TMI Blog2019 (1) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... estine receipt of the raw materials, namely, MS Ingots from which they purportedly manufactured and cleared quantity of 8316.357 MTs of their finished goods i.e. angle, channel and bars. There is no other evidence with respect of purported clandestine manufacture or clearance of 8316.357 MT of finished goods. The third party evidence can be considered as a mere starting point of investigation and cannot be considered as a reliable evidence without corroboration. The whole case against the appellant has been made merely on the basis of certain records found in the premises of M/s Pankaj Ispat Ltd. and a generalised confessional statement of Sh. Pankaj Aggarwal that the records found from his premises are correct. These records contained entries not only of the appellant but also many other parties. Record of removals and specific entries in the private records of Pankaj Ispat Ltd. pertaining to the appellant were not questioned. There is no corroboration to the same with any corresponding record of purchase in the appellants factory, manufacture, sale of finished goods, receipt of cash, electricity consumption by the appellant. Sh. Girdhar Sahu denied the contents of the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld meet with all the consequences of demand and penalties. A mere mathematical possibility that the shortage of CI moulds could have resulted in manufacture of excess finished stock of angles, channels etc. could not be accepted without respective entries in record. The claim is all the more not acceptable because the appellant has been found to be indulging in clandestine manufacture and clearance - Demand, interest, penalty and redemption fine are upheld. The penalty of ₹ 39,96,040/- against the appellant is upheld out of total penalty of ₹ 3,79,32,215/- and rest is set aside. The redemption fine of ₹ 15,97,000/- imposed in the impugned order is upheld. Appeal allowed in part. - E/50476/2016-EX[DB], E/50477/2016-EX [DB], E/50489/2016-EX [DB], E/50491/2016-EX [DB], E/50497/2016-EX [DB], E/50432/2016-EX [DB] - FINAL ORDER NO. 53511-53516/2018 - Dated:- 21-12-2018 - MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) And MR. C.L. MAHAR, MEMBER (TECHNICAL) Present for the Appellant: Mr. A.K. prasad, Advocate, Ms. Surbhi Sinha, Advocate, Ms. Rinki Arora, Advocate Present for the Respondent: Mr. S.K. Bansal, D.R. ORDER PER: C.L. MAHAR All the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Raipur Rs.60,515/- Paid and appropriated ₹ 15,129/- 11 M/s Prayas Steels, Plot No. 5 To 8, Phase-II, Siltara Industrial Area, Raipur Rs.3,75,744/- Rs.3,75,744/- 12 M/s Rooplaxmi Industries India Pvt. Ltd., Sondara, Behind Nandan steel, Raipur Rs.1,76,125/- Rs.1,76,125/- 2. Briefly stated facts are that during the course of search by the officers of the Preventive Wing, Central Excise, Hqrs., Raipur regarding evasion of Central Excise duty by M/s M/s Pankaj Ispat Limited Urla Industrial Area, Raipur, at their factory premises various private records revealing unaccounted purchase of raw material and sale of finished goods were recovered. Scrutiny of the said documents recovered from Noticee No.5 revealed that Noticee No.1, M/s Hanukripa Ispat Pvt. Limited had received 4527.810 MT and 5837.520 MT of MS Ingots during the period 2010-11 (from June'2010) and 2011-12 respectively, cleared by Noticee No.5 during the said period. 3. In the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispatched from Noticee No.5 to Noticee No. 1, which pertained to both, accounted for goods as well as unaccounted goods found in the records of Noticee No.1 10. During the search of factory premises of Noticee No. 1 some loose papers, ( IN slips) containing all the details related to transportation of Ingots, Sponge Iron lumps/fines from Noticee No.6 to 12 to the factory of Noticee No.1 were also recovered. Scrutiny of the documents revealed that some of the consignments received against such slips were covered under invoices but in most of the cases neither any invoice nor any entry in the purchase register of Noticee No. 1 was found recorded and it appeared that 686.56 MT of MS Ingots and 15.95 MT of Sponge Iron was procured by Noticee No.1 clandestinely from Noticee No. 6 to 12. 11. Statement of Shri Giridhar Sahu, Billing Clerk of Noticee No 1 was recorded on13.02.2013, wherein he was shown the material receipts recovered from the premises of Noticee No. 5 and he accepted that these materials receipts were related to Noticee No.1. He also recognized the signature of Shri Radhe Shyam Yadav on the said material receipts. 12. In his Statement dated 13.02.2013, 1Shri Lali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndestine removal of 31.52 MT of M.S. Ingots. 17. On scrutiny of the invoices issued by Noticee No.6 in respect of consignments, claimed to had been diverted to M/s Kanha Steel., it was observed that the invoices were initially issued in favour of Noticee No.1 and later on name of the consignee had been changed manually by using correction fluid. As regards other consignments received back by Noticee No.6 and claimed to have been Captively consumed, no document evidencing transportation of goods from the premises of Noticee No. 1 could be furnished. 