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2016 (5) TMI 656 - CESTAT KOLKATA

2016 (5) TMI 656 - CESTAT KOLKATA - 2016 (339) E.L.T. 310 (Tri. - Kolkata) - Clandestine manufacture and clearances - Demand of excise duty - pertaining to documents recovered from the residential premises - Held that:- there is no confessional statement recorded during investigation that Appellants have indulged in any clandestine manufacture and clearance of goods based on documents recovered from the residential premises of Shri Sanatan Maity. There is also no evidence on record as to from wh .....

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and clearance of dutiable goods. As already observed by the Courts any suspicion, however grave, can not take the place of an evidence. In the present proceeding certain documents recovered from the residence of Shri Sanatan Maity etc. are the only indicators to raise suspicion that certain goods might have been manufactured and cleared by the Appellants. In the case of Pan Parag India Ltd. vs. Commissioner of Central Excise, Kanpur (supra), relied upon by the Appellants, also there were 719 lo .....

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ne month of the receipt of this order. In the interest of justice penalty upon Shri Ajay Bansal, Director of Appellant No.2 is reduced to ₹ 30,000/-. Also in view of Bombay High Court's Order in the case of CC(E.P.) vs. Jupiter Exports [2007 (6) TMI 2 - HIGH COURT, BOMBAY], penalties imposed upon partner Shri Ajay Bansal and Shri Rajendra Agarwal are not imposable and are accordingly set aside. - Appeal disposed of - Appeal Nos.EA-477, 223, 224, 478, 479/09 - Order No.FO/A/75295-75299/2016 .....

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s interest plus equivalent penalty 2. M/s.Bajrang Steel & Alloys Pvt.Ltd. (Appellant No.2) E-223/2009 CCE/BBSR-II/No.01/COMMISSIONER/2009 dated 30.01.2009 Rs.59,62,705/- + interest + Equivalent penalty 3. Shri Ajay Bansal, Director of Appellant No.2. E-224/2009 -do- Rs.25.00 lakh penalty 4. Shri Ajay Bansal, Partner of Appellant No.1 E-478/2009 CCE/BBSR-II/No.27/COMMISSIONER/2009 dated 29.05.2009 Rs.50.00 Lakh penalty 5. Shri Rajendra Agarwal, Partner of Appellant No.1 E-477/2009 -do- Rs.25. .....

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o.2 and is also a partner of Appellant No.1. Appellant Shri Rajendra Agarwal is also a partner of Appellant No.1. On 11.08.2006 simultaneous searches were carried out by the officers of Directorate General of Central Excise Intelligence (DGCEI) in the premises of Appellant No.1, 2 and some residential premises. Another premises of one Shri Sanatan Maity was also searched on 11.08.2006 who was the Accountant of Appellant No.1. Officers of DGCEI recovered a private diary and certain documents from .....

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eipts of Rods from various parties and that these documents are rough working sheets. Statements of Shri Ajay Bansal (Director of appellant No.2 & partner of appellant No.1) were recorded on 11.08.2006, 06.09.2006 & 26.09.2007 as partner of M/s. Shivam Steel Corporation (Appellant No.1). He was shown the documents recovered from the residence of Shri Sanatan Maity when he confirmed in his statement dated 11.08.2006 (Q No.39) that as per these documents and the statements of Shri Sanatan .....

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26.09.2007 appellant Shri Ajay Bansal agreed that they are selling re-rolled products to one M/s.Bajrangbali Steel (P) Ltd. and that in some cases finished goods were cleared without payment of central excise duty. Under this statement dated 26.09.2007 he expressed his inability to comment on the documents recovered from the residential premises of Shri Sanatan Maity. Shri Amit Kumar Agarwal and Shri Prem Chand Agarwal, Directors of M/s.Bajrangbali Steel (P) Ltd. confirmed that sometimes they r .....

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loan purposes. After completing the investigations separate show cause notices were issued to the appellants and decided under separate Order-in-Original as tabulated in para 1 above. 2.1 After making the Bench go through the findings of the Adjudicating authority learned Advocate made the following submissions/arguments during the course of the proceedings as well as through written submissions filed on behalf of the appellants:- (i) That it is wholly incorrect to hold that Shri Sunderlal, men .....

