TMI Blog2015 (12) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... ed only the statements of persons with regard to supply of LAB through SWC and failed to address the issue on the procurement of sulphuric acid/oleum, which is another raw material required for manufacture of acid slurry and electricity consumption. On perusal of various statements and records, it is seen that these are mainly recovered from SWC who manipulated and used various fictitious names for sale of LAB received from TNPL to various customers including the appellants. Adjudicating authority has computed the quantity and value purely on mathematical formula and worked out the total quantity of acid slurry by adopting the ratio of raw materials LAB and sulphuric acid purely based on the alleged quantity of LAB received by the appellants from SWC and not supported with any evidence. As regards the payments made to three employees of SWC, the appellants claimed that this was paid for the expenses. Regarding payment of ₹ 11 lakhs made by Fintex Chemicals to TNPL, we find that there is no finding to link the said payments to supply of LAB to the appellants and mere statements that they are related and controlled by the appellants, is not an evidence to hold that appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 5,94,012/- on the goods cleared for home consumption by wrong availment of exemption. He also ordered for confiscation of 449 kgs. of acid slurry seized along with the lorry from M/s. Baby Star Soap Works and appropriated an amount of ₹ 1,250/- and also confiscated the vehicle and imposed a penalty of ₹ 50,00,000/- on Shri A.R. Shanmugasundaram, partner of M/s. Caress Industries and also imposed penalties on the other co-noticees. Against the said order the appellants preferred appeal before the Tribunal. The Tribunal vide Final Order dated 09.08.2002 (reported in 2002 (147) ELT 1035 (Tri.)) remanded the matter for denovo adjudication. The relevant portion of the said order is reproduced as under:- 9. On a careful consideration of the submissions and on perusal of the entire order and records of the case, we are satisfied that the ld. Commissioner has failed to take into consideration the most important criteria required for manufacture i.e. receipt of both the ingredients namely LAB and oleum (concentrated sulfuric acid) for the purpose of manufacture of the final product namely acid slurry in terms of the quantum of raw material required and final pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out at a very belated stage and the very evidence appears to be flimsy, fictitious and concocted one. When the defence is put forth that they have not received all the inputs required to manufacture the final product as per their reply to SCN, then there is lot of force in their submission and deserves consideration. It cannot be said that reply was an afterthought. The ld. Commissioner in not having discussed the aspect of non-receipt of oleum (sulphuric acid), nor he has shown as to how the acid slurry was manufactured and to whom it was removed, therefore we have to uphold the submissions made by the appellant that the order is not a speaking order and the impugned order is required to be set aside for de novo consideration. Ld. Counsel was very fair in seeking remand of the matter and did not argue for setting aside the impugned order. A perusal of the impugned order and the evidence relied upon by revenue gives us an impression that department has not established their case of clandestine removal and manufacture of acid slurry. However, ld. Counsel has stated that appellants have succeeded in bringing rebuttal evidence on record and they will be able to establish that the alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eared for home consumption by wrong availment of exemption under Notification No. 1/93 dated 28.02.1993, for the period 16.10.1993 to Feb, 1995. He has also confiscated 449 kgs. of acid slurry seized along with the lorry under Rule 173Q of CER, 1944 and imposed a redemption fine of ₹ 5,000/- and appropriated an amount of ₹ 1,250/-. He has also ordered for confiscation of the vehicle and appropriated the an amount of ₹ 5,000/- towards the value of the vehicle. He imposed a penalty of ₹ 50,00,000/- on Shri A.R. Shanmugasundaram, partner f M/s. Caress Industries under Rules 9(2), 173Q and 226 of CER, 1944 read with Section 38A of CEA, 1944. He has also imposed a penalty of ₹ 10,000/- on Shri P. Ganeshan of M/s. Baby Star Soap Works, and ₹ 5,000/- on Shri P. Murugan, driver of the vehicle under Rule 209A of CER, 1944 read with Section 38A of CEA, 1944. Only M/s. Caress Industries and Shri A.R. Shanmugasundaram, parter of M/s. Caress Industries preferred appeals and others have not preferred any appeals. 4. The Ld. Advocate representing for the both the appellants explained the investigation proceedings initiated against the appellants and drew att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal in his denovo order. She further submits that the original records of electricity consumption were already taken over by the department during investigation and in their custody and in spite of repeated requests, the same were not handed over to the appellants. Therefore, they are not in a position to work out the details of electricity consumption and the bills paid to the TNEB. Since the documents were already with the department the adjudicating authority had failed to examine the electricity consumption. She also submits that no evidence was adduced regarding clandestine removal of acid slurry without payment of duty. As per the capacity of the plant, the total quantity of final products of manufactured were duly accounted in their records. 6. Regarding payments made to the three persons of SWC, she submits that it was paid to them for meeting towards the expenses and not for procurement of LAB. She further submits that in the denovo proceedings, the adjudicating authority had allowed cum-tax benefit as well as benefit of modvat credit. She relied on the following case laws in support of her contentions: 1. Caress Industries Vs. CCE, Chennai 2002 (147) ELT 1035 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards receipt of LAB from TNPL. He further submits that the role of Fintex Chemicals and Prakash Traders, where the appellants used to accommodate sale proceeds and make payment to TNPL. Documents recovered from SWC merely show sale of LAB to non-existing firms. He further submits that the appellants used their own transport for transportation of LAB and the they used their own tanker for this purpose. The invoices shown supply of LAB to non-existing firms. It is also confirmed that independent transporter M/s. Tulsi Transport, delivered LAB to the appellant under the TNPL invoices raised in the name of non-existing firms. 