TMI Blog2023 (5) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... proper one to corelation can be established between the goods cleared on Delivery Memos and the invoices issued by the appellant. It is quite evident the goods were necessarily to be cleared on the invoice containing the details as prescribed by the rules. Even if the private records other than the invoice i.e. delivery memo were to be considered as proper documents for the purpose of clearance of the goods then also they should have carried the necessary details. The fact that delivery memos that were used for the clearance of the goods did not contain the details as required in terms of the above stated rules is not in dispute. The contention of the appellant that this omission on their part was for the reason of ignorance of law can never be admitted as valid defence for the reason that appellant were registered under Central Excise from 2005 onwards, and in case they had any difficulty in following any of the provisions or in understanding the same they could have approached the jurisdictional officers. Ignorance of law is not an excuse for conducting the business in manner not sanctioned as per the law. Any exercise taken to correlate the delivery memos with the invoices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be co-related with the duty paying documents is an act of clandestine clearance and demand of duty against such clearances needs to be made by invoking the extended period of limitation as provided by the proviso to Section 11 A (1) of the Central Excise Act, 1944. Penalty - HELD THAT:- Since the demand of duty is upheld by invoking extended period of limitation, in view of the decision of the Hon ble Supreme Court in case Rajasthan Spinning and Weaving Mill [ 2009 (5) TMI 15 - SUPREME COURT] , penalty imposed on Appellant 1, under Section 11AC is justified. Since the penalty imposed under section 11AC of the Central Excise Act, 1944 on Appellant 1 is upheld, there are no justification for imposition of same amount of penalty under Rule 25 of the Central Excise Rules, 2002. Thus the penalty impose under Rule 25 on the Appellant 1 is set aside - Appellant 2 is the receiver of the goods cleared by the Appellant 1 against delivery memos. The finding recorded by the Commissioner, to the effect that these goods do not get reflected in their book of accounts is not challenged. Appellant 2 has knowingly dealt with goods which were liable for confiscation knowingly and hence pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed above. 2.1 M/s BSS Mines Minerals Pvt Ltd (Appellant 1) is engaged in manufacture Manganese Oxide (MnO) (CETH 28209000) and Manganese Di Oxide (MnO2) (28201000). The main raw material for them is Manganese Ore (MnO2) which they procure from Appellant 2. 2.2 M/s Goodearth Agrochem Pvt Ltd (Appellant 2) is manufacturer of Manganese Oxide (MnO) (CETH 28209000) and Manganese Di Oxide (MnO2) (28201000). They procure the raw material viz Manganese Oxide (MnO) (grinded and un-grinded), Manganese Di Oxide (MnO2) and Manganese Ore from Appellant 1. 2.3 Shri Pramod Budharaja is one of the Director of Appellant 1 and also of Appellant 2, looking after day to day affairs of both viz purchase of raw material, sale of finished goods, production, clearances and related accounts etc. The directors of appellant 1 and appellant 2 as admitted by appellant 3 in his statement dated 01.12.2009 are as follows: Appellant 1 Appellant 2 Shri Pramod Budhraja Shri Rishi Budhraja Shri Rahul Budhraja Shri Pramod Budhraja Shri Rishi Budhraja Shri Rahul Budhraja Smt Sunita Budhraja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case as a whole or at various stages for removal of excisable goods by clearing the same under Delivery memo without issuing proper Central Excise invoices, in acquiring possession of, in transporting, in removing, in depositing or dealing with the excisable goods knowing and having reason to believe that the goods in question were liable to confiscation under the Central Excise Act, 1944 or Central Excise Rules, 2002. 2.6 The show cause notice has been adjudicated as per the impugned order referred in para 1 above. 2.7 Aggrieved appellants have filed these appeals. 3.1 We have heard Shri Gajendra Jain and Ms Payal Nahar Advocates for the appellants and Shri Dhirendra Kumar Joint Commissioner, Authorized Representative for the revenue. 3.2 Arguing for the appellants learned counsels submit:- Both the show cause notice as well as the impugned order proceeded on the basis of presumption that the appellants had cleared MnO twice i.e., under the cover of DMs and also under the cover of the invoices issued later on. This presumption is not only incorrect on fact but also without any evidence whatsoever. Initially due to lack of awareness of the central excise proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ashyap, Manager (Commercial), Shri Vijaykumar Mantri, Manager (Commercial). These statements show that the appellants had cleared the goods manufactured by them to GAPL under DMs and the Central Excise invoices for the same were issued later on. In other words, the quantities of goods cleared by the appellants are The co-relation between the various documents maintained by the appellants and GAPL clearly show that invoices were issued and duty was paid only in respect of the quantity of MnO already cleared in past under DMs. Revenue has placed reliance on the gate out register of the appellants to allege clandestine removal of goods. It is submitted that the evidence in the form of gate out register (Outward register) maintained by the appellant 1 and the gate in register (inward register) maintained by appellant 2 show that appellant 2 had received only the quantity of goods covered by the DMs issued by the appellants and there was no receipt of any goods when Central Excise invoices were issued by the appellants for payment of duty. On comparison of DMs and invoices for the month of April 2009, it would be seen that total MnO dispatched as 43 grade was 172.755 MTs, 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue is not producing concrete and positive evidence to prove that the appellant 1 have clandestinely removed MnO to Appellant 2. The total quantity of MnO which notice alleges to have been clandestinely cleared by the appellants during the period 5.12.2006 to 23.3.2007 is 709.336 MTs. The Commissioner has accepted the explanation of the appellants so far as DM No.169 issued by GAPL to the appellants for 35.340 MT of Manganese Ore (grade: DB2320) is concerned and has set aside the duty demand to that extent. Duty demand to the extent of 71.400 MTs is not sustainable since it pertains to sale of Manganese Ore by the appellants to GAPL. After deducting the quantities of 35.340 MTs and 71.400 MTs as referred to above, the balance quantity that remains is 602.596 MTs. During the FY 2006-2007, the appellants have paid duty on total quantity of 644.354 MTs of MnO. The quantity cleared on payment of duty is more than the balance quantity of MnO to the tune of 41.758 MTs. If the allegation of the department that the duty paid quantity is besides the quantity cleared on DMs, the total quantity that was required to be dispatched would have been 709.336 + 644.354 MTs = 1353 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Order, in the months of April 2008, August 2008 October 2008 and June 2009 there are no clearances in the DSA but certain quantities were dispatched under DMs for the months of April 2008, August 2008 October 2008 and June 2009. Just like there are no entries in the DSA for the clearances made under DMs for the months of April 2008, August 2008 October 2008 and June 2009, there are instances where the quantity cleared as per the DSA is much more than the quantity covered by the DMs as may be seen from the comparison of the total quantities as per DSA and those cleared under DMs in the months of May 2008, June 2008, September 2008, December 2008, August 2009, September 2009 and October 2009. This fact shows the inadvertence on the part of the person maintaining the DSA and nothing else. Several DMs for the months of April 2008, August 2008, October 2008 and June 2009 cover dispatches of MnO manufactured on job-work basis and hence, are accounted for in the DSA. If the quantities cleared under DMs and those cleared as per DSA are compared in totality financial year-wise, there would be no difference barring the clearances of MnO manufactured on job-work basis. Difference if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MnO on job-work basis for GAPL. As explained earlier in para 6.1 and para 6.2 Supra, GAPL would have lost royalty if it had not used manganese ore (procured from MOIL) or if it was used for nonmanufacturing activity. Since GAPL has not lost royalty, it is evident that GAPL has not sold the said raw material to appellants and has only sent the said raw material on job-work basis. For this purpose, the appellants have enclosed two certificates of Chartered Accountant. One certificate clearly shows total Manganese Ore purchased by GAPL from MOIL in 2008-09 (refer page 401 to 403 of Vol-II) and the second certificate specifies the quantity of ore on which royalty was lost in 2008-09 (refer page 404 405 of Vol-II). However, the Commissioner did not recognize the fact that appellants manufactured MnO on job work basis for GAPL. The quantity on which duty has been paid by the appellants is more than the quantity covered by DMs. The quantity on which duty has been paid by the appellants is 1523.102 MTs which is more than the quantity i.e., 1490.838 MTs covered by DMs. The submissions made in paras 18.12 to 18.14 supra are reiterated here. The total quantity covered by the DMs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction, clearance and closing stock as shown in the Daily Stock Account. As such the allegation of manipulation of Central Excise records is incorrect and perverse. The appellants have not contravened any of the provisions of the Central Excise Act, 1944 and Central Excise Rules, 2002 with an intent to evade payment of duty and therefore extended period of limitation cannot be invoked and penalty is not imposable. In any case, imposing penalty twice is uncalled for. Since the duty demand itself is not sustainable in the present case, the appellants are not liable to pay interest. 3.3 During the course of arguments counsel for appellant was asked to submit cross tabulation of the invoices against which the duty was paid with the DM s for the at least six months which was submitted by them along with 04.01.2023. Revenue was asked to submit the observations on the said cross tabulation. 3.4 Arguing for the revenue learned authorized representative while reiterating the findings recorded in the impugned order submits: The matter was referred to the field Commissionerate who have vide letter dated 28.11.2022 reported as follows: In this regard, it is submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs. 5,09,00,262/- clandestinely without cover of proper Central Excise Invoices and without maintaining the statutory records and without payment of Central Excise duty amounting to Rs. 60,22,723/- (BED Rs. 58,53,738/- + Ed. Cess Rs. 1,17,075/- + S H Cess Rs. 51,911/-), during the period from 05.12.2006 to 14.10.2009 in contravention of the provisions of Rule 4, 6, 8, 10, 11 and 12 of the Central Excise Rules 2002 by suppression and misrepresentation of the facts. 38.1. The Noticee No. 1 has interalia contended that the activities carried out in their factory are of two types. The first category is that of processing of Manganese Ore and the other one is manufacture of Manganese Oxide (MnO). Manganese Ore is the basic raw material required for carrying out both the processes mentioned above. Manganese Ore is basically Manganese Dioxide. Manganese Ore (Chemical Grade) is a rare commodity and is available only to manufacturers who have been allocated quota by MOIL. Financial year 2005-06:- 38.2. The Noticee No. 1 has further submitted that in the financial year 2005-06, they had opted for total exemption upto first clearances of Rs. 100 Lacs in terms of Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r while computing demand. I also find that the said Delivery memo was filed in the File 424 seized under Panchanama dated 15.10.2009 / 04.03.2010 along with the Delivery memo issued by the Noticee No. 1 to M/s. Goodearth Agro Chem Pvt. Ltd., Nagpur. therefore held that the said quantity of 35.340 MT of goods under the Delivery Memo No. 169 dated 22.12.2006 was inadvertently considered as supply of goods (MnO) by Noticee No. 1 to M/s Goodearth Agro Chem Pvt. Ltd., Nagpur. The same therefore needs to be abridged from the total demanded quantity of goods cleared by Noticee No. 1 to M/s Goodearth Agro Chem Pvt. Ltd., Nagpur the duty demanded thereof needs to be accordingly recalculated and reduced. Quantification of duty:- 38.6. I, therefore, held that Central Excise duty of Rs. 43,256/- [BED - Rs. 42,408/- + Ed. Cess Rs. 848/-] in respect of said 35.340 MT which was demanded as set out in Annexure D of the Show Cause Notice is liable to be reduced from the total demand of central excise duty of Rs. 60,22,723/- of Annexure D. The duty liability under Annexure D will therefore now work out to Rs. 59,79,467/-. 38.7. I further find that the Noticee No. 1 has contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38.10. Even assuming without admitting that they manufactured and cleared such MnO for and on behalf of M/s Goodearth Agro Chem Pvt. Ltd. on job work basis, the Noticee No. 1 ought to have paid the applicable Central Excise duty on account of manufacture and clearance of such MnO after following the procedure envisaged for manufacture of goods on job work basis, which they have failed to do so. 38.11. In view of the above, the plea of Noticee No. 1 is nothing but an afterthought and is not at all acceptable. 38.12. It is observed from the para 21 of the SCN that the Noticee No. 1 have contended that they have cleared MnO on Delivery Memo but they have issued Central Excise Tax invoices and paid duty at the end of the month. However, it is observed that the said contention of the Noticee No.1 is incorrect, in as much as in the month of April, 2008, August, 2008, October, 2008 and June, 2009, they have shown 'NIL' clearances in the Daily Stock Account register whereas as per seized records, they have cleared MnO to the tune of 131.140 MT 36.156 MT, 38.18 74.232 MT and 190.690 MT in the respective months, under the cover of Delivery Memo to Noticee No. 2, wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods in the month of April, 2008 on delivery memo. 38.16. I therefore find it very difficult to accept that such clearances on numerous occasions involving different period is not recorded in the Daily Stock Account inadvertently. So many clearances under Delivery Memo at various occasions involving substantial period and duty liability going unrecorded in the books of account cannot be construed as a genuine explanation for such lapse. The explanation put forth by the Noticee No. 1 is nothing but an afterthought to somehow justify their clandestine clearance under the delivery memo without following the Central Excise procedures such as issue of tax invoice etc with an ulterior motive to evade payment of duty on such clearances. Thus, I find that this is again a casual plea on a very flimsy ground. Such explanation on part of Noticee No. 1 is totally bereft of any substance and is rejected as untenable and unacceptable. 38.17. Further, on perusal of some of entries, for clearance of MnO made by Noticee No. 1, in the DSA register and tax invoices issued for clearance of MnO by the Noticee No. 1, I find that in some instances, for clearance of the goods as indicated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Revenue neutrality:- 38.22. I further find that the Noticee No. 1 in their defence have contended that even if Noticee No. 1 had to pay duty on such clearance of MnO under delivery memo, then such duty paid by them would have been available as Cenvat Credit to Noticee No. 2 as such it is a case of revenue neutrality and the allegation of clearance of goods without payment of duty with an intent to evade the same, is on the face of it, unsustainable. 38.23. I however find that irrespective of whether payment of duty by an input stage manufacturer is revenue neutral for the final stage manufacture being entitled for Cenvat of duty paid on inputs, does not absolve the input stage excisable goods manufacturer from payment of applicable duties at the time of clearance of excisable goods. Subject to certain condition based exemptions the law requires manufacturers of excisable goods not only to pay the applicable duty at the time of clearances of excisable goods but also requires such manufacturers to follow the procedures prescribed under Central excise Rules any other applicable rules for procurement, manufacture, job work, clearance, payment of duty etc. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional quantity of MnO they would have required additional Manganese Ore, procurement of which is not in SCN. It has been further claimed that on the basis of document no. 4 submitted along with reply dated 2.10.2010 the Noticee No. 1 would have required additional quantity of raw material. I find that the documents no. 4 so submitted alongwith reply dated 2.10.2010, is nothing but back calculation of raw material requirement based on production recorded in their statutory records. However, as observed herein above, as the Noticee No.1 have actually not properly maintained their procurement/receipt of raw material, production of finished excisable goods (MnO) thereof and clearance of such excisable goods on delivery memo, I find no substance on Noticee No. 1's plea. Infact, I find that as accepted by Noticee No. 1 and also as is evident from delivery memo S. No. 169 of Noticee No. 2 issued for supply of Manganese Ore to Noticee No. 1, the receipt of which has not been recorded by Noticee No. 1. the Noticee No. 1 have also not recorded the quantity of goods manufactured out of such unaccounted raw material and have also not issued any tax invoice evidencing payment of Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble and not acceptable. 39. Clandestine removal:- 39.1. The Noticee No. 1 has also placed reliance on the following judgments other such judgments to emphasize that the onus of proof of clandestine removal is on the Department. i. COMMISSIONER OF C. EXCISE, PATNA Versus UNIVERSAL POLYTHELENE INDUSTRIES, 2001 (130) E.L.T. 228 (Tri. - Kolkata) ii. ICYCOLD COMMERCIAL ENTERPRISE Versus COLLECTOR OF C. EX., CALCUTTA-I, 1994 (69) E.L.T. 337 (Tribunal) 39.2 In this regard, I find that, in the instant case, the department has detected clearance of goods on delivery memo by the Noticee No 1 without issuance of proper tax invoice, without payment of Central excise duty, without following Central excise procedures. I also find that the Noticee No 1 is engaged in procurement of raw material without reflecting it in their statutory books of account, manufacture of finished excisable goods out of such unaccounted raw material not recording such production in their books of accounts, clandestine clearance of such goods on delivery memo without issuance of proper tax invoice and without payment of duty. I, therefore, find that, in the instant case, the department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suppressed procurement of raw material from the department but also suppressed the quantity of excisable goods i.e. MnO manufactured and cleared without payment of duty out of such raw material from the department such clandestine activity was feebly attempted to be justified by the Noticee No. 1 in the guise of job work which is not tenable as held supra. I therefore find that the above case law also is of no use to the Noticee No. 1 as it is not applicable. 40) Whether the extended period of five years is invokable in this case under proviso to Section 11A of Central Excise Act, 1944. 40.1. I, find that, in the instant case, there is evidence indicating clandestine clearance of excisable goods by the Noticee No. 1 on delivery memo on numerous instances. I also find that once such documents evidencing clearance of excisable goods without payment of duty are recovered, the onus to explain the same squarely lies on the Noticee No. 1. I, however, find that no plausible explanation has been submitted by the Noticee No. 1. I further find that their Authorised Signatory has also accepted the removal of goods on delivery memo in un- retracted statements. In the circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Hon'ble Apex court in the case of Collector of Customs vs D Boormal reported in 1983 (13) ELT 1546 (SC), held that department is not required to prove its case with mathematical precision to a demonstrable degree. The law does not require prosecution to prove the impossible. All that is required is the establishment of such degree of probability that a prudent man may, on the basis, believe in the existence of the fact in issue. The Hon'ble court further observed that secrecy and stealth being it's covering guards it is impossible for the preventive department to unravel every link of the process. Many facts relating to this illicit business remain in their special or peculiar knowledge of the person concerned. In the instant case, the ratio of the said judgment is squarely applicable in view of the foregoing discussions. 40.6. The Hon'ble Tribunal in the case of Gulab Chand Silk Mill (P) Ltd. Vs CCE, Hyderabad reported in 2005 (184) ELT 263 (Tri.-Bang), held that clandestine activity at best can be established only by circumstantial evidences and it will be humanly impossible to establish every link in the chain of clandestine activity without any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the aforesaid discussions it is observed that the extended period has been rightly invoked in the case. 41) Whether interest at the appropriate rate is also liable to be recovered under the provisions of Section 11 AB of the Central Excise Act 1944. 41.1. Since the demand is sustainable, interest at the rate as applicable from time to time on the amount of Cenvat credit proposed to be demanded as above, is also to be recovered from the Noticee No. 1 under Section 11AB of Central Excise Act, 1944 by following the judgment of the Hon'ble Supreme Court in the case of Commissioner of Trade Tax [UP] Vs Kanhai Ram Thekedar reported in 2005-TIOL-76-SC-CT, wherein it was stressed that the interest amount is inbuilt in the recovery provision itself and there is no requirement of a notice to be given to the assessee for recovery of interest, which the assessee was required by law to pay on the tax admittedly payable but which was paid beyond the time limit. Applying the ratio decidendi derived from the above decision, I hold that the proposal for the recovery of interest under Section 11AB of CEA, 1944 is sustainable. 42) Whether the Noticee No. 1, 2 and 3 hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court, in the case of Punjab Tractors Ltd Vs CCE, Chandigarh [2005 (181) ELT 380 (SC)] has held that, for the violation of rules, the appellant will undoubtedly be liable to pay the penalty as prescribed under the said Rules for such violations . 42.7. Further in the case of CCE Rajkot Vs Deco Ceramics Industries reported in 2003 (156) ELT 611 (Tri.Mum), the Hon'ble Tribunal has held that, Once the goods have been removed clandestinely, the provisions of Section 11AC of the CEA are attracted. 42.8. In the case of Kejriwal Enterprises Vs CCE New Delhi reported in 2001 (131) ELT 226 (Tri.Del) the Hon'ble Tribunal has held that, No doubt a fraud has been perpetrated on Revenue and therefore a deterrent penalty is called for. Since the penalty could be much higher and penalty almost equal to the amount of credit taken has been imposed, we do not see any reason to interfere with the imposition of penalty or with the quantum thereof . 42.9. In this case, but for the investigation undertaken by the officers, the mis-deeds of the Noticee No.1 would not have come to light and would have remained un-noticed resulting in huge revenue loss to the Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules, 2002 as the Noticee No. 2 have abetted Noticee No. 1 in clandestine removal of excisable goods with intent to evade payment of duty. 44. PENALTY ON NOTICEE NO. 3 MANAGING DIRECTOR OF NOTICEE NO. 1 2 44.1. I find that the Noticee No. 3 is a common Managing Director of both Noticee No 1 and Noticee No. 2 and was well aware about the activities of both Noticee No. 1 and Noticee No. 2. The Noticee No. 3 was therefore well aware about the fact that the goods were being cleared by Noticee No. 1 to Noticee No. 2 on delivery memo only without cover of invoice and without payment of duty. I further find that Shri Sujit Kumar Das, Technical Manager - cum - Factory In-charge of Noticee No. 1 in his statement dated 4th March, on being asked about issuance of Central Excise invoices by Noticee No. 1 in respect of goods cleared on delivery memo, has stated that he is not aware about issuance of such Central Excise Invoices or otherwise by Noticee No. 1 and the same can be explained by their Managing Director Shri Pramod Budharaja. I further find that same was reiterated in the Panchnama proceedings dated 04-03-2010 drawn at factory premises of M/s BSS Mines, Kalmeshwar Road ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4.4 Appellant has through a long drawn process of submissions and arguments sought to establish that out of the ignorance they were clearing the goods on the delivery memo to their sister concern and subsequently issuing the invoices towards such clearance. They have before us by their submissions concluded that they have in fact paid duty on more quantity of goods then what is covered by the delivery memos. Summarizing their arguments year wise in para 21 of their written submissions they have prepared a table which is reproduced below: (Qty in MTs) Particulars Dec 2006 to Mar 2007 Apr 2008 to Mar 2009 Apr 2009 to Oct 2009 Total Qty. of Manganese Oxide (MnO) claimed to have been removed clandestinely 709.336 1635.635 1016.501 Total (A) 709.336 1635.635 1016.501 Deductions: Manganese Ore supplied by GAPL to the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act on the outstanding amount, for the period starting with the first day after due date till the date of actual payment of the outstanding amount. Rule 10 Daily Stock Account (1) Every assessee shall maintain proper records, on a daily basis, in a legible manner indicating the particulars regarding description of the goods produced or manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and particulars regarding amount of duty actually paid. (2) The first page and the last page of each such account book shall be duly authenticated by the producer or the manufacturer or his uthorized agent. Rule 11 Goods to be removed on invoice (1) No excisable goods shall be removed from a factory or a warehouse except under an invoice signed by the owner of the factory or his authorized agent ----- (2) The invoice shall be serially numbered and [shall contain the registration number, address of the concerned Central Excise Division,] name of the consignee, description, classification, time and date of removal, mode of transport and vehicle registrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1 Records are to be necessarily maintained in the course of any business activity. These records are also used to determine the tax liability of the assessee. Earlier, for this purpose the Government had prescribed the records to be maintained, referred to as 'Statutory records'. The statutory records under Central Excise Rules, 1944 were dispensed with in the year 2000 and it was decided to rely on private records of the assessee. This was done as a measure of simplification and for adopting a common accounting system. While framing the Central Excise (No.2) Rules, 2001 (hereinafter referred to as the said Rules), CENVAT Credit Rules, 2001 and other Rules issued. under Central Excise Act, 1944, the Government has continued with the policy of relying on the private records of the assessee. 2. Private records 2.1 The main features of the acceptance of private records are as below: - (i) The fact that the rules do not prescribe 'statutory records' shall not be construed that no record has to be maintained. Every assessee shall maintain private record. (ii) The rules which require certain records to be maintained, are self contained and they specify t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting appropriate penal action. If such non-maintenance of records is with intent to evade payment of Central Excise duty, the more stringent penal provisions of the Central Excise Act and Central Excise Rules shall be attracted. Trade and industry are advised to ensure that the requisite information as required under amended rules is scrupulously maintained in their identified private records to avoid any penal action. 2.5 The private records relevant for Central Excise including the Daily Stock Account maintained in compliance with the provisions of the said Rules shall necessarily be kept in the factory to which they pertain. 2.6 The manufacturer shall maintain proper records for receipts, disposal consumption and inventory of the inputs and capital goods including the relevant information regarding value, duty paid etc., from the persons whom the inputs and capital goods procured is recorded and the burden of proof regarding the admissibility of the Cenvat Credit shall lie upon the manufacturer taking such credit. (Rule 9 of CENVAT Rules, 2004.). Similarly the records are required to be maintained for receipt, payment and procurement of input services. 4.7 From ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representative on the same. The results of the exercise undertaken are reproduced below: On examination of the above correlation statements along with the documents submitted in support learned authorized representative has submitted as follows: i. Cross verification of six months of the documents viz delivery memo and the central excise invoice is not possible. ii. It has been noticed that in the Invoices both number of bags as well as weight of the Manganese Oxide (MnO) are mentioned. Whereas, in the Delivery Memo, only the number of bags are mentioned except in certain cases where weight is also mentioned. There is also no reference number of Delivery Memo given in the Invoices. Further, the weight of the bags mentioned in all the Invoices is 50 Kgs. But when the weight of the bags given in the DM is calculated, it is coming between 30 to 42 Kgs only. For the month of February, 2007, Appellant has submitted 16 copies of the Invoices (Inv. No. 168 to 183) and 20 Delivery Memo (Sr. No. 228 to 251). It is noticed that in some cases, the date of issue of Invoice and the date of delivery Memo is same. Further, for Invoice No.BSS/INV/06-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is month. vii. For April, 2009, Appellant has submitted 23 copies of the Invoices (Inv. No.001 to 023) and 23 Delivery Memo (Sr. No. 149 to 171). For Inv. No. 001 to 007, the qty. given on the Invoice and corresponding DM is same. But if the weight of MnO is calculated per bag as given in DM, the qty. per bag is coming between 35.6 to 41.3. Whereas, the quantity per bag given in invoice is 50 Kgs. It is also pertinent to mention here that for all the above invoices, DM has been issued on the same day. For DM No. 159 dtd. 15.04.2009, there is no weighment slip, hence its quantity cannot be checked with the corresponding Inv. No.011 issued on same day. Further, the total quantity cleared for the month on Invoices is also not matching with the quantity cleared on Delivery Memo. viii. Similarly, for May, 2009, Appellant has submitted 5 copies of the Invoices (Inv. No.024 to 028) and 12 Delivery Memo (Sr. No. 172 to 187). It is noticed that in this month also there is mismatch in the quantity cleared on Invoices and DM. Total quantity cleared on Invoices is 59.051 MT, whereas the quantity cleared on Delivery Memo is 65.940 MT' ix. In view of the discrepancies in the data su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods have been brought or as to whether or not any duty has been paid or any goods have been lawfully imported etc., then the burden of proof shall lie upon the other party to the proceeding. In India Parliament inserted Section 178A by the Amending Act 10 of 1957, but it did not in its wisdom, go as far as Section 290(2) of the English Act. Section 178A in terms applies to gold, gold manufacture, diamonds and other precious stones, cigarettes and cosmetics . With regard to these specified goods if seized under this Act in the reasonable belief that they are smuggled goods, the burden of proof that they are not such goods shall be on the person from whose possession, they are seized. But with regard to any other goods, the rule in sub-section (1) of Section 178A would not apply unless the Central Government had specifically applied the same by notification in the Official Gazette. It is common ground that at the material time, no such notification applying the Section to the categories of the goods in question had been issued. In respect of such goods the provisions of the Evidence Act and the Code of Criminal Procedure, do not, in terms, govern the onus of proof in proceeding u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uliar knowledge of the person concerned in it. On the principle underlying Section 106, Evidence Act, the burden to establish those facts is cast on the person concerned : and if he fails to establish or explain those facts, an adverse inference of facts may arise against him, which coupled with the presumptive evidence adduced by the prosecution or the Department would rebut the initial presumption of innocence in favour of that person, and in the result prove him guilty. As pointed out by Best in `Law if Evidence (12th Edn. Article 320, page 291), the presumption of innocence is, no doubt, presumption juris : but every day s practice shows that it may be successfully encountered by the presumption of guilt arising from the recent (unexplained) possession of stolen property, though the latter is only a presumption of fact. Thus the burden on the prosecution or the Department may be considerably lightened even by such presumption of fact arising in their favour. However, this does not mean that the special or peculiar knowledge of the person proceeded against will relieve the prosecution or the Department altogether of the burden of producing some evidence in respect of that fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence that the gold had been smuggled after March 1947, it was held that a finding to that effect could be reached by referring to the conduct of the appellant in connection with (a) the credibility of the story about the purchase of this gold from three parties, (b) the price at which the gold was stated to have been purchased which was less than the market price and (c) the hurry exhibited in trying to get the gold melted at the refinery with a small bit of silver added so as to reduce the fineness of the gold and thus approximate the resultant product to licit gold found in the market . 38. This rule in Issardas Daulat Ram s case, (1962) Supp. (1) SCR 358 was reiterated with amplification in M/s. Kanungo Co s. case, AIR 1972 SC 1236 = 1983 E.L.T. 1284 (supra). Therein, the appellant was a firm carrying on business as dealer, importer and repairer of watches. On a search of the firm s premises on October 17, 1959, the Customs authorities seized 390 watches out of which 250 were confiscated on the ground that they had been illicitly imported into India. The firm s petition under Article 226 of the Constitution was allowed by a learned Single Judge of the High Court and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denial could be relied on by the Customs Authorities for the purpose of coming to the conclusion that the goods had been illegally imported. 40. In the case before us, the circumstantial evidence suggesting the inference that the goods were illicitly imported into India, was similar and reasonably pointed towards the conclusion drawn by the Collector. There was no violation of the rules of natural justice. The Collector had given the fullest opportunity to Bhoormull to establish the alleged acquisition of the goods in the normal course of business. In doing so, he was not throwing the burden of proving what the Department had to establish, on Bhoormull. He was simply giving him a fair opportunity of rebutting the first and the foremost presumption that arose out of the tell-tale circumstances in which the goods were found, regarding their being smuggled goods, by disclosing facts within his special knowledge. 4.10 In case of Indian Aluminium Company [1991 (55) ELT 454 (SC)] Hon'ble Supreme Court has held as follows: 2. Most of the facts in this case are not in dispute. Admittedly the aluminium raw material was imported by the petitioner Company and octroi duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary declaration he cannot now turn around and ask the authorities to make a verification of some records. The verification at the time when the raw material was still there is entirely different from a verification at a belated stage after it has ceased to be there. May be that the raw material was used in the industrial undertaking as claimed by the petitioner Company or it may not be. In any event the failure to file the necessary declaration has necessarily prevented the authorities to have a proper verification. 4. Shri Ganesh, learned Counsel for the petitioner Company relied on the judgment of this Court in Kirpal Singh Duggal v. Municipal Board, Ghaziabad $F(1968) 3 SCR 551. in support of his submission that the non-fulfilment of procedural requirement does not bar the claimant from pursuing his remedy in a court of law. That was a case where the appellant entered into a contract and supplied the goods to the Government. The Municipal Board collected toll when the trucks were passing through the toll barrier. The appellant obtained a certificate that the transported goods were meant for Government work. The appellant claimed exemption on the basis of the certificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n though procedural, has disentitled the petitioner Company because there was no way to verify whether it was entitled for such concession. In HMM Limited and Another v. Administrator, Bangalore City Corporation and Another no doubt the view taken in Duggal s case was confirmed but it does not made any difference so far as the present case is concerned for the reasons stated above. In that case the question was whether the goods namely Horlicks was consumed within the city or not and there was no dispute as to the quantum which was credited pursuant to the directions of the High Court. Hence no further verification was necessary. Therefore these two cases are distinguishable. 5. However, a concession has to be availed at the time when it was available and in the manner prescribed. The common dictionary meaning of the word concession is the act of yielding or conceding as to a demand or argument, something conceded; usually implying a demand, claim, or request, a thing yielded , a grant . In the Dictionary of English Law by Earl Jowitt, the meaning of concession is given as under : Concession, a grant by a central or local public authority to a private person or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shes the declaration in the prescribed form. It was further held as under : There is an understandable reason for the stringency of the provisions. The object of Section 5(2)(a)(ii) of the Act and the rules made thereunder is selfevident. While they are obviously intended to give exemption to a dealer in respect of sales to registered dealers of specified classes of goods, it seeks also to prevent fraud and collusion in an attempt to evade tax. In the nature of things, in view of innumerable transactions that may be entered into between dealers, it will well-nigh be impossible for the taxing authorities to ascertain in each case whether a dealer has sold the specified goods to another for the purposes mentioned in the section. Therefore, presumably to achieve the two-fold object, namely, prevention of fraud and facilitating administrative efficiency, the exemption given is made subject to a condition that the person claiming the exemption shall furnish a declaration form in the manner prescribed under the section. The liberal construction suggested will facilitate the commission of fraud and introduce administrative inconveniences, both of which the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 320(3) are not mandatory and non-compliance of those provisions does not afford any cause of action in a court of law. Privy Council in the above quoted decision has observed that the question whether provisions in a statute are directory or imperative depends upon the object of the statute and no general rule can be laid down. When the provisions of the statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of this duty would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty and at the same time would not promote the main object of the legislature, it has been the practice to hold such provisions to be directory. This is not a case where a certain provision is mandatory or directory. Here the question is whether concessional relief of duty which is made dependent on the satisfaction of certain conditions can be granted without compliance of such conditions. No matter even if the conditions are only directory. 13. In Formica India Division v. Collector of Central Excise, 1995 (77) E.L.T. 511 (SC), non-compliance with Rule 56A of the Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the language is clear and unambiguous. The provisions of Statute and the Notification, keeping in view the object and the purpose, had to be fully complied with in letter and spirit. The requirements are mandatory and are not procedural as is sought to be argued on behalf of the assessee. The Legislative intent, the object and purpose is to check the defrauding of the Government by the assessees resorting to similar double credits against single consignment by falsification of documents by various methods. The legislature only requires four particulars to be pre-printed, which in any event are within the prior knowledge of and pertains to the person issuing the invoice. Therefore, there is no justification for not complying with the same. The requirement of the law is that invoices were to be pre-printed and not hand written. The Legislative intent is evident from every word used in the Statute. The same has to be complied with. If the view taken by the Tribunal is accepted it would render the Statute redundant. Therefore, on the principle of Golden Rule of Interpretation, the view taken by the Tribunal is unacceptable. 4.13 In case of Irbaz Shoe Co. [2019 (365) ELT 263 (M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2001, dated 26th June, 2001, is to ensure prevention of evasion of duty under the garb of export sales. Keeping the purpose in mind, it is not sufficient for a manufacture to come up and say that all the goods manufactured by him have been exported and therefore, he is entitled to the benefit of Rule 19 of Central Excise Rules. If such a view is taken that the conditions prescribed in Notification No. 43 of 2001, is only procedural then the entire purpose of issuing the said Notification, would be defeated. 25. The appellant has removed the goods without informing the Department. The appellant has also not registered under Rule 9 of the Central Excise Rules. The contention, even if the appellant is not registered under Rule 9, still the appellant can avail exemption from paying excise duty cannot be accepted. The removal of goods came to light only after the visit of the officers to the factory and perusal of the documents. Complete nonadherence to the procedure, which has been prescribed to avail exemption from payment of excise duty leads to a presumption that this was done with intend to evade payment of duty and therefore, the authorities were justified in invoking Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed above. The duty so evaded is recoverable from them by invoking extended period of five (5) years under proviso to Section 11 A of Central Excise Act, 1944. 4.15 Appellants have contended that extended period of limitation cannot be invoked in the present case for the reason that what so ever duty would have been p[aid by the appellant 1 would have been available to Appellant 2 as CENVAT Credit. Hence the entire exercise is revenue neutral and there is no ground for the appellants not to pay the duty in respect of the alleged goods cleared to appellant 2. We do not find any merits in this submission of the appellant 1, in view of the decision of larger bench of tribunal in case of Jay Yushin holding as follows: 13 . In the light of the above discussion, we answer the reference as under: (a) Revenue neutrality being a question of fact, the same is to be established in the facts of each case and not merely by showing the availability of an alternate scheme; (b) Where the scheme opted for by the assessee is found to have been misused (in contradistinction to mere deviation or failure to observe all the conditions) the existence of an alternate scheme would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment is able to produce material to show that the appellant is guilty of any of those situations visualized in the Section. 13. Interpreting this provision, this Court in Collector of Central Excise, Hyderabad v. Chemphar Drugs and Liniments, Hyderabad, (1989) 2 SCC 127 = 1989 (40) E.L.T. 276 (S.C.), held : (when the period prescribed was six months prior to it being made one year by the Finance Act, 2000, with effect from 12-5-2000) : In order to make the demand for duty sustainable beyond a period of six months and up to a period of 5 years in view of the proviso to sub-section (1) of Section 11A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing this issue has not stated whether or not there were any such circumstances which would not allow the revenue to invoke extended period of limitation. It only observes in its order since both the assessees are situated under the jurisdiction of the same division and as such it cannot be reasonable to conclude that the revenue was not aware of the transactions. Since this is not what is envisaged under the proviso to Section 11A(1) of the Act, we cannot agree with the reasoning and the conclusion reached by the Tribunal. 4.18 Appellants have in their submissions do not dispute the fact about the clearance of the goods against delivery memos without issuance of the invoices. The fact which was admitted by the Manager (Commercial) in his statements recorded. The relevant text from the impugned order is reproduced below: 20. Statement of Shri. Vijay Kumar Mantri, Manager (Commercial), of the Noticee No. 1, was recorded on 10.03.2010 u/s 14 of the Central Excise Act, 1944, wherein he stated that he is working as Manager (Commercial) in Noticee No. 1, since. last 5 years. Shri. Vijay Kumar Mantri further stated that M/s. B. S. S. Mines Minerals Pvt. Ltd., situated at Plot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007 to March' 2007, Shri. Vijay Kumar Mantri stated that the goods despatched in Delivery Memo are actually Manganese Oxide (MnO) but were wrongly written as Manganese Dioxide and M/s. BSS Mines Minerals Pvt. Ltd. has prepared Tax invoice and the description of goods is shown as Manganese Oxide (MnO) only and they have also paid Central Excise duty on the clearance of the same. On being asked whether Daily Stock account is maintained for different grades of MnO, Shri. Vijay Kumar Mantri stated that finished goods i.e. MnO is sent to laboratory for analysis and as confirmed by the Lab Incharge, they prepare the delivery memo of that particular grade of MnO and at the end of the month, some Central Excise invoices are prepared for different grades of MnO, but Daily Stock account is not maintained by them for different grades of MnO, since the rate of duty is same for all the grades of MnO, however the value is derived as per the grade of MnO as per analysis report. Another statement of Shri. Vijay Kumar Mantri, Manager (Commercial), of the Noticee No. 1, was recorded on 13.04.2010 u/s 14 of the Central Excise Act, 1944, wherein he stated that from December 2006 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anganese Dioxide 302.440 MT valued at Rs. 41,81,850/-, which totally comes to 2620.604 MT valued at Rs. 2,16,97,153/-, Shri. Vijay Kumar Mantri stated that they have wrongly mentioned the production of 2255.604 MT of MnO and clearances of 2620.604 MT MnO in their Balance Sheet and Auditors report for 2006-07. I further state that in fact the production of MnO (Grinded + Un-grinded) is 2179.742 MT and clearances of MnO is 2317.804 MT only. Thus the clearance of MnO2 of 302.440 MT is included in the said clearances shown in the Balance Sheet. No bifurcation of MnO, MnO2 and Manganese Ore is shown in the Balance Sheet; only the total quantity cleared is shown. On being further asked that though in the year 2006-07 they have shown Trading purchase of 197.060 MT and Trading sale of 197.060MT Manganese Ore, in their Balance sheet, but there is no Trading purchase of Manganese Ore, Shri. Vijay Kumar Mantri stated that though they have not shown separately the purchase of 197.060 MT of Manganese Ore as Trading purchase, but the Manganese Ore purchased from MOIL, has been directly cleared from MOIL to their related company namely M/s. Goodearth Agrochem Private Limited, Bramhanwada an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details of production, clearances, dispatches, storage of MnO2 and Manganese Ore (Trading sales) and MnO (Trading sales) in monthly returns filed by them with the Central Excise Department. Shri. Vijay Kumar Mantri also stated that they have not maintained the receipt and storage of raw materials i.e. Manganese Ore, in proper statutory format, this is because the material has never physically entered in the factory premises of M/s. BSS Mines Minerals Pvt. Ltd., Yerla and the same has been delivered directly to M/s. