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2016 (8) TMI 932 - CESTAT NEW DELHI

2016 (8) TMI 932 - CESTAT NEW DELHI - 2016 (340) E.L.T. 697 (Tri. - Del.) - Demand and imposition of penalties - Clandestine clearance of goods - shortages of final product detected by the officers at the time of their visit - documents recovered from the residential premises of one Shri Vinod Kumar Gupta relate to raw material received and dispatch of finished goods - Held that:- the Revenue has not produced any evidence or not has even alleged that there was enhancement in the production capac .....

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Chartered Accountant's certificate clearly establish that no capital expenditure stand made by the assessee subsequently. Even the assumptive observations made by Commissioner may lead to enhancement in the production capacity to a little extent but same cannot lead to enhancement of the capacity to such a huge quantum which is almost four times the capacity fixed by the Commissioner. - In the present case the entire case of the Revenue is based upon uncorroborated unverified entries in the .....

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not adduced any positive and sufficient tangible evidence for the clearance of the final product from the appellants factory to the customer's premises, we find no justification to uphold the impugned order of Commissioner. Accordingly, confirmation of demand and imposition of penalty on M/s. CIL is set aside. Consequently, the penalties upon other appellants, who are Managing Directors or Directors of the said company, or the raw material supplier or the alleged buyers of their final product a .....

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disposed of by a common order as they arise out of same order of Commissioner vide which he has confirmed the demand of duty of ₹ 2,16,01,815/- (Rupees Two crores sixteen lakh one thousand eight hundred fifteen only) against M/s. Capital Ispat Ltd. (hereinafter referred to as CIL) along with confirmation of interest and imposition of penalty of identical amount under section 11 AC of the Central Excise Act, 1944. In addition, penalty of ₹ 15,000,00/- (Rupees Fifteen lakh only) each s .....

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e and form of ingots, billets and scrap etc. They are registered with the Central Excise authorities for payment of duty of excise and maintain requisite records in the ordinary course of their business. The appellants also have an office at West Patel Nagar, New Delhi where they are registered with the local Sales Tax authorities for the purpose of trade in identical goods. 3. As per facts on record, the factory premises of the appellant were put to search on 27.8.2002 and various checks and ve .....

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r Gupta, led the Revenue to believe that the details mentioned therein relate to unaccounted receipt of raw material and unaccounted sale of goods manufactured in the factory of CIL and cleared without payment of duty. The said entries were under the caption receipt / dispatch and gave the details of the party s name as also the make, number, weightment slip number, weightment and receipt of the total amount. 4. The statement of Shri Vinod Kumar Gupa, was recorded on 27.8.02 itself, wherein he d .....

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d 27.8.02 pertain to M/s. CIL; that he was not concerned with CIL and his nephew Shri Sandeep Gupta was director in CIL. On being asked about the entries in the dairy recovered from his premises, he stated that they were the accounts of receipt of raw material and dispatch of goods; that these documents contain the names of the parties, vehicle number, sizes and rate of goods; that in receipt of documents column, vehicle number was left blank and other columns mentioned in the documents were of .....

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d a view that Shri V K Gupta was evasive in his reply and his relative being the Director of CIL, the entries made in the documents were belonging to CIL and carried out further investigation. Accordingly, the statement of Director of CIL were also recorded. Shri Sanjay Singhal in his statement deposed that loose documents recovered from his residence were relatable to dispatch of finished goods from the CIL. Similarly, statement of other Directors were also recorded on various dates wherein he .....

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was found that the same contained information regarding datewise running of the factory for the period July, 2002 to August, 2002. As per the Revenue, the details given in the said chart matched with the details given in the documents recovered from the residence of Shri V K Gupta for the period 1.6.2002 to 26.8.2002. Shri K K Dabral in his statement dated 27.8.2002 deposed that the columns of PCs and MT pertained to production of goods and the number and quantity of pieces mentioned in the said .....

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ered along with documents contained information about the accounts and telephone numbers of the parties. The said Shri Radhey Shyam Gupta in his statement dated 27.8.02 deposed that being Manager (Cash) of CIL, was entrusted with the responsibility of collecting cash payments of the goods supplied by the company, to make payments to the raw material suppliers and to look after the expenses of the company. He gave the names of various buyers to whom the goods manufactured by the appellants were b .....

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e stated that same belonged to the dispatch of the goods because he find that documents contained information as regards the parties name, size of the goods, dispatch vehicle number etc. Similarly, statement of various other persons like authorized signatory and Excise Manager of CIL, Shri Madan Mohan Gupta as also Shri Sanjay Gupta General Manager were recorded. We will deal with the said statements in our subsequent paragraphs. 8. Further investigations were carried at the end of transporters. .....

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ny was handed over to the driver of the vehicle and the GR is always filled by the people at the time of loading of the vehicle. 9. Searches were also conducted by the Revenue at the factory premises of the raw materials supplier M/s. Reby Casting Pvt. Ltd. and M/s. J R Alloys Casting Pvt. Ltd. , Bhiwadi on 27.8.02. Shri Bharat Bhushan Bansal, Director of Reby Castings in his statement recorded on 13.11.03 deposed that they were supplying MS ingots to CIL. On being shown the documents recovered .....

