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C.C.E. Indore Versus M/s Modern Laboratories, Sh. Arun Kharia And Vice- Versa

Clandestine removal - SSI unit - Notification No. 8/98 dt. 02.06.1998 and 8/99 dt. 28.02. 1999 - Seizure of the goods and commercial invoices, register containing details of sales and a chart containing details of sales - demand of duty on the value excess of the turnover eligible for exemption - Held that: - duty demand was confirmed by the authorities below based on the commercial invoice which are alleged to have been corroborated either with the transporter LR, follow up reports of the alleg .....

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f the transporters were recorded and relied upon but only two dispatch register were recovered which has not been corroborated with the Lorry receipt or commercial invoice - when except confirmation from alleged consignee, no single statement is on record and no cross examination was allowed to check veracity of confirmation; the demand cannot be made on such value. - Even though the demand is mainly based upon the commercial invoices, but during investigation any excess production than reco .....

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s. 3083 and 3084 has been filed by the Commissioner, Central Excise Indore, whereas the Appeal No. 3270 of 2006 has been filed by M/s Modern Laboratories. Initially the adjudicating authority had confirmed a demand of ₹ 15,86,351/- along with penalty under Section 11AC of the Central Excise Act, 1944 against M/s Modern Laboratories. The adjudicating authority also imposed redemption fine against M/s Modern Laboratory and penalty on Shri Arun kharia. The Commissioner (Appeals) reduced the d .....

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are that the Appellant company is engaged in manufacture of medicines falling under Chapter 30 of the Central Excise Tariff Act, 1985. During the year 1997-98 and 1998-99 they were registered as SSI unit and were availing exemption from payment of duty in terms of Notification No. 8/98 dt. 02.06.1998 and 8/99 dt. 28.02. 1999 respectively. The officers of the Central Excise, Indore during their visit to the factory and office of the Appellant company, seized the commercial invoices, register con .....

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d excess stock of medicine valued at ₹ 69,088/- and the same was seized. A demand of ₹ 15,86,351/- along with penalty was proposed against the Appellant company. Shri Arun Kharia, Partner of the Appellant company was also made co-noticee and it was proposed to impose penalty upon him under Rule 173Q and Rule 209A of Central Excise Rules, 1944. The adjudicating authority confirmed the demand, imposed equivalent amount of penalty and redemption fine of ₹ 5,00,000/- in lieu of con .....

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ant company and also against setting aside of penalty on Shri Kharia. The Appellant company has filed appeal against upholding of demand and penalty, contending interalia, that the order passed by the Commissioner (Appeals) is not proper and justified in as much as merits of the case were not properly appreciated by him. 3. The Ld. Advocate appearing for the Appellant company submits that the demand was made on the basis of commercial invoice, register and chart found from factory and office and .....

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ous, as there are no evidences of clearances made without payment of duty. He submits that demand has been wrongly confirmed as against majority of entries of Annexure 65 and 66, the column no. 14, 15 and 16 are appearing blank, which clearly show that there is no evidence of removal of goods, receipt of payment or acknowledgment by the consignee of the receipt of goods. Therefore, the value of ₹ 40,99,056/- as shown by them in Annexure K1 for the year 1998 99 and value of ₹ 45,48,41 .....

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ner (Appeals) has refused to accept their contention merely on the ground that the demand is sustainable on the basis of relied upon document which is erroneous. That when column no. 14, 15 and 16 were blank, it itself means that there was no evidence of removal of goods, receipt of payment and acknowledgment of receipt of goods by any buyer. Hence, the demand is not sustainable. He also submits that the demand of duty on value of ₹ 21,89,383/- as shown in Annexure A1 for year 1998 99 and .....

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were in possession of the department, there was no evidence that such amount was received by them or deposited in their bank accounts. Similarly, though the reference of follow up from alleged consignee was given, however the fact remains that no statement of a single alleged consignee was recorded or relied upon in the show cause notice to show that the goods were received by them. That the Commissioner (Appeals) has upheld demand only on the ground that majority of sales were to three parties .....

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their claims. Further, no LR was found. That in absence of any statement and rejection of request for cross examination, the ledgers which are the property of the third party, cannot be relied upon. That in case of demand on value of ₹ 4,74,525/- as shown in Annexure B1 for the year 1998-99, the demand was confirmed on the basis of reports received from parties. That when neither the statements of such parties were recorded nor cross examination allowed, demand cannot be upheld on the basi .....

