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2016 (1) TMI 560 - CESTAT MUMBAI

2016 (1) TMI 560 - CESTAT MUMBAI - 2016 (333) E.L.T. A116 (Tri. - Mumbai) - Clandestine manufacturing and clearing of the said M.S. Ingots - shortage of raw materials and excess of finished goods - the case of the revenue is that appellant had not recorded the production in their factory premises and clandestinely removed the goods. To come to such conclusion they relied upon the electricity consumption and the statements of various transporters. - Held that:- there is no evidence which indicate .....

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he only input required for the manufacture of M.S .Ingots, Revenue has not brought on records to show that various other inputs which are required for manufacturing of M.S. Ingots were also procured clandestinely and were unaccounted. - Secondly, the allegations of clandestine removal of manufactured goods is very serious allegation and needs to be substantiated by Revenue authorities with tenable evidence to show that there was large scale manufacturing of commodities. - As regards the .....

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raised, we find that there is no reason to visit the appellants with any penalty. - Decided substantially in favor of assessee. - Appeal No. E/1728, 1729/10, 86420, 86421/13 - Final Order Nos. A/4002-4005/2015-WZB/EB - Dated:- 31-12-2015 - Mr. M.V. Ravindran, Member (Judicial) And Mr. C.J. Mathew, Member (Technical) For the Petitioner : Shri B. Santhanam, Advocate For the Respondent : Shri Hitesh Shah, Commr (AR) ORDER Per: M.V. Ravindran These four appeals are directed against orders-in-or .....

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appellant is evading Central Excise duty by clandestine manufacturing and clearing of the said M.S. Ingots, Preventive Officers of the Commissionerate paid a visit to the factory premises of the main appellant. During the visit, the stocks were verified and it was found that there was a shortage of raw materials and excess of finished goods. The excess stock was seized and investigation was continued and statements of Manager, various signatories and Directors were recorded. On completion of inv .....

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cause notices on merits as well as on limitation. The adjudicating authority after following the principles of natural justice, did not agree with the contentions raised by the appellants, confirmed the demand of duty with interest and imposed penalties on all the appellants. 4. Learned Counsel appearing for the main appellant would submit that the demand of duty confirmed in both the show-cause notices is incorrect. It is his submission that the clandestine removal allegations based on the alle .....

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tco Industries Ltd. v. CCE - 2013 (291) ELT 273 (Tri.) 4.1 It is his further submission that the demands raised for the differential duty on the allegation of clandestine removal of the goods during the period 24.03.2005 to 18.6.2008 in one show-cause notice and in another show-cause notice for the period July 2008 to November 2010 is based upon the imaginary electricity consumption @ 1046 units metric tonne. It is his submission that this calculation is considered by the lower authorities based .....

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e preferred an appeal before the Hon'ble High Court of Allahabad and it was rejected as reported at 2011 (269) ELT 337. Aggrieved by such an order of the Hon'ble High Court, Revenue filed a Special Leave Petition before the Apex Court and the said SLP was also dismissed as reported at 200 (269) ELT A108. 4.2 It is his further submission that subsequent to such judgement, various Commissioners in various assessee s cases allowed the contentions and dropped the proceedings of the show-caus .....

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ons on the issue and following the judgement of the R.A. Casting (supra) rejected the Revenue s plea and allowed the appeals of the assessee. It is his submission that the issue is no more res integra. 4.3 It is his further submission that there was an addendum to the show-cause notice stating therein that an investigation was carried out in the factory premises of Shree Sidhbali Ispat Ltd., it was noticed that the appellant herein was receiving sponge iron clandestinely cleared from their facto .....

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class only hence the statement having been retracted cannot be relied upon. It is his further submission that without prejudice to the submissions, the adjudicating authority has not followed the judicial discipline, by discarding the binding decisions of the Courts and the Tribunal ruling that the allegations of clandestine removal cannot be sustained merely on assumption and presumption basis and should be supported by positive evidence. It is his submission that the reliance placed on the 3r .....

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is unaccounted) of clandestine removal of excisable goods. It is his further submission that the judgement of the Honble Gujarat High Court in the case of Vishwa Traders Pvt. Ltd. (supra) specifically records that the department must have positive evidence that the manufacturer has clandestinely procured the raw material required to manufacture the final product, a fact which is absent in the case in hand. It is his further submission that there being absence of an independent and unimpeachabl .....

