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C.C.E., Raipur Versus M/s. M.S.P. Steel & Power Ltd.

Shortages in stock - shortages of 1,236.240 MT of sponge iron - clandestine removal of 495.240 MT of sponge iron - demand of duty along with interest and penalty - Held that: - even if the assessee fails to explain the shortages themselves, the charge of clandestine removal cannot be imputed in absence of independent investigation to corroborate the allegation. As rightly observed by the Commissioner (Appeals), the investigations have failed to bring the charge of clandestine removal by leading .....

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see's final product. Before the final product is removed, the same is required to be manufactured. As such, heavy onus is placed upon Revenue to establish the manufacture of the said goods. There are no statements on records, either admitting the manufacture of the said goods or removal of the same in clandestine manner. As such, I fully agree with the Commissioner (Appeals) that the findings of clandestine removal based solely on the shortages detected by the officers cannot be upheld. - As .....

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cisions of the Tribunal. It is a fact that even deponents of the statements at the time of recording, have nowhere admitted the fact of clandestine removal. The entire case of the Revenue is based upon the assumptions and presumptions. Ld. Departmental Representative has argued that the appeal should be decided on the basis of preponderance of probability and Revenue cannot be expected to substantiate its case by arithmetical precision. However, I find that in the present case, the Revenue has f .....

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findings arrived at by the Commissioner (Appeals) are appropriate and do not require any interference - appeal rejected - decided against Revenue. - Appeal No.E/2281/2007-EX[SM] - Final Order No.55299/2016 - Dated:- 24-11-2016 - Ms. Archana Wadhwa, Member (Judicial) Mr. R.K. Mishra, DR, For Appellant Mr. KK Anand, Ms. Surabhi Sinha, Advocate, For Respondent Per Mrs. Archana Wadhwa : Being aggrieved with the order passed by the Commissioner (Appeals) in which he had given relief to the responden .....

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ed various search and verifications as also stock taking, in the presence of Mr. SB Boyar, Works Manager and Shri Saibal Banerjee, Senior Manager Accounts). The stock verification conducted by the officers allegedly resulted in shortages of 1,236.240 MT of sponge iron. The said proceedings were recorded in Panchnama dated 02/03.09.2005, drawn on the spot. Shri Boyar accepted the said shortages and debited the amount of ₹ 20,98,245/- in their PL Account. 4. Apart from the shortages, the off .....

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irm the duty of ₹ 29,38,399/- along with confirmation of interest and imposition of penalty. The Show Cause Notice culminated into an order passed by the original adjudicating authority confirming demands and interest, as proposed and imposing penalty of equivalent amount under Section 11AC of Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002. 6. On appeal against the above order, Commissioner (Appeals), vide a detailed order has set aside the order of the adjudi .....

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g the depth of 5 metre and 10 metre and their total capacity was to the tune of 40 MT and 60 MT respectively. The total quantity of the sponge iron in the five hoppers was arrived at 644 MT. Thereafter, it was found that in hives showed there were different quantities of sponge iron, weighment of which was not possible. The quantity of sponge iron in these hives was arrived at 730 MT on eye estimation basis and thereafter the said quantity was deduced to the declared quantity to arrive at the sh .....

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that due to heavy monsoon and operating problems, stock of sponge iron was scattered at various places. 8. The said issue stands considered by the Commissioner (Appeals), who has observed that the statement of Shri Saibal Banerjee, Senior Manager (Accounts) had given an explanation to the purported aberration noticed during the course of investigation. For better appreciation, the reasoning adopted by the Commissioner (Appeals) in para 18 of his judgement is reproduced below:- "18. As rega .....

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result in correct stock determination. The Appellant has supported this contention by placing reliance on the decision in the case of Orient Cement V/s CCE - 1995(79) ELT 643(T) and IOD V/s CCE- 2003 ( 1580 EL T 49 (T) referred to at Para- 3.15 supra. The shape of a Hopper and the submission that the storage capacity would not be uniform are factors which would compel one to arrive at a finding that the dip reading method applied cannot determine the actual quantity of stock. The acceptance of S .....

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work/eye estimate. Therefore, reliance in the case of CCE V/s Steel Compels Ltd - 2006 (197) LET 512 and other cases by the Appellant is well founded in not accepting the shohages arrived at in the panchanama and in the Original Authority's order; when no shortage could be arrived at the question of its removal does not arise." Revenue in their Memo of Appeal have not advanced any valid reasons or evidence to contradict the above findings of the appellate authority. It is well settled .....

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n the recent decision of Hon'ble Punjab & Haryana High Court in the case of CCE, Ludhjnana Vs. Anand Foundaries and Engineers 12016 (331) ELT 340 (P&H) wherein it was held that the charges of clandestine removal based upon the alleged shortages of stock are not enough to up hold the charge of clandestine removal. Similarly in the case of CCE, Kanpur Vs.Minakshi Castings [2011 (274) ELT 180 (Allahabad)], Hon ble Allahabad High Court rejected the Revenue's appeal by observing that .....

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(India) Ltd [2005 (67) RLT 97 (Tri.)] held that even if the assessee fails to explain the shortages themselves, the charge of clandestine removal cannot be imputed in absence of independent investigation to corroborate the allegation. As rightly observed by the Commissioner (Appeals), the investigations have failed to bring the charge of clandestine removal by leading evidences in the form of statement of buyers, transporters, flow back of funds, extra use of electricity, etc. He has rightly con .....

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ced upon Revenue to establish the manufacture of the said goods. There are no statements on records, either admitting the manufacture of the said goods or removal of the same in clandestine manner. As such, I fully agree with the Commissioner (Appeals) that the findings of clandestine removal based solely on the shortages detected by the officers cannot be upheld. 10. As regards Revenue's allegation for clandestine manufacture and removal of 495.000 MT of sponge iron during the period of thr .....

