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TMI Blog2019 (5) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... demand / confirmed Penalty imposed u/s 11AC of Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002 Penalty Imposed under Rule 26 of Central Excise Rules, 2002 1 M/s.Prince Alloys (P) Ltd. Rs. 49,05,222/- Rs. 49,05,222/- -- 2 Shri T.K. Abdul Karim -- -- Rs. 1 lakh 3 Shri Ahmed Faizal Sha -- -- Rs. 50,000/- 4 Shri C.K. Abdurahiman -- --- Rs. 50,000/- 5 M/s. Bee Path Casting Pvt. Ltd. -- -- Rs. 10,000/- 6 Shri Anub Sha -- -- Rs. 50,000/- 7 M/s. Prince TMT Steels Ltd. -- -- Rs. 10,000/- 2.1. Briefly the facts of the present case are that the respondents M/s. Prince Alloys (P) Ltd., Palakkad (main respondent)are manufacturers of MS ingots, M/s. Prince TMT Steels Ltd. are the manufacturers of TMT bars / rods and M/s. Bee Path Casting Pvt. Ltd. are manufacturers of CTD bars and MS Rods. The Preventive Unit, Calicut conducted a search of the common office and factory premises of M/s. Prince Alloys Pvt. Ltd. and their sister concern M/s. Prince Rollings (P) Ltd. and seized several documents. Some incriminating private documents evidencing receipt of unaccounted MS scrap, unaccounted production of ingots ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MS ingots without payment of duty has not been proved. Thereafter, the Committee of Commissioners examined the records and the order passed by the Commissioner(Appeals) and there was no consensus among the members of the Committee and the matter was referred to the Chief Commissioner who directed that the appeal be filed before the Tribunal. Hence the Revenue filed the present appeals. 3. Heard both sides and perused records. 4.1. Learned AR appearing for the Revenue has submitted that the impugned order passed by the Commissioner(Appeals) setting aside the Order-in-Original is not sustainable in law as the same has been passed without properly appreciating the documentary evidences on record and without appreciating the law and the binding judicial precedent. He further submitted that the Revenue has filed the present appeals against the impugned order mainly on the following grounds:- a. Note Books allegedly maintained by Shri Anbu, Cashier pertaining to payments made to the production contractor, maintenance contractor and maintenance supervisor and note books allegedly maintained by one of the Chemists and seized under Mahazar dt. 12/07/2006. b. Retracted statements o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, he relied upon the decision in the case of Zaki Ishrati Vs. CCE, Kanpur [2010(255) ELT 545 (Tri. Del.) and this decision was affirmed by the High Court which is reported in 2013(291) ELT 161(All.). He also relied upon the following decisions:- i. CCE, Coimbatore Vs. Acufil Machines [2004(177) ELT 326 (Tri. Chennai)] ii. Surjeet Singh Chhabra Vs. UOI [1997(89) ELT 646 (SC)] iii. Naresh J. Sukhawani Vs. UOI [1996(83) ELT 258 (SC)] 4.3. He also submitted that the Department has recorded the statements of the employees who were related to production and clearance and also recovered private records which can be considered to arrive at a finding of clandestine removal. He further submitted that clandestine removal can only be proved by circumstantial evidence and it is not possible to establish every link in chain without any break. He also submitted that the Revenue has also relied upon the statements of the dealers to prove the clandestine removal. He also submitted that the details are recorded in the mahazar and its annexures and the same have not been challenged and therefore the same can be taken as sufficient evidence. it is his further submission that on analyzing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Commissioner(Appeals) vide the impugned order that the statements were retracted immediately and even the subsequent statements were also retracted. He also submitted that it is a settled legal position that the charge of clandestine manufacture and removal of goods without payment of duty cannot be established based on the uncorroborated statement of a person. This has been held in the case of CCE&C, Surat Vs. Suresh Synthetics [2016(332) ELT 385 (SC)] . He also submitted that it is a settled proposition of law that retracted statements cannot be relied upon without corroboration of independent evidence. for this submission, he relied upon the following decisions:- a) Vinod Solanki Vs. UOI [2008(233) ELT 157 (SC)] b) KI Pavunny Vs. Asst. Collector of CE, Cochin [1997(90) ELT 241 (SC)] c) Pascoal Dias Vs. ACC(P), Goa [2003(157) ELT 132 (Bom.)] iii. He also submitted that para 3 of the show-cause notice refers to physical stock verification of MS ingots and raw materials in the factory on 12/07/2006 and there was no discrepancy in stock of the goods whatsoever. Learned counsel also pointed out the flaws in the investigation and submitted that the investigation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Prince Rollings (P) Ltd., which has also procured the furnace simultaneously in 2005-06. This fact was considered by the Tribunal in the case of M/s. Prince Rollings (P) Ltd. and has examined this issue in its order dt. 05.10.2018 wherein the Tribunal has concluded that