TMI Blog2020 (11) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... otice means to say that Shri Mahapatra could not disprove the allegation; it was accepted by Shri Debasis Samal and Shri Anil Jain of M/s SPRML and that in spite of the same Shri Mohapatra maintained that they have not cleared any goods other than those shown in authorised clearances. We find that the above is only an allegation and the department has not adduced any evidence whatsoever to establish the case of clandestine removal against the appellants. It was incumbent upon the department, who are alleging, to prove the same with evidence. The reliability of such an evidence becomes weak as the same comes from a third party. It has been alleged that the appellants have clandestinely removed 13,683.05 MT of MS Billets without payment of duty. The allegation is only based on the data set to have been recovered from the secret office of M/s SPRML and no other evidence has been put forth. We find that as averred by the learned Counsel for the appellants, reliance cannot be placed only on the evidence available with the Third Party. The appellants have alleged that while obtaining the electronic record at M/s SPRML, department did not adhere to the provisions of 36(B) of the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to M/s SPRML on the basis of documents alleged to have been recovered from M/s SPRML, M/s SPRML have not been made party to the impugned SCN and thereby, the case suffers from the principle of non-joinder. Appeal allowed. - Excise Appeal No.76211 of 2018 Excise Appeal No.76212 of 2018 Excise Appeal No.76213 of 2018 - FINAL ORDER NO. 75583-75585/2020 - Dated:- 12-11-2020 - HON BLE SHRI P.K.CHOUDHARY, MEMBER (JUDICIAL) And HON BLE SHRI P.ANJANI KUMAR, MEMBER (TECHNICAL) Shri K.K.Anand, Advocate Shri S.Mohapatra, GM (Taxation) for the Appellant Shri S.S.Chattopadhyay, Authorized Representative for the Respondent ORDER P. ANJANI KUMAR Brief facts of the case are that the Appellant No. 1 is inter alia engaged in the manufacture of MS Billets (CETH 72), D.I. Pipes (CETH 73) and Pig Iron (Ch. 72); officers of DGCEI, New Delhi searched the premises of M/s Shree Parasnath Re-Rolling Mills Ltd, Durgapur (M/s SPRML); some data relating to unaccounted transactions, in external Hard Drives, were recovered from their secret office at Shantiban Park, Durgapur. Print outs of the contents of the hard discs were taken in the presence of authorized signatory of M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were taken from the said hard disks; copy of Panchnama drawn for stock taking of raw materials at the premises of M/s. SPRML; copies of other statements by officers of M/s SPRML; copy of any SCN issued to M/s. SPRML consequent to the searches on27-12-2012 and copies of all documents/records seized from M/s. SPRML relating to the receipt and purchase of raw materials from the notice No. 1 (like delivery challans, gate passes, GRs of transporters, material received, registered or the like, transport vehicle numbers etc. They also requested for cross examination of the panch-witnesses present during the recovery of two external hard drives at secret office of M/s SPRML; Shri Debasis Sasmal, CFO and Shri Anil Kumar Jain, Director of M/s. SPRML; the Commissioner did not accede to any of the above requests holding that the request was made after eight months after issuance of the show cause notice ; the Appellant No. 1 had no alternative but to file final reply dated 28- 11-2017; impugned Order has been passed in blatant violation of the principles of natural justice; Commissioner should not have confirmed the duty demand merely on the basis of untested oral evidence without bringing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the documents of his unit and did not have any idea about the documents shown to him; the Commissioner has thrown to wind all the principles of quasi-judicial proceedings; he confirmed the duty demand without ascertaining whether adjudication proceedings against M/s. SPRML were complete; this issue was raised in reply to the show cause notice but there is no finding. Moreover, he himself has accepted in his Order (at para 4.7) that there was no direct evidence of clandestine removal by the Appellant; entire duty demand has been arrived at in the show cause notice on the basis of hard drives/electronic records seized from the premises of SPRML on 27-12- 2012; the pen drives were not seized from the premises of Appellant No. 1; the same could not be relied upon straightway against Appellant No. 1 unless the provisions of Section 36(B) of the Central Excise Act, 1944 were satisfied and complied with and a certificate is issued under Section 36 B (4); computer printout was not a primary evidence, since it carried no signature and was prone to manipulation and therefore, Section36 B allows printouts to be used as evidence, with strict conditions; the conditions, inter alia, provide tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14- 15 (up to 09-04-2014); the period of duty demand in the instant case, February 2012 to December 2012, is included in the show cause notice dated 23-04-2015; interestingly, the said SCN doesn t mention any single case of unaccounted clearance to M/s. SPRML during the impugned period; the said SCN is pending for Adjudication. 