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M/s. Shivam Steel Corporation, M/s. Bajrang Steel and Alloys (P) Ltd., Shri Ajay Bansal, Director, Shri Ajay Bansal, Partner And Shri Rajinder Agarwal, Partner Versus Commissioner of Central Excise & Customs, BBSR-II

2016 (5) TMI 656 - CESTAT 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 where the raw materials for manufacturing of M.S. Ingots and Re-rollable produc .....

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cion, 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 loading slips indicating clandestine clearance by that Appellant. - Theref .....

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n 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 - Dated:- 29-4-2016 - DR. D.M. MISRA, MEMBER(JUDICIAL) AND SHRI H.K.THAKUR, .....

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(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.25.00 Lakh penalty 2. Brief facts of the case are appellant M/s.Bajrang Steel &a .....

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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 the residential premises of Shri Sanatan Maity. Shri Maity in his statements .....

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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 Maity, ingots were shown to be purchased from one Sunderlal but actually the .....

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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 received the materials from appellant No.1 with invoices and sometimes without .....

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es 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, mentioned in the documents recovered from the residential premises of Sanatan Ma .....

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o.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 and finished goods of Appellant No.2. (iii) That even if it is presumed that I .....

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erious 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 (P) Ltd. [2010 (254) ELT 606(P & H)] e) Pan Parag India Ltd. v. CCE, Kanpu .....

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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 Sunderlal ledger tallying with the cheque receipts of appellant No.2 will only ra .....

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(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.Bhoormull [1983 (13) ELT 1546(SC)] relied upon by Revenue is an old case law and .....

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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 respect to admitted duty liability of ₹ 28,17,957/- and ₹ 35,878/- wh .....

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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, presumption and conjectures which is not acceptable as per the settled legal prin .....

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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 show cause notice dated 26.11.2007. (ii) That as per the documents recovered fro .....

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es 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 Corporation (Appellant No.1). Ld. A.R. made the bench go through para-25 of th .....

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st 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 Cause Notices were predominantly based on certain documents recovered from the r .....

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377; 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 that the name Sunderlal, mentioned in the diary and computer printouts recover .....

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e 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 Appellant No.1 does not say that the name Sunderlal mentioned in the documents r .....

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uent 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 quantity of M.S.Ingots were manufactured by Appellant No.2. No shortages/excess .....

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ar 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 electronic form, generated by a computer. It may be noted that the Section star .....

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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 person having lawful control over the use of that computer; (ii) The informa .....

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ation 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 describe the manner in which the electronic record was produced; (c ) The certi .....

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ortantly, 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. Electronic records being more susceptible to tampering, alteration, transposition .....

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nder 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 statutory procedures and conditions of Section 36B, are not acceptable as evidenc .....

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nce 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 admissible evidences as recorded in para-7.1 above. Further, in the case of .....

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ervations 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 ground of evasion of tax, much less the retracted statements. To the extent th .....

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n 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 aside the order of Commissioner (Appeals) is fully justified. The Tribunal has .....

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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 transactions where Tempo Nos., were same as in the purchase invoices of the same date, .....

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nufacturing 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 suspicion against the appellants that they are undertaking clandestine manufactu .....

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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 acceptable. In this case law, on the issue of raising of demands on the basi .....

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) 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 the fact of clandestine removal, there need to be sufficient evidence on rec .....

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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. There is a long list of decisions and reference to refer to all of them may .....

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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. Ltd. - 2005 (182) E.L.T. 64 (Tri.-Del.) Similarly in the case of Paras Lamin .....

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emoval 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 this stage, we may refer to the decision of Hon ble Supreme Court in the cas .....

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vant 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 is made on the basis of 719 invoices of doubtful nature, the trustworthiness .....

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