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TMI Blog2018 (1) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s AFC is engaged in the manufacture of Flavours, Fragrances, Pharmaceuticals and Speciality Chemicals interalia known as Coumarin. The product Coumarin is used in the perfume industry being an aromatic compound. They are manufacturing Coumarin from 1,2 Benzopyrone 78 84% which is imported by them under advance licence issued by DGFT. The SION Norms has been approved by DGFT in terms of serial No. A2935 and is 17.6%. 3. M/s AFC were issued show cause notice dt. 16.09.2004 alleging that they had imported goods i.e 1,2 Benzopyrone for manufacture of Coumarin. That the product 1-2 Benzopyrone is Coumarin itself with small impurities and no manufacturing process was carried out by them on such imported goods except washing and drying the same. They have shown excess process loss and removed some of the excess production clandestinely without payment of duty in the guise of Sodium Sulphate and remaining quantity was shown as if manufactured from indigenous raw material. Simultaneously they have used the modvat credit on the inputs claimed to be utilized in the manufacture of Coumarin from the imported raw material whereas no inputs were used in imported 1-2 Benzopyrone. The inputs sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery challan and lorry receipts has been wrongly written and they never issued such documents. He denied receipt of Coumarin , however did not state to have received Sodium Sulphate. That there were phone calls between Appellant s head office and phone of Mr. Banthia and thus it appears that the Coumrin was cleared by the Appellant clandestinely to M/s Adarsh Aromas. Shri Makrand Prabhakar Gupta, Manager of M/s Mak Aromas in his statement dt. 17.02.2004 accepted receipt of goods through M/s Sai Roadways and handing over cash to Ms. Lakhpatwala. Shri Jaimin Uday Thakore in his statement dt. 17.02.2004 stated that he worked as commission agent in respect of Coumarin received from AFC under lorry receipts and delivery challans of M/s Mihir Enterprises which was a fictitious firm which facilitated AFC to accomodate their consignments cleared without payment of duty. That the goods were received in the name of M/s Mihir Enterprises through Sai Roadways and he has sold the goods in cash to parties. The cash was handed over to Shri Lakhpatwala. Shri Arun Madhav Naphde, Senior Accountant of M/s AFC in his statement dt. 11.05.2004 accepted making payments in cash to Shri Vilas Darwade of M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogus dealer invoice the inadmissible credit was availed on Caustic Soda, Toluene and Sulphuric Acid. The dealers and the AFC could not produce any document such as lorry receipts, payment particulars to transporter, legder etc. The vehicles were found to be of jeep, auto rickshaw, car, scooter/ motor cycle on which no goods can be transported. During the scrutiny of security register no entry of such goods were found on the day when the AFC shown the receipt in cenvat account i.e RG23 A Part - I. Shri Alok Singh and Shri Arun Naphde in this connection stated that they availed credit when dealer invoice were received through courier which shows that with such credit no goods were received. On the day of visit shortages were found which shows that all quantity of inputs shown as receipt in fact were not received in factory. The dealer has stated that they did not arrange for the transportation of goods. Also reliance was placed upon the statement dt. 05.07.2004 of Shri J.P. Bhangle, Production Incharge of AFC, Shri R.P. Menon (Production Supervisor), Shri Avinash P. Moore (Production officer) that except washing 1-2 Benzopyrone for Coumarin no other chemical such as Caustic Soda, Sul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Sai Roadways. On the basis of same investigation the show cause notices were issued for the subsequent period viz. SCN dt. 06.04.2005 for the period April 2004 to December 2004 towards duty of Rs. 16,95,268/- ; SCN dt. 02.02.2006 for the period Jan 2005 to Oct 2005 towards duty demand of Rs. 18,16,137/- ; SCN dt. 08.11.2006 for the period Nov 2005 to May 2006 towards duty demand of Rs. 11,64,442/- ; SCN dt. 07.06.2007 for the period June 2006 to March 2007 for demand of Rs. 4,18,608/- . 