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2016 (7) TMI 300 - CESTAT CHENNAI

2016 (7) TMI 300 - CESTAT CHENNAI - TMI - Clandestine removal of goods - manufacturing of CTD bars - modus operandi of the racket and loss of public Revenue - Appellant neither led any cogent evidence to controvert allegations of clandestine clearance of 269.712 MTs of CTD bars valued at ₹ 34,22,342/- involving duty evasion of ₹ 5,13,351/- alleged in the para 34 of SCN in respect of the periods involved in 1995-96 and 1996-97 nor discarded the evidence gathered by investigation again .....

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evasion of duty and their evidence remained uncontroverted, the appellant is answerable to law for the evasion of duty it has caused. - Beginning from the show cause notice all the authorities have erroneously held that the appellant is entitled to cum-duty benefit. It is shocking to know that how such a concession can be given to an evader who did not maintain authentic record recognized by law to demonstrate cum duty clearness. Appellant resorted to clandestine removal and no records were .....

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Dated:- 5-7-2016 - SHRI D.N. PANDA, JUDICIAL MEMBER AND SHRI B. RAVICHANDRAN, TECHNICAL MEMBER Shri M. Karthikeyan, Advocate for the Appellant Shri K. Veerabhadra Reddy, JC (AR) for the Respondent ORDER PER D.N. PANDA The appellants being aggrieved by order dated 24.9.2005 passed by learned Commissioner (Appeals) came to Tribunal in second Round of litigation. In the first round, for violation of natural justice, appellants were directed by Tribunal to appear before adjudicating authority for f .....

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d by the show cause notice on the ground of lack of evidence as to the clandestine clearance. This is evident from para 21 of his order. The duty demanded was followed by interest and penalty. 2.2 Learned Commissioner (Appeals) threadbare examined the allegations, evidence gathered by investigation and pleadings of the appellants. He held in page 13 and 14 of his order that the adjudicating authority failed in his duty to raise demand despite sufficient evidence, both oral and documentary were a .....

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rn viz., M/s. Triveni Alloys Limited (TAL) and use thereof in manufacture of 180 MTs of CTD bars which were ultimately cleared clandestinely without issuing excisable invoice. He recorded that the rest of the 89.712 MTs of CTD Bars manufactured (269.712-180 MTS) were also cleared clandestinely. However Learned Commissioner (Appeals) granted cum-duty price benefit to appellant while computing its liability without any evidence in that regard available on record. 3.1 Investigation made on 7.8.1996 .....

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manufactured goods clandestinely. Sri G. Sampath Raj, director of the appellant Company in his statement admitted that there was receipt of 200 MTS of unaccounted raw material i.e. M.S. ingots from its sister concern TAL and nearly 180 MTs of CTD bars were manufactured out of that which were cleared without payment of excise duty. 3.2 Investigation discovered one writing pad (marked for identification as No. 8 to Annexure - A of mahazar and a folder marked as No. II (2)) from the premises of one .....

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voices revealed in his statement dated 8.8.1996 that he entered into such fraudulent activity in the year 1994 being supported by the re-rolling mill owners to do so. Second sales invoices were issued to the buyers as if the bill traders were traders of goods as second stage sellers buying such goods from manufacturers of excisable goods. Fraudulent activity of the appellant came to light from the versions of buyers of the offending goods from Tamilnadu and Kerala. Sri Sharma admitted that he ha .....

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adu Mercantile Bank (TMB). He further opened an account vide No. 325576 in the name of D.M. Agencies at T. Nagar, Tamilnadu Mercantile Bank (TMB). All these bank accounts were operated in the name of non-existing concern and a person called Ravikumar who has no identity was operating such accounts. Proceeds of clandestine removals were routed through these accounts. 3.4 Chander Sharma also stated in his statement that he came across one Shri Thangavelu who connived with him giving him two firm n .....

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), Mount Road Branch vide Account No. 320966. Accounts in the name of non-existing firms viz.,Eshwar Enterprises, Shri Durga Enterprises were also opened by Mukesh. Eshwar Enterprises and Shri Durga Enterprises were given to Rajesh Ojha and Babulal. Account was also opened in Tamilnadu Mercantile Bank (TMB) vide No.323633 and at Lord Krishna Bank, Teynampet. 3.6 All such accounts were maintained to route black mony colouring that to be sale proceeds of false transactions backed by false invoices .....