there is no report of any action taken by the jurisdictional Central Excise authorities against M/s. Inductotherm (India) Pvt. Ltd. for suppression of capacity and thus understandably the value of the furnace cleared by them and in the absence of any proof, one cannot conclude simply on the basis of drawings attached to the invoice. Further regarding the electricity consumption, the Revenue has not carried out any tests or trail in the factory of the assessee to determine the average electricity consumption for manufacture of one MT of MS ingots. This issue has also been examined by this Tribunal in the case of Prince Rollings (P) Ltd. in its Final Order dt. 05/10/2018 in para 4.8 and after examining the orders of the Kerala VAT Tribunal and the Hon'ble High Court of Kerala, the Tribunal has rejected the contentions of the Revenue. Further the counsel submitted that the CCE, Calicut, based on the same investigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same evidence as relied upon by the Revenue in the present appeals. 4. Heard both sides and perused the records of the case. The brief issues which require consideration in the present case are: (i) Whether the allegation of clandestine manufacture and removal of steel ingots by the appellants is sustainable? Whether the Department relied on uncorroborated statements and documents whose ownership was not established? (ii) Whether seizure and confiscation of 4.544 MT of MS ingots in the factory of M/s. Prince TMT Steels Pvt. Ltd. is maintainable? 4.1 We find that the impugned order has mainly relied upon the following: (i) 3 Note books/pads allegedly maintained by Shri V.R. Sibiraj, Chemist and 4 Note books maintained by Shri Anbu, Cashier. (ii) Statements of various persons of the company and truck drivers. (iii) Electricity consumption. (iv) Alleged suppression of capacity of the furnace. 4.2 Coming to the note books maintained by the Chemist, it was alleged that they are relate to date-wise production of figures of MS ingots in different heats by M/s. PRPL and M/s. PAPL. It was alleged that Shri C.K. Abdurahiman, General Manager PRPL has accepted the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts but has not given any findings countering the same. 4.3 Moreover, we find that there are certain inherent discrepancies in the approach of the Revenue in the instant case. The impugned order has found in no uncertain terms that most of the unaccounted clearance was made to their sister concerns i.e. M/s. TMT Steels Pvt. Ltd. and M/s. Bee Path Castings Pvt Ltd. The appellants have brought to our notice that a show-cause notice 18/2007 dated 23.05.2007 to M/s. BPCPL was issued alleging that M/s. PRPL had removed 140 Ingots weighing 11.260 MT under invoice No. 409 on 11.07.2006 and that M/s. PAPL have cleared 275 Nos. of MS Ingots weighing 11.030 MT under invoice No. 362 on 11.07.2006. It is not understood as to how 275 Ingots and 140 Ingots would weigh approximately the same whereas in the mahazar dated 13.07.2006 drawn at M/s. PTSPL average weight of Ingot was taken to be 98 kg. 4.4 Show-cause notice No. 43/2007 dated 6.12.2007 issued to M/s. PTSPL alleges that M/s. PRPL have cleared 265.178 MT of MS Ingots to M/s. PTSPL. The confirmation of this show-cause notice has been set aside by Commissioner (Appeals) vide order 52-55/2010 dated 13.07.2010. 4.5 A combined look that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 176 2,05,800 -- M/s. PRPL and the amounts shown to have been received by him were quite different from above and as under: Month Amount April 2006 50,000 May 2006 78,000 June 2006 79,000 July 2006 60,000 The adjudicating authority has dropped the proceedings. Here also it is evident that the Department is not relying on the same set of records in two different proceedings thereby putting a question mark on the evidentiary value of the documents. 4.7 We find that Shri C.K. Abdurahiman, General Manager, Shri Anub Sha, Director, Prince TMT, Shri Sibiraj, Chemist and Sh. Anbu, Cashier have retracted their statements. They were again called for statements and their statements were recorded confirming the original statements. However, during the cross examination they have again retracted the statements. In fact issues raised and were not answered or attended. Shri Sibiraj, Chemist claimed that he did not maintain those records but one Armugham may have maintained. No efforts seem to have been made to find out if such Person existed. No findings contradicting the claim were also given in the impugned order on cross examination. We find that Ld. Commissioner has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Ahmed Fazal Sha that the average power consumption was around 700 to 750 units. Ld. Counsel for the appellants submitted that the Commercial Taxes Department has issued a demand notice alleging that 800 units were required for 1 MT of ingot. The Appellate Tribunal of VAT directed the officers to determine power consumption practically. On a direction given by Kerala High Court in Writ Petition C. No. 2371/13(V) concluded on the basis of study got conducted that 1103.64 units were required for 1 MT ingot. Accordingly, the adjudicating authority has dropped the proceedings. In view of the above, evidentiary value of electricity consumption, appears not strong. 