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1,071/- for the year 1998 99 and of ₹ 7,74,302/- for the year 1999 2000 as detailed in appeal memo is not sustainable, since the same was made on the basis of chart seized from their office with no corroboration with even any commercial invoice. That when there is no evidence of removal in case of such goods, no duty demand can be confirmed on such value. That the revenue never tried to ascertain as to whether any clearances were made against such entries from the alleged consignor. That i .....

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ers but the same was rejected merely on the ground that the cross examination has been sought of all the official and non official witness and the same is tactics on their part to prolong the case. That such contention of the adjudicating authority is illegal as no statement of even a single buyer was recorded and reliance was placed either upon their ledger or communication. That any third party documents could not have been relied upon, unless the Appellant is granted the opportunity to test t .....

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, Prop. of M/s New Bombay Road lines and Shri Bharat Kumar, Partner of M/s Shree Maharaja Road lines and their two dispatch register. However it can be seen that in Annexure 65 that there is no mention of any dispatch register details. Moreover, in absence of LRs and non granting of cross examination, no reliance can be placed upon mere statements or LR numbers. Thus, he submits that the demand is illegal. He places reliance upon the judgment of BASUDEV GARG Vs. CCE, 2013 (294) E.L.T. 353 (Del.) .....

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ngs. That simply stating that cross-examination of large number of persons would have taken the case to a non-ending process, cannot be a justified reason within Section 9D ibid to deny the opportunity to appellant. 3.2 He further submits that it is an accepted fact as apparent from the Order-in-Appeal that M/s Modern Laboratories were also manufacturing exempted goods and was also trading in medicines which has been accepted by the Commissioner (Appeals) and deduction granted to them. That the .....

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the government undertakings in the course of inviting tenders for purchase of goods, stipulate conditions that the supplier should have been supplying satisfactorily the pharmaceuticals to the extent of at least 20% of the quantity manufactured against item specified in the schedule of requirement and that the bidder should furnish documentary evidence in support of the satisfactory performance, such as copies of sales invoices etc. and the same is apparent from the copies of tenders annexed to .....

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ion to the departments and undertakings, who have invited bids. It is for these reasons that the officers found commercial invoices having same serial nos. and the register/ rough statements showing supply of goods. That only on the ground of bank account deposits, it cannot be said that they have cleared goods clandestinely. That it is fact on record that they were also trading in goods and were having separate license. That in absence of any investigation as to what was the value of traded goo .....

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und from their factory, the allegation against them is not sustainable. He submits that only on the basis of commercial invoices or the register, it cannot be said that the goods were cleared clandestinely. He relies upon the following judgments : (i) ARCH PHARMLABS LTD. Vs. CCE, HYDERABAD (182) ELT 413 (TRI-BANG) (ii) CCE, BHOPAL Vs. L.B.SONS 2011 (274) ELT 271 (TRI-DEL) (iii) CCE, JAIPUR Vs. DOLSUN CONTAINERS PVT. LTD. 2004 (302) ELT 287 (TRI-DEL) (iv) VASAVI SYNTHETCIS (P) LTD Vs. CCE, VISAKH .....

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nd actual value is due to number of factors like trading activities and clearance of exempted goods. The show cause notice does not controvert the statement of Shri Arun Kharia in as much as he stated that the traded goods and exempted goods value is also included. Clearly the demand is flawed and having been made without any investigation, cannot be made from the Appellant firm. The show cause notice and the impugned order has contended that Shri Arun Kharia when shown the duty calculation char .....

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copy of said chart, so that he could verify the same. That further when in the last question of his statement he was asked that the duty liability upon the Appellant firm is around 3 lakhs, he replied that he is not agreeing with the chart. To buy mental peace, he is ready to deposit the said amount. On getting the show cause notice he will be able to study and reserving his rights if any amount is found to be payable he will deposit and if it is found in excess, he shall claim refund of the sa .....

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medicines which were exempted from duty till June 98 99. The show cause notice nowhere states the value of exempted and traded goods. Each and every clearance was held to be dutiable which clearly shows that the show cause notice was issued and the demand was confirmed without any basis and merely on the basis of commercial invoice or balance sheet. Thus the demand having been confirmed without proper investigation, cannot be allowed to sustain and should be set aside on this ground alone. 3.4 .....

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unal but the same was rejected vide Order No. A/1697/04- NBS dt. 09.11.2014/ 08.12.2014. The Tribunal held that the fact of the goods not having been entered in RG- 1 will not invite penal action unless there is some evidence to show that the goods were in the process of being clandestinely removed or were meant for the same purpose. In view of said Order of the Tribunal, it is very clear that even the Tribunal did not find any intention of Appellant company to remove goods clandestinely nor the .....

