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TMI Blog2018 (12) TMI 1106X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of manufacture of Zarda under brand name 'Jagat' and 'Sagar Shakti' classifiable under Chapter Heading 2404 of the First Schedule to the Central Excise Tariff Act, 1985. Their factory premises as also the residential premises of one of the Director were visited by the officers of the DGCEI on 21.09.2011, who conducted various checks and verification. No discrepancy was found in the stock of the materials in the factory and no incriminating documents were recovered. However, the officers found one invoice No.06 dated 20.08.2011 issued by one M/s Sanjay and Co., Varanasi showing sale of 2,600 Kg of synthetic essential oil valued at Rs. 13 lakhs (Approx.) on which central sales tax was also shown to the extent of Rs. 26,600/- along with recovery of one Invoice No.155 dated 20.08.2011 from the residential premises of the Director. The officers scrutinized the statutory records and found that the said quantity as reflected in Invoice No. 155 had not been entered by the appellant in their statutory record had not been entered by the appellant in their statutory records. 3. The officers also conducted simultaneous searches in the business premises of M/s Shantilal J. Sopari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res from the transporters M/s Ridhi Sidhi Goods Carrier revealed that the transport company was not having its own trucks and they were arranging trucks on commission basis. On perusal of sale invoice No.155 dated 20.08.2011 issued by M/s Sanjay & Co., Varanasi he was unable to say as to which invoice number was involved in transportation of the goods in question and that he send all the consignment of aromatic chemicals to the appellant under the cover of consignment notes, the freight for which was received from an employee of the appellant. 6. In the above background the statements of various employees of the assessee as also of the owners of the vehicles were recorded. On the basis of the evidences collected and statements recorded during investigations, proceedings were initiated against the appellant alleging that they have manufactured and clandestinely cleared their final product without payment of duty. Accordingly, the show cause notice proposing the confirmation of duty as also imposition of penalty were issued. The same stands culminated into the impugned order passed by the Commissioner. The said order of the Commissioner is the subject matter of appeal before us. 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire case of the Revenue is based upon the said so called alleged receipt of the aromatic chemicals without there being any other evidences of procurement of the other raw materials, required to be used for the manufacture of the final products. He contends that their main raw material is raw tobacco which is used to the extent of 90% and in the absence of any evidences to show unaccounted receipt of the said raw materials, the evidence of the procurement of one of the raw materials, which is also being contested by the appellant, cannot lead to the inevitable conclusion of clandestine manufacture and removal of their final products. Arguing further, he submits that the manufacture of Zarda is a gradual process with various intermediate stages and requires machine, manpower, electricity, and packaging material. The said area have not been investigated by the Revenue, neither the buyers of the said allegedly removed zarda, without payment of duty have been identified. In such a scenario the findings cannot be held sustainable. The Adjudicating Authority has arrived at the quantum of clandestine removal on the basis of the input output ratio without taking into account the fact of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stributor's premises. The Revenue's entire case is based upon the recovery of the said excess material from the business premises of M/s Shantilal J. Sopariwala, which the appellant have admitted having been cleared without payment of duty either as samples or as replacements for the damaged goods and have already discharged duty of Rs. 34 thousand (approx.) on the same. The question which arises is as to whether such recovery of small quantity of appellant's final product from the business premises of their distributor, lead to allegation of huge quantity of clandestine removal by appellant, thus leading to confirmation of demand to the extent of around Rs. 4.6 crores. It is well established law that allegations of clandestine removal are required to be made on the production of sufficient and positive evidences, thus leading confidence to the Revenue's stand. Even for applying the theory of preponderance of proportionality there has to be evidences on record so as to inspire confidence in the Revenue's theory of clandestine removal. The said findings cannot be arrived at on the basis of assumptions & presumptions. However, merely because some excess quantity of final product wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e input output ratio of the various raw material and have calculated the quantum on the basis of such mathematical equations. For better appreciation we would like to reproduce the relevant paragraphs from the impugned order of the Commissioner (Appeals). "78. Having examined and held that SSKPL had indeed procured and received 10835 kg of essential aromatic oil from Sanjay & Co. and Cosmo Elmek vide invoice No.155 dated 20.08.2011and four consignments notes No. 1655, 1664, 1665 & 1666. Te next major issue is whether this un-accounted procurement of essential oils for production of zarda would lead to excess un-accounted production of zarda of corresponding quantity on which differential excise duty would be recoverable. The calculation of excise duty in the show cause notice is as per the formula of zarda given by sh. Vicky Chaurasia in his statement dated 06.02.2012 and 10.05.2013 where he submitted that to produce 45 kg. of zarda, 35 kg. raw tobacco is mixed with 10.5 kg of perfumery ingredients and that while preparing a batch of 10.5 kg perfumery ingredients 3.5 kg base oil (liquid paraffin) 3.5 kg aromatic chemicals (synthetic essential oil), 1.75 kg glycerin and 1.75 kg kim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the unaccounted raw materials and sale of unaccounted finished goods was in cash and without invoices and the same has been admitted by the persons concerned during the investigations. All this indicates that actually clandestine clearance of zarda took place and the exact quantification of the same is required, for the case, based on the evidence on record, as already noted, sh. Vicky Chaurasia himself gave the input - output norms for his zarda in his statements and these statements have not been retracted and even in these proceedings, the input output as explained by him has not been questioned by SSKPL. Their emphasis is rather on the grounds that no essential oils as mentioned in the Invoice No. 155 dated 20.08.2011 or the 4 consignment notes had been received and further that based on such receipt, though not admitted, the quantification of the zarda cannot be arrived at for the reasons that a lot many other inputs go into making of zarda for instance raw tobacco and packings/dibias for which inputs there are no allegations of excess receipt by them and also there is no evidence of transport of such unaccounted zarda or receipt or sale proceeds for such alleged clandes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to various decisions laying down that such determination of production of finished goods based upon the consumption of one of the raw material is not acceptable but he has not followed the said decision by referring to some other judgments which were not even relevant to the facts of the present case. 15. Apart from above, we note that there is virtually no evidence of the identification of the buyers to whom the said goods have been sold. Further the Revenue has not made any efforts to identify the transporters through whom the said goods were cleared. The value of such clandestinely cleared goods is huge and their needs to be some evidences of receipt of consideration of the same from the buyers. There is nothing on the record to reflect upon the receipt of any consideration. We further note that the manufacture of zarda takes a period of arround 3-4 days as disclosed by the proprietor but no such activity was found to be there in the assessee's factory during the course of the visit of the officers. No statement of any employee associated with the manufacture of such huge quantity stands recorded by the officers. 16. At this stage, we may refer to certain precedent decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... followings:- a. The department failed to establish procurement of unaccounted raw materials. b. No investigation conducted as to consumption of excess electricity, or employment of extra labors. c. No investigation conducted as to whether the appellants had installed capacity for manufacturing additional quantities of finished goods. d. No investigation conducted about involvement of huge cash for procurement of unaccounted raw materials. Similarly, no investigation conducted to find whether the appellants had received huge cash of about 24 crore during the disputed period from the buyers of finished goods. Further neither any trail of unaccounted cash was found nor any unaccounted cash was seized. e. No investigation conducted with the transporters to find out whether the appellants received unaccounted raw materials or cleared finished goods without invoices. f. Though, the names of the alleged buyers were available but investigations were conducted only from six buyers." 18. Similarly to allege clandestine removal on the basis of the chemical formula or input/output or arithmetic calculation has been held to be as unacceptable by various decisions. Reference can be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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