is also noted that majority of the supplier of MS ingots in turn have paid the duty for the clandestinely cleared MS ingots to the present appellant. In such a situation, in my considered view, as far as the purchase of clandestinely cleared MS ingots is concerned, there can be no doubt and is proved. 21.3 As far as the second aspect i.e. the sale of bars is concerned, I observe that the demands have been made based upon the assumed production from MS ingots clandestin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant have entries corresponding to the entries which are shown as with bills. Under these circumstances, in my considered view, all the MS bars which are shown as cleared without bills from the appellant's unit, were in reality cleared from the appellant's unit without payment of duty and the duty on the same is required to be confirmed. The quantity indicated for 2005-06 is 188.78 MT. During 2006-07 upto June, the same is 81.700 MT and from July to December 2006, the quantity is 352.770 MT. Duty, interest and penalties for clandestine clearance for these clearances is required to be computed. The second part of the demand is based upon the statement of various buyers of the appellant company as detailed in para 5.5 of the impugned order. I find that the statements of about 20 buyers were recorded, out of which the last six buyers are in reality, the buyers of Shri Faruk Shaikh which I have already covered earlier. In respect of the remaining 14 buyers though in the statement they have admitted purchasing the clandestinely cleared MS bars from the appellant, however, it is found that in some cases it is only the bald statement of the buyers. In other cases it is not onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uyers and in my considered view, as far as these clearances are concerned, since these are based upon documentary evidence along with the statements and the documentary evidence has been recovered from the appellant's own office and the appellant has admitted the details in these records, the same are required to be confirmed and the appellant is liable to pay duty, interest and consequential penalty on the same. These will be required to be recomputed by original authority. Personal penalties will also be required to be proportionately redetermined including the clearance through Shri Farukh Shaikh. However, in respect of the remaining quantity, as the statements had not specified the quantity or value purchased and the Revenue has not been able to find out the corresponding entries in record No. 23, 24 or 26 or estimate value or quantity from such entries, the same are not sustainable. In view of the above analysis, in my considered view, the evidences collected by the investigating team during the course of investigation are sufficient to the extent described above to prove the charge of clandestine removal. However, demand for the remaining quantity is not sustainable for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the hearing itself. In any case the whole case is based upon the records which were mainly recovered from the appellant's office and were explained by the director of the appellant company. The details written in the documents were very precise which includes dates, supplier's name, broker's name, exact quantity, rate etc. In most of the statements, all that was done was to explain or confirm the details already indicated in the document and the case of the Revenue is based upon such document. Even if we ignore the statements, the only conclusion from the documents particularly regarding procurement of clandestinely cleared goods will be what has been proposed by the Revenue. Only in respect of some of the buyers of MS bars, though in the statements they have accepted purchase of clandestinely cleared MS bars, but Revenue has failed to point out the corresponding entries in record No. 23, 24 and 26 and as mentioned with reference to point No. 2 of the difference of opinion, the demand in respect of the same cannot be upheld. Keeping in view the overall factual matrix, I agree with Member (Technical) that adequate opportunity was given and further cross-examination ..... 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