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Surya Vikash Plywood Pvt. Ltd. Versus CCE, Panchkula

2017 (12) TMI 666 - CESTAT CHANDIGARH

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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he said clandestine manufacture of the goods and there is no allegation how the said other raw materials were procured, therefore, the charge of clandestine manufacture and removal of the goods is not sustainable. - The department has considered that there is wastage 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 exami .....

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investigation, which has been contested by the appellant that there is no shortage of raw material and finished goods and without adducing any evidence on record for clandestine manufacture and removal of the goods, the demand confirmed on assumption and presumpiton is not sustainable against the appellants - appeal allowed - decided in favor of appellants. - E/2208/2010 - A/62123/2017-EX[DB] - Dated:- 11-12-2017 - Mr. Ashok Jindal, Member ( Judicial ) And Mr. Devender Singh, Member ( Technical .....

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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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l clarified that on the date of visit, the stock lying in a particular shed could not be inspected due to oversight. He requested the department to revisit the factory. Thereafter on 20.7.2009, the statement of Shri Vikas Aggarwal, ex-director of the appellant was recorded who stated that during his tenure, the factory used to run an average of two and half shift per day and there was around 22-25% average process loss of face veneer. On 21.07.2009, the appellant wrote a letter reiterating the f .....

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alleged that the average wastage percentage had increased in the year 2006-07. Similar allegation was made relying upon the final products allegedly found short. During the adjudication, Shri Vikas Aggarwal and Shri Dharam Pal Singh were cross examined wherein Shri Vikas Aggarwal reiterated his earlier statement and stated that the factory has worked as per hot press production records. Further, Shri Dharam Pal stated during his cross examination that the stock taking was not done in his presen .....

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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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mp; Engineers-2016 (331) ELT 340 (P&H) 3. CCE v.Nissan Thermoware Pvt.Ltd.-2011 (266) ELT 45 (Guj.) 4. CCE v.Trela Footwear Exports Pvt.Ltd.-2014 (306) ELT 629 (Tri.-Del.) 5. Atlas Conductors v.CCE-2008 (221) ELT 231 (Tri.-Mum.) 6. CCE v.Shree Sharma Re-rolling Mills-2008 (232) ELT 839 (Tri.-Del.) 7. Resha Wires Pvt.Ltd. v.CCE-2006 (202) ELT 332 (Tri.-Bang.) 8. Nabha Steel Ltd. V.CCE-2016-TIOL-941-CESTAT-CHD 9. Galaxy Textiles v.CCE-2011 (263) ELT 604 (Tri.-Ahmd.) 10. Sun Pharmaceuticals Ind .....

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157) ELT 481 (Tri.-Del.) (ii) Harsingar GutkhaPvt.Ltd. v.CCE-2005 (186) ELT 369 (Tri.-Del.) (iii) L.G.Electronics India Pvt.Ltd.v.CCE-2006 (192) ELT 244 (Tri.=Del.) which has been by Hon ble Allahabad High Court -2014 (306) ELT A68 (All) (iv) Chetak Mfg.Co. v.CCE-2012 (278) ELT 355 (Tri.-Ahmed.) (v) CCE v. Shyam Traders-2013 (290) ELT 478 (Tri.Del.) 6. Learned Counsel further submitted that the department has failed to specify breakup of the entire demand into three final products namely, plywoo .....

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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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lywood and other commercial plywood which shows approximately 17% process loss of face veneer. Therefore, the true average production of final products during 2003-04 to 2005-06 derived from the appellant's record is 38.59% of the total face veneer used in the manufacture of their final products, resulting in true average process loss of 22.82%. Shri Vikas Aggarwal, ex-director of the appellants, admitted that the process loss of the face veneer of 22% to 25%. The actual production of final .....

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-Del.) 4. Friends Auto Vs. CCE, Faridabad-2004 (167) ELT 228 (Tri.-Del.) 5. A M Industries Vs. CCE, Meerut-I-2000 (120) ELT 718 (Tri.) 6. CCE, Madras & Others Vs. D.Bhoormul-1983 (13) ELT 1546 (SC) 7. Super Tyres Pvt.Ltd. Vs. CCE, Panchkula-2009 (244) ELT 363 (Tri.-Del.0 8. Nizam Sugar Factory Vs. CCE, Hyderabad-1999 (114) ELT 429 (Tri.-LB) 10. Heard both sides and considered the submissions. 11. The facts are not in dispute as follows: 12. On 5.5.2007, there was stock taking was done in the .....

