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2016 (9) TMI 36 - CESTAT NEW DELHI

2016 (9) TMI 36 - CESTAT NEW DELHI - TMI - Demand of duty and imposition of penalty - clandestine removal of goods - received 238 triplicate and quadruplicate copies of invoices used by the Appellant firm to remove goods without payment of duty - no further investigation appears to have been conducted - Held that:- we find that in spite of possession of 238 invoices, no investigation was conducted to ascertain the veracity of those invoices. We further find that the department has not disclosed .....

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Sukumar Ghosh, who had stated that it indicates removal of goods, duty liability cannot be fastened against the Appellant's firm. The preparation of 238 invoices at the utmost can create a doubt that the goods have been removed under the cover of such invoices, however the same has to be corroborated by conduction of further investigation from the buyers/ transporter and other persons involved. In absence of any such investigation, demand cannot be substantiated against the appellant. - In .....

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re based upon records shown to him, the investigation officers should have brought on record of clearance of goods from the factory of Appellant firm with enquiries from buyers, transporters and the employees/ persons connected with the case. No such evidences or statements have been brought on record. In such case, we are of the view that demand cannot be made on the basis of statement of Shri Sukumar Ghosh or Shri Nizammuddin Sheikh. Also in case of demand based upon statement of Shri Nizzamud .....

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documents. No identification of person who has prepared said documents has been done. In absence of scribe of such documents, the investigation does not lead to inference of having goods produced in the Appellant's Factory. No evidence of Appellant firm having procured the unaccounted raw material has come to the light. Nevertheless, we find that on the basis of such documents showing consumption of raw material, it cannot be said that the goods have been manufactured and cleared by the Appellan .....

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oods. In absence of buyers of goods, transportation thereof and receipt of consideration, the charges of clandestine removal cannot be established. No effort has been undertaken to identify the author of said dispatch advice and slips pad. Thus, the demands cannot be made. Therefore, the demands are not sustainable. - A demand of ₹ 14,94, 236/- has been confirmed against the Appellant firm on shortages of MS Ingots found during physical verification on 14.02.2007. We find that the deni .....

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ds without payment of duty and a starting point of investigation. However, no further investigation has been conducted to ascertain the material fact of removal of goods. Since there is no buyer of goods and no investigation on removal of goods, in such a case we hold that duty demand is not sustainable merely on the basis of shortages of goods. Hence, the impugned order is not sustainable and are set aside. Since we have held that there is no sustainable demand, consequential penalties on Shri .....

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ted against the impugned order dated 22.10.2009 passed by the ld. Commissioner of Central Excise, Raipur whereby a demand of Central Excise duty of ₹ 2,57,07,177/- was confirmed and equal amount of penalty was imposed on M/s Shivalaya Ispat & Power Pvt. Ltd. In addition, penalty of ₹ 10,00,000/- and ₹ 5,00,000/- respectively were also imposed on the Director, Shri Iqbal Razzak Hingora and the General Manager, Shri Sukumar Ghosh under Rule 26 of Central Excise Rules, 2002. 2 .....

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ible person was found in the factory, the General Manager, Shri Sukumar Ghosh who was sitting at office of the firm was called upon to remain present at the factory, so that investigation can be conducted. During stock verification, the stock of Sponge Iron was found to be in order. However, a shortage of 517.280 MT was found in stock of MS Ingots. The officers recorded statement of Shri Sukuamar Ghosh, wherein he informed that he is responsible for liaisoning with the Sales Tax, Pollution contr .....

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n next day i.e. on 15.02.2007 and he was shown two box files containing triplicate and quadruplicate copies of 238 invoices along with some weighment slips. On enquiry, he stated that it is evident from invoices that the goods were removed from the factory and the same has not been recorded in their books. He further stated that the invoices were prepared only for transportation purpose and that the sales proceeds has been collected by Shri Joes and Shri Ajay Khandelwal. When put to question reg .....

