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M/s. Shree Sidhbali Ispat Ltd., M/s. Shridhar Castings Pvt. Ltd., M/s. Shree Balaji Steel Inds., M/s. Ramsons TMT Pvt. Ltd., Shri Darpan Kadi, M/s. Sangam Mount Transport Corporation, M/s. Ramsons Casting Pvt. Ltd., Shri Natwarlal Vallabhadas Dholakia, M/s. Chandda Transport, M/s. Akola Goods Transport, M/s. Shree Vyenkatesh Casting Pvt. Ltd., Shri Anil Kansal, Shri K.K. Pandey, M/s. Dashmesh National Roadways, M/s. Bhagyalaxmi Steel Alloys P. Ltd., M/s. Omco Steel Pvt Ltd., M/s. Orange City Alloys Pvt. Ltd., M/s. Shree Steel Casting Pvt. Ltd. And M/s. Kamboj Ispat Pvt. Ltd. Versus CCE Nagpur

2016 (4) TMI 605 - CESTAT MUMBAI

Clandestine removal - lack of investigation - whether the main appellant has indulged in clandestine manufacture and clearances of finished goods? - whether revenue is able to make out a case of clandestine removal and whether penalties are to be imposed on the appellants? - Held that:- The position with regard to the demand which is based on the copies of Truck Destination Register maintained by another transporter, namely M/s Akola Goods Transporter, Chandrapur, is no different. Here again, no .....

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orting the goods themselves in their own trucks. No investigations have been conducted with the actual transporters engaged by M/s Akola Transport Co. The Books of Account of M/s Akola Transport Co have also not been examined to find out the names of the actual transporters. In any case it is settled law laid down by the Hon'ble High Court of Patna in CCE v. Brims Products (2008 (9) TMI 603 - PATNA HIGH COURT ), that allegation of clandestine removal cannot be sustained based merely on transport .....

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, breadth, width of the raw materials/finished goods. Such theoretical calculations cannot be the basis for foisting demand on account of shortages. In short, the investigation has failed to establish the case of clandestine removal. - Decided in favour of assessee - E/183/12, E/430/12, E/148/12, E/149/12, E/155/12, E/156/12, E/150/12, E/162/12, E/163/12, E/164/12, E/169/12, E/184/12, E/185/12, E/187/12, E/207/12, E/225/12, E/186/12, E/624/12 & E/88404/14 - Order No. A/86680-86698/16/EB - Dated: .....

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of penalty in Rs. 1. Shree Sidhbali Ispat Ltd 2,81,61,001/- 28,25,000/- 2. M/s. Shridhar Castings Pvt. Ltd. 5,00,000/- 3. M/s. Shree Balaji Steel Inds. 5,00,000/- 4. M/s. Ramsons TMT Pvt. Ltd. 5,00,000/- 5. Shri Darpan Kadi 1,00,000/- 6. M/s. Sangam Mount Transport Corporation 1,00,000/- 7. M/s. Ramsons Casting Pvt. Ltd. 5,00,000/- 8. Shri Natwarlal Vallabhadas Dholakia 1,00,000/- 9. M/s. Chandda Transport 1,00,000/- 10. M/s. Akola Goods Transport 1,00,000/- 11. M/s. Shree Vyenkatesh Casting Pvt .....

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erein after referred to as main appellant) were holding Central Excise registration and are engaged in the manufacturing of iron and steel products namely sponge iron, M.S. Ingots and T.M.T/C.T.D. Bars falling under Chapter 72 of the Central Excise Tariff Act (CETA) 1985. The officers of Central Excise Commissionerate, Nagpur paid a surprise visit to the main appellant s factory on 22.07.2008 and conducted simultaneous search operation in the residential premises of the Director, Vice President .....