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duced for cross-examination hence the Revenue cannot place reliance on the statements. As regards unexplained income of ₹ 91,24,870/- they were received for hiring of various trucks by appellant and shown as indirect income in the balance sheet due to lack of knowledge of Shri Chatar Singh. It is his submission that the allegation which has been upheld by the adjudicating authority that this amount is relatable to the clandestine sales of the goods is incorrect as the details were not veri .....

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thers Pvt. Ltd. & Ors v. CCE vide final order No. A/50905-50910/2015-EX(DB) dt. 19.3.2015 for the proposition that in these three judgements, orders issued was identical as is in these cases. 4.4 On limitation it is his submission that the show-cause notice dated 11.09.2009 is for the period 24.03.2005 to 18.06.2008 is clearly time barred as the main appellant was regularly filing the returns with the lower authorities during the relevant period. 5. Learned Commissioner (A.R.) while supporti .....

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04.2009 and these statements were not retracted and only in reply to show-cause notice dated 23.04.2010 it is stated that the statements were incorrect as they were recorded in English and Shri Chatar Singh does not understand English hence it stands retracted. It is his further submission that the main appellant did not maintain any record of receipt of raw material or transportation of finished goods; no separate record in Form IV was maintained for procurement of bazaar scrap and Cenvated raw .....

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natory, Shri Bhagwandas Karmali & Shri Sikandar Yadav, Melters of the main appellants factory, there was no satisfactory explanation for an abnormally high shortfall in production of 16% vis-a-vis raw material consumption, which also indicates that the stated finished goods were clandestinely removed. He would draw our attention to the submissions and submit that the consumption of Ferromanganese/Ferro Alloys is also not explained why there was an excess consumption of such material every d .....

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payment of duty. It is his submission that the main appellant has not brought forth any evidence to disclaim to such statement of M/s. Shree Sidhbali Ispat Ltd. It is his submission that as regards the indirect income of ₹ 91,24,680/- which shown on account of Hiring Charges no explanation was forthcoming and no reply to show-cause notice which was indicated that the amount is an income from the hiring of trucks owned in an individual capacity by each of their Directors, it stands to reaso .....

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e main appellant habitually clandestinely manufactures goods and clears the same without payment of duty. He would submit that the furnace installed by the appellant were manufactured by M/s.Electrotherm (India) Ltd. and as per the performance certificate of the manufacturer shows wide variations in consumption of electricity vis a vis manufacture of finished goods. The appellant is unable to explain this fluctuation in-spite of the furnace being brand new when production commenced. He would sub .....

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apply in the case in hand. It is his submission that the show-cause notices dated 11.09.2009 and 11.02.2011 and orders-in-original dated 18.05.2010 and 19.03.2012 have laid out the case and needs to be sustain as held in the following cases:- 1. Kanungo & Co 1983 (13) EL T 1486 (SC) 2. C.C Vs D. Bhoormull1983 (13) ELT 1546 (SC) 3. Triveni Rubber and Plastics Vs CCE 1994 (73) EL T 7 (SC) 4. Nagpal Steel Ltd. Vs CCE 2000 (125) ELT 1147 (T) 5. Hans Casting Pvt Ltd. Vs CCE 1998 (102) EL T 139 (T .....

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Mills Vs CCE 2008 (222) EL T 543 (T) 14. Ahmednagar Rolling Mills Pvt Ltd Vs CCE 2014 (300) E. L.T. 119 (T) 15. CCE Vs APS Associates Pvt Ltd. 2015 (317) ELT 740 (T) 16. Sarlia Steel Pvt Ltd. Vs CCE FO no. A/2019-2023/15/EB dt. 8.7.2015 in Appeal no. E/1126/2010-Mum. 6. We have considered the submissions made at length by both sides and perused the records. 7. The issue involved in this case is whether the demand of an amount of ₹ 3.86 crores and ₹ 1.54 crores confirmed against the a .....

