TMI Blog2018 (7) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... to, and acknowledged by the department - the department cannot give a go by of such documents by relying on the statement of Range Officer that he was merely endorsing upon the document without physically verifying whether yarn was received by appellants after conversion. The evidences including the ARA-3s and D3s indicate the strong probability that appellant has send yarn for conversion. Another reason for rejection of these documents of conversion is that the vehicle numbers noted there in are fictitious. The Ld.Counsel has pointed out that out of the 400 AR-3As, only 14 numbers have incorrect vehicle number. Out of these, 8 documents were prepared by them. He has submitted that it happened only due to error in noting the vehicle number. We find no reason not to accept this contention of the appellant. Out of 400 AR3-As, when the vehicle numbers mentioned only in 14 documents showed variation or incorrectness. The strong inference that can be made is that it was merely human error. This cannot in our view, be a ground to reject all 400 documents as bogus. The main evidence relied is the statement of buyers of yarn from the appellant. The Partner/director of M/s. Peeye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0386/2017 dt.1/3/2017. The appellant filed appeal against the said Final Order before the Hon'ble High Court and vide judgment dt.8/11/2017, the Hon'ble High Court remanded the matter for fresh consideration. Hence the appellants are once again before this Forum. 2. On behalf of the appellants, the Ld.Counsel Sh.C.Saravanan appeared and argued the matter. His submissions can be summarized as under : (i) The main evidence relied by Revenue for confirming the demand are the statements recorded from the buyers of yarn from the appellant. The statements of the following customers/buyers were obtained. SL. NO. DATE STATEMENT OBTAINED FROM RELATION WITH NSM ANNEXURE NUMBER IN THE SCN 1 10.07.2003 C.Saravanan, Director of Peeyelcee Tex Export (P) Limited Customer C-14 2 10.07.2003 L.Sivasankar Narayanan, Partner of Peeyelyes International and Sansons Exports Customer C-16 3 10.07.2003 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn for conversion into hank yarn and returned the same to appellant. (v) The appellant cleared both cheese yarn and hank yarn. While cheese yarn was liable to merit duty, hank yarn was exempted from payment of duty in terms of notification No.5/1994-CE dt.23.02.1994. During the relevant period, appellant did not have facility for reeling hank yarn and therefore appellants cleared manufactured yarn for being converted into hank yarn to various job workers by following AR3-A procedure prescribed under Rule 96E of Central Excise Rules, 1944. The yarns cleared to job worker/convertor was received back by appellant after conversion as hank yarns and were cleared without payment of duty to customers as under the notification. (vi) The case of the appellant that yarn was send for conversion was not accepted by the department stating that it is not corroborated by evidence. In fact, the appellant has been availing the procedure of Rule 96E of Central Excise Rules for conversion of yarn to hank yarn through job workers. The procedure was done as per Rules under acknowledgment of Excise authorities. While complying such procedure documents pass through the excise authorities. Such docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (ix) Identical SCN issued against various persons were dropped by Commissioner (Appeals) and CESTAT. During the period of dispute. DGCEI had issued identical SCNs to other manufacturers namely M/s.Thanga Bhagya Mills M/s.Erode Annai Spinning Mills. The said manufacturers had supplied yarn to the very same customers as the appellant. Both these SCNs were later dropped. The decision in M/s.Erode Annai Spinning Mills is reported in 2007 (219) ELT 966 (Tri-Chennai). (x) Though SCN alleges clandestine clearance, the same is without any basis. The concept of clandestine clearance is when there is surreptitious clearance without records. In the present case the appellant had cleared yarns on the strength of Form AR-3A for conversion into hank yarn and thereafter cleared the same on the strength of Central Excise Invoices and maintained proper records. Therefore, no clandestine clearance is made out. In para 74 of OIO, the adjudicating authority had observed that there is no case against appellant for removal of excisable goods without accounting and/or payment of duty. (xi) The authorities below failed to note that the customers of appellant were engaged in manufacture o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) was 51,963 kgs for 1999-2000 and 24,451 for the period 2000-01. Records were recovered from the appellants which showed discrepancies in the vehicle numbers, used for transporting cheese yarn from appellants factory to that of convertors premises or for transporting back the hank yarn. On verification with RTO, these vehicle numbers pertain to two wheelers/motor car etc. which shows that the case of appellants that they had send yarn for conversion into hank yarn and cleared hank yarn is false. They were actually clearing cheese yarn in the guise of hank yarn. Statements of the buyers/customers who purchased yarn from appellant was taken. They have given statement to the effect that they have not purchased hank yarn from appellant. On the request of appellant, summons was issued to these customers for cross-examination. Three of them failed to appear. Their statements are fully reliable. The job worker/convertors have also stated that they did not undertake any work of conversion for appellant, but prepared bogus documents to show that hank yarns were cleared. Their retraction in cross-examination is an afterthought. 