TMI Blog2006 (8) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... r raw materials, investigation was concentrated on the receipt and use of Potassium Chloride ( also referred to in this order as Refined Carnalite or RC). The purchase bills, chemical stock note-book and the chits showed different quantities of refined carnalite received during the period 6-7-92 to 27-10-92. The figures were respectively 104500 Kgs., 120900 Kgs., and 168700 Kgs. The chit which was written by the chemist. Shri G. Gopinathan also indicated a closing stock of 1807 bags (of 50 Kgs each) on 27-10-92. During the period 27-10-92 to 10-2-93, the chemical stock note-book showed receipt of 92.800 MTs of refined carnalite. For the said period hand-written Chit No. 7 showed receipt of 115.950 MTs of refined carnalite. Therefore, it was found that a total of 284.650 MTs of refined carnalite had been received between 6-7-92 and 10-2-93 in the factory. 2.Shri D. Bhaskaran, Managing Director of the assessee Company had deposed that 750 Kgs of RC yielded 1000 Kgs of Potassium Chlorate . Therefore, adjudicating authority found that using 274.65 MTs of RC (284.650 MTs less 10 MTs found as balance in stock on 10-2-93), 366.200 MTs of Potassium Chlorate would have been produced where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67 bags of potassium chloride shown as receipt as a possibility". In the reply the assessee disputed the figures in the chit and also stated that the total stock in hand was only 298 bags in the factory premises and in their match factory at Thottiam. The storage point at Thottiam Match factory had never been discussed at any stage of the proceedings earlier. The assessee disowned Chit No. 7 which showed that 115.95 MTs of RC had been received. They claimed that this chit had not been prepared by Shri Satyanarayana. This chit was bereft of evidentiary value. The Commissioner held that it was immaterial as to who had prepared the chit. Moreover Shri Bhaskaran had admitted that Chit No. 7 contained details of receipt of RC from 8-8-92 to 31-12-93 vide his statement dated 14-6-93. The Commissioner observed that it was difficult to imagine as to how more than 17 MTs would be available in unretrievable solution when there was no production for the previous 10 days. As against the initial ratio of 750 : 1000 the MD revised input-output ratio to 61:100 [Chloride to Chlorate] based on standard formula. The new formula, according to the Commissioner was a manipulated figure as the same appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. There was no corroborative or material evidence regarding any unauthorised removal or despatch with reference to any conveyance used or having been booked by lorry or railway or for having received any amount towards the sale of such quantity alleged to have been surreptiously removed, let in by the department. There was no inculpatory statement from the assessee or any of his employees regarding any illicit removal of chlorate. There was no evidence of any illicit manufacture or removal of chlorate not accounted for in the statutory account and no case made out of any illicit removal of any consignment. 7.They alleged that the adjudicating authority was biased against the assessee following altercation between the Commissioner and the Managing Director Shri Bhaskaran when he had shouted at the Managing Director Shri Bhaskaran. They had requested for transfer of adjudication to another officer. 8.In the grounds it is claimed that the order of the Commissioner was not legally sustainable in the absence of any evidence. The order was passed in violation of principles of natural justice as the cross-examination of some persons requested for was not allowed. The adjudication of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Chit on 7-1-93 as seen on the Chit. This position was deposed by Mr. Ravichandran in his statement dated 14-6-93. According to the assessee, as per Chit No. 7, receipts of RC between 27-10-92 and 10-2-93 was 73.95 MTs and not 115.94 MTs. The mistakes/omissions commited by the security guard in the accountal of various raw materials though explained during the proceedings in writing, the Commissioner had ignored them. Therefore, the order was not a speaking order. The adjudicating authority observed that Mr Satyanarayana had deposed that during 24-7-93 to 3-1-93, 142.6 MTs had been deposited in the store room whereas as per the EB4, the quantity deposited was only 27.35 MTs. The Commissioner had found short accounting as corroborated by Shri Satyanarayana referring to Chit No. 6 which contained the above information. The appellants submitted that the chit was not in the hand-writing of Shri Satyanarayana but of Shri. Rajendran, one of the security guards as evidenced by him in the cross-examination. The security guard cannot be in the know of quantities of chlorate deposited in the store room. A comparison of in and out register particulars and its recapitulation in Chit