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TMI Blog2018 (12) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... orter M/s. Rajarathina Transport and statements were recorded. Based on such evidence, show cause notice dated 17.6.1998 for the period March 1995 to August 1996 was issued to the appellant demanding Rs. 25,67,595/- being the duty on finished products removed clandestinely and Rs. 18,93,298/- being the wrongly availed MODVAT credit. Prior to this notice an earlier show cause notice dated 18.8.1997 was issued by the Trichy Commissionerate demanding duty of Rs. 26,00,949/- alleging clandestine removal and proposing to disallow MODVAT credit to the tune of Rs. 48,788/- covering the period from 3.11.1994 to 28.10.1995. The appellant opted for settlement under Kar Vivag Samadhan Scheme (KVS Scheme) and settled the first notice by paying 50% of the duty demanded at Rs. 13,24,869/. 1.2 The second notice dated 17.6.1998 was adjudicated earlier by the Commissioner and taking note of the fact that period of seven months is overlapping with the period of first notice and that appellant had paid 50% of the duty in the earlier show cause notice, he confirmed Rs. 6,73,546/- as duty with reference to clandestine clearance of finished products and the demand of MODVAT credit was confirmed to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as wrong availment of MODVAT credit. There was specific direction that the penalties which were set aside by the adjudicating authority in the earlier proceedings on the transporters, dealers etc. should not be disturbed. When the dealers and transporters have been exonerated fully by dropping charges against them, the allegation of clandestine clearance or wrong availment of credit would have no legs to stand. 2.2 He referred to the periods involved in both the show cause notices and argued that the period in second show cause notice overlaps or takes in about seven months of the earlier show cause notice. In the earlier proceedings which was settled under KVS Scheme, the production of appellant factory with regard to the electricity consumption etc. was ascertained and on the basis of such data, the duty was quantified. The allegation of the department that appellant had suppressed actual electricity consumption is false. The electricity consumption was the basis for quantification of demand in the earlier proceedings to which the department was also a party. Though it is alleged that there is difference in the consumption noted by appellant in the log sheet and the EB card ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rokers cannot be relied without corroboration. They have stated that the statements were made under coercion. Therefore, the case of the department that these persons assisted in procuring unaccounted raw materials by payment in cash is not sustainable. Again, when the statements of such persons which have been relied upon by the department to issue the show cause notice and demand duty as well as recover MODVAT credit has been fully held to be unreliable so as to drop the proceedings against such persons, the deposition of the very same co-noticees cannot be relied against the appellant to demand duty or deny the MODVAT credit. He relied upon the decision of the Tribunal in S.S. Organics - 2017 (357) ELT 545. 2.6 The records if any, recovered from the transporter or private records maintained by the transporter, are not connected to the appellant factory. The said records cannot be used to demand duty from the appellant. Such private records cannot be relied upon without any corroboration. 2.7 Though the factory was visited by the officers on 6.5.1997, the demand of duty has been quantified upto 1.8.1996. The officers have not found any discrepancy with regard to the stock of ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitting that there could be supply of better variety scrap to M/s. EIL. Their contradictory statements would show that they have supplied unaccounted raw materials to M/s. EIL. The commissioner has not imposed any penalty on these dealers / suppliers only because of the direction of the Tribunal that no penalty can be imposed upon such persons in denovo adjudication. However, their role for supply of unaccounted raw materials is brought out from their statements. 3.2 The second allegation is with regard to unaccounted clearance of finished products. The main argument of the ld. counsel is with regard to the production capacity and that the alleged quantity cannot be manufactured by the appellant. He adverted to para 21 of the show cause notice. From the evidence gathered, it is clear that appellant had been suppressing the actual production by showing lesser heats in their log sheets for the period from October 1995 to August 1996. For the months of December 1996 to May 1997, M/s. EIL have themselves made a calculation of electricity consumption per MT. The figures were noted on the reverse side of log sheets. Electricity consumption is around740 units per MT. During this period, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on such persons in the denovo adjudication. The main evidence in the present case is the documents recovered from the premises of M/s. EIL, the document recovered from Rajarathina Transport, electricity consumption details and statements recorded. 5.3 The allegation of wrongful availment of MODVAT is mainly based on the statement of various traders / suppliers. All these persons have been exonerated by the Commissioner by setting aside the penalty imposed in the earlier proceedings and the said findings have become final as observed by the Tribunal in its Final Order dated 7.8.2008. Taking this into consideration, we may now address the arguments put forward by the ld. AR adverting to para 96 (96A) of the impugned order. The Commissioner has concluded that there has been unaccounted purchase of raw materials merely for the reason that in cross-examination, the traders / suppliers have deposed that there might have been a mixing up of scrap at their end. We do not find any logic in drawing inference from such statements that the appellants have procured unaccounted raw material. Apart from such statement, there is no evidence adduced by the department to show that the appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spute arising from the Commissioner's show cause notice which demanded duty from M/s. EIL on the basis of power consumption per MT on ingots was settled under the KVS scheme on payment of 50% of the duty demanded. Needless to say that both the department and the assessees are parties to this settlement. Neither of them is entitled to plea anything against the formula adopted in the Commissioner's show cause notice for quantification of duty (power consumption formula). If that be so, there could have been no demand of duty on M/s. EIL on a different formula for the overlapping period (7 months). This is part of the period comprised in the period of dispute involved in the present case. It would follow that the demand of duty raised on M/s. EIL in the show cause notice of DGAE (CE) on a basis different from the formula accepted by both sides for the purpose of settlement under the KVS Scheme cannot be sustained insofar as the overlapping period is concerned. The question which now arises for consideration is whether a different formula is applicable to the rest of the period of dispute covered by DGAE (CE) notice. The show cause notice have offered factual support to adoption of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uyers. Though one to one correlation may not be possible, a probable case has to be made out which is totally lacking before us. 5.8 It is further to be noted that on physical verification of stock, no discrepancy with regard to raw materials has been noted by the department. Even though statements of various traders were taken, the stock as recorded in the RG-I register and that was lying in the factory did not show any difference. The other evidence relied is with regard to the cash deposits made in the account of Shri Prem Kumar, who is the director of the company. The amounts in his Karur Vysya Bank account has been explained by him stating that he had other business of construction activities and amounts are with regard to such business. The department has rejected and not accepted this explanation. No verification has been done in this regard. Therefore, merely because there are certain cash deposits in the account of the director of the company, it cannot be concluded that these are amounts received from sale of clandestinely removed finished products. Therefore, we have to conclude that the department has failed to establish the allegation that the appellant availed fraudu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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