3.1 The partner of M/s. M/s.Peeyelyes Interntional, Sh. L.Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 issued under Section 3 of Essential Commodities Act, 1956. During the period of dispute, admittedly appellant did not have reeling machine for production of hank yarn. Hence it is contended by them that they were getting the cheese yarn converted into hank yarn at the job worker/convertors end and clearing hank yarn without payment of duty. 5.1 The case of the appellant is that for removing cotton yarn from factory for the purpose of conversion and to receive it back after conversion, the Central Excise Rules provides for certain procedures to be complied. The appellant had followed all such procedures and documents were issued by department acknowledging the compliance of procedure as well as receipt of hank yarn after conversion. On the scrutiny of evidence placed before us we are able to see that the series of documents relating to the conversion activity including D3 (issued by Range Officer certifying that hank yarn has been received after conversion) has been rejected by the department on the basis of letter given by the Range Officer that though D3 intimations were given by him, he had not conducted verification physically whether such goods were received back after con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehouse of removal, and triplicate to the consignee for despatch to the consignor. (4) The consignor shall present the triplicate application duly endorsed with such certificate to the officer-in-charge of the warehouse of removal within ninety days of the date of issue of the transport permit under sub-rule (2) RULE 156 B. Failure to present triplicate application. - (1) If the consignor fails to present the triplicate application to the officer-in-charge of the warehouse of removal in the manner laid down in sub-rule (4) of rule 156A, and the duplicate application endorsed with the rewarehousing certificate has also not been received by such officer from the officer-in-charge of the warehouse of destination, the consignor shall, upon a written demand being made by the former officer, pay the duty leviable on such goods within ten days of the notice of demand and if the duty is not so paid he shall not be permitted to make fresh removals of any warehoused goods from one warehouse to another until the duty is paid or until the triplicate application is so presented or the duplicate application is so received. (2) Where such duty has been paid, it shall be refunded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, be a ground to reject all 400 documents as bogus. 5.4 The department obtained statement from the convertors namely Nalwar Knitting, Balamurugan and Thennamai. Out of this the first two have stated during cross examination that they had given statement only under compulsion by department and that they indeed had converted cheese yarn into hank yarn for appellants. Though Sh.A.L.Thennappan at the very first occasion of giving statement itself, deposed that he undertook conversion for appellant. His statement has conveniently not been made part of SCN. Again, the department has not taken any statement from Ruba Yarns who has converted yarn for appellant. Records reflect that appellant has paid conversion charges to Ruba Yarn and Balamurugan which has been disregarded in toto. These evidences including the ARA-3s and D3s indicate the strong probability that appellant has send yarn for conversion. 5.5 The main evidence relied is the statement of buyers of yarn from the appellant. The Partner/director of M/s. Peeyelyes International and Sansons Exports, M/s.JaisarSpintex (P) Limited, M/s. Peeyelcee Tex Exports (P) Limited and M/s. Anitha Traders had stated that they purchased on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) of Section 9D(l). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(l) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the Gazetted Central Excise Officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for proving the truth of the contents thereof, he has to first admit the statement in evidence in accordance with clause (b) of Section 9D(l). For this, he has to summon the person who had made the statement, examine him as witness before him in the adjudication proceeding, and arrive at an opinion that, having regard to the circumstances of the case, the statement should be admitted in the interests of justice. Similar view was taken in the case of M/s.Ambika International vs UOI 2016-TIOL-1238-HC-P H-CX, J K Cigarettes Ltd vs CCE 2009 (242) ELT 189 (Del.). 5.6 From the discussions made above, we find that department has failed to establish t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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