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d to be the brother-in-law of the Vice President of the main appellant. Statements of various staff members of the main appellant were recorded. Another visit was made by the officers of the Central Excise on 24.07.2008 and on verification of the stock of T.M.T. Bars and Sponge Iron it was noticed that there was shortage. Re-verification of the stocks was made which reduced the total duty liability. The shortage was explained by the Manager (Commercial & Accounts) of the main appellant as du .....

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stine removal of the goods, a show-cause notice dated 23.03.2010 was issued to the main appellant as also to other appellants. The show-cause notice directed the main appellant to show cause as to why Central Excise duty amounting to approximately ₹ 2.82 Crores should not be demanded and recovered by invoking extended period, interest be not demanded and recovered and penalty not imposed on them under the provisions of Section 11AC of the Central Excise Act, 1944 and Rule 25 of Central Exc .....

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heard the matter and on that day the main appellant was represented and made elaborate submissions and again insisted cross examination of persons whose statements were relied upon. The matter was adjourned to 28.09.2011 on which date the main appellant sought adjournment due to non-availability of Counsel due to pre-occupation before the Tribunal. The adjudicating authority did not fix any date for cross-examination or for the appellant to make further submissions as also other appellants, pass .....

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in the instant case is (i) whether the allegation of clandestine removal can be sustained against the main appellant primarily on the basis of photocopies of the documents collected/resumed from 3rd party premises, (ii) whether the main appellant had requisite infrastructure for manufacturing of the goods said to have been clandestinely cleared and whether any payment were received in cash and any investigation was carried out at the end of buyers. (b) It is the submission that for the charge o .....

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Mills - 2015 (319) ELT A52 (Guj.), wherein the law has been laid down that the allegation of clandestine removal should be evidenced properly by the department. (c) The evidence relied upon in the form of documents seized/recovered/handover by 3rd parties do not establish a case of clandestine removal. (d) Demand of ₹ 10.5 lakhs on shortage of raw materials during panchanama proceeding is incorrect as during the search which was carried out on 22.07.2008 no incriminating document evidence .....

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nd extrapolated for arriving at the weight of other bundles of TMT which was totally incorrect as the length of TMT varies between 15-35 feet. It was informed by the Counsel for the main appellant that this panchanama was also contested by them. (e) It is the submission that the reason for difference in stock was not accepted by the lower authorities despite by the over all evidences in their favour and the shortage of stock cannot be alleged on estimation basis. (f) As regards the duty demand a .....

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or the documents do not bear any stamp of receipt of any consignee and no investigation has been caused at the end of the consignee despite there being fully addressed on the Lorry Receipt along with the documents. It is the submission that there was no recorded statement of the individual who had maintained the account book of Aishwariya Roadlines; despite various names of other transporters being given for engaging the transportation of the goods; statement of the Proprietor of M/s Aishwariya .....

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273) ELT 140 (T) (g) As regards the demand of approximately ₹ 60.85 lakhs on the allegation that there was clandestine removal of the finished goods against photocopy of 276 invoices obtained from Octroi department and demand of approximately ₹ 40.40 lakhs on the allegation of clandestine removal of the finished goods based on details of 123 LRs obtained from Octroi department, it was submitted that the adjudication order or the show-cause notice has not brought on record the source .....

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1 (136) ELT 243 (SC). It is the submission that the authorities did not question any of the main appellant s personnel with respect of photocopies of 276 invoices received from Octroi department as also regarding 123 LRs received from the Octroi department. It is the submission that the reliance placed by the adjudicating authority on the statements of transporters, most of them were commission agents who had arranged for transportation and used to hand over blank LR copies to the actual transpo .....

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me Court in the case of Andaman Timber Industries - 2015-TIOL-255-SC-CX wherein it has been held that an opportunity to cross-examine the witness should be granted if it is sought for. It is his further submission that the statement of the co-noticee is not reliable at all and it was pointed out by the statements of various commissions and omissions. (h) As regards the demand of duty of approximately of ₹ 55.92 lakhs on the allegation of clandestine removal of finished goods, it is the sub .....

