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2016 (8) TMI 126 - MADRAS HIGH COURT

2016 (8) TMI 126 - MADRAS HIGH COURT - 2016 (340) E.L.T. 6 (Mad.) - Cenvat Credit - demand raised on the allegation that in Unit I of the appellant has cleared credit availed raw materials, without proper invoices and attributed shortage of the stock - validity of retracted statement - Held that:- Though show cause notices have been issued by the original authority, for the shortage of raw materials noticed, which includes, allegation of clandestine removal of raw materials, the finding of the o .....

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as to whether, the appellate authority had acted beyond the scope of the appeal, and exceeded in his jurisdiction, the Tribunal passed an order, impugned before us, elaborating, as to how, adjudication has to be done, with reference to the aspect of clandestine removal of raw materials, which in our considered opinion, is jurisdictionally erroneous. On the facts and circumstances of the case, we hold that the directions issued by the appellate authority and that of the Tribunal, run contrary to .....

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Appellate Tribunal, Chennai, dated 04.02.2016, in Final Order No.40315 of 2016 in Appeal No.E/42574/2013-SM, of the assessee, by which, the Tribunal has remanded the matter to the Adjudicating Authority, with certain observations and directions. 2. Facts deduced from the material on record are that on 15.07.2008, inspection of Unit No.1 of the appellant, was conducted by the Head Quarters preventive Unit, Puducherry Commissionerate. The officers recovered 36 numbers of loose slips and a note boo .....

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roper invoices and attributed shortage of the stock, as recorded by the Inspecting Officer, to such removal. 3. Inspection was also done, in Unit II of the appellant on 16.07.2008 and shortage of raw materials was found. On 24.07.2008, statements were recorded from the Vice President of the appellant-Company. The appellant-Company sent a letter, dated 28.07.2008, to the department to return the records and documents, so as to enable them, to reconcile the shortage. For Unit II, a show cause noti .....

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n. There was no power supply from the night of 14.07.2008 and therefore, there was no production. The fact of power cut to the entire area was confirmed by the local Electricity Board officials, on the request made by the Inspecting Officials and that the said fact was also recorded in the Mahazar, dated 16.07.2008. In their reply, the appellant has also sought for cross-examination of the Officials, who carried out the stock verification in the Units I and II. The appellant has prayed for dropp .....

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ials and therefore, restricted the demand only to the shortage noticed by the officers. Consequently, the adjudicating authority has passed an order to demand a sum of ₹ 7,60,135/- from Unit I of the appellant and a further sum of ₹ 1,61,490/- from Unit II. He has also imposed penalty and interest. Under protest, the appellant has paid the abovesaid amount. 6. Being aggrieved by the Order-in-Original No.48/2011, dated 29.09.2011, passed by the Additional Commissioner of Central Excis .....

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r appeal to the Customs Excise and Service Tax Appellate Tribunal, Chennai, contending inter alia that when the department did not make any appeal against the Order-in-Original No.48/2011, dated 29.09.2011, on the finding recorded, in favour of the appellant, on the alleged clandestine removal of raw materials and restricted the demand only to the shortage of raw materials, the first appellate authority had acted beyond the scope of the appeal and that therefore, the order of the appellate autho .....

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the subject matter of appeal before the first appellate authority? (2) Whether the Tribunal can enlarge the scope of remand order, made by the first appellate authority which itself was not subject matter of appeal before him and contrary to Section 35A of the Central Excise Act, 1944? (3) Whether the Tribunal is justified in enlarging the remand order of the first appellate authority, wherein the first appellate authority has no power to remand a matter since, the provision Section 35A of the .....

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s justified in giving step by step directions to adjudicating authority, to carry out the adjudication of all matters all over again, contrary to the recorded facts, which included matters which reached finality and which did not form the subject matter of appeal before the first respondent appellate authority 8. Mr.K.Jayachandran, learned counsel for the appellant submitted that the entire proceedings against the appellant were made on the basis of stock verification on 15.07.2008 and 16.07.200 .....