5. The Appellant filed reply and also cross examined the persons i.e employees of the firm and other persons whose statements were relied upon by the revenue for making allegation against the Appellants. Some of the persons whose statement were relied upon could not be produced. For the Show Cause Notices issued for the subsequent period also the replied were filed. The adjudicating authority vide impugned orders did not agree to the submissions made by the Appellant and confirmed demand proposed in all the show cause notices alongwith the penalty. Penalty was also imposed upon Shri Jaymin Uday Thakore, M/s Mak Aromas, Ms. Hema Lakhpatwala, M/s Sai Roadways, M/s Adarsh Aromas vide impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing. The process involves use of 1-2 Benzopyrone, Caustic Soda, Methanol, Sulphuric acid, Toluene. They have claimed process loss of 17.6% for obtaining Coumarin form 1-2 benzpyrone (crude) method and the same is in line with the DGFT SION Norms i.e SION Number A2935. They had fulfilled their export obligations against Advance licence and hence all the licences were redeemed by the licensing authority in full. No proceedings were initiated against them by DGFT or no scn was issued. Infact some licences were redeemed even though the department informed them about the alleged misrepresentation as mentioned in the addendum to SCN. That 500 kgs of Coumarin packed in corrugated boxes was accidentally removed from the factory as Sodium Sulphate and was detained and seized holding the same as clandestinely removed and which has later culminated in investigation and issue of demand of Rs. 1,02,07,588/- He submits that the demand on 72,400 Kgs of Coumarin has been made against them on the ground that they have mis-declared the process loss of 17.36% whereas it is merely 2-3% and that cenvat credit was availed without receipt of inputs in the factory. The revenue has relied upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be relied upon as they did not appear for the cross examination. He relies upon the Tribunal order in case of M/s GTC Industries Vs. CCE 2006 (198) ELT 121 (Tri) wherein it was held that retracted statement cannot be relied upon. That the said order was upheld by the Apex Court as reported in 2015 (324) ELT 236. He also submits that some of their employee acted in concert in order to extract money from the company and gave wrong statements. That they filed Police complaint against them and the Court has taken cognisance of the said fact by issuing process. He places reliance upon the judgment in case of Chhota Lal Keshav ram Vs. CCE 1994 (67) ELT 916 (TRI). He also submits that the revenue has wrongly relied upon one assay report in case of Bill of Entry no. 8248 dt. 27.06.2008 to allege that the purity of the imported 1,2, benzopyrone was 97% to 99.6% whereas the said report was pertaining to different supplier and the BOE was different. That even the assay report was in respect of GLC Purity and not olfactory strength which was only 78 84%. Thus the purity was wrongly alleged in SCN on misrepresentation of documents. He submits that olfactory strength is criteria of sale whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sit shows that the Appellant has removed the same without payment of duty. He also relied upon the opinion of Prof. K.D. Deodhar and statement of employees of the Appellant firm. He also took us through the statements of employees and dealer of the Appellant Unit as well as assay report showing purity of the goods. 8. We have heard both the sides and perused the records as well as oral and written submissions made by them. 9. We find that the demand has been mainly raised on the basis of statements of the employees of the Appellant concern and statement of dealers. The SCN also alleged that the GLC report of supplier shows purity in the range of 97-98%. As far as reliance placed on statements of employees is concerned it is found that Dr. A. R. Sawle in his statement dt. 18.06.2004 had deposed that the process loss for obtaining Coumarin from imported 1,2 benzopyrone imported is to the extent of 2% to 3 %. Further Shri Alok Singh in his statement had stated that the credit was availed without receipt of inputs in the factory. However in cross examination both of these persons and the other employee whose statements were relied upon stated that the statements given by them were wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their statements. Hence once the above persons have resiled from their statements it is no longer appropriate to rely upon their statements. We are of the view that the statements of the employees who were not connected with the manufacturing of Coumarin, it cannot be said that the manufacturing process shown by the Appellant firm is false. We find that apart from the statements of above persons there is no records or documents which can show that the production of Coumarin was much more than shown or recorded by the Appellant firm. We find that the revenue after the issue of first show cause notice dt. 16.09.2004 issued five more show cause notice for the subsequent periods by relying upon same investigation but did not conduct any physical test to see as to what is the percentage of production of finished goods. The Hon'ble High Court and Tribunal in number of judgments has held that only on the basis of statements which stands resiled in cross examination and in absence of corroborative evidence the demands cannot be confirmed. The judgments in case of Omprakash Modi Vs. CCU 1993 (67) ELT 618, GTC industries Vs. CCE 2006 (198) ELT TRI DEL) as upheld by Hon'ble Apex Court reporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant is as per SION Norms of DGFT which has not been held to be incorrect. No evidence has been adduced to show that any other similar consignment imported into India has not undergone the process as like Appellant have undertaken. It is coupled with the fact that the revenue has not produced any evidence that the product is not sold on olfactory strength but on GLC purity strength. The Appellant in support of their submission had produced technical literature viz. British Patent No. 1443406 and expert opinion of Shri Balasubramanian showing that the process loss claimed by them is incorrect. The adjudicating authority has held that since the imported product is itself Coumarin but containing some odour due to presence of traces of acetic acid or other material, therefore when no process loss is involved, the process loss shown in British Patent is not applicable. We find that from the British Patent specification that for purification of 97% Coumarin into 99.9% pure coumarin the process loss is about 8.60% and further process loss of 11.428% is incurred in refining 99.9% pure Coumarin into 99.95% pure Coumarin which clearly shows that in refining Coumarin of 97% a process loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported 1,2 Benzopyrone. Also it was contended in the SCN that the total receipt of raw materials is less than quantity required for manufacture of Coumarin when compared with the ratio of material required. We find that the Appellants in their reply before the adjudicating authority had contended that the ratio taken by the revenue in SCN are not correct as they are manufacturing Coumarin by two methods i.e by Phenol method and 1,2 benzopyrone method and that the ratio of raw material in respect of Phenol method is incorrect. The said contention of the Appellant was not controverted by the adjudicating authority. We also find that the Appellant had imported goods under Advance licence for import of 1,2 Benzopyrone (crude) 78 84% and the licences were redeemed by the DGFT inspite of revenue s allegation of Appellant declaring incorrect ratio of input-output. The Appellant in their communication with the DGFT always maintained that the ratio of input output declared by them towards SION Norms is in terms of olfactory strength of 1,2 benzopyrone 78 84% (crude). Inspite of communication of revenue with the DGFT that the norms pertain to GLC Purity and not olfactory strength the licence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ietor of M/s Adarsh Aroma in their statements have clearly stated that the goods were received by them under invoice. The inculpatory statements were given by Shri Jaymin Uday Thakore of M/s M.A. Aromas and Shri Makrand P. Ghate, Manager of Mak Aromas whose statement was recorded on 24.01.2004 and 17.02.2004. In statement dt. 24.01.2004 both of these persons stated that they are dealing in only duty paid Coumarin sold by Appellant but in subsequent statement dt. 17.02.2004 they stated that their earlier statements were incorrect and they dealt in non duty paying Coumarin. The Appellant due to such inconsistencies in their statements had requested for cross examination to which the adjudicating authority has acceded and issued summon to appear for cross examination. Both of these dealers did not appear for the cross examination. In such case when their statements recorded on different dates are contradictory and they did not appear for the cross examination, the statements of these persons cannot be relied upon for alleging that the Appellant has removed Coumarin under the cover of Sodium Sulphate and making demand against Appellant. Our views are also supported by the judgments in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaken in respect of imported 1,2 Benzopyrone we are of the view that in such case no duty is demandable from the Appellant as the duty can be demanded only where any manufacturing process is undertaken. In case of demand on ground that Appellant has availed credit without receipt of inputs in their factory we find that the adjudicating authority has denied the credit on the ground of non submission of transport documents. We find that the suppliers of goods has clearly stated that the goods were cleared to the Appellant. The Appellant has produced the payment details through bank of purchases made by them and their statutory records. Even the adjudicating authority has dropped penalty on the suppliers holding that the inputs were sold by them. In absence of any evidence of diversion of good and any other contrary evidence we are of the view that credit cannot be denied to the Appellant. In case of alleged shortages we find that Ms Hema Lakhpatwala in her statement dt. 27.05.2004 had explained the shortages found during physical verification and the reconciled stock account were also produced before the adjudicating authority which was not denied by him. Further no evidence of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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