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ted that there was clandestine removal, statement of concerned persons from M/s. Ganraj Trading Co. was not recorded and no statements were recorded of the sale made by M/s. Ganraj Trading Co. to various purchasers. (j) As regards the demand of approximately ₹ 2.4 lakhs allegedly removed clandestinely based upon the loose pad/slips seized from the residential premises of Shri Anil Kansal, it is the submission that the adjudicating authority has not considered the fact that no statement of .....

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a private organization and such evidence cannot be relied upon. (l) After reading from the provisions of Section 36(2) of the Central Excise Act, 1944, it was submitted that the print out taken from the computer should be during the period over which the computer was regularly used to store or process information; which was not done so in the case in hand. It is the submission that the Revenue has in its investigation not questioned any of the main appellant s personnel with respect to discrepan .....

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have been imposed that there is no question of penalty as there was clear-cut knowledge that the goods have been removed from the factory premises on documents. 5. Learned D.R. after taking us through the show-cause notice and the order-in-original would submit that (a) the main issue involved in this case is regarding the clandestine manufacturing and clearance of excisable goods through the parallel invoices by the main appellant. He would submit that there was no accounting for the excess ma .....

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g Co. and other documents like Lorry Receipt pertaining to Aishwarya Road Lines were recovered and during investigation it was confirmed that parallel invoices were issued from the factory in the name of different consignees on different date for different quantities and the said invoices were used twice, once on payment of duty and the 2nd time without payment of duty. Scrutiny of the main appellant has confirmed that both sets of invoices were issued by the main appellant. (c) Shortage of fini .....

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M/s Aishwariya Roadlines were recovered from Shri. K.K. Pandeys residence and Shri M. Pant has explained the modus operandi that two sets of documents are maintained. It was also found that in respect of Lorry Receipt in the business premises of M/s Aishwariya Roadlines, corresponding invoices were issued while in respect of documents which were found at the residence of Vice President Commercial of the main appellant such co-relation was not available. (e) During the scrutiny of computer hard .....

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se transport documents and invoices were cleared clandestinely and all the transporters during the investigation have confirmed that the goods were loaded from the factory of the main appellant. (g) The adjudicating authority has given detailed reasons for not granting the cross-examination of various transporters and reiterates the same and also relied upon the following judgements:- (i) Patel Engineering Ltd. Union of India - 2014 (307) ELT 862 (Bom) upheld by the Apex Court as reported at 201 .....

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s of the Central Excise department were deputed to collect the documents from Octroi department of Nagpur Municipal Corporation and these documents were received from Octroi authorities as recorded at para (C) of page 83 of order-in-original and this point was not raised by the main appellant after the issuance of show-cause notice. (i) It is his submission that the demands have not only been raised from the documents recovered from the transporter but the documents were corroborated by the tran .....

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of excisable goods was going on with the activity involvement of the Managing Director. (k) It is his further submission that the penalties imposed on various appellants is also correct as held by the Tribunal in the case of Twenty First Century Wire Rods Ltd. - 2010 (250) ELT 94 (Tri. Mum) and Madhumilan Syntex Ltd. v. Union of India - 2007 (210) ELT 484 (S.C.). He would also relied upon the judgements in the case of Siemens Ltd. - 1994 (70) ELT 305 and Steel Tubes of India Ltd. 2007 (217) ELT .....

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statements have to be disregarded. 6.1 It is his further submission that if these statements of transporters are dis-regarded, there is no statement which implicates the main appellant for clandestine manufacture and clearance of the goods. He would submit that in the absence of any evidence to show there was clandestine manufacture and clearance, the demand confirmed against the main appellant are not sustainable and liable to be set aside. 7. We have considered the submissions made at length .....

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aise more questions than answer them. To say that the investigations have been slipshod in our view will only be an understatement. It appears that the vital and clinching evidence has not been brought on record for reasons beyond us. Some of the stark gaffes that we have noticed in the investigation are enumerated here-in-below. 9.1 The notice relies upon LRs of a transporter and claims that non duty paid goods were transported under cover of the said LRs. Surprisingly, however, the testimony o .....