No. 6 wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ium Chlorate without payment of duty was established, the proviso to Section 11A(1) of the Act, was not attracted. The following case law were cited to support the appellants' claim that without cogent and positive evidence of unaccounted clearance, particulars found on some loose sheets could not be made basis for demand of duty : (1) Rouchas Watches v. CCE [2006 (197) E.L.T. 218] (2) Pilot Industries v. CE [2004 (173) E.L.T. 402] (3) Melton India (P) Ltd. v. CCE [2005 (181) E.L.T. 129] (4) OPEL Alloys v. CCE [2005 (182) E.L.T. 64] (5) Rajasthan Foils Pvt. Ltd. v. CCE [2005 (183) E.L.T. 101] (6) Hiltons Tobacco Ltd. v. CCE [2005 (183) E.L.T. 378] (7) Premium Packing Pvt. Ltd. v. CCE [2005 (184) E.L.T. 165] 14.Shri B.L. Meena, learned SDR reiterated the reasoning adopted by the Commissioner and reiterated the arguments. 15.We have carefully considered the case records and the submissions of both sides. In any taxcode, tax evasion attracts most stringent penalty and therefore any finding of clandestine removal has to be based on positive and cogent evidence. Cases of clandestine removals are often booked when excisable goods transported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emand made for clandestine clearance of 199.9 Tons by the adjudicating authority.. 17.Chit No. 1 had been written by a person who was not authorised to keep record of such information . The Manager, Shri Ravichandran who was supposed to maintain such records had not confirmed these figures. He described them as 'rough' figures. Even Shri Gopinathan, author of this chit stated that the details about the contents were known only to Shri Ravichadran. The important Chit No. 6 and Chit No. 7 where taken as written by one Shri Satyanarayana who stated later that he had not written the chits. The security guard Shri Rajendran stated during his cross-examination before the Commissioner that he had maintained them and written the contents. These chits are therefore not reliable evidence. Adjudicating authority has made an observation that who wrote the chit was not immaterial as the MD had not denied that it represented facts. This was in the context of discussing Chit No. 7 as acceptable evidence. 18.As far as the power consumption is concerned, if the Commissioner's finding of production based on RC received as per chits 1 and 7 is accepted, the consumption of power per ton of Potassi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made out with the figures of use of Potassium Chloride and no effort was made to investigate such use of Hydrochloric Acid or any other raw material. The settled legal position is that when several raw materials are involved, when a case of clandestine production and clearance is built on clandestine use of raw materials, the same should be proven with reference to unaccounted use of all such major raw materials. 22.In a case of clandestine removal the department should produce positive evidence to establish the same. In the absence of corroborative evidence, a finding cannot be based on the contents of loose chits of uncertain authorship. Department has not produced evidence of use of inputs to prove that there was manufacture of unaccounted finished product. No statements have been obtained to show as to from whom raw materials were purchased. No evidence has been obtained for the use of electricity or receipt of sale consideration by the assessee to prove clandestine manufacture and sale. The department had obtained a statement from M/s. Dhanalakshami Traders, dealer in Potassium Chloride to the effect that the assessee herein had obtained from them on payment of commission, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely. The inference is based on certain private documents only. There is no corroborative evidence recorded. If such huge quantity of cut tobacco was manufactured during the period from April 1998 to September 1998 when the factory is under physical control and removed, either the officer in charge has connived with the appellants or he closed his eyes to whatever was happening. In either case, the department should have proceeded against the officers. There is absolutely no indication in the investigation regarding any complicity of the officers posted in the appellants' unit. Moreover, the investigation has not found out at least a few buyers who have received the goods cleared clandestinely. There is no evidence of excessive consumption of electricity. When the officers visited the unit, they had not found out any unaccounted stock of cut tobacco. In the present case, the charges are based purely on a theoretical working out based on the private documents, which are not statutory. The Hon'ble CEGAT, in the case VST Industries Ltd. (cited supra), has held that the charges of clandestine removal cannot be based on assumptions and presumptions. In the Godfrey Philips case, the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
