TMI Blog2018 (10) TMI 893X X X X Extracts X X X X X X X X Extracts X X X X ..... by Shri Anbu, Cashier - It was alleged that Shri C.K. Abdurahiman, General Manager PRPL has accepted the same - Held that:- On a comparison of the above records with statutory RG-I figures, the officers concluded that there was unaccounted production of 2014.185 MT of ingots. The Commissioner has given a finding that Shri Sibiraj, Chemist and Shri C.K. Abdurahiman, General Manager have accepted the maintenance of records. The Commissioner also found that the above production is corroborated by the note books/pads which evidence payments to production contractor and the fact that the appellants have not accounted for 152.690 MT of MS scrap received (as against 170.150 MT) during 5.7.2006 to 11.07.2006 as per the vehement slips seized from the appellants. The appellants contended that reliance on retracted statement without independent corroboration of materials is not correct in law. Moreover as there was no discrepancy found either in the raw material, stock or finished goods stock, the allegation of unaccounted purchase of scrap, clandestine manufacture and removal would not sustain. It is very pertinent to note that neither the impugned order nor the show-cause notice menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase of main Raw material and other inputs; manufacture of final goods; clandestine removal of the same; transportation; receipt of the same in the customer's premises and the financial transactions. The edifice of the allegation in the show cause notice was sought to be built mainly on four pillars. (i). Production records alleged to have been maintained by Shri Sibiraj, Chemist (ii). Production records alleged to have been maintained by Shri Anbu Cashier about payments to production contractor (iii). Consumption of electricity and (iv). Capacity of furnace. All other aspects were either not investigated or investigated perfunctorily. Out of these four, first two were negated by the department itself while issuing SCNs to the sister concerns i.e. M/s PTSPL, M/s BCPL and Shri Aftab - The third one was nullified by the sample run conducted by VAT department on the directions of Hon'ble High Court of Keralan. The fourth one was not investigated to thoroughly establish as discussed above. Demand not sustainable - appeal allowed - decided in favor of appellant. - E/811-816/2009 - Final Order No. 21543-21548/2018 - Dated:- 5-10-2018 - SHRI S.S GARG, JUDICIAL MEMBER And SHRI P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons involved. Consequently, the below 6 appeals have been filed by different parties as shown below. Sl. No. Name of the Appellant Appeal No. 1. M/s. Prince Rolling (P) Ltd. (PRPL) E/812/2009 2. Shri Anub Sha, Director, PTSPL E/813/2009 3. Shri C.K. Abdurahiman, General Manager, PRPL E/814/2009 4. Shri Ahmed Faizal Sha, Director, PRPL E/815/2009 5. Shri T.K. Abdul Karim, CMD, PRPL E/816/2009 6. Prince TMT Steels Pvt Ltd. E/811/2009 2. The learned counsel for the appellants has submitted that the Department has relied upon mainly the following: (i) Statements of Sh. V.R. Sibiraj, Chemist, Sh. Anbu, Cashier, Sh. C.K. Abdurahiman, General Manager and Sh. Ahmed Faizal Sha, Director of M/s. PRPL, however, these statements were retracted before the issue of SCN and subsequently also during the cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Plywood Pvt Ltd Vs CCE, Cochin, 2006 (201) ELT 229 (Tri). 2.2 Learned counsel further contended that though the Ld. Commissioner permitted cross examination of Sha C.K. Abdurahiman, Sh. Anub Sha and Sh. V.R. Sibi Raj on 06.08.2011 has completely ignored their averments during the cross examination. Sh. V.R. Sibi Raj stated that he had not written any notebook since he was not responsible for production; maybe Sh. Armugam, another chemist may have written but he was not sure. He retracted his statements recorded on 12.07.2006 vide a letter dated 13.07.2006. He was forced to write again on 27.07.2006 that his earlier statement was correct. It is very pertinent to note that the Commissioner has not even rejected the evidence of witnesses during the cross examination. The said Sh. Armugam was not even questioned and his statement was not recorded. Therefore, the unauthenticated notebooks allegedly containing the details of the production are not proved and thus have lost evidentiary value. 2.3 The SCN at Para 7 alleges that M/s PRPL have cleared most of the ingots clandestinely manufactured to their sister concerns i.e. M/s. PTSPL, Kanjikode and M/s. BCPL, Kanjikode; howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been maintained by Sh. Anbu, Cashier with the noting March 2006-1588 Tonnes, April 2006-1115 Tonnes, May 2006-1176 Tonnes . The Deputy Commissioner of Central Excise, Palikkode-II Division issued a SCN no. 40/2009-ST dated 15.12.2009 to Sh. Aftab, Production Contractor proposing to demand Service Tax wherein the details of payments received by him from the appellants in 2006 were recorded to be April- ₹ 50,000/-, May- ₹ 78,000/-, June- ₹ 79,000/- and July-Rs.60,000/-. The SCN was dropped by the adjudicating authority. Here also, the figures are not matching with the allegation on the amount of payments made to Sh. Aftab by the appellants in the instant SCN. Therefore, it is evident that the Department is not relying on the contents of the notebooks allegedly maintained by Sh. Anbu, Cashier in respect of SCN issued to the production contractor whereas, heavy reliance is placed on the same in the impugned order. 