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2015 (10) TMI 2142 - CESTAT MUMBAI

2015 (10) TMI 2142 - CESTAT MUMBAI - TMI - Denial of SSI Exemption - manufacture of welding electrodes - Clandestine removal of goods - Imposition of penalty - Held that:- It is an admitted fact that all the 12 companies had bank accounts and transactions were made through cheques/DDs. It is not coming out from the show cause notice or the impugned order whether any effort was made through the banks to find out the precise address and the persons behind them who has withdrawn the money given to .....

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hom the said supplier companies have purchased the welding electrodes. Results of such investigation could have helped in arriving the correct and true factual position.

No enquiries have been made with the buyers of welding electrodes of the three marketing companies. If enquiries were made at least with some buyers and it was found that the buyers have received the goods carrying the brand name of appellant No.1 alone, perhaps the case of the Revenue would have been on much stronger .....

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roving the quantum of clandestine production and clearance of the final product. We may hasten to say here though we are of the view that there are pointers to indicate that the appellants have indeed indulged in the clandestine clearance of the goods without payment of duty, however, it is equally important to have a reasonable if not correct quantity and value of the goods clandestinely cleared. Sometimes it may be difficult to have the correct figures but in such cases the estimation has to b .....

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f welding electrodes which were cleared clandestinely. There are number of other raw materials and there are few evidences which indicate that some other raw materials had come to appellant No.1. However, these are few stray cases and do not account in substantial way to the clandestine clearance of quantity alleged in the show cause notice. These observations are applicable for demands covered by annexure-I as also annexure-V - welding electrodes manufactured by appellant No.1 were manufactured .....

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cy and as noted earlier, there are indications that the appellants had received the unaccounted raw material and manufactured and cleared the goods unaccounted. We are, therefore, of the view that the demand made in this annexure is required to be upheld.

Revenue has gone by the statement of Shri T.K. Rajgopal who has stated that he has sold about 400 MT of rutile to appellant No.1. We find that the Revenue has not found the details from the bank account of Rhodonite that in how many .....

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old about 400 MT of rutile to Shri Poonamchand Malu. We also note that Shri Poonamchand Malu in his statement has denied this part of the statement of Shri T.K. Rajgopal and he has stated that he has purchased few consignments through broker alone. Thus there is a vast difference between what is admitted purchase of rutile from Rhodonite as claimed by Shri Sanjay Malu or Shri Poonamchand Malu

As far as the show cause notice dated 21.11.2003 is concerned, we set aside the demands cove .....

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were also not recorded in any books of account. The confiscation is in order and the fine imposed is not on the higher side and the same is upheld. As far as penalty under Rule 26 on appellant No.2 is concerned, in our view, without any evidence whether the turnover of appellant No.2 would cross the SSI exemption limit and also keeping in view the duty involved on the goods seized, we reduce the penalty imposed to ₹ 1,00,000/- under Rule 26. Penalties have also been imposed on appellant No .....

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hri V.K. Agrawal, Additional Commissioner (AR) : For the Respondent ORDER Per: P.K. Jain Appellant No.1 is manufacturing welding electrodes and availing the benefit of SSI exemption. Appellant No.3 is the Managing Director and appellant No.4 is another Director of appellant No.1. For manufacture of welding electrodes, the main inputs are wire rods and flux. Manufacturer of electrodes also converts the wire rods purchased into the required size/diameter wire rods for purpose of manufacture of ele .....

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into cases. 1.1 Appellant No.2 is another private limited company with appellant No.3 and appellant No.4 being the Director of the said company. It is claimed by them that earlier they were in the manufacture of flux and later on they started manufacturing MS wires. 1.2 In brief the case of the Revenue is that appellant No.1 was not showing the entire production of welding electrodes in their books of account and other statutory records thereby evading payment of duty. It is the case of the Reve .....

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appellant No.6, 7 & 8. Further, for the unaccounted production, raw materials and inputs were being purchased in the name of fictitious firms and payments for the same were being made in cash. 1.3 Appellant No.5 was the Manager and was looking after the production, marketing etc. of appellant No.1 and it is also claimed by him that he was also looking after the day-to-day working of appellant Nos. 6, 7 & 8. Appellant Nos. 6 & 7 are the proprietorship firms of appellant No.10 who is .....