4.9 The impugned order alleges that the appellants have suppressed the capacity of the plant to be 6 MT whereas it was actually of 8 MT. Though the invoice mentioned the furnace to be 6 MT, it is evidenced by the drawings supplied by M/s. Inductotherm (India) Pvt. Ltd that the furnace was of 8 MT. The appellants submitted that the invoice No. 3618/21.10.2005 issued by Inductotherm (India) Pvt. Ltd was for 6 MT only. The furnace was of 6 MT only but with lining as applicable to 8 MT furnace. Heat registers maintained by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch finished goods outside the factory (d). Instances of sales 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; (f). Use of electricity for in excess of what is necessary for manufacture of goods otherwise manufactured and validity cleared on payment of duty (g). Statements of buyers with some details of illicit manufacture and clearance; (h). Proof of actual transportation of goods, cleared without payment of duty (i). Links between the document recovered during the search and activities being carried on in the factory of production; etc......... 9. In view of the above legal position and facts available on record, we are constrained to reiterate that evidence of only one diary cannot be made the basis of establishing clandestine manufacture and removal of the fabrics. It has been repeatedly held by the Courts that clandestine manufacture and clearance cannot be readily inferred from few documents and statements unless the allegations are also corroborated and established on evidences, relatable to or linked with actual manufacturing operations. As far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to account. Purchase of any other raw material was not established. Electricity consumption was not established as discussed above. Statements of the drivers indicated that they have transported goods to their sister concerns and that they were given papers in an envelope which they showed to officers of whenever it was checked. Therefore, it cannot be alleged that all clearances were clandestine. Clearances to units other than sister concerns, if any, were not established. There was no investigation or record or findings in the impugned order about financial transactions. Under these conditions, allegation of clandestine removal only on the basis of production, allegedly evidenced by the records said to have been maintained by Chemist showing production and the records said to have been maintained by Cashier showing payments to production contractor cannot be relied upon. As a matter of fact, Revenue did not rely on these records while issuing SCNs to their sister concerns i.e. M/s PTSPL and M/s BCPL. Whereas the sister concerns M/s PTSPL and M/s BCPL were alleged to have received about 166 MT and 11 MT of MS ingots from the appellants respectively. Therefore, private records alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corroborated. 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. In view of the above, we are inclined to accept the submissions of the appellants on the facts of the case and go by the case law submitted by them. 6.2. Further we find that it is well settled legal position that the allegation of manufacture and clandestine removal of goods without payment of duty being a serious charge, 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 of goods from the factory, receipt of the goods by the buyer and receipt of consideration etc. These requirements have been held in the following cases. i. Commissioner Vs. Bihariji Manufacture Co. Pvt. Ltd. [2015(323) ELT 106 (Del.)]; [2015(323) ELT A 023(SC)] ii. Mahesh Silk Mills Vs. CCE, Mumbai [2014(304) ELT 703 (Tri. Ahmd.)] iii. Continental Cement Company Vs. UOI [2014(309) ELT 411 (All.)] iv. CCE Vs. Motabhai Iron & Steel Industries [2015(316) ELT 374 (G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priate technical /scientific measurements. Neither the Department nor the appellants cared to adopt this method. In the absence of any conclusive evidence the capacity of the furnace remains uncertain. (iv). It is quite evident that many of the above factors affecting power consumption from factory to factory are relevant in the same factory also and can significantly affect production over a period of time. As such the finding wide variation of consumption in electricity confirms the allegation of unaccounted production and clearance is wrong. (v). None of the parallel invoices were recovered or seized. Impugned order records that lorry drivers have stated that they used to carry ingots without bills from the factory. The appellants contended that both lorry drivers stated that they were transporting goods with bills only. I find that there is no mention of transportation of M.S. Ingots without bills in the statements of the lorry drivers as concluded in the impugned order. 8. We find that the Learned Commissioner has given careful consideration to the facts of the case and has given reasoned findings which are similar to the case, based on same set of facts and investigat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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