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ntral Excise Act, 1944 were complied with. In the present case, the computer print outs have been obtained from hard disks and thumb drives from a computer of the department which apparently was never used for storing the information regularly by the Appellant nor the Appellant had any control over the said computer. Reliance of the Appellant in the case of Premium Packaging Pvt Ltd V/s CCE -2005 (184) ELT 265 (T) is therefore well founded. There is also sufficient force in the submission that u .....

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dt. 18.10.2005 and 30.12.05 only the first and last page of the print-outs were authenticated by Shri Saibal Banerjee and the panchas. The other pages were not authenticated. Therefore, the reliance in the case of Premier Industries & Control Ltd v/s CCE - 2005 (121) ECR 186(T) para 9 is well founded to contend that the computer print-outs relied upon in this case cannot be an evidence to indicate shortage and/or affairs of the Appellant. This finding is reinforced on perusal of panchanamas .....

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th reference to the charge framed at Para 8 of the Impugned Show Cause Notice regarding non accountal of production of sponge iron of 28.08.05, 29.08 05 and 30.08.05 totaling to 495 MT reproduced at Para 9 of the Impugned Show Cause Notice, had contended that such calculation was "on the basis of data retrieved from computers seized from their factory under Panchnama dated 02/03.09.05 is that the kiln started for a new campaign after shut down and it takes a couple of days to give a quantif .....

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Para 9.13 of the Order impugned wherein the Appellant had contended before the Original Authority that "a perusal of DSA/RG-1 under Annexure-II to the show cause notice in the Month of August, 2005 it would be clear that there is no production from 28.08.2005 to 30.08.2005 as the Kiln was shut down for preventive maintenance and accretion cutting. It would be evident from the DSA/RG-1 that the last Shut down was taken in 21.06.2005 to 27.06.2005. As stated above, the Kiln has to be shut do .....

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d its non-duty paid removal as has been made out cannot be sustained. 21. I have also perused the rival contentions with regard to the documents recovered by the officers and relied upon in the Show Cause Notice as per Para 7(i) to 7(iv) to prove that there are certain clearances of final products without a corresponding duty paying invoice. It is alleged that the truck-cum-dispatch register is prepared before loading of the SI fines in the Appellant's premises. The authors of two such advic .....

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amba Sponge, Raigarh as on the reverse of the said advice there is a rubber stamp showing a removal to the said date there is a duty paid invoice to M/s Prakash Industries Ltd. for 29 430 MTS of the goods for which no such corresponding weighment truck movement-cum-Dispatch advice has been found and recovered by the officers. 22. I find this assumptions is prima facie base d on conjectures and surmises, There is no material on record to suggest whether any investigations were caused to confirm s .....

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rance of goods from the factory without payment of duty. The allegation made out on two such "advices" without questioning the security officer who has stamped on the reverse of the "advice" when more than 300 such "advices" were in the custody of the investigators, does not induce confidence to arrive at non duty paid removal. Similarly, in respect of delivery advice Nos. 323,321 & 301 in the name of M/s Shobha Ispat, Raigarh, M/s Harsh Vinimay, Raigarh and M/s .....

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e register to have cleared sponge iron under cover of invoices no. 1362/1363 three times (page 21 Sr. No. 1/2 dated 27.07.05 Sr. No. 1 & 3 dated 28.07.05 and Sr. No. 05 dated 29.07.05 ) on three different dates. Similarly invoices no. 1307, 1309, 1311, 1314, 1315, 1316, 1364 and 1365 have been mentioned twice. In yet another case ( page no. 7, Sr. No. 3 & 4 dated 18.08.05) the notice has completed the register by the vehicle no., party name (consignee,) transporters name, invoice no. 157 .....

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lanation tendered by Shri Saibal Banerjee. 23. In the backdrop of the above contention, it was imperative on the part of the investigating officers to atleast cause further enquiries in relation to the instances cited in the preceding Para. This has evidently not been done at the stage of investigations. The deposition of Saibal Banerjee, could not have been ignored to cause further enquiries to corroborate the charge of clandestine removal. Such invoices / dispatch advices do raise a presumptio .....

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e' can only be explained by the person who has written them. The person who has written the invoice d number on the back of the said advice is neither identified nor examined by the department and hence, the same cannot be admitted in to evidence and no liability can be fixed simply on the basis of speculation. The Appellant have reiterated this contention at paras 4.7 to 4.9 supra. It is my considered view that it is quiet likely if the statements of such persons had been recorded during th .....

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ut in the impugned Show Cause Notice and relied upon by the Original Authority. 25. Reliance has been placed in certain Registers and other documents kept in the laboratories and elsewhere without any corresponding evidence of the said trucks mentioned therein having left the premises. The allegation of parallel invoice as made out in the show cause notice is also not sustainable as such parallel copy To invoice as made out in the show cause notice is also not sustainable as such parallel invoic .....

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agree with the contention of the Appellant reproduced at Para 4.18 and 4.19 supra. I find the investigation has not found out at least a few buyers who have received the goods cleared clandestinely. There is no evidence of excessive consumption of electricity. In the present case, the charges are based purely on a theoretical working out based on the private documents, which are not statutory. In the K. Harinath Gupta case Vs Commissioner of Central Excise Hyderabad report in 1994(71) E.L.T. 98 .....

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e dates and/or the details as appearing in paragraph 14 of the order impugned. In any case, I find the duty demand in respect of the purported aberrations noticed as per Para7(i) to 7(v) of the impugned Show Cause Notice have not been raised separately in the said notice. These documents have been referred only to corroborate the charge of clandestine removal of 1731.240 MT of Sponge Iron. The demands in the present proceedings are therefore, only on the alleged shortages which clearly are not c .....

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