TMI Blog2019 (3) TMI 1476X X X X Extracts X X X X X X X X Extracts X X X X ..... managed by Shri D. Gunasingh are voluntary, truthful and unreatracted; that statements given by employees of ADR group units are also voluntary statements. It has also been noted by the adjudicating authority that Gunasingh has not retracted from his statement. Therefore, same coupled with documents seized from premises of ADR group units are substantive and corroborative evidences - Thus, there are a disturbing number of discrepancies and inadequacies in the entire proceedings which have been flagged by the Ld. Advocate. Admissibility of evidences - section 36B of CEA - Held that:- From the records it is not forthcoming if the Certificate as required under Section 36B (4) of the Central Excise Act was recorded from Ms.Amsavalli the computer operator of Raj Plastics. Hence the mandatory requirements of Section 36B ibid have been clearly followed in the breach. It is also pertinent to note that although pen drives and CPU were seized on 09.03.2010, the data therein was admittedly copied / printed out only on 20/21.05.2010, i.e after more than two months. The statement of Ms.Amsavalli, Computer Operator of Raj Plastics was recorded after a further gap of three months, on 30.08.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave separate manufacturing set up with their own machinery. There is also no allegation that there is any transfer or use of funds between the group units and that there was financial flow back between them - There is no charge of intermingling of goods manufactured since each units manufactured different products. Each unit have separate electricity service connection, and capital of each firm is separate. Nothing has been brought on record during investigation or brought forth in adjudication to disprove or demolish the above averments of the appellant. This being so, only for the reason that D.Gunasingh is a common factor in all the three units or assists in decisions thereof, this alone cannot be a reason for holding that appellant has ‚persuasive financial control over other two units‛ and that therefore the clearances of the appellants need to be clubbed with ADRA and Raj. A number of higher appellate forums have consistently set aside the demands by the department for clubbing of clearances based on such presumptions - The Hon’ble Supreme Court in CCE Jaipur Vs Electro Mechanical Engineering Corporation [2008 (7) TMI 77 - SUPREME COURT] has inter alia upheld the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to ADRA and Raj. Vide SCN No.162/2012 dt. 31.12.2012, it was alleged that these three entities should be treated as single financial entity constituting one single manufacturer, the manufacturer being ADRP represented by D. Gunasingh; that the said D.Gunasingh started ADRA and Raj camouflaging the true nature of their activities, to illegally avail SSI exemption and to evade central excise duty and therefore their value of clearances of household articles manufactured and cleared in all the three units should be clubbed together. The second allegation was that these group units also indulged in clandestine production and clearance of excisable goods. 2.2 Vide earlier SCN No.1/2010-MRU dt. 03.09.2010, the noticees were asked to show cause as to why the unaccounted quantities of raw materials and finished products seized from the premises of Raj and ADRA should not be confiscated. However, a corrigendum to the said notice dt. 29.01.2013 was also issued for making them answerable to the Commissioner of Central Excise, Madurai. 2.3 Both these notices were adjudicated by a common Order-in-Original dt. 22.12.2012 (impugned order) wherein the adjudicating authority arrived at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Raj should be treated as single financial entity constituting one single manufacturer, the manufacturer being M/s.ADR Plastics represented by Shri D. Gunasingh. (ii) The value of clearances of three units should be clubbed together to decide eligibility of small scale exemption under Notification No.8/2003 dt. 01.03.2003. (iii) Demand of ₹ 1,74,97,316/- from ADRA represented by D.Gunasingh and not paid by them on the illicit clearances made by them during October 2007 to March 2012 is confirmed. (iv) Interest on the above demand is confirmed. (v) An amount of ₹ 10,00,000/- paid by ADRP on 15.03.2010 is appropriated. (vi) Penalty equal to duty demanded, namely, ₹ 1,74,97,316/- on ADRP in terms of Section 11AC of the Central Excise Act, 1944 is imposed. (viii) Equal penalty of ₹ 1,74,97,316/- each on Raj Plastics (Raj) and ADR Agencies (ADRA) in