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2017 (12) TMI 666

Clandestine manufacture and removal - shortage of raw material and finished goods - evidence on record to corroborate the allegation of clandestine removal of the goods - Held that: - It is a fact on record that the raw materials found during the course of investigation to manufacture final products other raw material required for manufacturing the, the Revenue has not produced any evidence from where other raw materials were procured or found shortage. It is essential to allege that clandestine .....

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nation has stated that the number of shifts was recorded in the hot press production sheets which were not relied on by the department. Therefore, the statement cannot be relied in-toto. - Although the appellant is manufacturing three final products the demand has been made on average basis which is not sustainable in the eyes of the law. - In the absence of any corroborative evidence produced by the Revenue on record merely on the basis of shortage of raw materials during the course of .....

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wherein the raw material, namely, Melamine in the quantity of 3250 kg, Phenol in the quantity of 13959 kg and Face Veneer in the quantity of 21,60,926.26 Sq.meters respectively found short in comparison of the stock recorded in the RG-23A Part-I register. The physical stock of the finished goods, namely, plywood, block board and flush door etc. was also found short valued at ₹ 20,15,486/- as per recoded stock in RG-23A part-I. On the basis of the said shortage, the panchnama was drawn in .....

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act that there was no shortage of stock on the day of the visit and the stocks lying in a particular shed could not be inspected due to oversight. Thereafter on 9.9.2009 a show cause notice was issued to the appellant proposing the excise duty demand alleging that the raw materials allegedly found short have been issued to clandestinely manufacture and clear final goods based on the alleged shortage of raw materials and finished goods and based on the statement of Shri Vikas Aggawal. It was also .....

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rials and final products on the day of visit as the said goods were lying in shed No.2 of the factory was left unchecked due to oversight of the department. The department was requested to verify the stock and the same has been clarified by Shri Kejriwal vide his statement dated 6.6.2007 and 21.7.2009. 4. It is further submitted that the excise duty can only levied on manufacture of goods but in the present case no evidence placed on record which shows that the goods actually manufactured. No co .....

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ustries Ltd. V.CCE-2009 (234) ELT 666 (Tri.-Ahmd.) 11. Continental Cement Company v.UOI-2014 (309) ELT 411 (All.) 5. It is further submitted that there is no allegation that the other raw materials required for manufacturing the allegedly clandestine removed final goods were procured from some other source/or were found short, therefore, the allegation of clandestine removal does not stand. To support this, learned Counsel relied on the following decisions: (i) Nanhe Mal Export Ltd. V.CCE-2003 ( .....

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ages Pvt.Ltd. Vs.CCE-2006 (205) ELT 700 (Tri.-Mum) (b) Govind Rubber Vs. CCE-2005 (192) ELT 775 (Tri.-Del.) 8. In alternate, learned Counsel submitted that the calculation of demand is incorrect and the entire demand is barred by limitation. 9. On the other hand, learned AR opposed the contention of the learned Counsel and submitted that there was huge shortage of raw material detected at the time of visit of the officers and no tangible explanation was given by the appellant on the above shorta .....

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products recorded in the RG-1/daily stock account register is much less than the optimum capacity derived out of normal conditions. Therefore, he submitted that the department has made out a case. To support his contention, he relied on the following decisions:- 1. Raghunath International Ltd.Vs. CCE, Kanpur-2009 (237) ELT 61 (Tri.-Del.) 2. Rutvi Steel & Alloys Vs. CCE, Rajkot-2009 (243) ELT 154 (Tri.-Ahmd.) 3. Welcure Drugs and Pharmaceuticals Ltd. Vs. CCE, Jaipur-I-2007 (213) ELT 710 (Tri. .....

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of these goods. The appellant has controverted the allegation in the show cause notice stating that on 5.5.2007, no responsible person was present and there was no shortage of any of the raw materials and final products in the factory. The said goods were lying in shed No.2 of the factory which was left unchecked due to oversight. There was no shortage. It is a fact on record that the raw materials found during the course of investigation to manufacture final products other raw material required .....

