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TMI Blog2018 (6) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... f hank yarn simultaneous search operations were conducted on 18.6.2002 in the appellant's factory, Administrative / sales depot, at residence of Managing Director of ETM, Sh.K.Periasamy, at Surya Impex who is buyer of yarn and at Saranya Impex / Saranya Garments - buyer. Various documents were seized. At the time of visit to the factory, the officers verified accounts relating to production of yarn on cones and hanks. They noticed that the reeling machines (for reeling yarn into hanks) was in a dismantled condition without any electricity connection. Officers found that there was no manufacture of hank yarn. The verification of records seized/recovered alongwith statements revealed that ETM had various group companies, such as Everwin Export Corporation (EEC), Everwin Apparel Corporation (EAC) functioning in the same address and another Trading firm called KPK Exports engaged in sale of yarn (procured from ETM) and fabric (manufactured on job work basis). Perusal of invoices seized and comparison with accounts showed that entire invoices were not accounted. Invoices raised for sale of cone yarn by ETM & KPK were not accounted and instead invoices as if hank yarn were sold was accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sand nine hundred and sixty nine only) from M/s.Everwin Textile Mill P Ltd., Pollachi, towards excise duty (BED : Rs. 1,00,79,973/- + AED : Rs. 15,11,996/-) on the cotton yarn cones manufactured and cleared clandestinely under the guise of plain reel hank yarn by them for the period from February 2000 to 2001-2002 (upto February 2002) by wrongly describing the said goods as hank yarn and grey hosiery cloth and later without any accounting under Rule 9 (2) of the erstwhile CER 1944 and Section 11 A (2) of CEA 1944 after invoking the proviso to sub-section (1) of Section 11 A of the CEA 1944 enforceable under Section 38A of the CEA 1944. b. I appropriate an amount of Rs.10,00,000/- (Rupees ten lakhs only) already paid voluntarily by them on various dates, towards the above duty liability. c. I impose a penalty of Rs.1,15,87,369/- on M/s.ETM under Section 11AC of CEA 1944. d. I impose a penalty of Rs.50,00,000/- (Rupees Fifty Lakhs only) on M/s.ETM under Rule 25 of erstwhile CE (no.2) Rules 2001 and Rule 25 of CER 2002. e. I impose a penalty of Rs.2,000/- (Rupees Two Thousand) and Rs. 1000/- (Rupees One thousand only) on M/s.ETM respectively under Rule 9(2) and 52A of Central Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allegations that these reeling machines were not in working condition and had no electricity connection are factually incorrect. The department relies upon the Energy Audit Report to sustain the charge that there was no reeling facility and there was no manufacture of hank yarn. Though in the Energy Audit Report it was stated that the reeling machines were in idle condition, during cross examination, Sh.N.Muruganandham who gave the report has deposed that he has mentioned in the report that 5 Nos of lights are ON in the reeling section even though machine was in idle condition. This would show that appellant had reeling section and was manufacturing hank yarn. Though these reeling machines did not have electricity connection, these were operated by use of generator. (ii) The department has relied on the personal diary recovered from the residence of Managing Director Sh.Periasamy and fax messages send from the factory to the MD. It is alleged that there was no packing materials for hank yarn seen in the factory and the invoices for clearing cone yarn, seized at the time of search were not accounted. He submitted that in the private diary, the quantity of yarn was mentioned as bags ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment has not recorded statement from any of them. The quantity of yarn purchased from ETM directly and from KPK Exports is not furnished by department separately. With regard to Surya Impex, the allegation is that they purchased 6865 bags from ETM, whereas, invoices were issued only for 880 bags. This allegation is based on the notebook of Sh.C.Elango (B-49-yarn broker). The notebook of Sh.C.Elango cannot be relied as it was not kept systematically and the name of appellant, 'Everwin' was mentioned in the notebook only in few places. The statement made by Sh.C.Elango does not support or tally with details in the note book. So the allegations of clearing cone yarn without invoices to various persons like, Sri Karthika Trading Company on the basis of such note book cannot sustain. (v) The diary recovered from the residence of Managing Director, Sh.Periasamy cannot be admitted in evidence. The description of yarn, whether it is cone or hank is not mentioned in this diary/document. Instead, it was mentioned only as bags. Merely for this reason, the department has assumed that the same were cone yarn and not hank yarn. That department has failed to establish wilful suppression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reeling machines were operated using generator is only an after thought. In any case, no such generator facility attached specifically to reeling machine was pointed out to officers during their visit. The correspondences with TNEB supports the non-functioning of reeling machines in the factory. The Ld.AR referred to the Annual stock taking report for the year 2000 and submitted that this document also will not be of help to the appellants to contend that they manufactured hank yarn. Though this report is signed by an officer of department, it is issued by merely going through the