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2015 (12) TMI 590 - CESTAT CHENNAI

2015 (12) TMI 590 - CESTAT CHENNAI - 2016 (333) E.L.T. 158 (Tri. - Chennai) - SSI Exemption - Clandestine manufacture and removal of goods - Estimation of production - electricity consumption - Availment of exemption under Notification No. 1/93 dated 28.02.1993, for the period 16.10.1993 to Feb, 1995 - Confiscation of seized goods - Held that:- As seen from the Tribunal order, we find this Tribunal while remanding the case gave clear direction to the adjudicating authority to establish with evid .....

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cum-tax benefit. Whereas on perusal of the denovo order, we find that the adjudicating authority has discussed and reiterated 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 var .....

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nts 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 appellants revived LAB.

In spite of clear directions by the Tribunal by giving an opportunity to the adjudicating authority to bring out all the evidences including t .....

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ts and records of SWC who is a sole selling agent of TNPL.

Entire demand of clandestine removal of acid slurry has been made based on assumption and theoretical calculations by arriving taking notional quantity of LAB. Accordingly, we hold that the demand is not sustainable and entire demand is liable to be set aside. The confiscation of the seized goods of 449 kgs of Acid slurry and imposition of fine ordered by the adjudicating authority is upheld. The excise duty demanded in the im .....

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that the officers of the department visited the appellants unit on 12.01.1993 and carried out investigation and also verified the stock of raw materials and recovered the documents pertaining to purchase of Linear Alkyl Benzene (LAB). On the basis of investigation and statements recorded from various persons, a SCN dated 19.04.1994 was issued to the appellants alleging that they had clandestinely manufactured and removed the final product Acid slurry, without payment of duty. The adjudicati .....

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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 an .....

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n-receipt of both the ingredients which has been brought out in great detail even as per the vehicles said to have been noted in the SCN. On verification of the vehicle number by the appellant, they have found it to be that of scooters, mopeds and autorickshaws and not of the alleged lorry said to have been used for transporting the LAB. It was also pleaded that for transportation of these items, special tankers are required and special storage facility is also required and it cannot be kept in .....

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only one material and that too through various sources said to have been received without establishing the quantum said to have been removed by Tamil Nadu Petrochemicals, the main suppliers of the LAB. The main ingredient i.e. LAB was manufactured by Tamil Nadu Petrochemicals. It was for the department to establish that the entire quantum of raw material LAB was removed and supplied through SWC directly or indirectly. The evidence cannot be oral. It has to be shown through proper documentary ev .....

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s as an afterthought and that it is required to be rejected. The ld. Commissioner ought to have analysed the rebuttal evidence and given findings one way or the other instead of summarily rejected it as an afterthought. The evidence can be said to be afterthought will be only if the evidence has been brought 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 man .....

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ired 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 tha .....

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as clearly noted that the department cannot embark upon further investigation nor collect new evidence against the appellants, however taking into consideration the ratio of the judgment noted in other citations already extracted pertaining to manufacture and removal of Rubber, we are constrained to give directions to the department to take the electricity consumption figures and to see as to whether the allegation of suppression of receipt of inputs and clandestine manufacture can be establishe .....

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in terms of the ratio as now laid down by the Larger Bench of the tribunal in the case of Sri Chakra Tyres (supra). Further contention that in case if the department establishes their case, appellants are entitled to argue and plead with regard to valuation aspect and that they had received raw materials at whole-sale price and that they are entitled for various deductions and is also required to be considered. 3. The adjudicating authority in his denovo proceedings, in order-in original No. 30 .....

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3 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 Indust .....

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or the both the appellants explained the investigation proceedings initiated against the appellants and drew attention of the Bench to para-9 of the Tribunal s order dated 09.08.2002. She submits that the appellants are the manufacturers of acid slurry and Zinc sulphate and availed SSI exemption during the relevant period. The raw materials required for the manufacture of the final products are LAB and Oleum. She submits that the entire case has been made out by the department based on the alleg .....

