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Commissioner of Central Excise, Chennai-I Versus Indian Steel & Allied Products, Goyal Ispat Udyog, Indira Ispat Udyog

2016 (1) TMI 1061 - CESTAT CHENNAI

Manufacture and clandestine clearance of goods - MS rounds, bars etc. falling under chapter 7214.90 of CETA - hole issue of manufacture and clandestine removal of excisable goods appears to have emanated from the search of bill traders/agents premises - higher consumption of electricity - Held that:- Revenue failed to prove its case - No evidence has been established by Revenue to prove the clandestine manufacture and removal. - Therefore merely on the weighment slips from the weighbridge o .....

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invoices or any payment particulars of sale and receipt of goods. No evidence advanced by Revenue to connect these weighment slips with either supplier / buyer or to the assessees or to the transporter or to sale proceeds etc. Therefore the burden of proof is on the Revenue to discharge onus and as already discussed in the preceeding paragraphs the revenue has not proved in this case. - Further, mere electricity consumption cannot be the only basis for determining duty liability. - The d .....

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016 - Dated:- 27-1-2016 - Hon ble Shri R. Periasami, Technical Member And Hon ble Shri P.K. Choudhary, Judicial Member For the Appellant : Shri N. Rajagopalan, Special Counsel For the Respondent : Shri S. Sankaravadivelu, Advocate ORDER Per R. Periasami E/380/2005 & E/CO/11/2006 Revenue filed the above appeal against OIO dt. 27.4.2004 passed by Commissioner of Central Excise, Chennai. 2. The brief facts of the case are that respondents M/s.Indian Steel & Allied Products (ISAP) are manufa .....

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ises was searched on 24.7.97 and verified the records and also seized the records relating to commercial production and clearance of excisable goods. After completing investigations and recording statements from various persons and from their employees of respondent company brokers dealers etc., a SCN No.33/99 dt. 2.6.99 was issued to the respondent demanding excise duty of ₹ 1,64,38,943/- under proviso to Section 11A on the clandestine removal of excisable goods without payment of duty ma .....

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ded duty of ₹ 1,96,425/- and also imposed penalty of ₹ 20,000/- on the 1st respondent. The adjudicating authority dropped rest of the demand proceedings. The CBEC reviewed the order and Revenue filed appeal against the dropping of proceedings in respect of demand. 3. Heard both sides on 7.8.2015 and 25.8.2015. Shri K. Rajagopalan, Ld. Special counsel appearing for the Revenue reiterated the grounds of appeal and submitted a paper book containing case laws and briefly explained the mo .....

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spondent chose nearest two weigh bridges at Manali and Tirupati Weigh Bridge to weigh finished goods as well as scrap. Entire transaction towards purchase of scrap as well as clearance of removal of finished goods were carried out onlyby cash transactions and they received the raw materials i.e. scrap without bills only on payment of cash but same was not accounted in the Form-4 register.The recovery of slip from the weighbridge and verification of the weighment records available in Form-4 regis .....

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mits that respondent cleared excisable goods without payment of duty by direct sales to Iqbal Trader and Acete Sales Chennai by direct transaction without going through brokers. 3.4. He submits that adjudicating authority had overlooked all these evidences relied by the department and confirmed the demand only for the month of Jan 95 and dropped the rest of demand proceedings. The adjudicating authority cannot have macroscopic view and come to the conclusion that there is no link established wit .....

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in the revenue matters. To support this, he relied various case laws which is enclosed in the paper book separately. He drew our attention to following case laws :- (1) State of Rajasthan Vs Mohan Lal 2009 (237) ELT 435 (SC) (2) Super Tyres Pvt. Ltd. vs CCE Panchkula 2009 (244) ELT 363 (Tri-Del.) (3) Ravi & Co. Vs CCE Lucknow 2013 (291) ELT 47 (Tri.-Del) Particularly, he relied the State of Rajasthan Vs Mohanlal (supra) wherein the Hon ble Supreme Court has held preponderance of probability .....

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r consumption of 56,080 units where they have not accounted any production from this plant whereas the adjudicating authority confirmed the demand of taking an average 280 units per MT. He submits that adjudicating authority should have followed the same principles for the power consumption above for other periods by going by preponderance of probability. 3.6 He drew our attention to page 138 of paper book (Red Book) wherein the Superintendent (Adjudication) addressed a letter dt.10.11.2003 to M .....