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ri Ajay Bansal nowhere says that Sunderlal was the pseudo name of appellant no.2. That Shri Sanatan Maity also did not state that Sunderlal was pseudo name of appellant No.2. (ii) That during the visit of DGCEI to the premises of appellant No.2 no variations in the raw material stock or finished goods could be detected. That if appellants were indulging in large scale clandestine manufacture and clearances of ingots of re-rolled materials then there were bound to be variations in raw materials a .....

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That it is a well settled law that allegations of clandestine removal is a serious charge which must be proved by Revenue with corroborative, independent, cogent and concrete evidences. He relied upon the following case laws on this issue in support of his argument:- (a) Melton India (P) Ltd.v.CCE, Noida - [2005 (181) ELT 129(Tri.-Del.)] (b) Pan Parag India Ltd. v. CCE, Kanpur - [2013 (291) ELT 81(Tri.Del.)] c) Palvinder Kaur v. The State of Punjab [Manu/SC/0038/1952] d) CCE v. Rajdoot Cables ( .....

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ent of raw materials and use of extra power by appellants No.1 & 2. That certain computer printouts recovered from the residence of Sanatan Maity cannot be considered as acceptable document if not retrieved as per Section 36 B(2) & 36 B(4) of the Central Excise Act, 1944. That the procedures under Section 36B of the Central Excise Act, 1944 were not followed and also the documents were not recovered from the premises belonging to the appellants. (vi) That certain entries made in the Sund .....

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) SCC 765] (b) Sakeen Alloys Pvt.Ltd. v. CCE, Ahmedabad - [2013 (296) ELT 392(Tri-Ahmd.) [upheld by High Court (2014 (308) ELT 655 (Guj.)] (c) UOI v. MSS Foods Products Ltd. [2011 (264) ELT 165(MP)] (d) Mahesh Silk Mills vs. CCE, Mumbai [2014 (304) ELT 703(Tri.Ahmd.) [ upheld by Gujarat High Court 2015(319)ELT A- 52(Guj.)] (vii) That entire statement of a relied upon document has to be considered as such and not a part of such statement. (viii) That the case of CC, Madras & Others vs. D.Bhoo .....

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No.1. 2.2 Learned Advocate further argued that out of total demand of ₹ 2,04,30,072/- issued to appellant No.1,Rs.28,17,957/-, pertaining to documents recovered from the premises of M/s.Bajrangbali Steel Industries Pvt.Ltd. drawn under Panchnama dated 11.08.2006, is not disputed. Similarly demand of ₹ 35,878/-, with respect to six parallel invoices recovered from the factory premises of appellant No.1, is not disputed. That reduced penalty of 25% is only required to be paid with resp .....

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s not sustainable at all. That no other entry of these documents was verified during investigation to establish that all entries in these documents are genuine, except enquiries with M/s.Bajrangbali Steel & Alloys (P) Ltd.. That some of the entries like electricity consumption is actual as a person may take some actual figures also from his records to make inflated projections look genuine for bank loan purposes. That the demands issued against his clients is solely based on assumption, pres .....

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al No.E/477/09 were received into a bank account of appellant No.2. That Shri Ajay Bansal (Partner of appelaltn No.1 and also the Director of Appellant No.1) in his statement dated 11.08.2006 admitted that though as per the documents the ingots have been purchased by one Sunderlal but actually the said goods have been purchased by M/s.Bajrang Steel & Alloys (P) Ltd. (Appellant No.2). Learned AR made the Bench go through the important extracts of this statement as reflected in Para 2.4 of sho .....

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Shri Sanatan Maity the closing balance of ingots for one month exactly matches with the opening stock balance of the next month which shows the correctness of the purchases made by Appellant No.1 and used in the manufacture of clandestinely removed re-rolled products. iv) That as per statement dt.11.08.2006 of Shri Sanatan Maity, the documents recovered from the residence of Shri Maity at Kalunga, revealed purchase of Ingots, production of rods (Saria), Sale of rods, etc. of M/s. Shivam Steel C .....

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der-in-Original dt.29.05.2009 has correctly held that all amounts shown against Sunderlal indicate clandestine manufacture and clearance of goods manufactured by Appellant No.1 and 2. Ld. A.R., therefore strongly defended the Orders-in-Original passed by the Adjudicating Authority and pleaded for rejection of the Appeals filed by the Appellants. 4. Heard both sides and perused the case records. Cases of clandestine manufacture and clearances were made against Appellant Nos. 1 and 2. The Show Cau .....