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ion of the Bench to para-33 of OIO and countered the findings that there is no documentary evidence of purchase of LAB by the appellant from various fictitious firms. The department failed to submit any evidence of receipt of the quantity of LAB. The only evidence relied by the department is that payment of ₹ 11,00,000/- by M/s. Fintex Chemicals to TNPL through SWC. The department failed to establish any link to the above payment to the appellants transactions. She drew attention to the s .....

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have storage capacity of tanks to store such a huge quantity of LAB nor they have that much capacity to manufacture the final products, acid slurry. 5. She further submits that the Tribunal in their remand order dated 09.08.2002 had given clear-cut directions to the adjudicating authority to establish the allegations with clear evidences on the receipts, manufacture, clearance including the electricity consumption. Whereas, the adjudicating authority has not complied any of the direction of the .....

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ectricity 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 .....

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Kanpur 2014-TIOL-1398-CESTAT-DEL 7. Indo Green Textile Pvt. Ltd. Vs. CCE, Mumbai 2007 (212) ELT 343 (Tri.-Mum.) 8. Mahesh Silk Mills, Surat Vs. CCE, Mumbai 2014-TIOL-1032-CESTAT-AHM 9. Kalyan Glaze Tiles Vs. CCE, Rajkot 2008 (222) ELT 417 (Tri.-Ahmd.) 7. The Ld. AR on behalf of the Revenue submitted detailed written synopsis on each issues and evidences and reiterated the same. He explained in the sequence of evidences, raw material procurement, transportation of raw materials etc. He submits th .....

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ts made payments both in cash and in cheques and DDs to SWC. They made payments for procurement of LAB through different agencies M/s. Prakash Traders, M/s. Fintex Chemicals, M/s. Thiru Vengadam Agencies, and M/s. Gomes Agency. All these firms were floated by the appellants. He further submits that SWC records relied by the department for supply of LAB through various fictitious names is not rebutted by the appellants. Statement of Shri Suresh, Accountant of SWC confirming supply of LAB in ficti .....

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e cheques and remitted the same in the SWC account 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-e .....

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age 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 not taken into consideration. He also submits that the electricity consumption is not the sole criteria for determining the manufacture of the final products. In this regard, he relied on the decision of the Hon ble High Court of Madras in the case of P.K .....

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for procurement of LAB. He relied on the following case laws in support of his submissions. 1. Rukmini Industries Vs. CCE, Hyderabad 2004 (175) ELT 600 (Tri. - Bang.) 2. Ureka Polymers Vs. CCE, New Delhi 2001 (127) ELT 618 (Tri.-Del.) 3. Mukesh Dye Works Vs. CCE, Mumbai 2006 (196) ELT 237 (Tri.-Mum.) 4. Bute Cosmetics Vs. CCE, Trichy 2001 (135) ELT 886 (Tri.-Chen.) 5. CCE, Madras Vs. Madras Chemicals 1986 (24) ELT 308 (Tri.) 6. Roxy Enterprises Pvt. Ltd. Vs. CCE, Delhi 1992 (6)) ELT 279 (Tri.) .....

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ablished any clear link with the appellants. She relied on the letter dated 03.04.1995 at page-86 of Volume-I, where they sought the details of invoices from TNPL for the LAB supplied to the appellants. The department failed to produce any evidence to the said letter. The department failed to bring out evidences from TNPL for delivery of LAB in respect of invoices to the appellants and also to others. He further submits that mere receipt of LAB does not lead to manufacture of acid slurry. She al .....

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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 con .....

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al issue of receipt of LAB and in the case of Kavitha Chemicals the adjudicating authority had dropped the proceedings in his denovo order. 13. We have carefully considered the submissions of both sides and the records submitted in the form of annexure to the appeal. In the first round of litigation, this appeal came up before this Tribunal, and the Tribunal in the Final Order dated 9.8.2002, remanded the case to the adjudicating authority. As seen from the Tribunal order which is reproduced at .....

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cted to examine and to give clear findings on the electricity consumption for the alleged manufacture of finished goods and also to consider the cum-tax benefit. Whereas on perusal of the denovo order, we find that the adjudicating authority has discussed and reiterated 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 electri .....