2.6 The Department's reliance on private notebooks and on certain numbers in the said notebook to be referring to MS ingots produced is mere assumption. Sh. Sibiraj during cross examination has denied that he has written that notebook and the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rise. Therefore, the findings of Ld. Commissioner in Para 126 127 with regard to purchase of scrap are irrelevant to the issue. It is pertinent to see that the officers visiting the premises on 12.07.2006 did not find any discrepancy in the physical stock. Therefore, the allegations on unaccounted purchase of MS scrap based on the diary maintained by Sh. Anbu, which is shown to be unreliable and not relied upon by the Department itself, are unsubstantiated. It is a settled legal position that the allegation of manufacture and removal of goods without payment of duty is a serious charge and the burden of proof is on the Revenue. The charge must be proved by producing cogent, positive, material evidence of procuring raw materials, manufacture of goods, removal, receipt by buyers and receipt of consideration etc. They relied upon the following cases: Commissioner Vs Bihariji Manufacture Co Pvt Ltd. 2015 (323) ELT 106 (Del), 2015(323) ELT A 023 (SC). Continental Cement Company Vs UOI 2014 (309) ELT 411 (All). (iii) CCE Vs Motabhai Iron Steel Industries 2015 (316) ELT (Guj.). CCE, Ahmedabad-II Vs Chhajusingh S Kanwal 2011 (272) ELT 202 (Guj.).f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearance of MS ingots without proper bills. (iv) Statements of Scrap dealers and scrap weighment slips towards unaccounted purchase of scrap; and cash payment slips to scrap dealers towards same (v) Private Notebook maintained by Cashier towards payment of production charges to Contractor on the basis of actual production. 3.1 The Ld. AR has stated that the case booked against M/s. PRPL is unaccounted manufacture and clandestine removal of Mild Steel Ingots, mainly to their sister units M/s. PTSPL, directors of which are same as that of PRPL. The Commissioner considered the evidences of Private Production Slips (showing heat-wise production) maintained by Chemist, Notebook maintained by Cashier for actual production of MS ingots, admission statements on unaccounted production made by Chemist, Cashier, General Manager, Director in charge of appellant, suppliers of scrap who have admitted unaccounted supply, electricity consumption, suppliers of scrap who have admitted unaccounted supply and recovery of part of parallel invoices. All of these were discussed in detail in OIO which established the sustainability of entire demand made on M/s. PRPL. Investigation at the end of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All.-HC) wherein it was held that assessee has the burden to prove the documents were wrong and did not belong to them. (This case was affirmed by Supreme Court Somani Iron and Steels Ltd. vs. Commissioner 2012 (277) E.L.T. A26 (SC). (iv) K.P. Polycolor India Ltd. vs. CCE, Haldiar -2013 (290) E.L.T. 81 (Tri.-Kol.) wherein it was held that. Rule 25 applies to both raw-materials and finished products. (v) Surjeet Singh Chhabra vs. UOI: 1997 (89) ELT 646 (SC) wherein it was held that even if confession was retracted within 6 days, Customs officers are not police officers therefore confession though retracted is binding. (vi) National Boards vs. CCEX, Calicut: 2014 (313) ELT 113 (Tri. Bang) wherein it was held that strong circumstantial evidence is sufficient for findings based on preponderance of probability -no systematic record of evidence is left by persons engaging in transactions involving evasion- evaders are always clever and Engineers in executing their criminal design. (vii) Ramachandra Rexins Pvt Ltd Vs. CCEX, Bangalore-I, 2013 (295) ELT 116 (Tri Bang.) wherein it was held that in a case of clandestine activity involving suppression or pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrap purchased for PAPL also. The learned Commissioner found that Shri Anbu, Cashier in his statement dated 28.03.2006 has stated that the entries made in red ink relate to unaccounted clearance of MS ingots using separate parallel invoices. Unaccounted clearances were mostly to M/s. Prince TMT Steels. We find that Shri C.K. Abdurahiman, General Manager, Shri Anub Sha, Director, Prince TMT, Shri Sibiraj, Chemist have retracted their statements and have confirmed their retraction during the cross examination before Commissioner. Shri Sibiraj in fact has stated that he had not maintained the note books as seen by him on 12.07.2006 and that he thought Mr. Aurmugam was writing the same. But he was not sure. Vide letter dated 17.12.2008 they have replied to the Commissioner that the production slips did not contain the number of ingots manufactured. The mention of the same as quantity in numbers in Annexure II to the show-cause notice was erroneous and was not based on records; the officers have not questioned Shri Aurmugam; the Chemist are not concerned with the quantity of goods produced except for test reports in the lab. The appellants contended that reliance on retracted statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e show-cause notice mentions any other party/person, not even one, to whom the appellants have allegedly cleared MS Ingots clandestinely. The appellants have alleged that the Department is not sure of the evidence, in the form of note books/pads it has collected, so much as it seeks to rely on the same in the case against the appellants while discarding the same in respect of show-cause notices issued to their sister concerns. We find that the stand of the Department was not uniform. Two different show-cause notices based on same set of records and evidences, proceeded on different quantities. Such an approach casts doubt on the maintainability of such evidence. It gives an impression that (as also alleged by the appellants) the Department itself was not convinced about the evidentiary value of the private records seized during investigation. A serious charge such as clandestine removal cannot be based on records which the department itself was not convinced of. It needs to be corroborated by confirming a series of steps in production and clearance. 