9. Regarding use of other raw materials, statements were recorded from the supplier of sulphuric acid and submits that the sulphuric acid is easily available in the open market and there was no requirement of storage of sulphuric acid. He drew attention to the OIO, where the adjudicating authority dealt on the storage and capacity of production. 10. Regarding electricity consumption, the adjudicating authority took all steps to obtain the power consumption from TNEB, since the TNEB expressed its inability to provide the details for 10 years. The same was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the appellants name. She also submits that reply to the SCN dated 11.09.95 at page95 in Volume-I and also the cross examination of TNPL at page71 in Volume-II and reply to SCN at page97 sub-paras e,f,g h. In their reply at para-IX a b, they have clearly explained that the fictitious firms were created by SWC to show the sale of LAB, which is not done by the appellants. She submits that the Department conveniently omitted TNPL and there were not made the noticee to the SCN only. SWC was made a noticee in the SCN only for penalty and the adjudicating authority dropped the proceedings against SWC. She drew the attention of the Bench to the reply at page 84 of volume-II, where the statement of Shri K.R. Ramamoorthy of SWC has clearly admitted that the fictitious names were created by the managing partner of SWC for their own purpose. The statement of Suresh Kumar confirmed that they have shown fictitious tanker for supply of LAB. Regarding, manufacturing capacity and storage facility, she submits that quantity alleged by the department is beyond the storage capacity. If every ton of acid slurry is manufactured, 0.770 of spent Acid (by-product) emerges and it requires huge capac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings on the manufacture of final products and clandestine clearance. Further it is vital that both the inputs LAB and sulphuric A6cid and the final product that is Acid slurry are highly corrosive chemical requires safety for transportation and storage and use. The Revenue tried to make out the entire case based on the SWC records for supply of LAB, various fictitious firms etc. The onus is on the department to establish the supply of LAB by SWC in various fictitious names pertaining to the appellants. Further, we find that mere single seizure of 449 kgs. of acid slurry valued ₹ 16000/- during the transit cannot be a proof for the Revenue to arrive conclusion that the huge quantity of Acid slurry was manufactured and cleared clandestinely. The, seizure of acid slurry found at M/s. Baby Star Soap Works, cannot be expanded to the total quantity of 1366.686 M.Ts alleged to have been manufactured by the appellants Clandestinely. 15. Further, we find that the adjudicating authority has computed the quantity and value purely on mathematical formula and worked out the total quantity of acid slurry by adopting the ratio of raw materials LAB and sulphuric acid purely based on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, M/s. Chandan Prints had retracted its statement during the course of adjudication. The statements of the remaining 46 traders have not been placed on record by the Revenue to prove that the remaining entries recorded in the diary also related to clandestine manufacture and removal of processed man-made fabric. There is no corroborative evidence of excess consumption of electricity, colours, dyes, chemicals, etc., by the appellant. There is also no evidence of transportation of processed man-made fabrics from the appellants factory or any instance where clandestinely removed goods were seized by the revenue. Cross-examination of the third party witness was also not provided to the appellants. 7. Appellants have relied upon several case laws on the issue of establishing case of clandestine manufacturing and clearance of excisable goods. We find that in the matter of Rajasthan Foils Pvt. Ltd. v. Commissioner of Central Excise, Jaipur [2005 (183) E.L.T. 101 (Tri.-Del.)], relied upon by the appellant, CESTAT held as under : 6. From the record, we find that the company is engaged in the manufacture of aluminium foils/sheets. The factory premises of the company was inspecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle. He had nowhere admitted that the goods booked did not accompany the invoices. No statement of any driver of the vehicle had been recorded who transported the goods. Shri Vijaypal Singh himself had no knowledge about the destination at which the goods were sent by the company. 8. Similarly, in the matter of Nova Petrochemicals v. CCE, Ahmedabad-II, this Tribunal in its Final Order Nos. A/11207-11219/2013, dated 26-9-2013 this bench has held as under in Para 40 : After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenues which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw materials, in excess of that contained as per the statutory records; (b) Instances of actual removal of unaccounted finished goods (not inferenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter hearings in the present appeals were concluded), once again reiterated the same principles, after considering the entice case law on the subject [Hindustan Machines v. CCE, 2013 (294) E.L.T. 43]. Members of Bench having hearing initially differed, the matter was referred to a Third Member, who held that clandestine manufacturing and clearances were not established by the Revenue. We are not going into it in details, since the learned Counsels on either side may not have had the opportunity of examining the decision in the light of the facts of the present case. Suffice it to say that the said decision has also tabulated the entire case law, including most of the decisions cite before us now, considered them and come to the above conclusion. In yet another decision of a co-ordinate Bench of the Tribunal [Pan Parag India v. CCE, 2013 (291) E.L.T. 81] it has been held that the theory of preponderance of probability would be applicable only when there were strong evidence heading only to one and only one conclusion of clandestine activities. The said theory, cannot be adopted in case of weak evidences of a doubtful nature. Where to manufacture huge quantities of final products the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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