18. The rejection of the goods from Noticee No.1, as claimed by Noticee No.6, also appeared to be incorrect as on the slips which indicated the receipt of material by Noticee No. 1 from Noticee No.6, the test report of the material was mentioned; however there was no mention of any rejection or return. Moreover Noticee No 1 had already accepted the receipt of the impugned goods without payment of duty and without cover of any invoice. Accordingly the liability of Central Excise duty on Noticee No.6 against the said clandestine removal of 11 consignments (totaling to 133.050 MT) of M.S. Ingots to Noticee No.1 worked out to ₹ 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Noticee No.11, in his statement dated 20.02.2013, accepted the same and deposited the central excise duty involved therein amounting to ₹ 3,75,744. 24. On verification at the end of M/s Rooplaxmi Industries India Pvt. transactions totalling to 49.650 MT of M.S. Ingots were removed by it without payment of Central Excise duty. Shri Kamal Vadhwani, Director of Noticee No. 12 in his statement dated 20.02.2013, denied the aforementioned removals. The total Central Excise duty on the said removals worked out to ₹ 1,76,125/-appeared recoverable from Noticee No.12, in light of the facts that Noticee No.1 had already accepted the receipt of the 49.650 MT of M.S. Ingots removed by Noticee No.12. 25. In view of the above, it appeared that Noticee No.1 had purchased 9240.395 MT of unaccounted raw material viz. M.S. Ingots during the year 2010-11(From June'2010) and 2011-12 removed clandestinely by Noticee No. 5 and out of the said unaccounted raw material it manufactured 8316.357 MT of Rolled products and removed the same clandestinely without issuing the Central Excise invoices and without payment of Central Excise duty. The Central Excise duty involved in the said c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the documents/records seized from M/s Pankaj Ispat are third party documents which cannot he accepted as evidence without independent corroboration. During his statement on 13.2.2013 Shri Bairang Jain has denied having received any M S Ingots from M/s Pankaj Ispat without accountal. The Commissioner has adopted a strange definition of `third party' in this case. That M/s Pankaj Agarwal, Director of M/s Pankaj Ispat ltd., has not said anything specific relating to supplies to the appellants. Neither was he examined by the adjudicating authority nor was he produced for cross-examination as per provisions of section 9D of the Central Excise Act, 1944. Hence his statement cannot be relied upon. That regarding the 29 slips seized from the factory of M/s Pankaj Ispat purportedly signed by Shri Radhey Shyam Yadav, Despatch Clerk of the appellants, evidencing receipt of unaccounted MS Ingots by the appellants it was submitted that the format of these material receipt SLIPS allegedly found in the factory premises of Pankaj Ispat Ltd., was different from the receipt format used by the appellants as evident from blank receipts seized from the premises of the appellants on 13.02.2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Radhey Shyam taken during the course of investigations did not match with most of the IN slips . Submissions with respect to demand of ₹ 14,24,796 28.3. As regards the demand of duty (of ₹ 14,24,796/-) on the shortages detected at the time of stock-taking, the Ld. Advocate submitted that the shortage of 330.288 MTs, of 'cast iron ingot moulds' was only notional. These moulds, after repeated use in the production of MS Ingots, eventually become scrap with 70% residual weight. This was melted in the furnace and converted to Ingots which in turn is converted to finished goods like MS Channels etc with recovery of around 85 %. Thus 330.288 MT of C.I. Moulds will produce 231 MT of MS Ingots, which in turn will produce around 196 MT of MS Channels/Angles. This is the quantity of finished goods (191.752 MT), after allowing some weighment errors, which was found in excess at the time stock taking. Thus, the shortage of raw material and excess of finished goods can be reconciled, and have duly been reflected in the ER-I Return for the month of May, 2013. Hence, shortage or excess detected was only notional. 28.4 As regards Shortage of 15.85 MT of M S In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... veni Engineering Industries Ltd. Vs. CCE Allahabad [2016 (334) ELT 595 (All)]. He further argued that Cum-duty benefit should have been extended to the appellants). APPEAL NO. E/50476/2016-Ex[DB] FILED BY SHANKAR LAL JAIN DIRCETOR, ALLEAL NO. E/50489/2016-EX[DB] FILED BY KAILASH CHANDRA AGRAWAL DIRCETOR, E/50491/2016-EX[DB] FILED BY BAJRANG LAL JAIN DIRCETOR 29. The Ld. Advocate appearing on behalf of all these appellants has submitted that penalties have been imposed on the Directors under Rule 26 of the Central Excise Rules, 2002. Penalty under this Rule can be imposed only for any act of omission of commission on the part of the partners making any goods liable for confiscation. There is no proposal in the show cause notice to hold any goods liable for confiscation on which demand has been raised. Hence, penalty cannot be imposed on the partners. Further he argued that it has been held in the case of CCE vs Ramesh Kumar Rajendra Kumar 2015(325)ELT506(Bom) by the Bombay High Court that Rule 209A (which is pari Materia current Rule 26) will apply only in respect of a person who has physically dealt with the goods which are liable for confiscation and that similar views ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... landestine receipt of the raw materials, namely, MS Ingots from which they purportedly manufactured and cleared quantity of 8316.357 MTs of their finished goods i.e. angle, channel and bars. The adjudicating authority has relied upon the entries recorded in the outward register of M/s Pankaj Ispat Ltd and certain weighment slips found in the factory premises of M/s Pankaj Ispat Ltd. Further, 29 acknowledged material receipts purportedly signed by the appellant s representative Radhey Shyam were also relied upon. He further relied upon statement of Director of M/s Pankaj Industries Ltd, who admitted clandestine removal of MS Ingots to the appellant. During initial investigation, Shri Radhey Shyam Yadav, Dispatch Clerk of the appellant accepted and acknowledged issue of these material receipts to M/s Pankaj Industries Ltd on receipt of materials i.e. M.S. Ingots. Shri Girdhar Sahu, Billing Clerk of the appellant also recognised signature of Shri Radhey Shyam Yadav on the said material receipts. The adjudicating authority has further reasoned that out of 4527.810 MTs and 5837.20 MTs of M.S. Ingots purportedly dispatched to the appellants by M/s Pankaj Ispat Ltd during 2010-11 and 2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal calculations and are based upon the input output ratio. Such assumptive clandestine removals cannot be upheld, inasmuch as the allegations of clandestine activities are serious allegations and are required to be arrived at on the basis of concrete evidences and not on the basis of assumption and presumption. We find that the Hon ble Delhi High Court in the case of 2016 (332) E.L.T. 416 (Del.) FLEVEL INTERNATIONAL Versus COMMISSIONER OF CENTRAL EXCISE have summarised the following tests to establish the charge of clandestine removal. (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) discovery of such finished goods outside the factory; (d) instances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings against other such purchasers who have not owned up the purchases of the carbon black. There is also no inculpatory statement from the appellants in regard to the purchase of the carbon black. We observe that the learned lower authority in his order in para 3 has stated as under : He further accepted the unaccounted purchase of 7,750 Kgs. of Carbon black for the year 1987-88 and 2275 Kg. for the year 1988-89; that the cash payment against purchase of Carbon black was made by Shri Kasinath and another Director of their company; that he was not available during the year 1987-88 to look after the affairs of the firm and from April 1988 Shri Kashinath was looking after the factory work; prior to April 1988 Shri Mirza was looking after the factory. Shri Ashok Kumar, a Director, who has given a statement, was himself not looking after the affairs of the company and regarding the payments stated to have been made by Shri Kashinath, another Director, no information has been elicited from Shri Kashinath regarding the payments. On going through the copy of the statement filed before us, we observe that Shri Ashok Kumar has stated as under : According to the invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and we are of the view that in the facts of this case the authorities should have examined the production of appellants in the light of the electricity consumption in the unit for corroboration after verification regarding the units consumed. We, therefore, set aside the impugned order of the learned lower authority and remand the matter to the learned lower authority for de novo decision in the light of our observations above. The appeal is, therefore, allowed by remand. 30.4. Thus, we set aside the impugned order with respect to this demand of ₹ 3,39,36,175/- and allow the appeal. 30.5. As regards demand of ₹ 25,71,244/- in respect of IN Slips seized from the premises of the appellants, we find that the receipt of unaccounted materials against these IN slips has been admitted by the Director Sh. Bajrang Jain and he has also accepted to pay duty on the supposed manufacture of finished goods from these un accounted material. However, Ld. advocate appearing on behalf of the appellant has contested manufacture of finished goods from the raw materials covered under these IN slips on the ground that there no corroborative evidence of corresponding manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant. As regards, the claim that 101.53 MT of ingots was returned to M/S Shri Ram Rolling Mills, we find that the claim is without any documentary evidence produced with regard to the same. Moreover, charge of clandestine removal is confirmed against M/S Shri Ram Rolling Mills in the adjudication order which has not been contested. Accordingly, we uphold the whole demand of demand of ₹ 25,71,244/- alongwith interest and penalty under Section 11AC. 30.5. As regards demand of Rs. demand of ₹ 14,24,796, on shortage of 330.288 MTs, of 'cast iron ingot moulds' and 15.85 MT of M S Ingots and excess stock of 191.752 MT of MS channels/Angles, the Ld. advocate has claimed that the shortage of 330.288 MTs, of 'cast iron ingot moulds' was on account of scrapped moulds on repeated use which were melted and used for manufacture of 191.752 MT resulting in corresponding excess stock of 191.752 MT of MS channels/Angles. Shortage of 15.85 MT of MS ingot has been claimed as weighment error. We find that the appellant was under a stautory obligation to properly account for all the cenvatable inputs and finished goods in the statutory records. The failure would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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