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M/s Davinder Sandhu Impex Ltd. Shri Baldev Singh, Director Versus Commissoner of Central Excise, Ludhiana

Clandestine removal of goods - assumption / presumption - demand based on the statement - absence of corroborative evidence - appellant submits that in this case there was no shortage of finished goods were found at the time of search and the raw material found short was assumed by the authorities below that same has been used in manufacturing of final product which have been removed clandestinely without payment of duty - Held that:- the case has been made out only on the basis of the statement .....

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estine removal is not sustainable in the absence of any corroborative evidence to the statement of Shri Baldev Singh, Managing Director. - Demand set aside - Decided in favor of assessee. - Excise Appeal No. 195 of 2007 with Misc. Application No. 51821 of 2014, Appeal No. 196 of 2007 - Final Order No. 52894-52895/2015 - Dated:- 14-9-2015 - Ashok Jindal, Member (J) And B. Ravichandran, Member (T) For the Appellant : Shri B L Narasimhan, Adv For the Respondent : Shri R K Grover, AR (DR) ORDER Per .....

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tuous. 2. The facts of the case are that a team of Central Excise officers visited to the factory premises of the appellant on 25th May, 2004 and had a search operation. They did not find any discrepancy in any stock physically present and in records. On 21st May, 2004, the statement of Shri Baldev Singh, Managing Director of the appellant was recorded, wherein shortages has been worked out on the basis of the statement i.e. 15 to 20% wastage took place in manufacturing of their final product an .....

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ded period of limitation on the ground that appellants have clandestinely manufactured Mufflers and T-Shirts from different type of yarns found short and removed the same clandestinely without payment of duty, invoices and without accounting the same. The matter was adjudicated and the impugned order has been passed. Aggrieved from the said order, appellant is before us. 3. The learned Counsel for the appellant submits that in this case there was no shortage of finished goods were found at the t .....

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uance of the show cause notice, the learned Commissioner sought an information from Knitwear Club, Ludhiana to ascertain the fact how much is the waste occurs during the activity undertaken by the appellant which was replied by the Knitwear Club, Ludhiana on very next day stating that wastage is of around 40%. If the said wastages of 40% is taken up for consideration, there will be no shortage of yarn and consequently, the charge of clandestine removal will not sustain. He further submits that t .....

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vir Metals Industries vs. CCE & CUS, Daman, Vapi reported in 2014 (313) E.L.T. 581 (Tri. -Ahmd.)/ Klene Paks Ltd. vs. CCE, Bangalore - I reported in 2009 (247) E.L.T. 271 (Tri. - Bang.) and CCE & CUS. & SER. TAX, DAMAN vs. Nissan Thermoware P. Ltd. reported in 2011 (266) E.L.T. 45 (Guj.). He, therefore, prayed that the impugned order is to be set aside. 4. On the other hand, learned AR opposed the contention of the learned Counsel and submits that the learned Commissioner (Appeals) h .....

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shipping bills which corroborates with the statement of Shri Baldev Singh, the learned Commissioner has come to a conclusion that the statement given by Shri Baidev Singh is correct, therefore, the charge of clandestine removal has been proved. He further submits that the wastage claimed by the appellant on the basis of the letter issued by Knitwear Club is not relevant when the wastage is ascertainable from the export documents and which has been admitted by the Managing Director of the appell .....

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to be that same has been recorded under influence and duress, thereafter, another statement was recorded on 3rd May, 2005 which was also retracted on the same day, where also same statement recorded which is a typed one and it is the claim of the Revenue that same has been typed by Shri Dinesh Kumar (who is an employee of the appellant) in the office of the Department. To that effect, Shri Dinesh Kumar filed an affidavit on 1st August, 2006 that the statement has been typed by the officers of t .....