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documents.It is clearly shown by filing second affidavit retracting his original statement stating that signature does not belong to him without verifying the document and the same ought to have been considered by the authorities. 3.7 He relied copy of bill trader details at page 133 and page 134 of paper book issued by R.S. Steel. He submits that right hand top corner of the bills, it is written name of the respondent in Tamil as "Allied". These documents relate to goods pertaining to .....

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ention to question related to payment details which was available in file no.22 captioned as commission challan file seized by mahazar on 7.8.96 and in his reply, Shri Murali acknowledged of having seen the documents and explained the statement and worksheet. Sl.No.8 of the worksheet relates to I.S.A.P.(1st respondent) He explained the worksheet with reference to handling of cash and handing over the amount to various units. Shri Murali in his statement also deposed that writing pad recovered fr .....

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e same statement at page 109 confirms collection of cash and payment to various employees and Sl.No.1 of the list relates to respondent-company and cash was paid to Mr.Goothandapani. Shri Iqbal confirmed in his statement available at Page 111of paper book where the tabulation list names the manufacturer's name wherein Sl.Nos.3, 10,11, 12 of the tabulation the respondent name is figuring. All these documents are relating to the respondent. Ld. Special Counsel submits that above evidences clea .....

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r the respondents submitted a written synopsis and also submitted a paper book containing case laws. He submits that cross objections filed in Volume I, III & IV should be taken into consideration. He reiterates the synopsis filed and reply to SCN filed before the adjudicating authority. He reiterates the findings of the adjudicating authority where the findings from OIO from page 13 onwards wherein the adjudicating authority clearly brought out in detail and dropped the proceedings. On the .....

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leared. cases enclosed in Vol-II at pages 75, 77, 79-82, 86. He relied on the following case laws :- (i) CCE Tirunelveli Vs S.S.D Spinning Mills Ltd. 2008 (222) ELT 392 (Tri.-Chennai) (ii) Pet Metal Pvt. Ltd. Vs CCE Vadodara 2012 (278) ELT 641 (Tri.-Ahmd.) (iii) CCE Madurai Vs Ratna Fireworks 2005 (192) ELT 382 (Tri.-Chennai) (iv) Puja International Vs CC New Delhi 1995 (76) ELT 69 (Tribunal) (v) Sanket Food Products Pvt. Ltd. Vs CCE Aurangabad 2005 (188) ELT 107 (Tri.-Del.) 4.2 Regarding weighm .....

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r these certificates were signed by him or not. Further he submits that description and quantity of all other discrepancies were countered by them in their reply to SCN which is annexed at Vol-IV before adjudicating authority. He submits that therefore the same was not applicable to their case as there is no movement of vehicle number which has not been verified by the department and correlated with the weighment slip. 4.3 On the bill trader documents, he submits that tabulations were not seized .....

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ent by demand draft from the ultimate buyer whereas it was alleged that payment was made in cash to the assessee and the adjudicating authority specifically sought clarification from the investigating agency. No reply was submitted. Regarding consequence to receipt of goods from first sale to second sale, department has not established any link of movement of vehicle number first bill linking to the second sale to show how the bill trader accounted the payment received from demand draft as they .....

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in their cross objection filed in Vol-I. He countered all the case laws relied by Revenue and submits that the adjudicating authority has rightly dropped the proceedings and also relied case of CCE Vs Rawf Re-Rollers - 2015 (317) ELT 499 (Tri-Chennai) wherein on an identical case, the Division Bench of this Tribunal has rejected Revenue s appeal. He submits that statement Mr.Murali dt. 8.8.96 at page 7 of the paper book confirms that he has not maintained regular accounts. 5. In rejoinder, lear .....

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yog (E/483/2005) and Goyal Ispat Udyog (E/436/2005) and reiterated that his submissions made in respect of appeal of Indian Steel & Allied Products (E/380/2005) on 7.8.2015 holds good. On the issue of weighment slips and bills generated in respect of second sales, statements recorded from various persons as the same modus operandi was adopted in this case also. 7. The brief facts of the case in respect of Appeal No.E/483/2005 is that M/s.Goyal Ispat Udyog (GIU) (presently known as Sri Ram Is .....