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or the period October 2006 to January 2007, the per month production of Sponge Iron was 1600 MT. On comparison of production stated by Shri Nizamuddin Sheikh with the production recorded in RG1 of the Appellant firm, it was found that there has been less recording of production of Sponge Iron. Accordingly a duty of ₹ 96,29,789/- was demanded alleging removal of the same without payment of duty. 2.3 During investigation, the officers also seized Register of Process department log book for t .....

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demand of ₹ 34,86,045/- was made against Appellant firm. 2.4 Further, during investigation slip pads containing details of heat wise production of M.S Ingots was found for the period 18.11.2006 to 08.01.2007. The quantity of 453.600 MT was not found to have been entered in RG-1 Account and alleged to have been cleared without payment of duty of ₹ 13,10,287/-. Also a slip pad and loose sheets were found and it was alleged that the same pertains to clearance of goods. When compared wit .....

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zzamuddin Sheikh. The adjudicating authority issued letter to the Appellant firm stating that since both the persons were employee of the Appellant firm, cross examination is not necessary. The Appellant thereafter filed final submission enclosing retraction affidavits of Shri Sukumar Ghosh and Shri Nizzamuddinh Sheikh, wherein they denied the contents of their statements. The adjudicating authority vide impugned order dated 22.10.2009 confirmed demand and imposed penalty upon the Appellants on .....

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or and his statement cannot be discarded as having no evidentiary value on ground of third party. (ii) That demand of ₹ 34,86,045/- on clandestine removal of 1849.400 MT of Sponge Iron on the basis of Log Sheets and Process Department Log Book is sustainable as the Appellant has not accounted for the Sponge Iron arrived on based of quantity of raw material mentioned in said records. The sponge iron quantity so arrived was not entered in statutory records. Since the panchnama proceedings wa .....

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e shortages due to clandestine removal and duty was paid. That since the shortage was accepted by Shri Hingora, therefore duty is payable. (v) That duty of ₹ 95,28,055/- on alleged clearances of 4233.900 MT of MS Ingots and sponge iron under the cover of parallel invoices as Shri Sukumar ghosh accepted the removal and also stated the name of persons who has signed the invoices and thus is enough evidence. That Shri Hingora in his statement stated that Shri Ghosh was attending work related .....

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uty demand is based upon assumption/ presumptions. That the demand based upon the triplicate copies of invoices is not sustainable as the same were not found from the factory premises or possession of any employee or director of the firm. The revenue did not disclose the source of such invoice. That even though the name of the alleged buyers and transporters were appearing on the invoices, no investigation was done to ascertain whether any goods were removed by the Appellant. No statement of any .....

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ecting any amount nor had any connection with the buyers of the goods. That his role was limited only to liaisoning activity and filing of return and hence his statement cannot be made basis for demand. He relied upon following judgments in support of his contention : (i) CCE, BHOPAL Vs. L.B. & SONS 2011 (274) E.L.T. 271 (Tri. - Del.) (ii) CCE, LUDHIANA Vs. SHATABDI CEMENT (P) LTD. 2007 (217) E.L.T. 387 (Tri. - Del.) (iii) RAWALWASIA ISPAT UDYOG LTD.Vs. CCE, DELHI 2005 (186) E.L.T. 465 (Tri. .....

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ence. The contractor did not produce any records showing such production nor any evidence of the number of workers employed by him nor of any payments made to the workers. That even the cross examination of the contractor was not given on the ground that he was employee of the Appellant firm which is wrong and baseless. That his statement is contrary to the Director s statement. Shri Sukumar Ghosh in his statement dated 27.05.2008, in answer to question no. 9 has clearly stated that he does not .....

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n his affidavit Shri Sheikh has denied his statements. He submits that no demand can be made on the basis of statement of contractor. He relied upon the judgment in case of RINKOO PROCESSORS PVT. LTD. Vs. CCE, AHMEDABAD 2007 (212) E.L.T. 529 (Tri. - Mumbai), wherein it was held that the Chits recovered from residence of folding contractor stating processed MMF in absence of any indication therein as how clearances were made, cannot be basis to allege clandestine removal. 5.2 The ld. Advocate sub .....

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from the statement of Shri Sukumar Ghosh and Shri Hingora, they have clearly denied the said papers. There is no admission or statement of any person owing such papers. Even though, it was alleged that the record pertains to Appellant firm but no author/ scribe of such documents has been identified. No person from the Appellant firm has signed such papers. That demand cannot be made against them merely on the basis of some loose papers showing some raw material and assuming that the goods were p .....

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ithout discussion is not sustainable. That only on the basis of private records, no demand can be made. That as may be seen from the statement dated 15.02.2007 of Shri Nizamuddin Sheikh that he has stated that Shri Mithilesh, contractor was manufacturing MS Ingots. That even then no statement of Shri Mithilesh was obtained. This shows the lack of credibility of investigation. The slip pad cannot be said to be containing production of Appellant's unit. That it is not known from whose possessi .....

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demand is based only on conjectures and surmises. 5.4 The Ld. Counsel relied upon following judgments in support of his contention to show that the demand based upon log sheets, log book, slip pad and dispatch challan is not sustainable : (i) CCE, TRICHY Vs. SREE RAJESWARI MILLS LTD. 2009 (246) ELT 750 (TRI) (ii) CCE, SURAT Vs. GANDHI TEXTURISERS 2008 (230) E.L.T. 186 (Tri. - Ahmd.) (iii) SHARADHA FORGE PVT. LTD. Vs. CCE, RAJKOT 2005 (179) E.L.T. 336 (Tri. - Mumbai) (iv) SOMESHWARA CEM.& CH .....

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o clandestine removal. 5.6 The Ld. Counsel further submits that even though the reliance has been placed upon statements of Shri Sukumar Ghosh, the fact remains that he was not at all concerned with the factory activities like procurement of raw material, production, removal or transportation of goods or receipt of sales consideration from buyers. His role in central excise was limited only to filing and signing of return. That as he is not associated with any excise related activities, the reli .....

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tatements. He states that section 9 D of the Central Excise Act, 1944 does not excludes the employee from its ambit and hence the reasoning of the Ld. Commissioner that the cross examination of employees cannot be granted has no legal basis. That the adjudicating authority should have granted cross examination of the person even though he was an employee as his statement has been relied upon. That it was more required in the light of the fact that he was not concerned with factory related activi .....

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statement of any raw material supplier has been recorded to show that the Appellant firm has purchased any additional raw material to produce such a huge quantity of finished goods. The investigating agency could not locate even a single supplier of the raw material needed for such huge production or the buyer of the alleged clandestinely cleared goods. No excess transportation of raw material to Appellant s factory. No clandestine manufacture. No excess power consumption, coal consumption or a .....

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goods. No records/ documents have been seized from any party to show that the goods have been clandestinely cleared to such parties. That it is really baffling that the investigation could not unearth not even a single buyer who might have received the clandestinely removed goods, though more than two Crores of duty evasion is alleged. No seizure of any clandestinely cleared goods has been made from any person. There is no statement of any person who has prepared the alleged relied upon document .....

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r private records in absence of enquiry from buyers, identification of authors is not sustainable. 6. Per contra, the ld. D.R. Shri R.K. Manji appearing for the respondent reiterated the findings recorded in the impugned order. He also placed reliance upon the judgment of M/s Shalini Steels Pvt. Ltd. Vs. Commr. Of Cus & C.Ex, Hyderabad, 2011 (269) ELT 485 (A.P) to state that the statement of employee has to be accepted as the same has been accepted to be true by the Managing Director and the .....

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ces, however no further investigation appears to have been conducted. The invoice can be considered as an instance to allege removal of goods, but the removal of the goods covered with the invoices has to be corroborated with further investigation and evidences. In the instant case, we find that in spite of possession of 238 invoices, no investigation was conducted to ascertain the veracity of those invoices. We further find that the department has not disclosed the source of such invoices. It i .....

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t it indicates removal of goods, duty liability cannot be fastened against the Appellant's firm. The preparation of 238 invoices at the utmost can create a doubt that the goods have been removed under the cover of such invoices, however the same has to be corroborated by conduction of further investigation from the buyers/ transporter and other persons involved. In absence of any such investigation, demand cannot be substantiated against the appellant. The Revenue has relied upon the stateme .....