terms of Rule 25 of Central Excise Rules, is imposed. (ix) Equal penalty of ₹ 1,74,97,316/- imposed on D.Gunasingh under Rule 26 ibid. (x) Unaccounted quantity of (a) 61 bags of 25 kgs. each of polypropylene valued at ₹ 1,06,000/- seized from the premises of Raj (b) 275 kgs. of gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund from one firm to the other and entire operations of the firms are done independently. Thus, the most vital element of financial participation for establishing common units, is absent in the present case. As such the allegation that the appellant has pervasive financial control over the other two unit is not correct and proposal to club the clearances of the firms on the said ground is not sustainable at all. Shri Gunasingh has carried out activities in the appellant firm and in Raj Plastics only in the capacity of a partner. In ADR Agencies, he is only an employee looking after the business activities. That alone cannot be made a reason for clubbing of clearances of the three firms which otherwise is completely independent. 3.4 Notwithstanding the above, it is an admitted fact that all the three firms were engaged in manufacturing separately in their own units and there is no allegation that they are dummy units of the appellant. Under the circumstances, even presuming without admitting that the clubbing of clearances of all the three firms have to be clubbed together for the purpose of SSI exemption, even then, the law requires that demand of duty should be made to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvisor of Raj Plastics was recorded on 21.7.2010 and on 28.8.2010. In the latter statement, it has been recorded from him that estimate quotations contained the actual details of supplies made to various dealers and these sheets were prepared by him using the computer available in ADR plastics as directed by Shri D Gunasingh. (refer para 10.2 of the SCN). The Commissioner has neither examined him in terms of Section 9D nor provided opportunity to cross examine him. Further, such sheets in the form of computer print outs are also not admissible as evidence. As such his statement is not admissible in evidence and the demands proposed and confirmed based on such estimate quotations are not sustainable. Section 9D 3.8 The appellant had sought for cross examination of the various witnesses from whom statements have been recorded and relied upon in this proceedings but no opportunity was provided by the adjudicating authority and no finding has been recorded for such denial. The adjudicating authority also did not examine the witnesses before admitting the statements recorded from them as admissible evidence in terms of Section 9D. Therefore, such statements recorded and relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace reliance on the following decisions : a) SreeNirmal Spinners 2014 (300) ELT 469 CESTAT Chennai b) Balsara Hygeine Products Ltd 2012 (278) ELT 526 Revenue appeal was dismissed by Hon ble Apex Court as reported in 2015 (321) ELT A146. c) Electro Mechanical Engg Corporation 2008 (229) ELT 321 SC d) Renu Tandon 1993 (66) ELT 375 Raj e) Vizag Poly Packaging Industries 2017 (347) ELT 506 f) Poly Printers 2002 (139) ELT 295 Revenue appeal dismissed by Hon ble Apex Court as reported in 2003 (151) ELT A303 SC. g) Superior Products 2008 (230) ELT 3 SC. 4.0 On the other hand, on behalf of Revenue, the Ld.A.R, Shri S.GovindaRajan supported the findings in the impugned order. He furnished the written submissions of DGCEI (DGG ST I) Madurai Unit dated 16.3.2019 addressed to the Principal Commissioner (AR) which can be summarised as under : 4.1. Cross examination of the third parties was not allowed by the adjudicating authority : In this connection, it is submitted that the adjudicating authority had given opportunity for cross examination of the third parties sought by the noticee(s) which were not at all availed by them. They did not appear o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ics. But they have not maintained any accounts to show how much cleared from each unit . 4.5 Shri D.Gunasingh in his statement dated 09.03.2010 and Smt.P.Amsavalli, their Computer Operator vide her statement dated 30.08.2010 have admitted the above facts. The notice did not dispute the veracity of the pen drives which were being used by them to record and maintain their day-to-day business transactions, while deposing further statements on 30.08.2010 and 26.09.2012 also. They have raised objections on the veracity of the pen drives only before the adjudicating authority during the year 2014. Therefore, the present stand taken by them that printouts and information recovered from the seized pen drives are inadmissible evidences under Section 36B of the Act is only an afterthought and therefore not sustainable. 