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.T. 291 (Tri. - Chennai). He submits that thus the demand against M/s Modern is not sustainable. He submits that the penalty against Shri Kharia has been rightly set aside as no removal was made without payment of duty. 4. Per contra, Sh. M.R. Sharma, the Ld. AR appearing for the respondent reiterates the ground of appeal supporting the Order in-Original and further submits that no deduction should be allowed to the Appellant concern. 5. Heard the ld. counsel for both the sides and perused the r .....

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ries of Annexure 65 and 66 where the column No. 14, 15 and 16 are appearing blank. Since except commercial invoices there is no other evidence of clearances of goods, or no confirmation of receipt of goods by the alleged consignee of such goods and no payment receipt against such invoices, I am of the view that it cannot be said that there was clearances against such invoices. I further find that Commissioner (Appeals) has not given any reason for denial of the Appellant s claim regarding reduct .....

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vely as summarized in Annexure A1 and A2 from the clearance value shown in Annexure 65 and 66 of the show cause Notice. The deduction was claimed on the ground that though Lorry receipt numbers was mentioned against such commercial invoices but no LR was found either from the Appellant premises or from the transporter or from the consignee. That similarly in case of payment details such as cheques or Demand Draft numbers, the Appellant had pleaded before Commissioner (Appeals) that there is no e .....

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has not accepted the contention of the Appellant on the ground that most of these entries pertain to three parties of Raipur who has certified the ledgers. I find that in case of entries alleged to be corroborated with Lorry receipts, not a single Lorry receipt has been brought on record nor any Lorry receipt was seized from any person or transporter. Though the statement of two of the transporters were recorded and relied upon but only two dispatch register were recovered which has not been co .....

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order on the ground that it is tactics on the part of the assessee to prolong the case. I am of the view that the whole case was booked on the basis of follow up reports and other details as narrated above. Also except two transporter not a single statement of any of the person i.e. consignee of goods, other transporter was recorded. In that case, the Appellant should have given the chance to test the authenticity of the claims of the witnesses of the revenue. It was specially so where the case .....

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Del.). Therefore I am of the view that the value of ₹ 21,89,383/- for the year 1998 99 and of ₹ 28,50,066/- for the year 1999-2000 is liable to be deducted from the value of clearances. Similarly I find that in case of entries appearing in Annexure B1 amounting to ₹ 4,74,525/-, the Appellant has sought deduction for the year 1998 99 and of ₹ 2,85,760/- in case of Annexure B2 for the year 1999 2000 is based only upon certain purchase orders on the ground that the demand w .....

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concern. The Appellant company has also sought deduction of ₹ 9,91,071/- for year 1998 99 on the ground against all such entries shown in Annexure 65 there is no corresponding commercial invoice. Similar claim has been made by them in respect of value of ₹ 7,74,302/- in Para I of their appeal memo. It is contended that the value of goods has been computed merely on the basis of chart and it was alleged that the chart contained details of payments. I find that no evidence of clearanc .....

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99 is not liable for duty as the goods were generic medicines and hence exempted from duty. Since this fact remains undisputed, I am of the view that no demand can be made on such value. I further find that the Commissioner (Appeals) has found the claim of the Appellant of deduction of ₹ 79,048/- and of ₹ 29,636/- for the year 1999 2000 as correct on account of goods being fully exempted. I therefore hold that this amount is not liable for duty. 8. Also I find that the even though t .....

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e Appellant concern is not sustainable. 9. In view of my above findings so far as the appeal filed by the appellant company is concerned, the confirmation of duty demand on amount of ₹ 87,38,636/- for the year 1998 99 is not sustainable. The remaining amount of ₹ 56,65,843 after grant of benefit of SSI Exemption Notification No. 8/98 CE dt. 28.02.1998 as allowed by the Commissioner (Appeals) is liable for duty @ 5% adv. The amount of such duty on value of ₹ 6,65,843/- comes to .....

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llant is liable for duty of ₹ 91,832/- only and the remaining demands are not sustainable. As regard penalty under Section 11AC, I find that an amount of ₹ 1,00,000/- already stands deposited at the time of investigation and an amount of ₹ 6,506/- was debited by them from PLA during their clearances of goods in normal course and shown in monthly returns. Since ₹ 6,506/- out of total demand of ₹ 91,832/- and ₹ 1,00,000/- was paid at the time of investigation, I .....

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