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11, 12 and 13 are Directors/proprietors of the three companies/firms viz. M/s. Rhodonite Welding Electrodes Pvt. Ltd., M/s. Sanjhi Foodco Industries Pvt. Ltd. and M/s. Ayush Enterprises. The claim of the Revenue is that these three companies/firms were allotted rutile by Indian Rare Earths Ltd. and a part of the rutile so allotted to them was purchased by appellant No.1 and used in the manufacture of unaccounted welding electrodes. The sale of rutile is not legally permitted and the rutile sold .....

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unit, office premises of appellant No.1, residential premises of appellant No.5, godown of appellant No.15, godown of appellant No.16, etc. Certain incriminating documents were recovered. In some places the goods were also seized. At appellant s factory, excess of raw material (physical stock stock as per records) was found. At Wadi godown of appellant No.1, 340 boxes of welding electrodes valued at ₹ 6,22,200/- were seized. Similarly, 202 boxes of welding electrodes valued at ₹ 3,15 .....

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tured are cleared without paying any central excise duty or making invoices. It was also stated by Shri Savarkar that appellant No.1 is receiving wire rods from appellant No.2, N.R. Wires and D.M. Engineers, Bhilai, and rutile was received from Indian Rare Earth Ltd., Tamil Nadu and Orissa and other minerals from various companies. Shri Savarkar also stated that they are receiving the wire rods from appellant No.2 without cover of any documents. Similarly, rutile is being received from some othe .....

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. Appellant No.5 also explained certain documents recovered from the factory which indicated that certain goods are received without bill or in the name of some other fictitious company. It was also stated by appellant No.5 that unrecorded production of welding electrodes are sold under the cover of three marketing companies viz. appellant Nos.6, 7 & 8 and also claimed that he looks after the three marketing companies. Another statement of appellant No.5 was recorded on 21.11.2002 wherein he .....

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r stated that the purchases from these 12 companies/firms are only on paper. Further, the welding electrodes actually manufactured by appellant No.1 are sold through these three marketing companies for which no bills are raised as the marketing companies are owned by the family members of the Malus and, therefore, there is no question of making any payment by these marketing companies to appellant No.1. Further, the sale proceeds of the welding electrodes by the three marketing companies are use .....

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.1.2003 wherein he stated the details given by appellant No.5 in his statement are true and correct. He also stated that the welding electrodes manufactured by appellant No.1 are sold in the name of appellant No. 6, 7 and 8 without accounting/payment of duty, the purchases done by the marketing firm are bogus. It was also stated that raw materials have been purchased in cash or in the name of other companies. Statement of appellant No.4 who is also the Director of appellant No.1, was also record .....

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td., Nagpur from D.M. Engineering Ltd., Bhilai and it was observed that even though the said invoices were in the name of Malvi Wires Pvt. Ltd., Nagpur, the goods have actually come to appellant No.2. Appellant No.5 in his statement dated 21.11.2002 also stated that wire rods are received by appellant No.2 in the name of third parties and the same are thereafter sold to appellant No.1. Enquiries with D.M. Engineering Ltd., Bhilai, indicated that MS wires sold to Malvi Wires Pvt. Ltd., Nagpur, ar .....

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the only supplier is Indian Rare Earth Ltd., a Government of India Undertaking. It was found that appellant No.2 had the requisite licence to procure rutile and has purchased the same to the tune of 369 MT during 1999-00 and 2000-01 and illmenite to the tune of 61.445 MT during 2000-01 and 2001-02. At the time of search, no flux was found in the premises of appellant No.2 and it was found that the said unit has only the wire drawing machines and there was no machinery to manufacture flux. Appell .....

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have purchased only once, that also 5 MT. Other buyer was Vaibhav Traders, Indore. Enquiries with the said purported buyer indicated that the said buyer has closed down his business few years earlier. It was therefore concluded that the rutile and illmenite purchased by appellant No.2 was used by appellant No.1. Enquiries were made with Indian Rare Earth Ltd., Mumbai about various buyers of rutile in Nagpur, which led to investigation of one M/s. Rhodonite Welding Electrodes Pvt. Ltd. Shri T.K. .....