5.0. Quantification of value of clearances arrived by doubling the value of clearances : In this connection, the statements given by the dealers may please be referred. The excerpts are furnished as under. i) Shri G.Ganesan, Proprietor of M/s.Raga Stores, Madurai had, in his statement dated 10.3.2010 (Marked as Sl.No.15 of Annexure-C to the SCN No.162/2012 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to inform Shri SelvaRaj of ADR Plastics about their requirements of plastics articles and the goods will be received through Vinayaga Parcel Service; that they used to get the bills from ADR Plastics or ADR Agencies or Raj Plastics by couriers; that however, most of the times the description of goods in the bills received from ADR Group concerns will be different from that of the goods actually received by them and the bill value will be only half the value of the goods received by them; that he used to pay the amounts mentioned in the bill and amounts over the bills towards the receipt of the said articles to Shri SelvaRaj by cash . v) Shri A.Paramasivam, Proprietor of M/s.P.S.Metal, Nagercoil (marked as Sl.No.19 of Annexure-C to the SCN Page 36 of the SCN) that he used to receive Bills for less quantity of goods with reduced value as against the actual quantity and actual value of the goods supplied ; he used to inform Shri Gunasingh about his requirements by contacting him over phone, that Shri Gunasingh used to send Bills of ADR Plastics, ADR Agencies and Raj Plastics after sending the goods; that the quantity and price of the goods shown in the Bills would be less as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had confessed that he admits the receipt of the goods as mentioned in the Chits from ADR Plastics; Shri Gunasingh would send the goods as per the orders and send the bills of ADR Plastics, ADR Agencies and Raj Plastics. These bills would show less quantity and reduced value. Sometimes the goods are sent without bills; Shri Gunasingh would personally bring the chits titled Estimate Quotation showing the actual quantity of the goods supplied and the actual values thereof, while coming for collection . x) Shri M.Mohammed Raffic, Proprietor of M/s.Bismi Stores, Madurai had also admitted in his statement dated 13.08.2010 (Marked as Sl.No.27 of Annexure-C of the SCN Page 42 of the SCN) that Shri Gunasingh would send the goods as per the orders and send the bills of ADR Plastics, ADR Agencies and Raj Plastics. These bills would show less quantity and reduced value. The actual price of the goods would be three to four times of the price cited in the Bills . Sometimes the goods are sent without bills; the payments for the goods would be given to Shri Gunasingh in cash . 5.1 Thus, almost all the buyers (dealers) who had purchased plastic articles from ADR group concerns had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Bench, the Hon ble High Court in their order dt. 31.01.2019 referred to supra noted that ADR Plastics has filed regular statutory appeal before CESTAT Chennai numbered as E/40595/2015 and took the view that the Court should have the benefit of the order passed by the CESTAT Chennai in the said appeal and directed for disposal of the said appeal on merits and in accordance with law on or before 31.03.2019. 7.2 The issue that comes up for decision in this appeal is whether the clubbing of clearances of ADRA and Raj with ADRP (appellants herein) treating all the three units as single financial entity constituting one manufacturer, that being ADR Plastics, represented by D.Gunasingh, consequential confirmation of demand of ₹ 1,74,97,3016/- with interest and imposition of penalty on this appellant can be legally sustained or otherwise. 7.3 From the facts on record, the adjudicating authority has inter alia held that ADR Plastics represented by D.Gunasingh exercised persuasive financial and management control; that ADRP represented by Gunasingh is the real manufacturer and duty is to be demanded from ADRP only. It is also therefore concluded that ADR Plastics resorted to ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Computer Operator of Raj Plastics was recorded after a further gap of three months, on 30.08.2010. It also emerges that the said Ms.Amsavalli had joined Raj Plastics less than a month before the seizure of the pen drives, namely, on 14.02.2010. In the circumstances, we find that Ld. Advocate is correct in his assertion that the requirement of Section 36B