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rnational Ltd. (supra) have no relevance to this case and on responsible person was present and the appellant sought cross examination of pachas. Further, learned AR relied on the decision of the Tribunal in the case of Rutvi Steel & Aloys (supra), this Tribunal has observed that after giving two voluntary statements taking identical stand, the same cannot be retracted by way of an affidavit on later stage as no explanation was given why earlier two statements were signed. Further in the cas .....

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tries (supra) and in the case of D.Bhoormul, Hon ble Supreme Court has observed that the department is not required to prove its case with mathematical precision. In the case in hand, the appellant has never admitted regarding shortage of inputs/raw materials, therefore, the said decisions are not having relevance to the facts of this case. 16. Further, we find the decision in the case of Surya Tyres Pvt.Ltd. (supra) is in the context of excess consumption of raw materials as high as 16% and the .....

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re was shortage of 14,25,900 pieces of particular size and if they were all mixed together. The onus would lie upon the Department to undertake the said exercise which was not possible in such a short period due to the large number of inventory which was there at the site. Nothing was brought on record, in any manner, to show that to manufacture such a large amount of 14,25,900 pieces, there was material which had been consumed since neither any relevant record had been shown to show that electr .....

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of clandestine removal and there was no evidence to show the clandestine activities as no further investigation was conducted to establish the identity of the buyers or the suppliers of the raw materials. The adjudicating authority had mentioned that the production was recorded by weight but in the sale invoices, the goods were sold by numbers without indicating the weight of the finished goods but nothing was proved that how the stock position was verified regarding sale invoices which only sho .....

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Admittedly, there is no other evidence on record so as to relate to the clandestine activities of the assessee. The Commissioner (Appeals) has rightly relied upon the various decisions of the Tribunal including the decision in the case of Jai Timber Company v. CCE & C, Bhopal [2009 (234) E.L.T. 457 (Tri.-All.)] and has rightly concluded that mere shortages detected at the time of visit of the officers cannot ipso facto lead to the allegations and findings of clandestine removal. 7. No illega .....

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eared without payment of duty. It is undisputed that demand of duty on the raw material was also based on the quantification of the production calculated on the input and output ratio. The department did not produce any evidence of clandestine removal and sale of goods which may lead to a conclusion that duty of excise was paid by reason of fraud, collusion or any wilful misstatement or suppression of fact or contravention of any provisions of the Act or Rules with the intention to evade payment .....

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orroborates the fact of clandestine manufacture and removal of final products. In the circumstances, on the basis of the material available on record, it is not possible to state that the Tribunal has committed any legal error in giving benefit of doubt to the assessee. 21. On the basis of analysis and observation made by the various judicial pronouncements hereinabove in this case it has been alleged that there is shortage of raw materials. The same has been used in the manufacture of final pro .....

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of the decision of the Tribunal in the case of Nanhe Mal Export Ltd. (supra), this Tribunal has observed as under: 7. In this case the duty of ₹ 1,55,324/- was confirmed on the ground that there was shortage of some of the raw material. It is admitted facts that appellants also used other inputs along with inputs found short in the manufacture of the final product and in respect of lamination which is used in the packing. The appellants also availing the benefit of Modvat credit and there .....

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that dispute is in respect of colour picture tubes which according to the appellant were rejections during the production of colour televisions and claim of the revenue is that these are used in the manufacture of televisions which are cleared without payment of duty. The appellants are maintaining a register regarding rejections of colour picture tubes. The registers show the rejection of the picture tubes. The revenue has also not produced any evidence to show that these picture tubes are use .....

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of 22% to 25% in the manufacture of final products relying on the Standard Input Output Norms that the appellant has clandestinely manufactured goods. In respect of the said allegation, Shri Vikas Aggarwal during the cross examination has stated that the number of shifts was recorded in the hot press production sheets which were not relied on by the department. Therefore, the statement cannot be relied in-toto. The cross examination conducted is having evidentiary value, therefore, the demand o .....

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