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ner/2009 dt.30.01.2009. Similarly duty demands of ₹ 28,17,957/- and ₹ 35,878/- have not been disputed by Appellant No.1 with respect to Order-in-Original No.CCE/BBSR-II/No.27/Commissioner/2009 dt. 29.05.2009. 6. From the case records it is observed that remaining part of demands confirmed in both the Orders-in-Original are only based upon certain documents recovered from the residence of Shri Sanatan Maity, Accountant of Appellant No.1. The case of Revenue against Appellant No.2 is t .....

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t to document No.2/DGCEI/RRU/SSC/FAC/2006 and not on the issue that the entire amounts against Sunderlal, shown in the records recovered from the residence of Shri Sanatan Maity, are received from Appellant No.2. Statement dt. 11.08.2006 is recorded in Hindi and the same pertains to one document but while doing its English translation the word has been translated as documents as per para 2.4 of the Show Cause Notice dt.30.01.2009. Statement dt. 11.08.2006 of Shri Sanatan Maity, Accountant of App .....

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08.2006 also conveys that these documents are rough working sheets. By subsequent statement dt. 05.09.2006 Shri Sanatan Maity states that the data on the seized documents was only rough projected calculations done for bank loan purposes. It is not coming out from the Show Cause Notice and the Order-in-Original dt. 30.01.2009 as to from where the raw materials were procured by Appellant No.2 for the manufactured of M.S.Ingots for which duty is demanded. It is also not coming out as to how much qu .....

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(2) and (4) of the Central Excise Act, 1944 were followed. In the case of Anvar Pv vs. V.K.Basheer [Manu/SC/0834/2014] Apex Court, while interpreting Sec. 65B of the Evidence Act, made following ruling in paras 13 to 17. 13. Any documentary evidence by way of an electronic record under the Evidence Act, in view of Sections 59 and 65A, can be proved only in accordance with the procedure admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in el .....

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bility of such a document, i.e. electronic record which is called as computer output, depends on the satisfaction of the four conditions Under Section 65B(2). Following are the specified conditions Under Section 65B(2) of the Evidence Act: (i) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly used to store or process information for the purpose of any activity regularly carried on over that period by the .....

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(iv)The information contained in the record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity. 14. Under Section 65B(4) of the Evidence Act, if it is desired to give a statement in any proceedings pertaining to an electronic record, it is permissible provided the following conditions are satisfied: (a) There must be a certificate which identifies the electronic record containing the statement; (b) The certificate must de .....

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ertificate that the same is to the best of his knowledge and belief. Most importantly, such a certificate must accompany the electronic record like computer printout, Compact Disc (CD), Video Compact Disc (VCD), pen drive, etc., pertaining to which a statement is sought to be given in evidence, when the same is produced in evidence. All these safeguards are taken to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Elec .....

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r permit the proof of an electronic record by oral evidence if requirements Under Section 65B of the Evidence Act are not complied with, as the law now stands in India. 7.1. The language of Section 65B of the Evidence Act, 1962 and Section 36B of the Central Excise Act, 1944 is similar. The ratio laid down by the Apex Court will thus be squarely applicable to the provision of Section 36B of the Central Excise Act, 1944 and any reliance placed on the computerized printouts, without following stat .....

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case of Appellant No.2, it is observed by the Adjudicating Authority that since an amount of ₹ 1,88,00,000/- was received by Appellant No.2 from Sunderlal, therefore, the remaining amount of ₹ 3,04,21,230/- appears to be attributable to the sale proceeds of M.S.Ingots clandestinely received by Appellant No.1. The findings of the Adjudicating Authority are thus clearly based on presumptions, assumptions and surmises when the computerized documents relied upon by the Revenue are not .....

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Gujarat High Court rejected the appeal of the Revenue by making following observations in para-10. 10. All the appeals are based predominantly and essentially on factual matrix. The Tribunal elaborately and very correctly dealt with the details furnished by both the sides and rightly not sustained the demand of ₹ 1.85 Crores, which had no evidences to bank upon. Confessional statements solely in absence of any cogent evidences cannot make the foundation for levying the Excise duty on the g .....

