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2016 (9) TMI 1099 - CESTAT KOLKATA

2016 (9) TMI 1099 - CESTAT KOLKATA - TMI - Clandestine manufacture - 7072.978 MT iron and steel products without payment of duty - private records recovered from the residence of the appellants - licit clearances made by the main Appellant also find mention in the private records, indicating the correctness of the private records - Held that:- argument made by appellant that the quantities at Sl.No.18,19,24,25 & 26 of the same page which show marked differences between quantities shown in the pr .....

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or those claimed by the main Appellant in their reply were actually existing or not. Similarly for manufacturing such huge quantities of finished goods, as alleged to be clandestinely manufactured and cleared by the main Appellant, there must be procurement of substantial quantities of raw materials. The entire investigation conducted does not throw any light as to how main Appellant clandestinely procured huge quantities of raw materials for manufacturing finished goods. There are allegations .....

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ring the course of investigation. The maximum capacity of manufacture of 1200 MT/month was not refuted by the department by carrying out any study that actual production per month could be more than 1200 MT . It was clear during the investigation that Appellants were not giving the correct picture in explaining the private records recovered from their residence. Under the circumstances it was incumbent upon the department to find out evidences for corroborating private records with other indepen .....

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pon case law, offence of clandestine removal of finished goods and duty demand against the main Appellant, is not sustainable and Appeal filed by the main Appellant is required to be allowed on this account. - Cenvat credit - allowabilty - cross-examination of certain persons was sought by the main Appellant who confirmed duty paid raw materials to have been received by them - Held that:- Adjudicating authority while framing issues of the Order-in-Original neither made cross-examination of w .....

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- Imposition of penalties - no findings have been given at all in the Order-in-Original as to why penalties are required to be imposed - Held that:- in the absence of any findings by the Adjudicating authority in this regard penalties imposed upon the Appellants are set aside. - Appeal partly allowed and partly remanded back - Appeal Nos. E/545, 546, 547 & 548/07 - Order No. FO/A/76056-76059/2016 - Dated:- 23-9-2016 - Shri H. K. Thakur, Member (Technical) And Shri P. K. Choudhary, Member (Ju .....

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f ₹ 10.00 Lakh each has been imposed by the Adjudicating authority under Rule 209A of the Central Excise Act, 1944. 2. Shri N.K.Choudhary (Advocate) and Shri Partha Banerjee (Advocate) appeared on behalf of the Appellants. Learned Advocate Shri N.K.Choudhary submitted that Adjudicating authority under Order-in-Original dated 30.05.2007 has confirmed a demand of ₹ 1,08,05,030/-, along with interest and penalty, against the main Appellant on the grounds that huge quantities of goods ma .....

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teel products and all the other three Appellants are Directors of the main Appellant. That Shri Ghanshyam Agarwal and Shri Mahesh Kumar Agarwal are also the Directors of M/s.Adhunik Ferro Alloys Ltd. (AFAL) engaged in trading of iron and steel products. That Shri Jugal Kishore Agarwal and Shri Manoj Kumar Agarwal are proprietors of M/s.Northers Industrial Corporation (NIC) and M/s.Pragati Ispat Udyog respectively, who are also trading in iron and steel products by purchasing goods from the open .....

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t of any of the Directors was recorded during investigation. That these private records were showing the addresses of the alleged recipients of the goods and the vehicle numbers in which such finished goods have been alleged to be clandestinely removed. That no statement of any of the recipients, drivers and vehicle owners was recorded during investigation. That no excess/shortage of raw materials/finished goods was recorded and no finished goods were seized in transit. That there is also no cor .....

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f the Adjudicating authority but he brushed aside the arguments taken by Appellants on the ground that private records suggest manufacture of much higher quantity. That actual clearance on payment of duty during the relevant period was 4558.115 MT and not 2049.655 MT as taken by the Adjudicating authority. Learned Advocate made the Bench go through page 81 to 89 of (Valume-I of the Appeal Memo) to argue that these documents, inter alia, gives the names of their buyers to whom duty paid goods wer .....

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rahlad Steels Pvt.Ltd., M/s.Venus Udyog Ltd. and M/s.Ramshree Steels Pvt.Ltd. was not allowed to the Appellants. (vi) That no findings have been recorded by the Adjudicating authority regarding imposition of penalties upon the Appellants. (vii) That there is no evidence that inputs, on which credit is denied, have been sold by the main Appellant to the trading concerns. (viii) Learned Advocate relied upon the following case laws in support of his arguments.:- (i) Kranti Associates Pvt.Ltd. & .....

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t [2014 (308) ELT 655] Deptt. s Appeal dismissed by S.C. [2015 (319) ELT A117(SC)] (x) Shrinagar Lamps Pvt.Ltd. [2010 (255) ELT 221(P & H)] (xi) Arsh Casting Pvt.Ltd. [2010 (252) ELT 191 (HP)] (xii) Motabhai Iron & Steel Industries [2015 (316) ELT 374(Guj.)] (xiii) Universal Polythelene Industries [2001 (130) ELT 228(Tri-Kol)] (xiv) Onkar Textile Mills Pvt.Ltd. [2010 (259) ELT 687] (xv) Jay Iron & Steel Industries Ltd. [2015 (325) ELT 130(Tri.Mumbai.)] (xvi) Brims Products [201 (271) .....

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g the true facts with respect to documents recovered from their residence. That the clearances made by the main Appellant on Central Excise invoices, indicating payment of duty, were also accurately reflected in the private records recovered from Appellants residential premises. Learned AR made the Bench go through Sr.No.7 on page 487 of Volume-II of Appeal papers to indicate that quantity clearance in Central Excise invoice and the one indicated in private records was the same. However, on a sp .....