have not been complied with; so also, the evidence of a newly joined employee (Ms. Amsavalli) cannot be relied upon. 7.6 This Tribunal has echoed the sanctity of Section 36B in the decisions of Ind Royal Furniture Co. Pvt. Ltd. and Agni Steels Pvt. Ltd. (supra) relied upon by Advocate. In Agni Steels (supra), this Bench had held as under : 15. From an overall analysis of the investigation, the requirements of Section 36B as also the finding in the above case, we find that it is manifest on the Investigating Officers to comply with the safeguards mandated under Section 36B of the Central Excise Act, 1944 and this is critical since, admittedly, the computer printouts were produced in the office of the DGCEI behind the back of the appellants and the appellants were nowhere in the picture during the alleged retrieval of the dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60,79,469/-. Therefore, we do not find any merit in the appeal filed by the department in E/401/2009 requesting to interfere with the dropping of the said demand of duty. 7.7 In the circumstances, we are of the considered opinion that the printouts taken from the pen drives cannot be said to have passed the strict proceduralities mandated in Section 9B ibid and hence cannot be treated as admissible evidence. 7.8 We find that in their reply dt. 19.05.2014 of ADR Plastics and reply dt. 17.11.2014 to the SCN, the appellants had given a list of 14 persons for cross examination namely, K. Ganesh, Proprietor of Karthik Plastics, Suresh, Proprietor, AST Industries, G. Ganesan Proprietor, Raga Stores, S.Nagoor Pitchai, Proprietor, Bhanu Stores, G. Kaliappan, manager, Sri Srinivasa Stores, M. SelvaRaj, Madurai, A. Paramasivam, Proprietor, P.S. Metals, B. Narayanan, Proprietor, Sri Krishna Plastics, A. Joseph, Manager, Annai Plastics, G. Selvakumar @ Karthick Ganapathi Plastic, R. Venkatesh, Supervisor, Raj Plastic, A. DuraiRaj, Partner, ADR plastics, D. Asir, partner, Raj Plastics, A. Amsavalli, Proprietrix, ADR Agencies. In their reply dt. 17.11.2014, the appellant ADRP had pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that in the absence of examination of witnesses of the cross examination, the statements are inadmissible evidence and the demand of duty based on such statements alone is unsustainable. We are therefore of the considered opinion that the denial of request for cross examination by the adjudicating authority will only serve to vitiate the entire proceedings particularly when the purported corroborative documentary evidence in the form of printouts from pen drive have been held to be as failing the test of Section 36B ibid. 7.10 It is interesting to note that statements of S/Shri Kaliappan and Kamal Raj were recorded in 2010 where they have deposed about the transactions for subsequent years which is 2010-11 and 2011-12. It is not understood how the said witnesses could have knowledge about the transactions for 2010-11 and 2011-12 in the year 2010 itself. The department has heavily relied upon the statement of these two persons to quantify the demand by doubling the value of clearances shown in the accounts of the appellant. It is also to be noted that the appellants had later taken registration and paid excise duty upon the workings which was furnished to the department. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparate employees, without any deputation of employees between them, no interdependent between the units in respect of plant and machinery. There is no charge of intermingling of goods manufactured since each units manufactured different products. Each unit have separate electricity service connection, and capital of each firm is separate. Nothing has been brought on record during investigation or brought forth in adjudication to disprove or demolish the above averments of the appellant. This being so, only for the reason that D.Gunasingh is a common factor in all the three units or assists in decisions thereof, this alone cannot be a reason for holding that appellant has persuasive financial control over other two units‛ and that therefore the clearances of the appellants need to be clubbed with ADRA and Raj. 8.4 A number of higher appellate forums have consistently set aside the demands by the department for clubbing of clearances based on such presumptions. The Hon ble Supreme Court in CCE Jaipur Vs Electro Mechanical Engineering Corporation - 2008 (229) ELT 321 (SC) has inter alia upheld the finding of Tribunal that notwithstanding certain employees of three firms bei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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