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present case relates to April,89 to February,95. It is pertinent to see that the appellants are registered with central excise and being a chemical industry the adjudicating authority ought to give a clear cut 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 ma .....

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ound 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 the alleged quantity of LAB received by the appellants from SWC and not supported with any ev .....

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second raw material ie., sulphuric acid oleum is equally important to establish illicit manufacture of finished goods of such a huge quantity, as alleged in the findings. As rightly contented by the appellants if they have to manufacture such a huge quantity of acid slurry definitely it requires huge storage capacity for LAB, finished product and spent acid, which is a by-product as the same cannot be thrown out without clearing. In this regard, the Tribunal s coordinate Bench in the case of Mah .....

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om the factory premises of Mahesh Silk Mills on 19/20-10-1955. While recovery of the impugned from the factory premises of Mahesh Silk Mills is not disputed by the appellant but no one from appellants side has admitted that the diary belonged to the appellant. Nor the contents of the diary were admitted by any one from the appellants side. The scribe of the said diary has not been identified by the Revenue for ascertaining the ground realities. Only one trader - Chandan Prints, who is one of t .....

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ng 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 appella .....

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ntral Excise officers on 19-2-2000 and certain notebooks detailed at Sl. Nos. 1 to 5 of the resumption memo prepared on the date, at the spot, were seized. The entries contained in these notebooks had been tabulated in chart marked Annexure A, to the show cause notice which according to the Revenue, depicted details of clearances in condensed manner during the period in dispute to various buyers and also of the material sent for weighment and the raw material received for the manufacture of the .....

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e entries in the notebooks mentioned at Sl. Nos. 4 and 5 of the resumption memo, pertains to goods sent for weighment by the company to the Dharamkanta and from these entries, it could not be inferred that these goods were cleared to the buyers without payment of duty specially when there is no evidence/statement of any buyer of having received the goods without cover of invoice or payment of duty from the company. In the entries of notebook mentioned at Sl. No. 4 of the resumption memo, at page .....

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y through whom the goods were allegedly booked on the basis of GRs in question. Only statement of Shri Vijaypal Singh, Proprietor of that transport company was recorded on 2-5-2001 who simply stated that he used to arrange the trucks from outside as and when required by the company for transportation of the goods and had been getting ₹ 25/- as commission from the driver of the vehicle. He had nowhere admitted that the goods booked did not accompany the invoices. No statement of any driver .....

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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 a .....

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y (g) statements of buyers with some details of illicit manufacture and clearance; (h) proof of actual transportation of goods, cleared without payment of duty (i) links between the document recovered during the search and activities being carried on in the factory of production; etc. Needless to say, a precise enumeration of all situations in which one could hold with activity that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superi .....

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, this Bench has considered some of the case law on the subject in Centurion Laboratories v. CCE, Vadodara, 2013 (293) E.L.T. 689. It would appear that the decision though rendered on 3-5-2013 was reported in the issue of the E.L.T. dated 29-7-2013, when the present case being argued before us, perhaps, not available to the parties. However, we have in that decision, applied the law, as laid down in the cases, some of which now have been placed before us. The crux of the decision is that relianc .....

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e 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 .....

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be adopted in case of weak evidences of a doubtful nature. Where to manufacture huge quantities of final products the assessee require all the art materials, there should be some evidence of huge quantities of raw materials being purchased. The demand was set aside in that case by this Tribunal. 9. In view of the above legal position and facts available on record, we are constrained to reiterate that evidence of only one diary cannot be made the basis of establishing clandestine manufacture and .....

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e books/diaries or statements cannot be considered as enough evidence for clandestine manufacture and clearances. Accordingly, duty demand ₹ 30,18,378/- is not sustainable against the appellant Mahesh Silk Mills, and the same is set aside. Consequently, neither any penalty is imposable upon Mahesh Silk Mills nor their land, plant nor machinery are liable to confiscation under Rule 173Q of the Central Excise Rules, 1944. Appeals filed by the appellants are allowed by setting aside the Order .....

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