5.Learned Advocate submits that even otherwise it is a well settled law that in order to prove the allegation of clandestine removal the department must bring on record cogent, positive and concrete evidence to prove the said allegation; such allegation cannot be sustained on the basis of assumptions, presumptions and conjectures; in the instant case, while alleging clandestine removal of 13683.05 MT of MS Billets, no evidence has been brought on record to show unaccounted purchase of various raw materials; in order to manufacture evidences relied upon for confirming demand is third party documents. He submits that Commissioner has relied upon the following judgments. (i). Systems and Components Pvt Ltd - 2004 (165) ELT 136(SC). (ii). Siemens Ltd Vs CCE, Calcutta - 1994 (70) ELT305. (iii). Columbia Electronics Ltd Vs CCE, Indore - 2002 (14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no justification to sustain the penalty; there is absolutely no justification for imposing penalty on Appellant No. 2 just because he is one of the Directors of the Appellant No. 1; no evidence has been brought on record in support of the findings that the Appellant no. 2 played instrumental role in the alleged clandestine activity by Appellant no. 1; penalty against him merits to be quashed in toto; similarly no penalty can be sustained against Appellant No. 3 as his detailed statement was recorded during the course of investigation wherein he has stoutly denied the authenticity of the records seized by the DGGSTI from the premises of M/s. SPRML; he gave satisfactory reply to each and every question put to him; moreover, Appellant no. 3 is merely an employee of Appellant no. 1 and the provisions of Section 26(1) are not applicable in his case. 10. Learned Authorised Representative appearing for the revenue reiterates the findings of commissioner. 11. Heard both sides and perused the records of the case. Brief issues concerning this case are as follows:- (i) Whether in the facts and circumstances of the case the evidence in the form of print out taken from the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tely removed the same without accounting and without payment of applicable duty; the list of such clearances were placed in Annexure-H to the show cause notice. 13. The sum and substance of the submissions submitted by the learned Counsel for the appellants is that the principles of natural justice have been grossly violated in the case as seized documents were not provided; cross-examination was not allowed; they were denied right to represent themselves in a personal hearing after they got documents relied upon or otherwise; the department is relying upon third party information which is not a reliable evidence; department has not undertaken any worthwhile investigation other than taking the print out from the Hard drives alleged to have been found in the secret premises of M/s. SPRML; revenue have not adduced any evidence regarding procurement of raw material, consumption of electricity/fuel, deployment of labour, transportation, financial transactions etc. to prove the charge of clandestine removal; department has slapped the demand on Unit-III without any investigation or evidence; penalty was levied on the Managing Director even without recording his statement. 14. We s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment in the instant case. In view of the same, we find that principles of natural justice have been violated in this case and for that reason the case needs to go back to Commissioner for reconsideration. However, we find that need for such a remand back to the adjudicating authority, for violation of principles of natural justice, can be decided after appreciation of the facts and merits of the case. 15. We find that though the learned Commissioner accepts the need to decide whether it would be prudent enough to hold the appellants responsible for such unlawful transactions with M/s. SPRML in the absence of any direct evidence or admittance by the noticee, he proceeds to find that admitted facts need not be proved in view of Systems Components Pvt Ltd. [2004 (165) ELT 136(SC)] and that in case of clandestine removal evidence can be gathered from the circumstances in view of Siemens Ltd. Vs. CCE, Kolkata [1994 (70) E.L.T. 305]. He finds that in clandestine activity persons try their best not to leave evidence; department is not required to prove its case with mathematical precision but it is enough if it is established with a reasonable degree of probability. He relies up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he period February 2012 to December 2012. However, we have supplied the goods on the basis of delivery order may be verbal. Q.No.32. All these documents had been seized by DGCEI, New Delhi on spot under proper authentications of the key persons of M/s.SPRML and their statements as well as Director s establish the fact that the transaction shown in these documents are genuine. Accordingly, it is proved that you have supplied your finished goods to M/s.SPRML, without cover of Central Excise invoices and assessment/payment of appropriate Central Excise duty. Please comment. Ans. I have seen the documents seized by DGCEI from M/s.SPRML, for which I am submitting the details of sales to the above party during the asking period for your verification. I am only concerned about what my books of accounts is saying. Q.No.33. But as per records seized by DGCEI and accepted by SPRML the goods supplied by you without payment of duty and without issuance of Central Excise invoice, being not recorded in your books of accounts, how your payment shall be based on your books of accounts please explain. Ans. Since the documents seized from SPRML, I have no idea. I am concerned what saying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw materials like iron ore, lam coke, steam coal, manganese and scrap. No evidence has been gathered to show the illegal and clandestine procurement of the said raw materials. We find that there is force in the argument of the appellant. In addition to the above, the Department did not produce evidence of consumption of electricity, deployment of labour and production of such billets. We find that without any investigation conducted in that direction, thereto without taking stock of raw materials and finished goods immediately after evidence was found at the end of M/s SPRML, allegation of clandestine removal cannot be sustained. It is also seen that statement of Shri Aditya Jajodia, Managing Director was not even recorded and it is surprising to see that while alleging clandestine removal of that magnitude responsible senior person like the Managing Director was not even questioned. Only Sh. Mohapatra who is an authorised signatory of the appellants has been questioned who did not accept any misconduct on their part. The allegation is only based on the data set to have been recovered from the secret office of M/s SPRML and no other evidence has been put forth. We find that as aver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenues which mainly are the following : (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 sales of such goods to identified parties. (e) Receipt of sale proceeds, whether by cheque o 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, evidence made available is not even enough even for a Gross approximation. The appellant has relied upon a number of cases wherein it was settled that in order to prove the allegations of clandestine removal the department must bring on record cogent, positive and concrete evidence to prove the said allegation, the said allegation cannot be sustained on the basis of assumptions and conjectures. We find, in view of the above, that the investigation and consequentially the allegation of clandestine removal, lacks credence and suffers from incurable lacunae. 22. It is seen that the appellants claimed that they are registered with Central Excise and have units (ii), (iii) and (iv). However, the SCN has been issued to unit no. (iii). It is not made clear in the SCN or in the Adjudication order as to why the said demand was slapped against the unit no. (iii). No reasons, whatsoever, have been given. It is seen from the records that Annexure- H which was prepared giving month-wise, date-wise quantity, rate, value of the alleged clandestine clearances along with the Truck numbers. It is repeated to be statement of clearance and payment received from M/s SPRML for unaccounted sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive. *** *** *** Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it. We find that reliance on case laws cannot be with an intent to invoke catchy sentences/phrases which can in no way a substitute for slipshod investigation. 24. Appellants contended that DGCEI, New Delhi issued another SCN, alleging clandestine removal by the appellants, and that the period covered therein also includes the period covered in the instant case and therefore, the SCN in the instant case does not survive. We find that DGCEI New Delhi have investigated a case of clandestine removal by Unit-III and Unit-IV of the appellants and have issued a show cause notice dated 23.04.2015 to the appellants. Though, there is no bar in issuing SCNs for the same period covering different aspects backed by different set of evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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