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Nabha Steel Ltd, Pushpanjali Steels Alloys Pvt Ltd, Shri Ajay Goyal, Director Versus Commissioner of Central Excise, Chandigarh

2016 (5) TMI 777 - CESTAT CHANDIGARH

Clandestine removal of manufactured goods - Demand of duty along with interest and penalty - Evasion of duty - Kachcha slips recovered during investigation which were not signed at all - Some exculpatory and some inculpatory statements were recorded - Denial of cross examination of persons whose statements are inculpatory - Appellant submitted that while manufacturing MS ingots, the appellant consumed electricity 900 to 1000 units for manufacture of 1 MT MS ingots whereas the allegation of cland .....

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the impugned order is set aside. - Decided in favour of appellant with consequential relief - Appeal Nos. E/1953-1955/2010-EX(DB) - Final Order Nos. 249-251/2016-CHD - Dated:- 9-12-2015 - Ashok Jindal, Member (J) And Raju, Member (T) For the Petitioner : Shri P K Mittal & Shri Naveen Bindal, Advs For the Respondent : Shri M R Sharma, AR ORDER Per Ashok Jindal The Appellants, namely, M/s. Nabha Steels Ltd., M/s. Pushpanjali Steels Alloys Pvt. Ltd. and Shri Ajay Goyal, Director are in appeals .....

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d that these appellants are engaged in evasion of duty way of clandestine clearances and manufacture of goods. The factory premises were searched on 7.9.2007 of the appellants and residence of Shri Ajay Goyal and records/documents were resumed under panchnama. The stocks were also verified wherein in the case of M/s.Nabah Steels 78.305 MT of pig iron, 25.180 MT of MS ingots were also found short and 102,185 MT of sponge iron was found in excess. In the case of M/s.Pushpanjali Steels Alloys 12 MT .....

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material supplier and one broker were also recorded. The statements of the buyers of clandestine manufactured goods were also recorded. On the basis of these statements, a show cause notice was issued to demand of duty from both the appellants alongwith interest and penalties of equivalent amount were also imposes. Another show cause notice was also issued to demand of duty on account of clandestine clearance of the goods alongwith interest and for imposition of penalty. The SCNs were adjudicat .....

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t of Shri Ajay Goyal was also recorded. Some of the statements are exculpatory and some are inculpatory statements. During the course of adjudication, the cross examination of persons whose statements are inculpatory asked but the same was denied by the adjudicating authority. 4. On merits, he submitted that the appellants while manufacturing MS ingots, the appellant consumed electricity 900 to 1000 units for manufacture of 1 MT MS ingots whereas the allegation of clandestine clearance of the go .....

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s admitted any clandestine manufacture or removal of goods. With regard to the statement of the buyers, he submitted that the appellants were selling the goods to 28 buyers out of which 16 parties' statements were recorded and 15 parties stated that they have received the goods without bills and made payment in cash. Out of statements of 12 persons, these parties did not make statements at the dictate of the department. Therefore, the department has not relied upon the statements of these pa .....

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sons who alleges to have rendered the statement. Therefore, those statements cannot be relied upon as all the statements are identically worded un-rebutted statements. All these statements in that fashion the concerned officer and these persons merely put their signatures at the asking of the department. He further submitted that it is not possible to remember alleged entry from February 2005 to August, 2007 when the statements were recorded during the period March, 2008 to September, 2008 on th .....

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4 crores but no show cause notice was given to any of the buyers to impose penalty under Rule 26 of Central Excise Rules, 2002. Therefore, the statements are doubtful. 5. With regard to the raw material, excess final products, it is submitted by the learned Counsel that the shortage is based on the basis of eye estimation and there was no actual weighment at that time. The cross examination of investigating officers Shri Gautam was denied. He, further submitted that there was 78.305 MTs of pig i .....

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ainable. 6. He further submitted that the department alleged that both the appellants had received cash of ₹ 19 crores during the period February, 2005 to August, 2007. As the appellants were doing trading of various steel items which were sold to buyers and the same is confirmed with the statement of Shri Ajay Goyal who categorically stated that the appellant had been doing trading also. Therefore, the payment received towards trading of finished goods cannot be treated as the amount of f .....

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hen there were surpluses have not been considered by the adjudicating authority. He further submitted that there was trading of scrap and also cash trading of finished goods. 7. With regard to the statements of broker and raw material suppliers, he submitted that 10-15 raw materials suppliers and the statement of two raw material suppliers and one broker has been recorded. The statement of Shri Bittu was heavily relied upon by the department. The job of the broker is only to facilitate sale and .....

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material suppliers revealed that kuccha or puccha documents produced by the department to show purchase of remaining 90% of the raw materials. It is the confusion or may be doubt as regard the statement of other raw materials suppliers have not relied upon. Thus, the statements of these persons have not supported the case of the department. The statement of raw material suppliers are identically worded and had been typed in the office of the department, therefore, the same cannot be relied upon .....

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e, however submitted that no evidence of transportation of the goods or removal thereof has been brought out by the adjudicating authority. As the cross examination of the persons whose statements has been relied upon has not been granted, therefore, the impugned order is to be set aside. 10. To support his contention, he relied upon the various judicial pronouncements, namely, in the case of Continental Cement Company vs. Union of India-2014 47 GST 725 (All) wherein it has been held that clande .....