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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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zed representative of the appellant-company Shri Rajesh Agarwal and Rajesh Dixit were present throughout at the time of the search of the factory premises on 29th and 30th May 2003 and had signed the panchnama. the appellants have neither given any satisfactory reason for seeking cross examination of the panch witnesses nor have they availed the opportunity of personal hearing at the original adjudication stage. 13. We find that the observation made by this Tribunal in the case of Raghunath Inte .....

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e of Welcure Drugs & Pharmaceuticals Ltd. (supra) retraction was done after 22 days after confessional statement. Therefore, the decision of the Tribunal is not relevant to the facts of this case. We find that there is no retraction made by the appellant. During the course of cross examination of the Shri Vikas Aggarwal and Shri Dharam Pal Singh, they have stated true facts. Moreover, Shri Dharam Pal Singh stated that he was dealing with excise records and have nothing to do with the activit .....

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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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in the case of Nexa Products (India) (supra), this Tribunal has observed as under: 8. The said submission is without any merit. Specific defence had been taken by the manufacturer that no effort had been made to segregate the nuts and bolts into various sizes and to find the shortage by comparing the same with the recorded balance and there was huge stock of 91 lacs pieces of various sizes of nuts and bolts and it was impossible for the Department to come to a conclusive factual finding that the .....

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icity had been consumed or labour had been utilized to manufacture the said quantity. Neither the fact of purchase of raw material from the vendors or the sale to the consumers was brought on record. In the absence of any corroborative evidence, the levy of such a huge demand was, thus, totally arbitrary and has been rightly set aside. 18. Further, in the case of Anand Founders & Engineers (supra) again this Tribunal has observed as under: 6. The Commissioner (Appeals) set aside the findings .....

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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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raw materials or the transporters. Further, it was held by the Tribunal that mere shortages detected at the time of visit of the officers cannot ipso facto lead to the allegations and findings of clandestine removal. The relevant findings recorded by the Tribunal read thus : - The Revenue has "7. again reiterated the same stand that as shortages detected at the time of visit of the officers, which has to be held that the respondents had cleared their final product in a clandestine manner. .....

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lity or perversity could be pointed out in the aforesaid findings of fact recorded by the Commissioner (Appeals) as well as the Tribunal which may warrant interference by this Court. Accordingly, no substantial question of law arises in this appeal. 19. Further, in the case of Nachiketa Paper Ltd. (supra), Hon ble Punjab & Haryana High Court has observed as under: 7. Having heard learned Counsel we are of the considered view that the findings recorded by the Tribunal in para five of the orde .....

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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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ct recorded by the Tribunal upon appreciation of the evidence on record, it is apparent that except for the shortage in raw material viz., HD which was disputed by the assessee and the statement of the Director, there was no other evidence on record to indicate clandestine manufacture and removal of final products. On behalf of the revenue, except for placing reliance upon the statement of the Director recorded during the course of the search proceedings, no evidence has been pointed out which c .....

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ducts but no other evidence has been produced on record how the goods were manufactured, from where the other raw materials procured, to whom the goods sold, how the goods transported and no tangible evidence has been produced to confirm that the same has been cleared without payment of duty. Therefore the whole of the demand is based on assumption an presumptions, therefore, in the light of the above judicial pronouncements, the demand is not sustainable. 22. We further find that it is contende .....

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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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the case of Harsingar Gutkha Pvt.Ltd. (supra), this Tribunal has observed as under: 7.It is well settled that the charge of clandestine manufacture and removal of the goods by the manufacturer cannot be sustained on assumptions and presumptions. It has to be proved by adducing cogent and convincing evidence. In the present case, the Revenue has failed to produce such an evidence. 24. Further, in the case of L.G. Electronics India (P) Ltd. (supra), this Tribunal has observed as under: 4. We find .....

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d in the manufacture of televisions as the TVs requires many other parts also such as cabinet, PCB etc. As the appellants were maintaining separate record regarding rejection which were for the year 1998-99 is only 269 out of the total picture tubes received by the appellant and for the year 1999-2000 it is only 3169 and such rejections are mentioned in the record maintained by the appellant. In these circumstances, we find that demand on the ground that these picture tubes are used in the manuf .....

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