TMI Blog2016 (8) TMI 932X X X X Extracts X X X X X X X X Extracts X X X X ..... hance their production capacity. The 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 documents recovered from the premises of third person as also upon the statements of some of the concerned persons, which depositions are also not very clear leading one to believe that the appellant was indulging in clandestine activities. A cumulative reading of the statements leads us to believe that same stand given in the context of trading activity of the assessee. As the Revenue has miserably failed to establish the manufacture of such huge quantity of the appellants final product and has 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 j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esult of stock taking, certain stock of raw material as also final product was found short and certain incriminating documents were recovered. Simultaneously the premises of one Shri Vinod Kumar Gupta located at Chirag Delhi, New Delhi were also put to search and various incriminating documents were recovered from the said residential premises. The scrutiny of the details mentioned in the said documents recovered from the residential premises of Shri Vinod Kumar 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 deposed that though he was aware of the Company in the name and style of M/s. CIL, but he has no business dealing / relations with the said company and he has not made any investment ever in the said company. He further stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust, 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 documents recovered from the Dabral residence, matched with the documents recovered from the residence of Shri Vinod Kumar Gupta in respect of certain entries. 7. Some incriminating documents were also recovered from the personal search of Shri Radhe Shyam Gupta, Manager (Cash) on 27.8.2002 itself. As per the Revenue, the said documents were giving the details of payments made / received, in cash along with the names of the parties to whom the payments were made or received. The small pad recovered 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts of CIL. He also agreed that file number, recovered from the residence of Shri Vinod Kumar Gupta, was a ledger for the month of August, 2002 and the documents also contain the details of receipt of raw materials by CIL from various sources; that details of receipt of raw materials, 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 is reflected in the documents. He also clarified that they were not maintaining any other account and he was unable to explain the entries reflected in the said documents. As regards the entries against his name, he clarified that they had received all the cheques and mentioned in the said account; that no transaction of cash was reflected in their books of accounts and they are not maintaining any other acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-noticees. The said notice resulted in passing of present impugned order by the Commissioner. 12. It is seen that during the adjudication, the appellant M/s. CIL submitted that they are engaged in the manufacture of angles and channels by using ingots, billets and scrap etc. as also in trading of said goods as also raw material, for which purpose, they have a separate Delhi registered office at West Patel Nagar. Many a times company was getting orders from their customers for supply of particular goods 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and he was doing so in a name and style of proprietary unit M/s. Hari Shanker and Sons. He is neither the Director 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 attending office on regular basis and as such, he was unable to answer many question put to him during investigation, as is clear from the statement recorded by the officers. However Shri Sanjay Singhal, clarified that they were also engaged in the trading of goods. There are major contradiction in various statements of Shri Sanjay Singhal and the statement of other persons are not establishing the fact beyond doubt. The entire case of the Revenue being based upon the entries made in the documents recovered from the third party premises as also on the basis of not so clear statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous persons. As per the appellant, some of the entries made in the said records relate to manufactured goods at the appellants premises, whereas the remaining entries are in respect of trading activities of the assessee as also of Shri Vinod Kumar Gupta. Shri Gupta in his statement recorded before the officers have clearly admitted that he was also doing the trading activities in respect of identical goods in the name and style of M/s. Hari Shanker and Sons. Revenue has not bothered to verify as to which of the entries are 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 that the entries reflecting sale purchase of goods were relatable to goods manufactured by the assessee. The adjudicating authority has not accepted the said contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduction 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 number of machines installed and as per the formula given in the relevant rules. Vide order dated 7.6.1999, the Commissioner has fixed the appellant s annual capacity of production as 7452 MT per annum. It is also placed on record the fact that during the last 5 years starting from 1997-98, the actual production as reflected in the RGI register of the appellant was in most of the cases less than 10,000 MT. The Revenue s allegation that the appellant during the three months of June, July and August 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 Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Curiously, the competent authority had under its order dated 18th December, 1998, few days after the raid by the Department had fixed the annual capacity of the production by the appellants unit and had determined their monthly liability to the tune of ₹ 15 lacs and the same was communicated to the appellants under letter dated 18th December, 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 monthly liability of the appellants to be ₹ 15 lacs, one fails to understand as to how the calculations regarding production of the goods worth ₹ 15,01,18,759/- warranting the duty liability of ₹ 2,96,08,491/- for a period of 51/2 months during the period from August to November, 1998, and that too without any documentary or othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod. 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 consumption of electricity i.e. 61 unit per MT is not only impractical but impossible also. It is also not the Revenue s case that the appellant have used an alternative source of electricity by way of using batteries or generator set etc. for which they have to seek permission from the department of Industries, RIICO to set up the DG set, which permission is not available. 23. Examination of the above two factors lead us to conclude that such a huge quantity of the final product of the appellant 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 evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the sole basis of statement and no attempt by the Revenue to undertake any serious investigations, so as to substantiate the allegation of manufacture of 606 ACs by producing the evidence to show that the basic raw material required for manufacture was procured, the order upholding the charges of clandestine manufacture cannot be sustained. Accordingly by setting aside the majority order, the Hon ble High Court upheld the minority order. 25. As we have already observed that the Revenue has miserably failed to establish the manufacture of such huge quantity of the appellants final product and has 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 and other employees of the company are also set aside. In a nut shell the impugned order is se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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