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osing demand of duty of ₹ 1,33,62,467/- on the clearances made during the period April 1994 to 7.8.1996 and also proposing penalties both on the appellant and its Managing Director. The adjudicating authority vide his OIO No.3/2004 dt.27.4.2004 dropped the show cause proceedings against the appellant as well as against his M.D Shri Ram Goyal. Hence the present appeal by Revenue. 8. Further, he submits that appellant Goyal Ispat Udyog have used Manali Weighbridge for both weighment slips an .....

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.P.V.Rajasekaran of Srinivasa Trading Co. who confirmed the transactions. Further, he relied the statement of Shri Ram Goyal, M.D. dt. 13.9.96 of Goyal Ispat at page Volume III wherein he clearly admitted that during the period 1994-95, 1995-96 and 1996-97 they have removed the goods from the factory under the cover of bill trader's invoice and so admitted cash transactions and also identified the details of bill traders recorded in the tabular statement pertaining to the appellant. He relie .....

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t page 102, identified the appellant Goyal Ispat Udyog and also confirmed certain transactions pertaining to the appellant. E/483/2005 & E/CO/40991/2013 9. As regards the third appellant, M/s. Indira Ispat Udyog (IIU) in appeal No.E/436/05, he reiterated the same submissions as above. He further drew our attention to statement of ShriP.K. Bansaldt. 5.3.97 enclosed at page 19 of the paper book wherein he clearly admitted that he signed the weighment slips and also handed over the weighment sl .....

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t slips, the same should have been applied for the remaining weighment slips and the local authority should have confirm the duty. Regarding power consumption and preponderance of probability, cases laws relied were identical to Indian Steel and Allied Products. 10. Ld. Advocate for the respondents submitted written submissions in respect of both the appellants Indira Ispat Udyog and Goyal Ispat Udyog and also submitted written synopsis and reiterated all the arguments and also relied findings o .....

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goods of finished goods is of 5938.003 MTs out of 5156.77 MTs of raw material which is not correct as per the adjudication order. Therefore quantifications are not based on any valid evidence. Regarding the statement of traders and also weighment slips, he submits that the Commissioner in his OIO at page 69 atpara-35 has clearly brought out that he has examined all the statements and also weighment certificates and brought out the contradictions. Statements weighment Certificate No.4573 and 4574 .....

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dated 27.4.2004 passed by the Commissioner of Central Excise, Chennai-I on 3 different assesses on identical issue of clandestine removal of iron and steel items ie. MS rounds. MS bars etc. The adjudicating authority after examining the records and investigation reports of DGCEI and allegation made in the respective SCNs, dropped the demand proceedings and held that investigation failed to prove any clear evidences of manufacture and removal of excisable goods without payment of duty. In respect .....

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tively. On perusal of revenue appeals and the grounds of appeal, we find that the grounds made therein are similar in all 3 appeals and the investigation carried out by DGCEI on Bill trader s premises and other persons is more or less common to all the 3 cases and some of the statements of persons are relied in all the cases. The revenue s main contention is that the adjudicating authority failed to consider the records and statements recorded from various persons and overlooked the evidences. R .....

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the whole issue of manufacture and clandestine removal of excisable goods appears to have emanated from the search of bill traders/agents premises on 7.8.96 and recovery of records and second sales invoices of various manufacturers. Interestingly, we find only on 13.9.96 (in respect of GIU), 28.10.96 (in respect of IIU) & 24.7.97 (in respect of ISAP) i.e. after one year the respondents premises were searched and statements were recorded. We find that the allegation of manufacture and clandes .....

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d the charges collected as ₹ 15/-, and the signature of customer and weighbridge in-charge. The adjudicating authority in his findings at para 34, 36 and para 32 and 33 of respective OIOs has clearly discussed this issues in detail. Though these weighment documents printed as weighment certificate it is not certificate per se but only weighment slips. The weighment slip of weighbridge owner is only an abstract document to show the quantity weighed for the purpose of collecting weighment ch .....

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e persons in charge of weigh bridge etc. no recovery of any weighment slips from assessees premises nor any statements recorded from the persons who signed the weighment slips. It is pertinent to state that in order to establish clandestine removal of excisable goods it has to be proved with corroborative evidence linking the weighmentslips. The preponderance of probability will apply only when it is proved with certain clinching evidence. The case laws relied by the Revenue in the case of CC Vs .....

