TMI Blog2016 (4) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... on the shortage of the raw material is justified. The Learned Authorised Representative cited various decisions on this issue. We agree with the submission of the Learned Authorised Representative. The demand of duty of ₹ 27,560.00, the Learned Advocate had not contested, and therefore, it is required to be upheld. Regarding imposition of penalty on Shri Sandeep Arunkumar Khaitan Director of the assessee company, we find that he has accepted the removal of finished goods to the quantity of 4,82,220.00 L. Mtrs, and therefore, the imposition of penalty is warranted. However, the quantum of the penalty is required to be reduced. We do not find any material against imposition of penalty on Shri Mohan Lal Khaitan and M/s Koral Prints. There is no material available of involvement of Shri Mohan Lal Khaitan, and M/s Koral Prints and therefore, imposition of penalty on them are not justified. It is well settled by serious of decisions that if the goods are not available, confiscation of goods and imposition of redemption fine cannot be warranted. In view of the above discussion, the impugned order is modified to the extent the demand of duty of ₹ 14,65,949.00 and ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as and Shri Sandeep Arunkumar Khaitan, Director of the assessee company. The officers verified the physical stock of finished goods, Man Made Fabrics (Processed) and found the same tallied with the recorded balance of MMF (P) as entered in the Daily Stock Register (RG-1 Register). However, 4,82,220 L. Mtrs. Grey fabrics (accounted for in Lot Register) was not found either as such or at any stage of processing in the Mills. The Central Excise Officers recovered various records and documents from the factory premises of the assessee. They recorded the statements of various persons including Shri Sandeep Arunkumar Khaitan, and the employees of the Assessee, Transporter, and dealers. 3. A Show Cause Notice Dated 06.07.2006 was issued proposing demand of duty of ₹ 2,14,13,670.00 alongwith interest and to impose penalty on the ground that the Assessee cleared finished MMF(P) measuring 66,91,771.78 L.Mtrs., clandestinely during the period from 28.06.2001 to 25.11.2001 (in short material period ). It has also proposed confiscation of the goods of MMF(P) 66,91,771.81 L.Mtrs though not physically available. It has also proposed to impose penalty on Director of the Assessee amongst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements of the employees of the transporters as reproduced in the Show Cause Notice. The employees of the transporter merely stated that process of issuing the transport documents. There is no admission by the transporters of delivery of the grey fabrics on the basis of the said rough scribbling. 5. The main argument of the Learned Advocate in respect of demand of ₹ 1,81,38,79.00 and ₹ 17,72,360.00 (i.e. total ₹ 1,99,11,979.00) on 62,22,212.25 L.Mtrs. is that just few months before the visit of the Central Excise Officers on 26.11.2005, they were paying duty as per determination of the Annual Capacity of Production (ACP) under Rule 96 ZQ of the erstwhile Central Excise Rules, 1944, read with Section 3A of the Act 1944, where the production capacity was determined about 96 Lakh Sq.Mtrs., in a year. It is submitted that in the present case, the actual clearance of MMF(P) during 6 months (28.06.2001 to 25.11.2001) was 41,21,000.00 L.Mtrs as per Monthly Return filed to the Department. It is submitted that the additional quantity of about 62 lakh Sq.Mtrs alleged clandestine removal, on which duty was demanded, are beyond the manufacturing capacity supported by AC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Tejwal Dyestuff Industries vs Commissioner of Central Excise, 2007 (216) E.L.T. 310 (T), upheld by the Hon ble Gujarat High Court as reported in 2009 (234) E.L.T. 242 (Guj). The learned Advocate also submits that the demand is barred by limitation. He has also submitted Written Notes and compilation of case laws. The learned Advocate submits that the penalty imposed on the buyers cannot be sustained as there is no material available to impose penalty on them. 7. On the other hand, the Learned Authorised Representative on behalf of the Revenue reiterates the findings of the Adjudicating Authority. He submits that the Director of the assessee company in their statements accepted the clandestine removal of the goods, and therefore, there is no need to produce further evidences. He relied upon the decision of the Hon ble Supreme Court in the case of Commissioner of Central Excise, Mumbai, vs Kalvert Foods India Pvt. Ltd. 2011 (270) E.L.T. 643 (S.C.), and the decision of the Tribunal in the case of Shalini Steels Pvt. Ltd. Vs Commissioner of Central Excise, Hyderabad 2010 (258) E.L.T. 545 (Tri.-Bang.), which was upheld by the Hon ble Andhra Pradesh High Court as reported in 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt make with 4 chambers each (i.e. total 8 chambers). They were working under Compounded Levy Scheme under Rule 96ZQ of the erstwhile Central Excise Act, 1944 upto 28.02.2001. With effect from 01.03.2001, Section 3A of the Act, 1944 was omitted for levy of Central Excise duty on the basis of Annual Capacity of Production (in short ACP). Notification No.19/2000-CE, dt.01.03.2000, issued in exercise of powers conferred by Section 3A(3) of the Act, 1944, in supersession of the earlier Notification No.36/98-CE, dt.10.12.1998 specified the rate of Excise duty on processed textile fabrics under various headings/sub-headings as mentioned in the notification, manufactured or produced by an independent process with the aid of hot-air stenter on the basis of ACP. The Appellant by letter dt.31.03.2000, in terms of Notification No.19/2000-CE (supra), declared the total quantity of processed fabrics produced or manufactured in the preceding financial year 1998-1999 was 54,51,127.00 L.Mtrs. A Trade Notice No.17/2000, dt.03.03.2000 was issued by the Surat-I Commissionerate, determined the production capacity of a chamber in terms of