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dicating Authority but without bringing any corroborative evidence apart from statement of Shri Baldev Singh demand has been confirmed. Such a situation has been dealt by this Tribunal in the case of Klene Paks Ltd. vs. CCE, Bangalore - I(supra), wherein the facts of the case are as under:- "2. The relevant facts that arise for consideration are appellant-company herein are manufacturers of HDPE/PP, woven fabrics, sacks. The appellant-company availed Cenvat credit of the duty paid on HDPE/P .....

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rious persons like the officers, directors of the company and also the suppliers of raw materials were recorded. Investigations culminated in issuance of show cause notices which summarises the contraventions, main allegation being, that the appellants had contravened the provisions of Rule 57A/57AB of the Central Excise Rules, 1944 and Rule 3(4) of the Cenvat Credit Rules, 2001-2002 inasmuch as they had not used Cenvat credit availed plastic granules in the manufacture of woven fabrics/sacks, b .....

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of waste is more than that. Coming to such a conclusion, a demand was raised on all the appellants.". 7. In these set of facts, this Tribunal has observed as under:- "5.1 As regards the merits of the case, we find that the impugned orders have proceeded on the ground that the appellants had shown excess percentage of waste and by showing such excess percentage of waste, they had cleared the HDPE/PP granules clandestinely without reversal of Cenvat credit or without paying any duty. It .....

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It is now a well settled law that mere presumptions and assumptions cannot be the basis for fastening the charge of allegation of clandestine removal". 8. We further find that in the case of CCE, CUS. & SER. TAX, Daman vs. Nissan Thermoware P. Ltd. (supra), the Hon'ble Gujarat High Court has observed as under:- "7. Thus, on the basis of findings of fact recorded by the Tribunal' upon appreciation of the evidence on record, it is apparent that except for the shortage in raw .....

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erial available on record, it is not possible to state that the Tribunal has committed any legal error in giving benefit of doubt to the assessee". and thereafter the Hon'ble Gujarat High Court has held that the confessional statement of an accused in criminal offence which cannot be par with the statement recorded during preventive checks, therefore, the Hon'ble High Court has set aside the charge of clandestine removal. 9. We also find that in the case of Mahavir Metals Industries .....

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ation of shortages would be only a theoretical exercise. It is settled law that such calculation of shortages arrived at on the basis of input-output calculation, cannot be made the basis of clandestine removal. The appellants have also challenged that the statement of the authorized signatory as also by the partner do not stand corroborated with sufficient evidence as they are against the record and cannot be made the sole basis for holding against them. I agree that the veracity of the stateme .....

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lity and the appeal is required to be allowed. 16. On perusal of the Order-in-Original and Order-in-Appeal, I find that the appellant has taken a consistent stand before both the lower authorities that the burden of proof as regards allegation of clandestine removal is on the Department. It is seen from the records that the entire charge of clandestine removal of the finished goods is based upon the theoretical working of calculating the consumption of inputs and presumptive clearance of the fin .....

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ed the final products out of the inputs detected short on the calculation of input-output ratio. I find that as correctly pointed out by the Id. Counsel that this Bench in the case of Suzlon Fibres Pvt. Ltd. (supra), in Para 3 has categorically stated as under : "3. We agree with the above contention of the Id. Advocate, apart from the input-output ratio, there is no evidence on record to show clandestine manufacture and clearance of the goods. Such cases are required to be established beyo .....

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indings of fact recorded by the Tribunal upon appreciation of the evidence on record, it is apparent that except for the shortage in raw material viz., HD which was disputed by the assessee and the statement of the Director, there was no other evidence on record to indicate clandestine manufacture and removal of final products. On behalf of the revenue, except for placing reliance upon the statement of the Director recorded during the course of the search proceedings, no evidence has been pointe .....

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ial). I have concurred with her views". 10. Further, we find that the Hon'ble Gujarat High Court in the case of CCE vs. Saakeen Alloys Pvt. Ltd. (supra), the Hon'ble Gujarat High Court has observed as under:- "7. As can be noted from the decision of the Tribunal, it has extensively dealt with the entire factual matrix presented before it. The Tribunal rightly concluded that in the case of clandestine removal of excisable goods, there needs to be positive evidences for establish .....

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