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d maintained by one Mr. Padmakar Wankhade, Supervisor. However, no statement of Mr. Wankhade has been recorded nor is there any explanation in the notice as to why such a statement could not be recorded. 9.3 Even in respect of statements which were recorded, there seems to have been no follow up on the leads provided. For instance, Mr. Monu Pant, who is the proprietor of M/s Aishwarya Roadlines, whose LRs/Daily Account Book Register were seized from the residential premises of his brother-in-law .....

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the notice contains no reference to any investigation with the actual transporter. Neither any statements of such other transporters are on record, nor is there any explanation available as to why such statements could not be recorded. 9.4 Shortage of raw materials and finished goods during stock taking in the factory has been alleged on the basis of theoretical calculation of weight rather than actual physical weighment. 9.5 Documents said to have been obtained from the Octroi have been, are n .....

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the burden of proving that the same pertain to the appellant lies upon the revenue. The notice has however, without establishing how the said documents could be correlated with the Appellant assumed the same to be correct and pertaining to the Appellant. 9.7 Having summarised the lacunae and shortcomings in the investigation, we shall now deal with the broad evidence relied upon qua each of the demands confirmed in the impugned order and examine whether the evidence relied upon is sufficient to .....

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d for the day of 2.4.2008, there is absolutely no other evidence that has been relied upon. Admittedly, as per the Revenue the LRs/the daily account book Register were prepared by Mr. Padmakar Wankhede, however there is no testimony of Mr. Padmakar Wankhede on record. There does not appear to us any conceivable reason as to why the testimony of the author of the document has not been brought on record. Though such a testimony, by itself would not have been sufficient to nail the Appellant, Howev .....

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which goods have supposedly been cleared clandestinely. There is also no evidence in the form of unaccounted procurement of raw materials, fuel, labour, receipts of unaccounted cash, etc. which are some of the basic parameters which have been laid down by Courts and Tribunals over a period of time for determining whether or not the allegation for clandestine removal is established. It may be worthwhile to quote the tests that have been laid down in the case of in M/s Nova Pharmaceuticals Pvt. L .....

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goods (not inferential or assumed) from the factory without payment of duty; (c) discovery of such finished goods outside the factory; (d) instances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque or 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 validly cleared on payment of duty; (g) statements of buyers with some .....

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Pvt. Ltd. v. CCE, 2013 (296) ELT 392 (T), which has been affirmed by the Hon ble Gujarat High Court in CCE v. Sakeen Alloys, 2014 (308) ELT 655 (Guj.), (c) Mahesh Silk Mills v. CCE, 2014 (304) ELT 703 (T), as affirmed by the Hon ble Gujarat High Court in CCE v. Mahesh Silk Mills, 2015 (319) ELT A52 (Guj.) (d) CCE v. Air Carrying Corporation, 2009 (248) ELT 175 (Bom.) 9.10 The only contrary evidence is statement of Shree Monu Pant which seeks to suggest that the goods were being clandestinely cle .....

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dering the lack evidence, it would serve no purpose to remand the matter back for seeking cross examination of Shree Monu Pant, the gaps and the lacunae in the investigation cannot be undone by his cross examination. 9.11 The second largest demand of ₹ 60.85 lakhs is based on the photocopies of 276 parallel invoices which are claimed, by the Revenue, to have been obtained from the Octroi department. Here again, even though the names and addresses of the purchasers are available on the alle .....

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appalling aspect of the investigation is that the revenue has not even placed on record the document under cover of which these photocopies of LRs and invoices were obtained from the Octroi department. Further the said documents are admittedly photocopies. It settled law that photocopies are not credible evidence and it becomes necessary for any investigating authority to place on record authenticated copies of such photocopies in case the originals are not available. Here, not only there is lac .....

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s relevant to note here that with respect to the said 276 parallel invoices, statements of Mr. Pandey, Vice President and Mr. D.D. Rathi, Manager (Commercial & Accounts) of the Appellant Company were recorded and both of them have, in their statements dated 18.09.2009 and 17.09.2009 respectively, denied the existence of such parallel invoices by the appellant. In so far as the 123 LRs supposed to have been received from the Octroi department have been received, the investigating authority di .....

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not maintain any records regarding actual transportation having been undertaken, as they were concerned only with the commission for arranging the transport. No testimony of the actual transporter, if any, has been recorded. The statements of the transporters in question are without reference to any documentary evidence/record maintained by them and are completely uncorroborated. The statement of the transporters clearly brings out the fact that they were handing over the blank copy of the LRs .....

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stries v CCE reported in 1995 (80) ELT 118 in support of decision to reject cross examination. In our view the revenue alleged for denying cross examination, on the sole ground that the transporters were co-noticees, is untenable. It is settled law that while a co-noticee has a right to refuse to be subjected to cross examination, it is incumbent upon the part of the adjudicating authority to put it to the co-noticee whether he would be willing to subject himself to cross examination. In any cas .....

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by the consignees is thus not established. No investigation was undertaken to bring on record the author of the said truck destination register. The said statement of Mr. Shakheel Khan shows that M/s Akola Transport Co was only acting as a commission agent and were merely arranging for transportation rather than actually transporting the goods themselves in their own trucks. No investigations have been conducted with the actual transporters engaged by M/s Akola Transport Co. The Books of Accoun .....

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goods, the explanation given by the appellant on the very next day of the Panchnama wherein the shortages were disputed have not been countered or dealt with in the notice. Further the Panchnama as clearly record that the stock positions have been worked out based on theoretical calculations by assuming the length, breadth, width of the raw materials/finished goods. Such theoretical calculations cannot be the basis for foisting demand on account of shortages. 9.17 In these circumstances, we are .....

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from third partys premises by themselves cannot prove the case of clandestine removal against the appellant unless their contents are corroborated by independent evidence. In this case, we find that such corroborative evidence is totally missing. There is no answer available, either in the Show Cause Notice, or in the impugned order, to explain the absence of statements of most relevant persons such as the consignees/buyers shown in the invoices/LRs/Truck Destination Register/Books of Accounts .....

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mises of Shree K.K. Pandey. Mr. Rajeev Verma, Dispatch supervisor, in the statement dated 22.12.2008 has accepted that the 11 parallel invoices were prepared and issued by him under signature as per direction of Mr. K. K. Pandey. Mr. K. K. Pandey and Mr. D. D. Rathi have in their statements dated 29.7.2008 identified the signature of Mr. Rajeev Verma on the parallel invoices. Likewise, Mr. Hriday Deb in his statement dated 10.9.2008 has also confirmed the signatures in the parallel invoices. In .....

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be granted an opportunity for cross examination, where after the adjudicating authority can decide afresh. 9.19 The impugned had also referred to certain collateral evidence to corroborate the allegation of clandestine removal. We have perused through the said additional evidence and find that not only is the same unreliable but the same also does not support the theory of clandestine removal. 9.20 The order records that there were 8 hard disks that were seized from the residential premises of .....

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print out that were taken from the cloned hard disks and a statement prepared by comparing the closing balances that had been furnished to the banks, as appearing in the hard disks, vis-vis that appearing in the RG-1 register. This comparative statement cannot be used to draw any adverse inference as firstly the veracity of the cloned hard disk is in serious doubt and secondly it is an undisputed position that the actual stock statement furnished to the bank has been seized from the residential .....

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t March 2007 reflecting therein the stock position of iron ore which was compared with the balance thereof in the statutory records, is not reliable. 9.22 The comparison of the production log sheet printed from the cloned hard disks vis-vis the production recorded in the RG-1 also cannot form a basis for alleging clandestine removal as the RG-1 records the actual production, after approval from the quality control department while the log sheet records whatever has been manufactured, though a pa .....

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