quantity shall be deemed to be 1 lakh Sq.Mtrs per chamber per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of recovery of documents from their premises. By Interim Order No. 573-576/2015 dated 13.11.2015, the Tribunal directed to the Learned Authorised Representative for the Revenue to take instructions from the Commissionerate as to how the demand of duty on huge quantity of MMF(P) for 6 months was raised on alleged clandestine removal of goods, appears to be contrary to the Annual Capacity of Production as determined by the Commissioner, which was applicable just before few months. The Learned Authorised Representative produced the letter F. No. V(Misc)2-58/RC/2014-15, dt.26.11.2015 of the Additional Commissioner, Central Excise, Customs Service Tax, Surat-I addressed to the Additional Commissioner (AR). It has been stated in the said letter that the average production of the assessee company for 3 months is about 6.5 Lakhs per month and accordingly, the annual production capacity of the unit would be at least 78 Lakhs L. Mtrs (approx.). Therefore it is very much possible that the production capacity of the unit may be more than 50 Lakhs L. Mtrs per annum. On perusal of the said letter, we find that the annual capacity of the unit would be at least 78 Lakhs L. Mtrs (appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seems to have totally ignored the said specific ground of defence that the installed capacity could not permit production of huge quantity of processed fabrics as has been calculated by the Department. The records clearly disclose that as per the Department the total quantity of processed PB fabrics during the period from 1-6-1998 to 16-11-1998 was 7794848 mtrs. against the declared quantity of 1207490 mtrs. in the records maintained by the appellants. Curiously, the competent authority had under its order dated 18th December, 1998, few days after the raid by the Department had fixed the annual capacity of the production by the appellants unit and had determined their monthly liability to the tune of ₹ 15 lacs and the same was communicated to the appellants under letter dated 18th December, 1998. This point was specifically raised by the appellants but has not at all been considered by the adjudicating authority, though the fact that the said point had been raised in defence was clearly recorded in the order itself. 10. The said point in relation to the total capacity of production in the appellants unit goes to the root of the matter. If the competent authority after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actory was ascertained and/or verified. Not even an attempt in that regard was ever made. No records regarding the electricity consumption were either checked or even perused. No records regarding the staffing pattern and the labour employment was ever gathered. No measurements of the space available for stocks or for stocking the raw-materials and the final product was verified. No account books and bank records of the appellants were checked to ascertain about the flow back of money particularly in relation to the alleged clandestinely removed material. The accounts record also could not lend any support to the allegations of any consideration having been received by the appellants from the alleged clandestinely removed goods. In short, no investigation in relation to the relevant aspects of the matter was carried out by the Department either before the issuance of the show cause notice or even thereafter. Entire investigation appears to be lopsided, half-hearted and half-backed. In the present case, it is revealed from the Panchnama dt.26.11.2001 that there were only two stentor machines having four chambers in each machine installed in the factory, which are capable to man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Kanhaia Cargo, Surat, in his statement dated 26.05.2006 stated that each LR is prepared in four copies (i) consignee copy (ii) consignor copy (iii) Lorry copy (iv) office copy. He confirmed that grey fabrics covered under LR were delivered from their godown situated at Saroli, Surat to the person who produced copy of LR/letter pad. On being further asked, he stated that such consignee copy of LR/Letter pad/bond were not available with them. Similarly, Shri Harandra D. Kotwala Accountant of M/s. South Gujarat Transport Service, Surat in his statement dated 29.05.2006 stated that they do not have consignee copy or letter pad on the basis of which delivery of grey fabrics were made in year 2001-02. It is seen from the Show Cause Notice that all the employees of the transporters in their statements categorically stated that the copy of LRs or letter pad as shown to them were not available with them. So, it is evident from the statements of the employees of transporters that they could not produce copy of the LRs as relied upon by the Department. It is stated by the employees of transporter that they retained the office copy of the LRs in their record, but, they could not produce t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 12-4-2000, and 12-6-2000. It is not disputed that the returns were regularly filed and the fact that these inputs were used for the final products was mentioned from the very inception in the declarations made and the returns filed by the assessee before the Revenue authorities. The copies of monthly returns filed under Rule 7 of the Cenvat Credit Rules, 2001, which are on record, show the use of these inputs in the final products manufactured by the assessee. The receipt of these inputs in the factory premises of the assessee having been established, coupled with the fact that, as per the declarations and returns and other statutory record, the inputs were in fact used in the final products by the assessee, the lethargy of the Revenue Officers in not verifying the relevant statutory records and invoices, as to what exact quantity of raw material was used in the final products, and that in how many final products such inputs could have been used, existence of the particulars in the RG-23 Register reflecting the invoices and the existence of