TMI Blog2020 (3) TMI 594X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the Assessing officer towards gross profit on unrecorded sales and unaccounted purchases is directed to be deleted. At the same time, the Revenue would be at liberty to take action as per law where the matter so decided by the CESTAT is appealed against by the Revenue and is decided in its favour. - Decided in favour of assessee. - ITA. No. 555 And 556/JP/2016 - - - Dated:- 12-3-2020 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM For the Assessee : Shri Rano Jain (C.A.), Shri Himanshu Goyal (C.A.), Shri Prathu Singal (C.A. And Praneti Agarwal (C.A.) For the Revenue : Shri K.C.Gupta (JCIT) ORDER PER: VIKRAM SINGH YADAV, A.M. These are two appeals filed by the assessee against the respective orders of ld. CIT(A)-IV, Jaipur dated 23.03.2016 for the assessment years 2010-11 2011-12 respectively. 2. With the consent of both the parties, these appeals involving common issues were taken up for hearing and the matter was heard, and now being disposed off by this consolidated order. 3. For the sake of present discussion, with the consent of both the parties, assessee s appeal in ITA No. 555/JP/2016 for the assessment year 2010-11 has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. (iii)That the ld. CIT(A) has erred in not accepting the rejoinder to remand report filed before him and also refusing to accept the rejoinder sent through courier. (iv)That the CIT(A) has erred in not accepting the plea of the appellant that since the case of the appellant was pending at Honorable CESTAT New Delhi the present case in appeal to be adjourned sine die till the disposal of the said appeal by CESTAT, New Delhi. (v)That the ld. CIT(A) has erred in not accepting the plea of the asssesse for applying ratio of the decision passed by Honorable Rajasthan High Court in the assessee's own case wherein the proceedings for AY 2008-09 2009-10 have been stayed for the want of order by Honorable CESTAT. 5. On the facts and circumstances of the case, the learned CIT(A) has erred, in dismissing the ground for error made by AO in charging interest under section 234B 86 234D of the Act. 6. On the facts and circumstances of the case, the learned CIT(A) has erred, in dismissing the ground for initiation of penalty by AO under section 271(1)(c) of the Act. 4. Briefly the facts of the case are that the assessee is engaged in manufacturing and trading o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order which are reproduced as under:- 7. The reply filed by assessee has been considered. During the course of hearing, the Ld. A.R. vehemently argued that the action of Central Excise Department was biased and has been challenged. Moreover, the assessee is in the process of filing of appeal CESTAT where total relief is expected. It was also argued that even if the turnover of 15.13 Cr. is to be adopted, in no condition the total sales can be added. The assessee has cited certain case laws in favour of its claim. A request has also been made to keep the proceedings abeyance till decision of CESTAT appeal. 8. The matter has been considered. But the plea of the assessee is not acceptable in toto. The assessee pleaded the average of rate of sale of finished goods in the case of the assessee as per the balance sheet is ₹ 27,406/- per MT. It is pertaining to mention here that during the year under consideration the assessee has made undisclosed production and sale of ₹ 12,56,60,484/- ( 4548.145 MT @ 27,406 PMT works out to ₹ 12,56,60,484/-). It is an admitted fact that the sales is of finished goods for which the assessee has to incur some cost in pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the CIT(A), whereby he has confirmed the order of A.O. making two additions of ₹ 75,64,761/- and ₹ 20,10,567/- on the basis of certain enquiries made by the Excise Department. A search and seizure operation was conducted at the premises of the assessee and also some other dealers and transporters by the Excise Department. On the basis of this search, the Excise department alleged that the assessee had procured scrap from various parties which was not accounted for and has processed it and such production was also not accounted for. It was also alleged that this production has been cleared clandestinely by the assessee without payment of duty. Total clandestine removal of goods alleged by the Excise Department for the period from 01.11.2006 to 31.08.2011 was ₹ 177,93,97,766/-, resulting in evasion of duty amounting to ₹ 23,85,67,946/-. 7. It was further submitted that the Assessing Officer in the present Income Tax proceedings, on the basis of investigation done by the Excise department alleged the following amounts as undisclosed production and sale by the assessee amounting to ₹ 12,56,60,484/- for A.Y. 2010-11, ₹ 10,49,36,677/- for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Excise Department by the Hon ble CESTAT, the additions made by A.O. are liable to be deleted. 10. Per contra, the ld. DR is heard who has vehemently argued the matter. He has again taken us through the findings of the Assessing officer and submitted that it is a clear case of evasion of excise duty by the assessee and which has been detected of DGCEI and basis such detection of clandestine manufacture and clearance of finished goods, the AO has determined undisclosed production and sale of finished goods amounting to ₹ 12,56,60,484/- and basis, the same, he has determined undisclosed investment in stock of ₹ 75,64,761/- and undisclosed profits of ₹ 20,10,567 on such undisclosed sales. He accordingly supported the order of lower authorities. 