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of demand of ₹ 96,27,789/-, the same has arisen on the sole basis of statement of Shri Nizzamuddin Sheikh who has stated that the production of Sponge Iron was 1600 MT per month. We find that his statement is not supported by any evidence. No documents in the form of his production register or wage record or any production report are available on record for substantiating his statement. 8.1 We find that in case of the above demands, the show cause notice and the adjudication order have pla .....

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used to visit the factory. Shri Sukumar Ghosh was called to factory for investigation purposes. In his statement dated 14.02.2007, he deposed that his activity in central excise are related to filing and signing of return and mainly his job is of liasioing in central excise, pollution and sales tax matters. In such case, when the investigation has not brought on his involvement in factory related activities, his statement cannot be made basis for demand of duty against Appellant s unit. It was .....

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such eventuality, it was incumbent upon the adjudicating authority to grant cross examination of Shri Sukumar Ghosh. Having denied the opportunity of cross examination, the statements of Shri Sukumar Ghosh cannot be made basis for demand. Also the cross examination of Labour Contractor Shri Nizzamuddin Sheikh has been denied on the ground that he is employee of the Appellant firm which is not correct. Being not an employee of a firm and no document/ production record having been found out from .....

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on the facts of each individual case and its merits. In the instant case, the sole incuplatory statement was of Shri Sukumar Ghosh, who is not related with activities of production and clearance of goods. As he is not concerned with such activities nor involved in such case his statement could not have been the ground to demand duty as number of persons were allegedly involved. The veracity of his statements could have been ascertained only during the cross examination which has not been done. W .....

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d clandestine removal of goods. Therefore, the ratio of judgment of Shalini Steels (supra) is not applicable in the present set of facts. The Hon ble High Court of Delhi in the case of CCE, DELHI I Vs. VISHNU & CO., while dwelling upon the reliability of statement has held that Once it is shown that the maker of such statement has in fact resiled from it, even if it is after a period of time, then it is no longer safe to rely upon it as a substantive piece of evidence. The question is not so .....

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r statements were based upon records shown to him, the investigation officers should have brought on record of clearance of goods from the factory of Appellant firm with enquiries from buyers, transporters and the employees/ persons connected with the case. No such evidences or statements have been brought on record. In such case, we are of the view that demand cannot be made on the basis of statement of Shri Sukumar Ghosh or Shri Nizammuddin Sheikh. Our views are also based upon the judgment of .....

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ntification of person from whom the invoices were recovered and in absence of investigation from the buyers of the goods, no demand can be made on account of clandestine removal. Similarly, in case of demand based upon statement of Shri Nizzamuddin Sheikh, we find that apart from his statement no other documentary evidences are available on record. We, therefore hold that the demand of ₹ 95,28,055/- and of ₹ 96,29,789/- are not sustainable. 8.3 In case of demand of 34,86,045/- on the .....

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material detailed in such documents has been procured. The officers at the time of investigation found the stock of raw material as per the quantity recorded in records. No evidence of Appellant firm having procured the unaccounted raw material has come to the light. Nevertheless, we find that on the basis of such documents showing consumption of raw material, it cannot be said that the goods have been manufactured and cleared by the Appellant. We, thus hold that the duty demand is not sustainab .....

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such papers. The adjudicating authority in his order has only held that the charges are established on the basis of documents. We find that no discussion has been done as to how the said records lead to inference of removal of goods. In absence of buyers of goods, transportation thereof and receipt of consideration, the charges of clandestine removal cannot be established. No effort has been undertaken to identify the author of said dispatch advice and slips pad. Thus the demands cannot be made. .....

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actual weighment basis. This has resulted into variation in physical stock. It is also contended by them that the recorded quantity was arrived at on the basis of quantity mentioned in RG-1 till 31.01.2007 and then adding to that quantity the alleged production for the subsequent period and deducting the clearances. The officers have also added quantity of 164.780MT of M.S. Ingots on the ground that the same is production for the period 09.02.2007 to 14.02.2007. Addition of said quantity is with .....

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