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e of finished goods and raw material and receipt of unaccounted income of ₹ 91,24,680/- non accountal of actual production of Runners and Risers. Both the adjudicating authorities have relied upon heavily and only on the report purportedly given by Dr. N.K. Batra who held that for manufacturing of one metric tonne of M.S.Ingots, required electricity is 1046 units and have justified the same stating that the consumption of electricity by the main appellant indicated that they have not recor .....

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hbali which was unaccounted but we find that the said allegation is not supporting the case when various personnel of the main appellant were confronted with such statement of M/s. Sidhbali, stated that they have not received the goods from M/s. Sidhbali. Further, we find that sponge iron is not the only input required for the manufacture of M.S .Ingots, Revenue has not brought on records to show that various other inputs which are required for manufacturing of M.S. Ingots were also procured cla .....

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of issues. Heavy reliance placed by the adjudicating authority on the said report to presumably to work out the manufacturing of M.S. Ingots and clandestine removal therein seems to be incorrect as has been held by the Tribunal in the case of R.A. Casting (supra). In the said judgement, this Tribunal had specifically recorded as under:- 23. The Tribunal has consistently taken the view that wherever electricity consumption alone is adopted as the basis to raise demands, the order of the lower aut .....

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and that too on different dates to adopt the test results as the basis to arrive at a norm, which can be adopted for future. The impugned demand based merely on assumptions and presumptions cannot, therefore, be sustained nor could be justified both on facts and in law. 7.2 It is to be noted that Revenue aggrieved by such an order took up the matter before the Hon'ble High Court of Allahabad and the Lordships dismissed the appeals by a speaking order, which is upheld by the Apex Court by dis .....

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and removal of goods i.e. M.S. Ingots. The said decision has gone into all the aspects which have been agitated before this Bench and held that there cannot be any demand on the assessee based only on the presumption of manufacturing and excess consumption of electricity. It is also seen that the judgement relied on the ratio laid down by R.A. Casting (supra) we find that the Tribunal has recently in 2015 in final order A/51402 - 51403/2015-EX(DB) dated 23.04.2015 in the case of Savitri Con-Cast .....

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e removal of manufactured goods is very serious allegation and needs to be substantiated by Revenue authorities with tenable evidence to show that there was large scale manufacturing of commodities. In the case of Viswa Traders Pvt. Ltd. supra, the Hon'ble High Court of Gujarat has held as under:- 7. The Tribunal in Paragraph Nos. 12, 13 and 16 has recorded clear finding that when the premises of the respondent were visited, the stock of raw-material and finished goods were tallying with the .....

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, Borax Power, Calcium and Dolomite as inputs/raw material. On the date of visit of the officers to the factory premises of the appellant, it is undisputed that the stock of raw materials as well as finished goods was tallying with recorded balances. This conclusion can be reached from perusal of records, as there is nothing on record to indicate otherwise. 13.On careful perusal of the entire records of the case, we find that there is nothing on record as to unrecorded purchases or consumption o .....

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ls. There is a solitary evidence in the form of statement of supplier of one of the raw material i.e. Borax Powder, who indicated that the appellant had procured Borax Powder and not accounted the same in his record; and the said entries and information were deduced from the documents of the premises of Shri Anil Jadav and whose evidence has been discarded for having not been produced for cross examination; in the absence of any other tangible evidence to show that the appellant had been procuri .....

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which would indicate that there was clandestine manufacture and clearance of the goods from the factory premises of M/s. VTPL, in the peculiar facts and circumstances of this case, we hold that the impugned order which confirms the demand on the appellant M/s. VTPL and imposes penalty on them is not sustainable and is liable to be set aside and we do so. We find that the Hon'ble High Court of Delhi in the case of Flevel International in Central Excise Appeal No.6/2013, in their judgement da .....

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ning clandestine removal has been discussed and the legal position has been summarised as under: "(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 naccounted finished goods (not inferential or assumed) from the factory without payment of duty; . (c) di .....

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on of goods, cleared without payment of duty; (i) links between the documents recovered during the search and activities being carried on in the factory of production; etc." On applying the ratio of the judgements of High Courts, we find, in the case in hand there is no tangible evidence of clandestine manufacture and clearances and the confirmation for the demand of duty is merely on assumption and presumptions and is unsustainable. 7.4 As regards the demands confirmed by the adjudicating .....

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