octroi receipts as also the expert opinion in respect of LAB having been used in the final product, altogether create a doubt as to the corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not examined the other aspects namely electricity consumption, use of the other raw materials. It is noticed that the Central Excise Officers obtained the statements of employees of various transporters and none of them placed iota of evidence of supply of grey fabrics and delivery of the finished goods. The Tribunal in the case of M/s. Mahavir Metal Industries (supra) observed the allegation of clandestine removal cannot be sustained in the absence of evidence of clandestine manufacturing. The statements were uncorroborative nature and could not be made sole basis for holding against the assessee. Their veracity has to be gauged from accompanying circumstances and corroborated by independent evidences. In that case, the Tribunal following the decision of the Hon ble Gujarat High Court, set-aside the demand of duty. The relevant portion in the case of M/s Mahavir Metal Industries (supra) is reproduced below:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any legal error in giving benefit of doubt to the assessee. 18. In view of the foregoing and there being no concrete evidence (as agreed by both the Members) of clandestine removal of the goods, the appeals are required to be allowed as held by Honble Member (Judicial). I have concurred with her views. 18. The Hon ble Gujarat High Court in the case of Commissioner of Central Excise, Ahmedabad-I Vs Gopi Synthics Pvt. Ltd. 2014 (302) E.L.T. 299 (Guj.) dismissed the appeal filed by the Revenue. It has observed that the Department failed to discharge onus to prove clandestine removal of the goods, despite, sufficient time being available with the investigating agency. In the present case, we find that the Central Excise Officers visited the assessee factory on 2001 and no initiative was taken for verification of the records, electricity consumption etc. The statements of the employees of the transporters were recorded in 2006, which are uncorroborative nature. In the case of Aum Aluminium Pvt. Ltd. (supra), the Tribunal held as under:- 60. I have considered the submissions made by both sides and perused the records. 60.1 The allegation against the assessee is of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence. In DPP v. Hester - (1972) 3 All ER 10.16, Lord Morris said : The purpose of corroboration is not to give validity or credence to evidence which is deficient or suspect or incredible but only to confirm and support that which as evidence is sufficient and satisfactory and credible; and corroborative evidence will only fill its role if it itself is completely credible There can be, therefore, no corroboration of evidence, which is itself unworthy of credence. 60.7 In the entire records of proceedings, there is no evidence to indicate that there was clandestine manufacturing. There is no independent tangible evidence on record of any clandestine purchases or receipt of the raw materials required for the manufacturing of the alleged quantity of finished goods for its clandestine removal from the factory. In the entire notice and the order there is no satisfactory and reliable independent evidence as regards the unaccounted manufacture and or receipt of the huge quantities of raw materials. There is also no cogent evidence about any freight payment for any such movement. 60.8 I do not find cogent evidence of disproportionate and unaccounted receipt and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RG-1 register entries. The electricity consumption has not been shown to be on the higher side. No buyers of the fabrics have been identified and their statements recorded. My learned brother has discussed the various decisions produced before us by learned advocate and has distinguished the same. However, I find that such distinction is on the basis of minor factual differences. In fact, the demand raised on the basis of notebook, etc., was set aside by Tribunal in precedent decisions, even if there were inculpatory statements of various persons admitting clandestine removal on the ground that the allegations of clandestine removal requires sufficient and strong evidence, which must corroborate. 20. In the case of Vikram Cement (P) Ltd. (supra) the Tribunal held that evidentiary value of the statement of the Director, in the absence of any other evidence cannot be established the guilt of the assessee. The burden of proof is on Revenue and it is required to be discharged effectively. Half-hearted investigation by Revenue cannot be established their case. The clandestine removal of goods cannot be presumed merely on the recovered of some loose papers. This decision of the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Authorised Representative for the Revenue in respect of demand of duty of ₹ 14,65,949.00 on 4,82,220.00 L. Mtrs of grey fabrics. It is seen that there was shortage of 4,82,220,00 L. Mtrs of grey fabrics during the physical stock verification. The appellants failed to give a proper reason. Thus, the demand of duty on the shortage of the raw material is justified. The Learned Authorised Representative cited various decisions on this issue. We agree with the submission of the Learned Authorised Representative. The demand of duty of ₹ 27,560.00, the Learned Advocate had not contested, and therefore, it is required to be upheld. 23. Regarding imposition of penalty on Shri Sandeep Arunkumar Khaitan Director of the assessee company, we find that he has accepted the removal of finished goods to the quantity of 4,82,220.00 L. Mtrs, and therefore, the imposition of penalty is warranted. However, the quantum of the penalty is required to be reduced. We do not find any material against imposition of penalty on Shri Mohan Lal Khaitan and M/s Koral Prints. There is no material available of involvement of Shri Mohan Lal Khaitan, and M/s Koral Prints and therefore, imposition of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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