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s modus operandi as depicted by investigation in para 7 of the show cause notice. He admitted destruction of evidence which was done after completion of delivery of the goods. He categorically stated that the non-existing firms S.S. Enterprises, RVS Traders etc. were instrumentalities to give shelter to clandestinely cleared goods of the appellant. 4.2 The writing pad discovered from Chander Sharma in the course of investigation revealed clearance of the offending goods from 1.1.1996 to 31.5.199 .....

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rises. He identified two second sale bills seized from Pankaj Saha, a broker which was available in Folder No. II under Annexure C1 - 3 to the mahazar. 4.3 Apart from noticing S. Chander was one of the key players in the racket of clandestine removal and issued false invoices, investigation also noticed that R. Murali, a broker was also a conduit for which search to his premises was made and his statement recorded. In his statement dated 7.8.1996, he admitted that he was a broker procuring order .....

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d that members of the racket colluded to give shelter to the clandestinely removed goods of the appellant and other manufacturers issuing false second sales invoices as if Chander Sharma was the buyer of the offending excisable goods from the appellant and others and selling that as second stage dealer. 5.1 Pankaj Saha, the Manager of Jai Hind Traders in Chennai, stated on 7.8.1996 and 10.8.1996 that he was engaged in the buying and selling of re-rolled CTD bars and MS rods from the appellant. H .....

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goods of various mills including the appellant s re-rolling mill. 5.2 One Shri Sanjay Kumar Ojha who was looking after the accounts of the non-existing firm M/s. Priyank International, in his statement dated 7.8.1996 admitted that the transactions were made through false invoices issued by Priyank International. Ojha had also issued false invoices in the name of M/s. Hira Traders. 6. Investigation noticed that in the name of Hira Traders false invoices were issued to one PMA Steels of Chennai .....

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ri Murugan Steels. These were all non-existing concerns. 7. In para 19 of the show cause notice, investigation brought out the result of enquiry with M/s. Eshwar Traders of Chennai. They came across two names viz., M/s. Iqbal Traders and Asik Steel. A. Mohammed Iqbal connected with these concerns stated that the re-rolled CTD bars without excisable invoices were procured from the appellant company. The non-existing concern Sri Murugan & Co., Venu Steel and M.H. Steel, Abu Steel and Others ha .....

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the buyers M/s. Gold Star, Shams Steels, PMA Steel who were all beneficiary of the false invoices. 9. Search to Triveni Alloys Ltd. (TAL), the sister concern of the appellant at Gumudipoondi revealed that 209.075MT of unaccounted raw materials were supplied to the appellant without payment of duty. Sampath Raj Jain, director of TAL as well as the appellant-company admitted such fact in his statement on 30.4.1997 and 20.12.1998. He also admitted that the above quantity of the ingots cleared by TA .....

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ingots produced out of such scrap were cleared to the appellant without bills. Using such unaccounted goods the appellant manufactured 180 MTs of CTD bars and cleared the same evading excise duty. 10. In the course of hearing by Tribunal, the appellant submitted that investigation made out a case without any basis. Learned adjudicating authority dropped the proceeding initiated by SCN dated 3rd/6th October 2000 considering no evidence against the appellants. But learned Commissioner (Appeals) s .....

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stine removal, the charges against the appellant failed to sustain. Accordingly order of learned Commissioner (Appeals) is liable to be set aside. 11. Revenue on the other hand says that when the adjudicating authority failed to take cognizance of the cogent and credible evidence recovered in the course of investigation demonstrating the questionable modus operandi of the racket and loss of public Revenue, as well as failed to appreciate value of the statements recorded from different persons wh .....

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ts issuing false invoices. Such unaccounted raw materials produced 180 MTs of CTD Bars. When such cogent evidence were on record, learned adjudicating authority did not apply his mind to appreciate. That caused prejudice to Revenue. Learned Commissioner (Appeals) rightly allowed appeal of Revenue on good grounds. Demand was raised on 180 MTS of clandestinely removed goods. The appellate authority further held that 89.712 MTs (269.712 MTs - 180 MTs) of CTD Bars were also clandestinely removed by .....

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,351/- alleged in the para 34 of SCN in respect of the periods involved in 1995-96 and 1996-97 nor discarded the evidence gathered by investigation against it. Nothing could be demonstrated by the appellant company to establish that it had no unaccounted clearances. The only prayer of the appellant was to take a lenient view when the appellant disclosed unaccounted finished goods of 180 MTs cleared clandestinely, manufacturing that out of the unaccounted raw materials received from its sister co .....

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igation brought out its story of clandestine removal of goods made by appellant in clear terms recording evidence from bill trades and purchasers of such goods as well as recovering certain incriminating materials from them during search. Their oral evidence remained intact without being assailed by appellant. The documentary evidence discovered from the custody of such witness also remained unchallenged by the appellant. Their involvement in the bill trading racket causing evasion could not be .....

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not be ruled out by both appellants leading any cogent and credible evidence. 15. Bill traders engineered false invoices and document holding out that they were buyers of duty paid goods cleared by the appellant which were sold by them as second stage dealer. But that was not so. The conduits i.e. brokers and bill traders were agents of the appellant and engineered false documents to deceive Revenue. Version of bill traders and brokers unearthed oblique motive of the racket including the appell .....

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ls seized revealed such material fact. 16. All unaccounted transactions were routed through various bank accounts opened by the bill traders in collusion with brokers in the name of non-existing concerns. This was revealed by the bill traders and substantiated from the respective bank accounts. Such facts are elaborated at the outset in the preceding paragraphs of this order. Discovery of such bank accounts by the investigation remained uncontroverted by appellants for no contrary evidence led b .....

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y. Such clearance was apart from the clearance of 269.712 MTs of unaccounted goods appearing in para 28 of the show cause notice. It is surprising why investigation, adjudicating authority as well as appellate authority had misplaced sympathy on the evaders to confine the evasion to 269.712 MTs ignoring 180MTs of finished admitted by the Director of the appellant to have been clandestinely removed causing evasion of duty over and above the quantity of 269.712 MTs as stated above when Show Cause .....

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.712 MTs (180 MTs + 269.712 MTs) of finished goods evading duty. 18. The appellant when failed to maintain proper accounts it is not entitled to plea of set off of 180MTs clandestinely removed against unaccounted clearance of 269.712 MTs found by investigation in para 28 of the show cause notice. It is therefore required that without any hesitation the adjudicating authority has to re-compute the duty liability of the appellant in respect of 449.712 MTs which is aggregate of 180MTs of goods as w .....

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to illegal and criminal activities. It is basic commonsense that no person will maintain authentic records of the illegal activities or unaccounted manufacturing done by it. Therefore in absence of authentic record to show above clearances, preponderance of probability comes to rescue of Revenue and the plea of set off of offence fails. The echoing evidence on record established that investigation discharged its burden of proof bringing out proof of ill design of the appellant aided and abetted .....

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of to establish allegations, but if on probabilities the statutory authorities can establish evasion, the legal standards are adequately met with. The appellants were implicated for their complicity not on the basis of solitary evidence only, but cumulative evidence like actual manufacture not brought to accounts, clandestine removals were patent, conduct of parties questionable, false bank accounts opened to route sale proceeds of clandestine removals, destruction of evidence, false invoices is .....

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y removed. Thus duty on 449.712 MT (180MT + 269.712MT) is accordingly imposable by adjudicating authority. It is also settled principle of law that negative equality cannot be pleaded as a defence to any action which is not in accord with law and justified - Rajiv Kumar Sharma Vs. Commissioner of Central Excise (Del.) - 2012 (276) ELT 321 (Del.). When investigation has discovered the truth and the bill traders as well as the purchasers of clandestinely removed goods demonstrated the questionable .....

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w to demonstrate cum duty clearness. Appellant resorted to clandestine removal and no records were maintained in respect of such clearance. Therefore the duty evaded transactions which have never seen the light of the day deserve no concession of cum duty benefit at all. The tainted deals should be banned by coercive measures of law to prevent recurrence thereof as were as to discourage evasion. If such benefit is granted, that shall legalise illegalities. The very false documentation by the bil .....

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