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name of the furnace, weighment slip number, weight of goods, amounts and total number of pieces were given. He further deposed that as per the common practice in the industry, the goods are weighed in the factory at the time of clearance and also on receipt of goods by the buyers, for cross verification of weight of goods and normally the difference between two weights ranges from 50 60 Kgs. He further submitted that they have raised invoices where there may be weight shown in the invoice and i .....

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f J R Alloys and Castings Pvt. Ltd. was recorded on 21.7.03 wherein he deposed that they were supplying the goods to CIL and stated that invoices / bill and weighment accompanied the consignment while the goods were dispatched to CIL. He deposed that entries made in the documents recovered from the premises of Shri Vinod Kumar Gupta were purchase bills of CIL and their company has issued invoices for all the transactions and in their books of accounts no entry of cash was recorded and they are n .....

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mar Gupta relate to raw material received, dispatch of finished goods and details of payments during the month of June, 2002 to July, 2002 and August, 2002. He further deposed that they had not issued any bills for the material supplied by them except where the same was being supplied on the basis of invoices. 10. The investigation were further carried to the buyers of the goods in respect of the names of the buyers which appeared in the records recovered from the residence of Shri Vinod Kumar G .....

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tively involved in the functioning of the company and were indulging in evasion of Central Excise duty by resorting to removal of goods. Accordingly, proceedings were initiated against various persons by way of issuance of show cause notice dated 18.9.06 proposing to confirm the demands in respect of clandestinely removed final product by M/s. CIL. The notice also proposed confirmation of interest and imposition of penalty on the manufacturing unit as also imposition of penalties on other co-not .....

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ods which were purchased by them from the other manufacturer and supplied directly to the customers. They are also purchasing scrap etc. and after segregating, they were selling them to ultimate customers. For the said purpose, records were being maintained at factory premises as also at their head office and consolidated accounts was prepared at Delhi Head office. The documents recovered from the residential premises of Shri Vinod Kumar Gupta, according to the Revenue were giving details of raw .....

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uced by the Revenue showing clearance of the final product from the appellants factory. As such, they submitted that the Revenue s assumption that the entries from the documents recovered from Shri Vinod Kumar Gupta residence relate to actual manufacture at the appellant s factory cannot be sustained in the absence of evidence showing the actual receipt of raw material at the factory premises and manufacture of their final product and their clearance. They also contended that during the period 1 .....

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n no position to manufacture excess quantity to the extent of 9994.663 MT of finished goods, which the revenue is alleging to have been manufactured and cleared clandestinely. They also contended that during the year 2002-2003, the monthly average per MT consumption of electricity ranged from 203 to 348 unit depending upon the nature of goods and as per the allegations of Revenue, for the manufacture of June, 2002 to August 2002, the average per MT consumption of electricity would come out to 61 .....

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ector of the Company nor holding any position in the company and as such, the documents recovered from his premises, which also stand maintained for his own trading firm cannot be relied upon for upholding the charge of clandestine removal. Similarly, the loose documents recovered from the personal possession of Shri Sanjay Singhal or from the other employees cannot be relied upon for upholding the charge of clandestine activities. The Managing Director of the Company Shri Sanjay Singhal was not .....

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nts recovered from the third party premises as also on the basis of not so clear statements of various deponents, cannot be sustained. 13. The adjudicating authority did not find favour in the above stand of the appellant and confirmed the demand along with imposition of penalties on various persons vide his present impugned order. 14. Hence, the present appeals. 15. Learned advocate Shri Balbir Singh, appearing for the appellant has reiterated the same grounds which were raised before the adjud .....

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of 4 annexure attached to the show cause notice which stand made on the basis of documents recovered from the residential premises of one Shri Vinod Kumar Gupta. According to the Revenue, the said entries made in the documents reflect upon the clandestine clearance of M/s. CIL for the month of June, July and August, 2002. As such, three different annexure stand made for the said three months and annexure D, confirming demand of duty to the extent of ₹ 4,10,342/- is in respect of shortages .....

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either managing director or director of M/s. CIL and is not holding any post of profit in the said manufacturing unit. Further the Revenue has relied upon the statement of various persons to confirm the allegations of clandestine removal. 18. The appellants have strongly contended that the allegations of clandestine removal cannot be upheld based upon the entries made in the documents recovered from the third persons premises read with uncorroborated statement of various persons. As per the appe .....

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trading activity of Shri Vinod Kumar Gupta and has demanded duty on full entries by treating the same as if the same were manufactured and cleared by the appellant. 19. It is also on record that the appellant was registered with the Sales Tax authorities for their West Patel Nagar office and were doing the trading activity. As per the appellant they were not maintaining the accounts of such trading activity so as to evade the sale tax. This fact per se will not lead to unavoidable conclusion th .....

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ve that the manufacturing unit is engaged in illegal activities, lies very heavily upon Revenue. For the said purpose, they are expected to produce evidence of movement of raw material from the premises of the raw material supplier to the factory, the actual manufacture of the goods, and the movement of final product from the factory towards customers premises. In the present case, when we examine the statements given by some of raw material supplier, as also the customers, we find that there is .....

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t cannot be held that the entries made in the records were relatable to the goods manufactured by the appellant himself. Apart from the fact that no reliance can be placed upon uncorroborated, vague and unsubstantiated statements of various persons, it is also noted that as per the entries made in the said records, there is allegation of sale to 460 parties in the month of June and 523 in the month of July and 424 parties in the month of August, 2002. The Revenue has made inquiries only with thr .....

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h, it is very essential for the Revenue to establish with the production of evidence that such goods stand manufactured by the appellant. There is no cogent positive evidence to that effect available on record. Apart from the fact of absence of evidence of manufacture, we also note that during the period 1997-2000, the appellant was working under the Compounded Levy scheme and the annual capacity of production was being fixed by their jurisdictional Central Excise authorities depending upon the .....

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st had manufactured 9994.663 MT would lead to the total annual capacity being 39978.652 MT which is almost 4 to 5 times higher than the annual production capacity fixed by the Commissioner himself. The appellants have taken a categorical stand before the Commissioner that subsequent to APC fixed by him, they have not added any machines in their factory so as to enhance their production capacity. They have also produced the Chartered Accountant certificate to that effect. While rejecting the said .....

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e relevant period so as to enhance the capacity. The change in the value of d factor can result in consequent increase in the production capacity. Though we find that said observation of the adjudicating authority is in the realm of assumption and presumption, we also note that the appellants annual capacity vide order dated 7.6.1999 was fixed by taking into account the maximum parameters. The Revenue has not produced any evidence or not has even alleged that there was enhancement in the product .....

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d specifically raised the point relating to the impossibility of production capacity from the appellants factory to the extent of demand made by the Department. However, the adjudicating authority seems to have totally ignored the said specific ground of defence that the installed capacity could not permit production of huge quantity of processed fabrics as has been calculated by the Department. The records clearly disclose that as per the Department the total quantity of processed PB fabrics du .....

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ber, 1998. This point was specifically raised by the appellants but has not at all been considered by the adjudicating authority, though the fact that the said point had been raised in defence was clearly recorded in the order itself. 10. The said point in relation to the total capacity of production in the appellants unit goes to the root of the matter. If the competent authority after taking into consideration the production capacity of the appellants unit was convinced in December, 1998 of mo .....

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uty liability of the appellants. It is nobody s case that subsequent to the day of raid, the appellants had reduced their production capacity. At the same time, undisputedly, the Department had not verified in the course of the investigation the production capacity of the appellants factory. Even the electricity consumption record in respect of the appellants factory was not checked. In these circumstances, it will be absurd to believe the claim of the Department about the possibility of huge pr .....

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the same on the lower side, the allegation of higher production for the earlier period cannot be upheld, as it is not the Revenue s case that the assessee reduced their production capacity subsequently. By applying the ratio of the decision to the facts of the present case, where the production capacity was fixed by the Commissioner prior to the period in question and it is not the Revenue s stand that subsequent to the fixation of ACP, the appellants have added any further machinery in their fa .....

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mal circumstances, the electricity consumption for manufacture of 1 MT of iron and steel ranges from 203 to 308 units. This also stand established by the electricity consumption pattern for the earlier years as also during subsequent period. The allegation of clandestine manufacture and removal are for three months i.e. June, July and August, 2002 and electricity consumption for manufacture of such high quantum of their final product during the relevant month comes to 61 unit per MT. Such lower .....

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t could not have been manufactured in a span of three months. As such, the question of clearance of the same does not arise. 24. Otherwise also as already observed the onus being on the Revenue for establishing the clandestine manufacture and removal, is required to be discharged by production of evidence beyond reasonable doubt. It is not to say that the Revenue is required to establish each and every missing link but the evidence produced by them should be at least to the extent which inspires .....

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hat same stand given in the context of trading activity of the assessee. Further as per Bombay High Court decision in the case of Commissioner of Customs vs. Foto Centre Trading Co. [2008 (235) ELT 193], it stand observed that the statements cannot be made the sole basis for holding against the assessee unless there is other independent corroborative evidences. Infact there are various decision of the Tribunal on the said issue. Some reference can be made to the following one: 1. Radhey Shyam Ka .....

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ast, on the evidences which lead one to believe that the duty stand evaded. At this stage, we make reference to the decision of the Tribunal in the case of M/s. Thermotech vs. CCE Delhi [2013 (293 (ELT) 712 (Tri-Del)] wherein minority decision of the Tribunal was to the effect that the clandestine activities are required to be proved based upon the sufficient, tenable and positive evidence. However, the majority decision of the Tribunal upheld the charge of clandestine activity against the asses .....

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