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ation revealed that there is a bank account in Dena Bank, Itwara Branch, Nagpur, which has been opend in the name of Orange City Traders and one Shri Sushil Soni has signed the application for opening the account as a proprietor of the said firm. It was also found that number of DDs were made from the said bank account in the name of Indian Rare Earth Ltd. and on checking up with Indian Rare Earth Ltd., it came out that these DDs are relating to purchase of rutile by M/s. Rhodonite, M/s. Sanjhi .....

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that they had supplied certain raw materials to appellant No.1. 2.1 Further investigations were done from various bank accounts etc. and after a detailed investigation, show cause notice dated 21.11.2003 was issued. During the course of investigation, two show cause notices in respect of the seized goods were also issued. After receipt of the reply from various noticees, the case was adjudicated. Aggrieved by the said order, various noticees had filed appeal before this Tribunal. This Tribunal .....

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ailed in Annexure A-I, A-II, A-III, A-IV and A-V of the show cause notice, confirmed interest under Section 11AB and imposed equal amount of penalty under Section 11AC on appellant No.1 and also imposed penalties on appellant Nos. 2 to 13. (ii) In respect of show cause notice F.No. DGCEI/PRU/INT/33/2002/236 dated 17.2.2003, the Commissioner confirmed a demand of ₹ 1,63,810/-, interest under Section 11AB, equal amount of penalty under Section 11AC read with Rule 25, confiscation of various .....

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ggrieved by the said order, the appellants are before this Tribunal. 3. The case was heard extensively on 10.6.2015, 17.6.2015, 23.6.2015, 6.7.2015 and 9.7.2015. 4. The learned senior counsel for the appellants submitted that the case is based upon assumptions and presumptions and there is no concrete evidence for alleged clandestine removal. It was submitted that in the five years for which the demand is raised, there has not been a single case of illicit removal where the goods have been detai .....

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s-examining them, relying on one sales tax return and inferring the same in case of balance 11 dealers and barring a few sporadic and random transactions relating to some inputs of insignificant quantity for which appellant No.1 has provided a complete answer, there is no evidence from where the steel wires which constitute 72% of the raw material consumption was procured. Even for balance flux, there is no evidence of the corresponding raw material consumption. Learned senior counsel made submi .....

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ry works and various problems that occur into day-to-day running of the factory. The demand raised by the department is based only on the turnover of three marketing companies and no efforts have been taken to match the same with the alleged annual production as claimed by Shri Savarkar. It was further submitted that the statement of Shri Sanjay Malu recording unaccounted purchase of raw material production of finished goods is again baseless. As per his statement, 14.5 MT of unaccounted illemni .....

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ith respect to the proprietors of these alleged bogus companies whose affidavits were filed as required in the case of Kulbhushan Jain vs. CC, Delhi reported in 1999 (111) ELT 906 (T). It was further submitted that all the 12 entities had the bank accounts and were filing sales tax returns and it cannot be said that these 12 entities were bogus as the cheques were realized in the accounts of these 12 entities, which proves the existence of these entities. It was also submitted that from Shri San .....

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odes from various purchasers and he denied the contents of the statement of Shri Sanjay Malu. Shri Sushil Soni also mentioned the details of various brand names of electrodes other than the brands owned by appellant No.1, which itself corroborates that the purchases were made from genuine companies. It was also submitted that the department made no enquiries with the buyers who purchased electrodes from Vidarbha Enterprises which could have explained the origin of welding electrodes. The learned .....

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dings, appellant No.10 has filed an affidavit and still the department did not either record his statement or cross-examine him and the learned senior counsel again relied upon the judgment of this Tribunal in the case of Kulbhushan Jain (supra). It was submitted that the statement of Shri T.K. Rajagopal cannot be relied upon as the department has not conducted thorough investigation of the facts stated therein. No enquiries were conducted with the UCO Bank account of Rhodonite wherein it has be .....