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td. [2010 (255) ELT 68 (HP)] 3.1 On the diversion of raw materials learned AR made the Bench go through para 3.7.5 of the show cause notice dated 10.02.2003 to argue that raw material in certain cases were diverted to other concerns on the invoice of NIC and only duty paying invoices issued by the scrap manufacturer were received by main Appellant for taking credit. 4. As a counter to the arguments made by learned AR Shri N.K.Choudhary (Advocate) argued that private records are not accurately ma .....

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the truck drivers/truckowners or customers indicated in the private records. 5. Heard both sides and perused the case records. Following two issues are required to be deliberated in these Appeals.:- (i) Whether main Appellant has indulged in clandestine manufacture and removal of 7072.978 MT iron and steel products without payment of duty? (ii) Whether credit of ₹ 17,50,694/- has been correctly denied to the main Appellant? 6. So far as the issue at Para 5(i) above is concerned Revenue ha .....

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rought to the notice Sr.No.7 on page-487 of Volume-II to this Appeal, to indicate quantity in Central Excise invoices and in the private records is the same and that private records represent the correct quantity of goods manufactured by the main Appellant. However, learned Advocate appearing for the Appellants also pointed out the quantities at Sl.No.18,19,24,25 & 26 of the same page which show marked differences between quantities shown in the private records and the Central Excise invoice .....

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s recovered from the residential premises which are not authentic as observed earlier. Main Appellant in their reply to the show cause notice dated 10.02.2003 submitted that quantity cleared as per Central Excise invoices is 4558.115 MT during the relevant period and not 2049.655 MT as taken by the department. Details of such sales were also furnished by the Appellants before the Adjudicating authority showing, inter alia, the names of the customers. Similarly the details of parties and vehicles .....

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ial quantities of raw materials. The entire investigation conducted does not throw any light as to how main Appellant clandestinely procured huge quantities of raw materials for manufacturing finished goods. There are allegations of not receiving of the raw materials, but no evidence of excess procuring raw materials without duty paying documents has been brought on record by the department. It is difficult to appreciate that on one hand Appellant will clandestinely divert the duty paid raw mate .....

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g the correct picture in explaining the private records recovered from their residence. Under the circumstances it was incumbent upon the department to find out evidences for corroborating private records with other independent evidences to pin down such smart operators and not resort to presumption and surmises. Reliance placed by the department on Apex Court s decision, in the case of AC CE Rajamundry v. Duncan Agro Industries Ltd. [2010 (120) ELT28(SC)], and Section 36A of the Central Excise .....

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ttled legal proposition that suspicion howsoever grave can not take the place of a proof. 6.1 On the issue of clandestine removal main Appellant through their Advocate has relied upon several case laws as mentioned in Para-2(vii) above. In the case of Sakeen Alloys Pvt.Ltd. v. CCE Ahmedabad (supra), upheld by Gujarat High Court and Supreme Court, CESTAT Ahmedabad held as follows in Para-8, 9 & 11: 8. In the cases relating to clandestine removal of excisable goods, following are the indicator .....

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aler s premises or residential premises searched during investigation. (vii) Confessionary statements of the persons concerned with the clandestine manufacture/removal of excisable goods. 9.It is observed from the case records that in the present proceedings, there are few confessional statements of the persons which were later retracted by the persons concerned. The confessional statements subsequently retracted can be argued to be an afterthought under a proper legal advice but to observe the .....

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Director of the Company. Similarly, in the case of CCE v. Arsh Casting Pvt. Limited [2010 (252) E.L.T. 191 (H.P.)], the Hon ble High Court of Himachal Pradesh held that the private records maintained by the staff of the company cannot be made as the sole evidence to hold that clandestine removal of the goods is established and accordingly, the following point of law was decided in favour of the assessee:- Whether on the basis of private records, the Central Excise duty can be demanded or not whe .....

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sitive evidences like purchase of excess raw materials, shortage/excess of raw materials/finished goods found in the stock/factory premises of the appellant, excess consumption of power like electricity, any seizure of cash during the investigation when huge transactions are made in cash. In the present case also, it is observed, from the annexures to the show cause notice dated 1-5-2009 issued to the appellants, that there were huge cash transactions to the tune of ₹ 11.23 Crores. When su .....

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ss/shortage of the raw materials or finished goods found. The documentary evidences collected from the business premises of M/s. Sunrise Enterprise and the statements recorded by investigation, can at the most raise a reasonable doubt that some clandestine removal activities are undertaken by the appellant. However, such a suspicion or doubt has to be strengthened by positive evidences which seem to be lacking in this case. Any suspicion whosoever cannot take the place of evidence regarding clan .....

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certain quantities were sold to various customers by accepting payment in cash. In such a situation, the quantification undertaken by the investigation becomes doubtful and incorrect. For this purpose cross-examination of the person Incharge looking after the records of M/s. Sunrise Enterprise was must, which was not allowed by the adjudicating authority. In view of the above observations, the demand of duty of ₹ 1,85,10,861/- is not sustainable and is required to be set aside. 6.1.1 In th .....

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the above observations and the settled proposition of law in the relied upon case law, offence of clandestine removal of finished goods and duty demand of ₹ 1,08,05,030/- against the main Appellant, is not sustainable and Appeal filed by the main Appellant is required to be allowed on this account. 8. So far as issue at Para 5(ii) above is concerned Revenue has relied upon certain statements of the recipients of raw materials as per Para-3.7.5 of the show cause notice dated 10.02.2003. It .....

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