4.6 The impugned order relies on a register maintained by the cashier allegedly containing the payments made to the Production Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en Koya and Shri Anoof, Sales manager of M/s BCPL the OIO simply mentions that the statement of sales manager was relied upon. Ld. Commissioner concluded saying that the retraction of statements has no relevance as the statements were corroborated by the documents and records. We do not find any such corroboration. In fact as mentioned above, the records were not relied upon by the department itself in the proceedings against M/s PTSPL, M/s BCPL and Shri Aftab, the production Contractor. Therefore, the corroboration with respect to one of the two facts i.e. production is to be held not corroborated. As stated earlier, clandestine removal is a serious charge and requires to be proved at least to the level of preponderance of probability. Only records which came for consideration pertain to production. It was not proved as to who was the author of the records. Clandestine procurement of Raw material was alleged on the basis of statements. No discrepancy was found in the raw material, finished goods stock in the premises of the appellants. It is not a case of pre-announced audit of the unit by authorities. It was a surprise visit/raid by the preventive unit. If the appellants were eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ram P. Vaidya, Product Manager of M/s. Inductotherm (India) Pvt Ltd though it was relied upon in the SCN as per Sl. No.42 of the Annexure III to the show-cause notice. We find that the department has not produced any other evidence than the alleged drawings attached to the invoice. It was not confirmed as to whether the payment was made by the appellants for 6 MT furnace or 8MT furnace. No trial run was conducted in the presence of experts to ascertain the actual capacity of the furnace. No report of any action taken by the jurisdictional Central Excise authorities on M/s Inductotherm (India) Pvt Ltd for suppression of capacity and thus understandably the value of the furnace cleared by them. In the absence of any other concrete proof, one cannot conclude simply on the basis of drawings attached to the invoice. 4.10 As stated above, clandestine removal is a serious charge and for alleging the same the department has to meticulously prove the purchase of main Raw material and other inputs; manufacture of final goods; clandestine removal of the same; transportation; receipt of the same in the customer's premises and the financial transactions. We find that Tribunal in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us to suggest clandestine manufacture and clearance by the appellants. Mere reliance on note books/ diaries or statements cannot be considered as enough evidence for clandestine manufacture and clearances. Accordingly, duty demand ₹ 30,18,378/- is not sustainable against the appellant Mahesh Silk Mills, and the same is set aside. Consequently, neither any penalty is imposable upon Mahesh Silk Mills nor their land, plant nor machinery is liable to confiscation under Rule 173Q of the Central Excise Rules, 1944. Appeals filed by the appellants are allowed by setting aside the Order-in-Original dated 5-3-1999. 4.11 We find that in the instance case, the evidence whatever was heavily loaded towards only one aspect of the above. That is unaccounted production based on the records alleged to have been maintained by Shri Sibiraj, Chemist and Shri Anbu, Cashier and statements of some persons. Shri Sibiraj, Chemist claimed that he did not maintain those records but one Shri Armugham may have maintained. All the statements were retracted twice once during the investigation and once during the cross examination. Production was estimated on the basis of certain numbers, ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Even these SCNs though confirmed by lower authorities were set aside by Commissioner Appeals. The department is said to have withdrawn the appeals on litigation policy. Therefore, the order passed by Commissioner (A) has attained finality. Similarly, it was alleged that as per records maintained by the cashier, the production contractor Shri Aftab was paid huge money during the impugned period, the SCN issued to him for recovery of service tax mentioned small and altogether different figures. The SCN was also dropped by lower authority. No appeal appears to have been filed on the same. As the department itself did not find these records reliable, the only conclusion that can be drawn is that these records are not reliable. We find that the Ld. AR argued on the basis of certain case law that the department need not prove clandestine clearances with mathematical precision. Though, We accept the same in principle, as per the discussion above the allegation was mainly on the production; the authenticity of the records not being proved; statements being retracted during investigation and cross examination; findings on the basis of records not being corroborated by other parameters; tran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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