accounts maintained by appellant. In such report also, the stock of hank yarn at the time of stock taking is shown as 'Nil' which goes to show that there was no hank yarn at all in the factory. The clearances of hank yarn shown in the report are merely figures adopted from the accounts of appellant. (iii) During the search different invoices with same Sl.Nos with different dates for clearance of cone yarn was recovered. Some were not accounted. For eg. there was double invoice with Sl.No.459. One invoice was dated 30/1/2002, whereas, with same Sl.No. another invoice is dt.31/1/2002. On scrutiny it was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KPK Exports to make it appear that hank yarn was cleared to end consumers. (vii) The file seized from appellant factory containing purchase invoices for packing materials, cone, cone labels etc. revealed that during the disputed period, there was no purchase of labels, or packing materials for hank yarn. Though there was account for purchase of cone labels, there was no account for purchase of hank labels which would go to establish that appellants have not at all cleared hank yarn. (viii) Another evidence is the diary of Managing Director, Sh.Periasamy, recovered from his residence. This diary contains partywise details. The particulars in the diary were compared with kalaas coolie vouchers of ETM. It showed that no invoices were issued for consignments noted against 'H'. The diary also showed particulars of cash/cheque received and paid. The made up file seized from residence of Sh.Periasamy alongwith his diary and documents seized from KPK on comparison established that appellants cleared cone yarn without invoices and without payment of duty and also cleared cone yarn in the guise of hank yarn. The sum total of the evidences would establish clandestine clearance on the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion he has merely given evasive replies. Apart from this report, the department has verified details of connected load of the factory from TNEB. Power was sanctioned to the factory with machinery details like blow room, carding, drawing, simplex, spinning, cone, winding, humidification plant, compressor and cooling tower. TNEB has clarified that no reeling machines were connected to power in the factory during the period. Appellants have relied upon the stock taking report dt.11/11/2000 to contend that they have cleared hank yarn. Though it is shown that hank yarn is cleared, it is pertinent to note that the quantity of hank yarn in stock noted in the report at the time of last stock taking and current stock taking is nil. This would only prove that stock taking was conducted there was no hank yarn at all. Appellants have merely showed in their accounts that hank yarn was cleared and these figures have been adopted in the report which was endorsed by the officer. The report certifies that it is based on figures in stock register. Thus, we do not think that this document will support the appellant in any manner, especially when the stock of hank yarn on both dates of stock taking is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e verified with RG1, it was noticed that even though 80 bags were dispatched on 18.02.2000 as per the diary entry, no such entry was available in RG1. The dispatch of 60 bags mentioned in the diary on 19.02.2000, tallies with RG1. From the above, it appears that the daily production of yarn in ETM was being accounted in their RG1 either as cone yarn or hank yarn. The diary seized at the residence of Shri.K.Periyasamy, MD of ETM clearly indicates clearance of cone yarn as yarn bags produced and cleared, even though accounting was done in RG1 as cone yarn and hank yarn. 5.3 The diary throws light on the method by which ETM was clearing cone yarn in the guise of hank yarn. Though in RG-1 the appellant accounted production in respect of cone yarn and hank yarn, the diary showed details of production of cone yarn only. Again, there were no packing labels or materials purchased by appellant for packing hank yarn. The purchase of packing materials showed purchase of labels for cone yarn only. The appellants have not been able to counter these evidences, with satisfactory explanation. 5.4 Some documents were seized from the administrative office which contained vouchers for payment of Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of KPK was taken back by their staff. All invoices issued by ETM in the name of KPK were mere invoices, meant to cover delivery of goods made directly to parties and no goods were physically received at KPK. At KPK, the hank invoices are adjusted by way of creating sales to few fictitious parties and to Mariyamman Yarns and Sri Sonakaruppan Yarn etc. The cone yarn invoices taken back were destroyed immediately. The statement of the Managing Director, Sh.K.Periasamy supports the above wherein he has stated that the cone yarn despatched showing invoices raised in favour of KPK was not accounted in their records. These statements corroborate the documentary evidences including parallel invoices unearthed by the department. 5.6 In addition, during the time of inspection, conducted at Saranya Impex/Saranya Garments, the officers noticed at the premises 10 bags of cone yarn cleared from ETM without any invoice. The same were seized as per mahazar dt.18/6/2002. Sh.C.Elango was the yarn broker who did transaction with ETM, KPK etc. A note book was seized from him. The said note book contained details of date-wise despatch of yarn supplied to Surya Impex, which is a knitting unit. The dia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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