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d to appear for cross-examination which has been acknolwledged in the impugned order and therefore his statement loses its evidentiary value and cannot be relied upon to arrive at the conclusion of clandestine procurement of rutile. The learned senior counsel relied upon the following judgments:- (i) Arsh Castings Pvt. Ltd. vs. CCE, Chandigarh reported in 1996 (81) ELT 276 (T), (ii) L. Chandrasekar vs. CC reported in 1990 (48) ELT 289 (T). 4.1 It was also submitted that Orange City Traders was e .....

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further submitted that the Revenue has erroneously concluded that rutile procured by appellant No.2 has been diverted to appellant No.1. The genuine transactions carried by appellant No.2 were totally ignored by the department. Even during investigation, one of the buyers, Samrat Cylinders, has acknowledged the purchase of flux from appellant No.2 and the sale of flux is evident from the ledger maintained by appellant No.2. Further, the reliance on LRs of Kerala Transport Corporation to conclu .....

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hat unaccounted quantity of steel was recovered from the premises of appellant No.2 and the same cannot in any manner be relied upon to conclude that such huge quantities of steel has been diverted by appellant No.2 to appellant No.1. It was also submitted that no action has been taken against appellant No.2 for removal of unaccounted steel. The senior counsel also submitted this Tribunal s decision in the case of Lily Foam Industries (P) Ltd. vs. CCE reported in 1990 (46) ELT 462. The learned s .....

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se some payments have been made through Dena Bank account of Orange City Traders, it cannot be concluded that these materials were procured by appellant No.1. It was further submitted that the Revenue has not been able to establish procurement of requisite quantity of raw material. Learned senior counsel also submitted the judgment of Honble Supreme Court in the case of Oudh Sugar Mills vs. UOI reported in 1978 (2) ELT J172 (SC) and the case of Hindustan Coca Cola Beverages Pvt. Ltd. vs. CCE, T .....

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ndicative of the fact that appellant No.1 has been clandestinely clearing the goods under the garb of appellant No.8. It was submitted that invoices of appellant No.8 are genuine transactions and no efforts have been made to verify from the buyers of the said transactions. It was submitted that multiple invoices bearing same serial number existed in the file because the orders pertaining to those invoices were cancelled and the subsequent new invoices were not renumbered. It was also submitted t .....

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unilal Sahu, which has not been verified/authenticated and is, therefore, unsustainable. He relied upon the decision of this Tribunal in the case of Mahesh Silk Mills vs. CCE, Mumbai reported in 2014 (304) 703 (Tri.-Ahmd.), wherein it is held that charge of clandestine removal cannot be sustained based on private records without corroborative evidence. It was submitted that during the course of examination of Shri Chunilal Sahu, he was unable to substantiate the factual details stated by him in .....

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ot been verified/authenticated by the Revenue. It was also submitted that the LR transport document alone cannot be relied upon for sustaining charge of clandestine removal as has been held in the cases of Kothari Pouches vs. CCE, New Delhi reported in 2001 (135) ELT 531 (Tri.-Del.) and Modern Ex-Servicemen Engg. Co. Pvt. Ltd. vs. CCE, Panchkula reported in 2014 (304) ELT 298 (Tri.-Del.). It was submitted that this demand is not based upon any other piece of evidence and, therefore, is required .....

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price has been computed and such a generalization adopted by the department is erroneous as the electrodes of different size and shape are sold at different rates and adopting uniform price for all of the same is highly unjustifiable. As far as the demand pertaining to Annexure A-V is concerned, learned senior counsel submitted that there is no allegation of clandestine removal against Orange City Traders and consequently the demand raised based on the deposits made in Orange City Traders bank .....

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in 2013 (290) ELT 545 (Tri.-Del.) as maintained by the Hon ble Supreme Court reported in 2015 (317) ELT A159 (SC); (iii) Ashwin Vanaspati Industries vs. CCE reported in 1992 (59) ELT 175 (T) statements of various parties taken at the time of investigation are not reliable as the deponents have not been produced for cross-examination. (iv) Globe Synthetics vs. CCE, New Delhi reported in 2003 (159) ELT 228 (Tri.-Del.); (v) Rama Shyama Papers Ltd. vs. CCE, Lucknow reported in 2004 (168) ELT 494 (Tr .....