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'ble High Courts and the Tribunal in various decisions consistently held that clandestine manufacture and removal of excisable goods is to be proved by tangible, direct and affirmative and incontrovertible evidences. The Hon'ble Allahabad High Court in the case of CCE Vs R.A. Castings Pvt. Ltd. (supra) on the identical issue upheld the Tribunal s order and dismissed the Revenue appeal. The said High Court's decision stands affirmed by Hon'ble Supreme Court as reported in Commissi .....

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d-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 .....

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ipt of sale proceeds, whether by cheque o by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity for in excess of what is necessary for manufacture of goods otherwise manufactured and validity cleared on payment of duty (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 .....

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atements of some persons may even be responsible official of the manufacture or even of its Directors/partners who are not even permitted to be cross-examined, as in the present case, without one or more of the evidence referred to above being present." The guidelines laid down by the Tribunal in the above case for establishing clandestine removal is squarely applicable to the present case. Whereas in the instant case none of the above evidences or any one evidence has been established by R .....

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tory or any documentary proof of receipt of the finished goods by the buyer having received the goods without cover of invoices or any payment particulars of sale and receipt of goods. No evidence advanced by Revenue to connect these weighment slips with either supplier / buyer or to the assessees or to the transporter or to sale proceeds etc. Therefore the burden of proof is on the Revenue to discharge onus and as already discussed in the preceeding paragraphs the revenue has not proved in this .....

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erred to the decision of the Hon ble Supreme Court in the case of Collector of Customs, Madras & Ors. v. D. Bhoormull [1983 (13) E.L.T. 1546 (S.C.)], the Gujarat High Court s judgment in Maganlal Gulabchand Shah v. Union of India [1992 (59) E.L.T. 235 (Guj.)] and the Tribunal s decision in Roxy Enterprises (P) Ltd. v. Collector of Central Excise [1991 (53) E.L.T. 585 (Tribunal)]. It is the case of the appellant that the department need not prove actual clearance with mathematical precision. .....

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Perumal of M/s. Ganapathy Sankaran Traders which was to the effect that they had sold the cone yarn received from the respondents to two parties stationed at Samisigapuram and Chatrapatti; and (e) record of cross-examination of traders/buyers etc. We wanted to examine these evidentiary materials, but none is available on record, nor is the SDR possessed of any. In the circumstances, we are not in a position to assess any probability. 6. None of the citations given by SDR can support his proposi .....

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uty. That case was established by quantitative statements furnished by the party to their bank, stock taking report of the bank etc. Neither any such evidence with acceptable authenticity is available on record in the present case, nor any of the documents/statements relied on by the appellant is available. Demand of any amount of duty must have necessarily a quantitative basis, for which mathematical precision is required. This attribute is missing in this case. 7. The appeal is dismissed." .....

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is order has dealt the issue in detail and brought out his clear findings. Though the Revenue has relied higher electricity consumption, the demand is not based on electricity consumption but based on the weighment slips and other records. In this regard, Hon ble High Court of Allahabad in the case of CCE Vs R.A. Castings Pvt. Ltd. (supra) has clearly held that mere electricity consumption cannot be the only basis for determining duty liability and upheld the Tribunal s order and dismissed the R .....

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er to prescribe/fix norm for electricity consumption first and notify the same to the manufacturers and thereafter ascertain the reasons for deviations, if any, taking also into account the consumption of various inputs, requirements of labour, material, power supply and the conditions for running the plant together with the attendant facts and circumstances. The Tribunal further observed that no experiment have been conducted in the factories of the appellants for devising the consumption norms .....

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y its allegations. The Tribunal has also considered the report of Dr. Batra, which has been relied upon for making the allegations that there was higher electricity consumption. It appears that Dr. Batra in his report has observed that for the production of 1 MT of steel ingots, 1046 units electricity required. 4. So far as the various after allegations relating to the fictitious firms and the income from the share trading, the Tribunal recorded the finding that since the incriminating statement .....

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red by the appellants, there is nothing on record to link it with the so called clandestine removal of the goods. 5. On consideration of the aforesaid findings, we are of the view that the findings of the Tribunal are based on the material on record and they cannot be said to be without any material and perverse. We find that the Revenue has invoked the proviso to Section 11A(1) of the Act but no case has been made out in the show cause notices or in the adjudication order that there were any mi .....

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