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the appellant cannot be put in a worse position, on their appeal, in the absence of any appeal or cross objection by the department. He further submitted that when the appellant has approached the appellate authority to redress his grievance, on the aspect of shortage of raw materials only, and not on the alleged clandestine removal of raw materials, which allegation has been found, as not substantiated, by the original authority, neither the first appellate nor the Tribunal has any jurisdiction .....

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correctness of the said finding, recorded on proper appreciation of fact, evidence and submissions of the appellant and if the department had any grievance against any finding, it ought to have reviewed the said order and filed an appeal, before the first appellate authority. 11. According to mr.K.Jayachandran, learned counsel for the appellant, the Tribunal has failed to appreciate that consequent to the amendment to Section 35A of the Central Excise Act, the first appellate authority has no j .....

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n the orders of the adjudicating/appellate authority, and that of the Tribunal. He further submitted that he has no objection for the remand, insofar as mere shortage of raw-materials is concerned, on stock verification, but, reiterated that neither the first appellate authority nor the Tribunal, has any jurisdiction to direct the original authority to once again, adjudge the aspect of alleged clandestine removal of raw-materials, in the absence of any separate appeal by the department, against .....

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landestine removal, which resulted in shortage of raw-materials, is adjudged on the materials, as directed by the appellate authority and Tribunal, adjudication would not be conclusive. Heard the learned counsel for the parties and perused the materials available on record. 14. On the above rival contentions, this Court frames the following substantial question of law, "(1) Whether the appellate authority has exceeded in its jurisdiction, in acting beyond the scope of the appeal, filed by t .....

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h, on the aspect of allegation of clandestine removal of raw materials. After adverting to the oral and documentary evidence, the Additional Commissioner of Central Excise, Puducherry/adjudicating authority, vide order, dated 29.09.2011, made in Order-in-Original No.48 of 2011, dated 29.09.2011, at Paragraphs 46 and 47, has observed, as hereunder: 46. It was stated that during the cross examination, the officer admitted to the follows:- (1) That even though the indication of the vehicle number, .....

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e consignees, one of which was Sandip Industries, follow-up action and stock verification carried out by officers at Sandip Industries, but no discrepancies were noticed. 47. It was stated that the above admissions clearly revealed the following:- (a) That the 36 loose slips, in the background of the facts that there was no shortage or excess of raw materials ascertained on 15/16.07.2008, that the stocks of raw materials kept in loose-condition, ie., in half-filled bags and in hopper were not co .....

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ndip Industries have no evidentiary value in the face of the admission that there were no discrepancies noticed at Sandip Industries. (c) That no other investigation was undertaken by the officers later on with any of the consignees as per the loose slips, clearly confirm that there is absolutely no justification to draw conclusion to the effect that the said slips were used for clearance of cenvated inputs. Ultimately, while recording the findings on the disputed facts, the adjudicating authori .....

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d 975.65 Kgs of raw materials (granules), 25 Kgs. of Master Batch and 57600 Nos. of oven sacks and fabrics (all inputs) at Unit-II are proved beyond any doubt. 15. Regarding 36 loose slips seized from the security office room, I find that there is no clinching documentary evidences found during the course of investigation of the case to corroborate the clandestine removal of raw materials from SPL Unit-I to Unit II and to M/s. Sandeep Industries. 16. The statements obtained from the security per .....

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w materials and evidence regarding the buyers of the. so called unaccounted goods is essential and necessary as held by The Hon ble Tribunal in the case of Dalmia Vinyls (P) Ltd vs CCE reported in 2005 (192)ELT 606. "It is well settled that the burden for proving the clandestine clearances is upon the Revenue and is required to be discharged by production of sufficient and affirmative evidence, which is lacking in the present case as held by the Hon'ble Tribunal in the case of Utkal Gal .....

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ed unreservedly by the subordinate authorities as decreed by the Apex Court in UNION OF INDIA Versus KAMLAKSHI FINANCE CORPORATION LTD -reported in 1991(55) ELT 433(S.C). 18. Following the above decisions, I find that mere documentary evidence of 36 loose slips found in the security room is not enough to prove the clandestine removal of raw materials from Unit I to Unit II. Hence, the allegation of clandestine removal fails. Consequently, the demand is restricted to the shortage noticed by the o .....

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he present proceedings. Thus, on the aspect of alleged clandestine removal of raw materials, the adjudicating authority, vide order, dated 29.09.2011, has categorically held that the documents, stated supra, are not sufficient to prove clandestine removal of raw materials, from Unit I to Unit II of the appellant and therefore, the adjudicating authority has held that the allegation of clandestine removal fails. 16. When the appellant was aggrieved over the demand, on shortage of raw-materials an .....

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ropping part of the demand without proper explanations to the physical shortage of goods lacks merit and hence, requires re-examination. The case is therefore required to be re-visited by the Department for the limited purpose of examining the aspect of the dropped portion of the demand and to arrive at a plausible explanation for the shortage of inputs as alleged in the show cause notice. (v) The proposals of penalties made under Rule26 of the Central Excise Rules, 2002, against the Directors o .....

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evidence of 36 loose slips found in the security room is not enough to prove clandestine removal of raw materials from Unit I to Unit II. The original authority has also held that the allegation of clandestine removal is also not substantiated. 18. Section 35-A of the Central Excise Act, 1944, sets out the procedure to be followed by the appellate authority. Sub-Section 3 of Section 35-A of the Act, states that, (3) The Commissioner (Appeals) shall, after making such further inquiry as may be ne .....

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as not been levied or paid or has been short-levied or short-paid or erroneously refunded, no order requiring the appellant to pay any duty not levied or paid, short-levied or short-paid or erroneously refunded shall be passed unless the appellant is given notice within the time-limit specified in Section 11A to show cause against the proposed order. 19. Though show cause notices have been issued by the original authority, for the shortage of raw materials noticed, which includes, allegation of .....

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ny order, by the appellate authority, adversely affecting the interest of the assessee, in the appeal filed by the assessee. Thus, the directions of the appellate authority, in Appeal No.23/2013 (P), dated 03.12.2013, Paragraphs 14 (iv) to (vi), are certainly beyond the scope of the appeal, and thus, as rightly contended by the learned counsel for the appellant that the appellate authority has exceeded in his jurisdiction, in exercise of powers, under Section 35-A of the Central Excise Act, 1944 .....

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July, 2008. There is a material on record to show that the appellant challenged inventory taken on that day, on the ground that was taken in darkness due to no power supply. There appears a communication dated 28.07.2008 of the appellant in that regard objecting to the act of search party. That is on record. Therefore that deserves consideration. Causing enquiry with the Electricity Authority about power supply during that period, if the authority finds the plea of no power supply on the date of .....

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nt. On hearing the appellant on that count, the authority shall pass appropriate order. 22. From the order impugned before us, it is seen that when the assessee has questioned the very jurisdiction of the appellate authority and submitted that he had gone beyond the scope of the appeal, and issued directions, extracted supra, the Tribunal, without adverting to the said ground of challenge, has gone further and elaborated, as to how, the oral and documentary evidence, should be considered, in adj .....

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of and considering defence plea shall adjudicate the matter. 7.4. The materials proposed to be utilised in readjudication proposed by this order, shall be confronted to the appellant for defence.The loose slips gathered in the cause of search should be examined and evidentiaryvalue thereof evaluated for the purpose of use in the adjudication. Defence if any on that aspect shall also be considered by adjudicating Authority.The appellant is entitled to the confrontation of every material sought to .....

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and, if any. The Tribunal has further observed that, It may so happen that all the materials and evidence may corroborate with each other. That aspect may be specifically dealt. 24. Even taking it for granted that the Commissioner of Appeals can exercise powers for passing a just and proper order, in exercise of powers, conferred on him, under the proviso, to sub-Section 3 of Section 35A of the Central Excise Act, 1944, yet the Section, mandates adherence to the principles of natural justice, by .....

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a worse position, as a result of filing an appeal. It is a latin phrase, expressing the principle of procedure, according to which, using the remedy at law, should not aggravate the situation of the one who exercises it. 26. Had the assessee not filed an appeal, it would not be placed in a situation of inviting an adverse order, on the aspect of clandestine removal. A party who files an appeal, expects that the appellate authority would only address the grounds of appeal, made against the order .....

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