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The learned AR reiterated various findings in the impugned order. He took us through the various statements particularly the two statements of Shri Sanjay Malu as also the statement of Shri Poonamchand R. Malu and Shrawankumar R. Malu. He further submitted that these statements are claimed to be retracted. However, no such retraction was filed before the investigating officer or any officer of the department. The retraction was in the form of affidavits which were produced only at the time of ad .....

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at in the affidavit filed, they have not elaborated what is wrong in those statements and what part of the statements is incorrect. Learned AR took us through these statements particularly that of Shri Sanjay Malu where he has explained the whole of the modus operandi. Learned AR submitted the following case laws in support of his contention that such retractions are of no consequence and the statements can be relied upon:- (i) CC(P), Mumbai vs. Shamsuddin M.A. Kadar reported in 2010 (259) ELT 4 .....

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(ATFE); (vii) Asia World Exports vs. CC, Mumbai reported in 2011 (274) ELT 225 (Tri.-Mumbai) (para 26.3); (viii) Pundole Shahrukh & Co. vs. CC, Mumbai reported in 2014 (313) ELT 573 (Tri.-Mumbai); (ix) Sidhharth Shankar Roy vs. CC, Mumbai reported in 2013 (291) ELT (Tri.-Mumbai); (x) P.B. Nair C&F Pvt. Ltd. vs. CC, Mumbai reported in 2015 (318) ELT 437 (Tri.-Mumbai); (xi) ACC, Madras-1 vs. Govindasamy Ragupathy reported in 1998 (98) ELT 50 (Mad.); (xii) Zaki Ishrati vs. CC&CE, Kanpu .....

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how cause notice is ₹ 3,79,39,861/- which will work out to clandestine clearance of 7459 tons. If we divide the figure by 45, it will amount to clandestine clearance of 165.76 tons. Shri Pradeep Savarkar, Quality Control Manager, has indicated the capacity as 226.83 per month and in view of this fact, the alleged clandestine clearance broadly correlates. 5.2 Learned AR further submitted that it is not possible in the case of clandestine clearance to find every link as these links are in th .....

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ission of clandestine clearance etc.:- (i) Lucky Dyeing Mills P. Ltd. vs. CCE, Surat reported in 2008 (222) ELT 543 (Tri.-Ahmd.) (paras 9, 12, 13); (ii) CC, Madras vs. D. Bhoormull reported in 1983 (13) ELT 1546 (SC) (paras 30, 31, 32); (iii) Ahmednagar Rolling Mills Pvt. Ltd. vs. CCE, Aurangabad reported in 2014 (300) ELT 119 (Tri.-Mumbai) (para 5.1); (iv) Gulabchand Silk Mills Pvt. Ltd. vs. CCE, Hyderabad-II reported in 2005 (184) ELT 263 (Tri.-Bang) (para 10); (v) National Boards vs. CCE, Cal .....

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ch was not accounted, purchase of raw material in third party s name and purchase of wire rods through Sunflame Fuels Pvt. Ltd. Further, the department has been able to bring evidence regarding the sales of the goods inasmuch as the three marketing companies were used for the sale of the unaccounted production. He further submitted that even on the finance side, the department is able to unearth the account of Orange City Traders. Thus there are evidences from all the sides and in view of these .....

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2014 (304) ELT 335 (Del.). It was further submitted that the learned AR s contention that the retraction cannot be relied upon as the retraction letter has been submitted only at the time of adjudication and the retraction aspect has not been mentioned in the subsequent statement of some deponents. It was submitted that this aspect has been dealt by the Tribunal in the case of Opel Alloys (P) Ltd. vs. CCE, Ghaziabad reported in 2005 (182) ELT 64 (Tri.-Del.), wherein the Tribunal has held that c .....

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icient circumstantial evidence leading to a probability of such alleged offence is erroneous and for this purpose, the learned senior counsel relied upon this Tribunal s decision in the case of Aum Aluminium Pvt. Ltd. vs. CCE, Vadodara reported in 2014 (311) ELT 354 (Tri.-Ahmd.). The learned senior counsel submitted that in view of these contentions, the demands do not hold good and the demands are required to be set aside and consequently penalties and redemption fine imposed are also required .....

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of the goods are cleared without payment of duty. Shri Sanjay Malu who was the Manager and appears to be looking after all the work and in the know how of the things, has explained the modus operandi followed by appellant No.1, which elaborates that a part of the production is not being accounted. Further, the raw material required for unaccounted production to be purchased in cash or in the name of third parties and destruction of records after the transactions are complete. Directors of appel .....

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n by the Revenue. In the impugned order, based upon the investigations, the allegations have been upheld. While keeping in view the statements given by Shri Sanjay Malu and Shri Poonamchand R. Malu, T.K. Rajgopal etc. and also the results of the investigation, we do not have much doubt that appellant No.1 was engaged in unaccounted production of welding electrodes and was clearing the same without payment of duty. However, how much and what are the evidences to support that quantum are equally i .....

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d from the balance sheet. As far as the period 1.1.2002 to 19.8.2002 is concerned, invoices were available and the demand from April 2002 onwards is based upon invoices. It would thus be seen that annexure A-I demand is based upon the assumption that all the sales made by the three marketing companies are of welding electrodes alone and nothing else. Further, in respect of three years, the figures have been taken from the balance sheets and not from the sales invoices. For April 2002 onwards it .....

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, value, purchaser etc. The demand in annexure-III is based upon a document recovered during the search. The said document was maintained by one Shri Chunilal Sahu. The document indicated the clearance of welding electrodes cleared clandestinely during certain periods prior to the search. The document indicated specification of the welding electrodes, quantity etc. Annexure-IV demand is based upon certain LRs/chits recovered from offices of three transporters. As per the documents, certain vehic .....

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s not the case of the Revenue that Orange City Traders was engaged in the sale or marketing of welding electrodes. We are, therefore, of the view that in respect of each annexure, it is necessary to examine the evidences available as also the missing links etc. so as to judge the overall sufficiency or otherwise of the evidence to support that part and quantum of demand. 8.1 Annexure A-I is the demand which has been computed based upon adding the turnover of the three marketing companies. We fin .....

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and 2 companies. We note that the proprietor of Vidarbha Enterprises (appellant No.8) Shri Sushil Omprakash Soni (appellant No.9) in his statement has denied that Shri Sanjay Malu looks after the day-to-day work of the said marketing company. On the contrary, he stated that he looks after the said marketing company. (Thus statement of Shri Sanjay Malu and Shri Sushil Soni are contradictory). During the statement, he identified certain records pertaining to the said marketing company wherein his .....

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ination, Shri Sanjay Malu has stated that the statement was given under duress and he backed out from his statement. As far as other two marketing firms are concerned, we find it strange that no statement of the proprietor Shri Purushottam Malu was recorded. This was particularly necessary as in respect of Vidarbha Enterprises, statement of Shri Sanjay Malu was contradicted by Shri Omprakash Soni. It is not the case of the Revenue that Shri Purushottam Malu was not available. We also note that S .....

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to find out the truth and also to find out whether the electrodes purchased were the ones manufactured by appellant No.1 and were cleared by appellant No.1 without payment of duty, or part or whole of these were purchased from some other manufacturer and resold to various customers. From the investigation we find that a feeble attempt was made in this direction inasmuch as the summons were posted which came back due to insufficient address. Summons could not be served through the Assistant Commi .....

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ri Sushil Soni or Shri Purushottam Malu. Shri Sushil Soni in his statement has claimed that purchases from 12 marketing companies are genuine, it should have been possible to ask Shri Soni to provide complete details of these 12 companies/firms and thereafter question the concerned person. It is an admitted fact that all the 12 companies had bank accounts and transactions were made through cheques/DDs. It is not coming out from the show cause notice or the impugned order whether any effort was m .....

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een possible for the department to locate the companies and record the statements of the proprietors to find out from whom the said supplier companies have purchased the welding electrodes. Results of such investigation could have helped in arriving the correct and true factual position. 8.2 We also note that no enquiries have been made with the buyers of welding electrodes of the three marketing companies. If enquiries were made at least with some buyers and it was found that the buyers have re .....

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M/s. Rhodonite Pvt. Ltd. suggest that appellant No.1 did get the said critical material indirectly from sources other than Indian Rare Earth Ltd. directly, but the question is how much of the unauthorized rutile was received by appellant No.1 and whether this quantity of rutile received would correspond to the alleged production of welding electrodes in the name of three marketing companies. We do not find any correlation or any attempt to correlate the procurement of rutile from unauthorized so .....

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of the final product and is the main input is not disputed and is factually correct. There are no concrete evidences about the purchase of unaccounted wire rods.. In the absence of details of procurement of these two critical inputs (wire rods and rutile) and input-output correlation as also the factors mentioned earlier, we are of the view that the Revenue has not discharged burden of proving the quantum of clandestine production and clearance of the final product. We may hasten to say here th .....

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raised in annexure-I of the demand notice does not survive and we accordingly set aside. 8.5 We also note that appellant No.12 viz. Shri Shashibhushan Agarwal, Director of Sanjhi Foodco, has denied outrightly selling any rutile to appellant No.1 and the Revenue has not been able to find out any evidence to contradict the statement. Similarly, there is no admission from Shri Sanjay Malu or Shri Poonamchand Malu or Shri Shrawan Kumar Malu that they have purchased any rutile from Sanjhi Foodco. In .....

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one cannot conclude that all the rutile/illmenite purchased by Ayush Enterprises was diverted to the appellant. We note that the very fact that the drafts were made from the account of Orange City Traders, Nagpur, the least that was expected is to question Shri Omprakash Soni about these transactions. However, nobody seems to have been confronted about these transactions. Moreover, there are no evidences to indicate that all these consignments indeed have come to Nagpur and that also to appellan .....

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er, these are few stray cases and do not account in substantial way to the clandestine clearance of quantity alleged in the show cause notice. These observations are applicable for demands covered by annexure-I as also annexure-V 8.6 As far as Annexure-II is concerned, we find that this part of the demand is based upon the details recovered during search of the office of appellant No.1 on 20.8.2002. The documents were recovered from file title Sales Bills not accounted in the books of M/s. Malu .....

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any reason why such precise details will be available in a file relating to Malu Electrodes. We also note that it is not the case that appellant No.1 is claiming that the said goods have been sold to appellant No.8. The only conclusion that can be drawn in these cases is that these consignments were manufactured and cleared clandestinely to various buyers. More than one consignment have been sent with same invoice number. We do not find the explanation tendered by the learned senior counsel hav .....

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o confirmed that none of the four invoices are recorded in the statutory records and in fact there is a fifth invoice bearing the same number under which certain number cases of welding electrodes were dispatched by appellant No.1 and that invoice is recorded in the statutory records. Shri Sanjay Malu also accepted similar position in respect of other invoices. He also confirmed that the welding electrodes manufactured by appellant No.1 were manufactured under the cover of documents of Vidarbha .....

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ions that the appellants had received the unaccounted raw material and manufactured and cleared the goods unaccounted. We are, therefore, of the view that the demand made in this annexure is required to be upheld and we accordingly uphold this part of the demand. 8.7 Another demand is covered by Annexure-III. This part of the demand is based upon a paper recovered from one Shri Chunilal L. Sahu who was the production supervisor. The said document indicates datewise the details of clandestinely c .....

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d in Annexure-IV is based upon the documents recovered from Sainath Mahalaxmi Transporter, Nagpur, Siddheshwar Transport, Nagpur and Ashapura Roadways, Nagpur. We note that the documents recovered indicate the LR number, date and the vehicle number as also the destination city. From annexure-IV attached to the show cause notice, it appears to us that the weight of the goods as also the description of the goods being transported was not available in the LR or the said documents, even though the d .....

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other person was not asked the name of the dealer or purchaser of the goods and no investigation has been made at the dealer end so as to be sure that the goods transported are welding electrodes and the quantity indicated in annexure-IV is the correct quantity or the value of the goods. In the absence of any such detail, we are of the view that the benefit of doubt will have to go to the appellant, even though it is possible that some welding electrodes might have been transported through these .....

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value etc. and also in the absence of any corroborative evidence, the demand in annexure-IV is not sustainable. We therefore set aside the demand covered by annexure-IV. 8.9 We find that the demand in Annexure-V is based upon amount deposited in Orange City Traderss account. What Revenue has done is that all the cheques which have been deposited in the said account has been assumed to be sale proceeds of the welding electrodes cleared unaccounted by appellant No.1. We find from the investigatio .....

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has not said anything of this type in his statement. In fact we find that the Revenue has not confronted either the proprietor of Orange City Traders or the Directors of appellant No.1 or Shri Sanjay Malu or any other official of appellant No.1 about the account of Orange City Traders and the deposits in the said account. We also note that all the amounts that had been deposited have come through cheques/drafts. Revenue has not made any attempt to find out whose drafts these were and these payme .....

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trodes manufactured by appellant No.1 which have been cleared clandestinely without payment of duty. Since no connection whatsoever has been brought between the welding electrodes manufactured by appellant No.1 and the amount deposited in the account of Orange City Traders, in our view, the demand raised in Annexure-V does not survive and we accordingly hold so. 8.10 One of the critical item in the manufacture of welding electrodes is rutile. We find that the Revenue has gone by the statement of .....

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empt has been made to find out which of these consignments of Rhodonite were sold to appellant No.1. Neither Shri T.K. Rajgopal has been asked these details. All that Shri Rajgopal stated that he sold about 400 MT of rutile to Shri Poonamchand Malu. We also note that Shri Poonamchand Malu in his statement has denied this part of the statement of Shri T.K. Rajgopal and he has stated that he has purchased few consignments through broker alone. Thus there is a vast difference between what is admitt .....

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2002 is reduced to the duty amount covered by annexure-II and III. As far as the other noticees are concerned, our observations are as under:- (i) Penalty under Rule 26 read with Rule 209A has been imposed on appellant No.2. Penalty under Rule 26 is imposable on the excisable goods. In this case the goods involved are welding electrodes. Appellant No.2 is not concerned with either with the manufacture, sale or any other activity of the welding electrodes. Even as per the Revenues contention, ap .....

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orresponding to the goods sold by them is set aside. The penalty is also set aside. (iv) Appellant No. 9 and 10 are the proprietors of appellant No.8, 6 and 7. Since the penalty on proprietorship firm is already set aside, the penalty on them is also set aside. (v) No concrete evidence could be produced against appellant No.12 and 13 that they diverted the raw material to appellant No.1. Moreover, they are not concerned with any excisable goods, leave alone liable to confiscation. Hence the pena .....

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/2002/236 dated 17.2.2003, this show cause notice is pertaining to duty demand, confiscation of the goods removed without payment of duty and seized from godown of appellant No.1 as also premises of appellant No.15 and 16. The show cause notice also covers confiscation of the raw materials in excess than what was recorded in the statutory records. Similarly, certain electrodes i.e. the final product, were found in the factory, which were not recorded in the statutory records. We have gone throug .....

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ellant No.1s factory, these goods have been correctly seized under Rule 25 and the duty demanded is in order. The redemption fine imposed also is correct and is not on the higher side. Penalties imposed on appellant No.1, 15 and 16 are also not on the higher side. Similarly, the raw materials are finished goods which were found in excess of what was recorded in the statutory records and are confiscable under Rule 25(1)(b) and Rule 25(1)(a). The redemption fine imposed in lieu of confiscation is .....

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spect of show cause notice F.No. DGCEI/PRU/INT/33/2002/235 dated 17.2.2003, this show cause notice is relating to appellant No.2. As mentioned earlier. Appellant No.2 is a private limited company and the two Directors of this company are Shri Poonamchand Malu and Shrawankumar R. Malu who are also the Directors of appellant No.1. The said unit is not registered with the Excise department. From the investigation it appears that they were receiving MS wires which were being drawn to the required si .....

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