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ipt details from regular dealers/buyers. (vi) To find out the excess power consumptions. Without following the above test, the charge of clandestine removal is not sustainable. 11. He also relied upon the decision of Laxmi Engineering Works-2010 (254) ELT 205 (P&H). In the case, it is held that private records which have been recorded during the raid cannot be held a supportable evidence that there was an attempt of clandestine production/removal of goods. He also relied upon he decision of .....

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aside. 13. On the other hand, learned AR reiterated the findings of the impugned order and submitted that all the ground raised by the appellants in the appeals has been duly considered by the adjudicating authority while in the adjudication and dealt each and every issue thereafter the adjudicating authority has arrived ai decision that the appellants were involved in the activity 01 clandestine removal and manufacture of the goods. Therefore the demand of duty is sustainable and the impugned .....

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finished goods. The main thrust of the Revenue is that the statements on the basis kaccha slips and acceptance of transactions show that any statement made on the basis of kaccha slips by the buyers/suppliers. We have seen the decision of this Tribunal in the case of Gupta Synthetics Ltd. vs. CCE, Ahmedabad-2014 (312) ELT 225 (Tri.-Ahmd.) 14. After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made .....

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ccounted finished 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 far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of .....

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oduced below:- 12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with .....

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tine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department. 17. The issue came up before the jurisdictional High Court c Punjab and Haryana High in the case of Laxmi Engineering Work wherein the High Court has observed as under:- The Customs, Excise and Gold (Control) Appellate Tribunal has submitted the statement of facts without framing the question law. However, after going through the statement of facts, the following questio .....

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empt of clandestine production and removal of goods, then it is necessary to have the same positive evidence of clandestine production and removal of goods. 18. Further in the case of Chhajusng S.Kanwal (supra), Hon'ble Gujarat High Court has observed a under:- 12. From the facts and contentions noted hereinabove, it is apparent that the Tribunal has based its conclusion upon the findings of fact recorded by it after appreciation of the evidence on record which have remained unchallenged ina .....

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ining the traders and brokers. The Tribunal was, therefore, justified in holding that the statements of such traders and brokers were not admissible in evidence, as they had not been tested on the touchstone of cross-examination. It is apparent that the entire case of the Revenue is based upon the statements of traders and brokers who have stated that M/s. A.S. Corporation had procured fictitious bills from them and sold goods to their buyers as well as statements of transporters who have stated .....

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rs are concerned, the Tribunal upon scrutiny of the trip registers has found that the same do not support the case of the appellant that the goods were actually loaded from the premises of Sulekhram. The Tribunal has also found that despite the allegation of clandestine manufacture and clearance of goods, Revenue has not carried out any investigation to ascertain various factors which would indicate that Sulekhram had actually manufactured such large quantity of goods in its factory like discrep .....

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khram so as to indicate any connection between Sulekhram and M/s. A.S. Corporation. In the circumstances, in absence of any evidence to indicate that M/s. A.S. Corporation had purchased the goods from Sulekhram, there was no material on record on the basis of which Revenue could have arrived at the conclusion that the goods purchased by M/s. A.S. Corporation had been supplied by Sulekhram, and as such Revenue has not been in a position to establish its case regarding clandestine manufacture and .....

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consumption has been produced before us by the appellant wherein the consumption of electricity is around 900 to 1000 units per MT. If the charge of clandestine removal has taken as correct then the only 490 units is required to manufacture of 1 MT of MS ingots which is not possible. The adjudicating authority has not given any credence. To this evidence holding power consumption is not the criteria to allege clandestine removal. In fact in a case it is alleged that there is clandestine removal .....

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s not sustainable. 20. Further, we find that the production capacity of the appellants has no been considered by the adjudicating authority in true sense as machinery installed in the factory of the appellants having a capacity to manufacture such goods which have been alleged to be cleared by the appellants. If this fact has examined by the adjudicating authority, the impugned order was not required to be passed. Therefore, we find force in the arguments of the appellants i.e. to determine the .....

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ts. Therefore, the Revenue's case is not sustainable on this ground also. 22. We also observe that there are 28 buyers of the finished goods and the adjudicating authority has relied upon the statements of 16 parties and these statements are typed ones and identically worded and cross examination of these buyers have not been granted to the appellants which was denied on flimsy ground i.e. their life and liberty will be in danger. Therefore, the statements of these persons cannot be relied u .....

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the raw materials supplied by these persons worked out to ₹ 34 lakhs whereas to manufacture clandestine finished goods worth of ₹ 19 crores required raw materials worth of ₹ 15 crores. Therefore, The statement of these 3 people have no evidentiary value in the absence of denial of cross examination and not made party to the show cause notice to impose penalty under Rule 26 of Central Excise Rules, 2002 for allegedly dealing in excisable goods which were used in the manufacture .....

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y. In fact we have gone through the stock report which indicated that on each day certain goods were manufactured and out that goods some goods are sold and some remained unsold and on second day the stock position of the remaining goods was also shown in the stock report of succeeding day. This has been treated by the adjudicating authority as test report which is factually incorrect and no credence of the explanation given by the appellants was considered by the adjudicating authority. In that .....

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