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has to be read as a whole. Similar view was expressed by P&H High Court in the case of Commissioner of Central Excise, Delhi-IV vs. Rajdoot Cables (P) Ltd. (supra) where following observations were made by Honble High Court in para-3 while dismissing Revenues Appeal. 3. We have gone through the records and perused the orders passed by the adjudicating authority, Commissioner (Appeals) as well as the Tribunal. We are of the considered opinion that the orders passed by the Tribunal setting a .....

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he grain can be separated from the chaff but in the instant case, except for the statement of Shri R.K.Gupta, there is no corroboration by the Revenue during the investigation. The part of the statement of Shri R.K.Gupta is in favour of the Revenue and part of it not. If the statement of Shri R.K.Gupta is to be believed then it has to be believed in entirety. The scrutiny of the statement of Shri R.K.Gupta reveals that he has stated that about 50% of the transactions were bogus and the transacti .....

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There is also no evidence on record as to from where the raw materials for manufacturing of M.S. Ingots and Re-rollable products manufactured by appellants were procured. Alternately there is also weight in the argument of the Appellants that M.S.Ingots alleged to be clandestinely cleared by Aappellant No.2 are not sufficient to manufacture quantities alleged to have been manufactured and cleared by Appellant No.1. 8.4. The above factual matrix of the current proceedings only convey a strong sus .....

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l Excise, Kanpur (supra), relied upon by the Appellants, also there were 719 loading slips indicating clandestine clearance by that Appellant. It was held , by CESTAT, interalia, that demands are not sustainable on the basis of loose papers/loading slips unless corroborated appropriately by other independent evidence. In para-39 of this case law it is also observed that a statement has to be accepted or rejected in its entirety and part of the same cannot held to be incorrect and another part as .....

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unal s decision in the case of Rutvi Steel & Alloys reported in 2009 (243) E.L.T. 154 (Tri.) as also to the Tribunal s decision in the case of Bhandari Industrial Metals Ltd. reported in 2009 (245) E.L.T. 613 (Tri.). Similarly there is catena of judgments laying down that the inculpatory statements alone cannot be made the basis for arriving at a finding of clandestine removal. In a nutshell, it has been the constant stand of quasi-judicial and judicial appellate forums that for establishing .....

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ction of sufficient evidences. Again, it is to be proved by the Revenue that the raw materials required for production of huge quantity of final product were obtained by the assessee in a manner which is not in its regular course of its business. It stands held by the Tribunal in the case of Mohan Steels Ltd. reported in 2004 (177) E.L.T. 668 (Tri.), that duty demand cannot be confirmed unless it is shown that the manufacturer had procured all the raw materials required to manufacture the goods. .....

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e absence of corroborative evidences. (i) Dalmia Vinyls P. Ltd. - 2005 (192) E.L.T. 606 (Tri.-Bang.) (ii) Chemco Steels P. Ltd. - 2005 (191) E.L.T. 856 (Tri.-Bang.) (iii) C.M.Re-Rollers & Fabricators - 2004 (168) E.L.T. 506 (Tri.-Del.) (iv) TGL Poshak Corpn- 2002 (140) E.L.T. 187 (Tri.-Che.) (v) Minakshi Steels - 2005 (190) E.L.T. 395 (Tri.-Kol.) (vi) Sri Jayajothi & Co. Ltd. - 2002 (141) E.L.T. 676 (Tri.-Che.) (vii) Sharma Chemicals-2001 (130) E.L.T. 271 (Tri.-Kol) (viii) Opel Alloys P. .....

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in 2010 (254) E.L.T. 205 (P&H), it was held that charge of clandestine removal must be corroborated by independent and un-impeachable evidences such as purchase of consignees mentioned in invoices/payment to the manufacturers; that the charge of clandestine removal is a serious charge which must be proved by the department by a adducing sufficient and tangible evidences and demand of duty cannot be confirmed on the basis of assumptions and presumptions and surmises & conjectures. 52. At .....

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sufficient evidence to charge any person with liability. Entries even if relevant are only corroborative evidences and required independent evidence as to thustworthyness of those entries necessary to fasten liability. The entries made in the diaries though admissible u/s 34 of the Evidence Act, 1872, truthfulness thereof is not proved by any independent evidence. Replying on the above observations made by Apex Court to the facts of the present case, we find that the entire cases of the Revenue .....

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