11. We have considered the rival submissions and perused the material available on record. We find that the additions made by the Assessing Officer is arising out of the search action carried out by DGCEI conducted at the assessee s factory premises wherein it was found that the assessee was involved in clandestine manufacture and clearance of finish goods. During the course of assessment proceedings, basis such search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the order by ld. CIT(A) on 23.03.2016, the order of the CESTAT was not pronounced and therefore, couldn t be considered by him. 12. We refer to the order dated 20.10.2017 passed by the CESTAT and we deem it appropriate to reproduce the same as under:- These appeals including one appeal of Revenue arise from common Order-in-Original No.80-81/2012/C.Ex/JPR-II, Commissioner dated 31 December, 2012. The details of the appeals are as follows:- Sl.No. Appeal No. Appellant s Name Demand/Penalty Reason 1 E/56611/2013 Rughuveer metal Industries Ltd. Duty- ₹ 233420556/- Penalty- ₹ 233420556/- Charge of clandestine clearance. 2 E/56612/2013 Rughuveer metal Industries Ltd. Redemption Fine- ₹ 1000000/- Confiscation of goods worth ₹ 70,49,861/- Currency of ₹ 66,30,000/- Confiscation under Rule 25 of CER, 2002 (Panchnama dated 15.09.2010 (RUD-1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Industries Ltd. ₹ 51,47,390/- Charge of clandestine clearance dropped on account of duplication of demand. As all these appeals arise from the same investigation and are interconnected/common issue, are accordingly taken up together for disposal. 2. The main appellant-M/s. Reghuveer metal Industries Limited (RMIL for short) are engaged in manufacture of TMT bars under the brand name of KAMDHENU and MS ingots classifiable under chapter 72 of Centre Excise Tariff Act, 1985. The appellant is regularly paying the Central excise duty and also availing benefit of Cenvat credit on inputs. The main raw materials used are steel scrap and sponge iron. 3. The brand name KAMDHENU belongs to Kamdhenu Ispat Ltd. (KIL for short), who charged a royalty of ₹ 150 per metric ton of sales made by the appellant excluding service tax. 4. On the basis on information that RMIL- appellant were indulging in evasion of duty by clandestinely manufacture and clearance of finished goods, a search operation was conducted on 14-15/09/2010 at the factory and related premises by the officers of DGCEI. During the course of sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d certain documents were recovered. Quantity of 32,55,29.4 M.T. of KAMDHENU TMT Bar, valued at ₹ 19,24,676/- were detained. Investigation was also carried out with the suppliers of raw materials and buyers of the finished goods and also from the transporters of the goods and certain documents were recovered and resumed. Further statements of proprietor/partner/manager/authorised person/s etc. were recorded. Some of them admitted to have cleared unaccounted raw material without bills to the appellant and having received payment in cash. Some of the buyers of the finished goods Admitted to have received the final products without invoice or bills and without payment of duty of excise. 7.Investigations were also done at the premises of two transporters of the appellant, namely M/s Khawaja Garib Nawaj Transport Company, Ajmer and M/s Vikas Transport Company, Ajmer. No corresponding invoice/bill was found to be issued against some of the entries in the booking register of the said transporters. Further, for some of the GR's, no corresponding invoice was found to be issued. In respect of information collected from the commercial tax Department revealed that entry in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows: - The learned Commissioner have recorded the finding that the payment (credit) of ₹ 4 lakhs on 04/04/2008 as royalty by appellant to KIL and again debit of ₹ 4,28,104/- on 30/04/2008, in appellants account with KIL shows that the total royalty payment for the month of April 2008 was ₹ 8,29,441/-, as against royalty payment of ₹ 4 lakhs only recorded in the appellant's account. There is no substance in the submission that payment of ₹ 4 lakhs on 04/04/2008 was advance against the actual 'royalty due' entry of ₹ 4,28,104/- made on 30 April, 2008, since the appellant have not produced any vouchers in support of such contention. It was further observed by the Commissioner that it is highly unlikely that the appellant would show any royalty payment on paper, with respect to clandestinely removed KAMDHENU brand TMT Bars, since it would enhance their chances of being caught during scrutiny. Such excess payment of royalty would only have been available in the records/books of KIL. The learned counsel states that the appellant's account in the books of KIL seized by the Department - RUD 88, reflects the entries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Further, one Shri Daulat Ram, one of the Panchas stated that he did not witness the Panchnama proceedings and was called only at the end of search for an hour to sign the statements. The entire Panchanama loses its credibility and becomes void. He added that when Panchanama proceedings itself is doubtfull, entire case of the Department based on such Panchanama will not be sustainable. The cross-examination of Shri Daualt Ram also supports the credence to retractions made by the directors/employees of the appellant on 16.09.2010. 18. He further emphasized that there is no corroborative evidence to prove that the actual stock taking was undertaken by the officers in absence of weighment slips, details of vehicles used for weighment, payments to labour used for weighment, etc. 19. In such circumstances, no charge of shortage/excess of finished goods, or of clandestine clearance thereof, is sustainable. In this regard, reliance was placed on the following judgments:- CCE, Raipur, v. Devi Iron Power Pvt. Ltd., 2015 (321) E.L.T. 270 ( Tri. Del.) CCE, Meerut-I V. Silvertone Papers Ltd., 2013 (287) E.L.T. 478 ( Tri. Del.) Hissar Pipes Pvt. Ltd. V. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osh Metal Inglilstries v. CCE ST, Delhi, F.O. No. 50477/2017-CU[DBL.dated 25.01.2017 Nabha Steels Ltd. v. CCE, Chandigarh, 2016 (344) E.L.T. 561 (Tri. - Chan.) Sunrise Food Products Ors. v. CCE, Delhi, 2017 (1) TMI 84 - CESTAT NEW DELHI M/s. S.H. Haryana Wires Ltd. Ors. v. CCE, Faridabad, 2016 (10) TMI 449 - CESTAT NEW DELHI 24. That the entire finding is legally untenable on account of the fact that the Ld. Commissioner at the end of para 16 ( of orderin- original) has held that no cenvat credit demand could be confirmed against the appellant on this ground in the absence of any attempt from the department to quantify the amount. Thus, the investigation on this point appears to be way-ward and mis-directed. 25. Further, there is no logic in buying scrap without bills from a party, and thereafter, in subsequent invoices inflating the quantity vis-a-vis the scrap supplied. This finding in itself destroys the case of the department. There is no evidence regarding how the scrap without invoices was transported to the Appellant. 26. He also pointed out that for the alleged clandestine production and clearance of 42,300 MT of finished products, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been held by this Tribunal repeatedly that charge of clandestine clearance cannot be confirmed merely on the basis of third party records, in the absence of any corroborative evidence. Ld. Counsel placed reliance on following decisions: Bhawani Moulders Pvt. Ltd. 00 Ors. v. CCE, Raipur, 2017 (1) TMI 493 - CESTAT NEW DELHI M/s. N.R. Sponge Pvt. Ltd. v. CCE ST, Raipur, 2015-TIOL-1600- CESTAT-DEL Albright Steel Industries Ltd. v. CCE, Raipur, 2015 (322) E.L.T. 542 (Tri. - Del.) Sakeen Alloys Pvt. Ltd. V. CCE, Ahmedabad, 2013 (296) E.L.T. 392 (Tri. - Ahmd.), as maintained by the Hon'ble Gujarat High Court in CCE v. Sakeen Alloys Pvt. Ltd., 2014 (308) E.L.T. 655 (Guj.) CCE, Indore v. Rajratan Synthetics Ltd., 2013 (297) E.L.T. 63 (Tri. - Del.) 30. Ld. AR have reiterated the findings in the impugned order. Regarding royalty he submitted that payments of ₹ 4,00,000/- on 04.04.2008 as royalty by the appellant to Kamdhenu and again debit of ₹ 4,28,104/- on 30.04.2008 in Appellant's Account with Kamdhenu shows that the total royalty payment for the month of April 2008 was ₹ 8,29,441/-, as against royalty payment of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess of raw material in the factory was done in the presence of the employees of the factory. As per the cross examination of Shri Daulat Ram, even if he was present in the factory only for an hour and did not witness the physical stock taking, this does not mean that stock taking did not take place. The employees of the Appellant had expertise in weighment which must have been relied upon by the officers. 36. He further submitted that as detailed in Para 19-24 of the SCN dated 25.11.2011, it has been clearly brought out from the `Payal Export Quality Ex. Note Book (RUD-22)' that the Appellant was taking more heats from the induction furnaces than what they were reflecting in their statutory records, thus, this reflects clandestine production by the Appellant. 37. As per Para 63 of the SCN, certain suppliers have confirmed that they supplied non-cenvatable scrap without bills to the Appellant on cash basis and were raising invoices for three times the quantity of scrap actually supplied under the cenvatable invoices. 38. As per Para 36-61 of the SCN, it comes out that the Appellant was procuring Cenvatable scrap by showing higher quantity of scrap than what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be totaled together. A perusal of ledger resumed from Kamdhenu Ispat Ltd Shows separate column for Debit and credit amount whereas Revenue has put the amount of debit column as well as credit column in one single Column and then totaled it, which is nearly doubled because of wrong merging of the Debit side and credit side column. In our view any confirmation of demand based on such doubling of amount(s) cannot be sustained. There is no plausible reasoning given by, Revenue in support of totaling of debit amount and credit amount, while calculating demand of duty because of difference in royalty. Further, not recording of statement of kandhenue Ispat Ltd, on such resumed ledger account, also shows that here is no substance in the finding ofthe Revenue that alleged difference in royalty leads to clandestine clearances. 44. To sum up, the appeal No. E/56611 of 2013 is allowed in part of follows- (a) the demand of ₹ 7,33,57,221/- is set aside; (b) the demand of ₹ 16,00,60,335/- is set aside and remand to the learned Commissioner, for re-verification, in terms of directions and observations hereinabove; (c) order of confiscation of cash and goods is set a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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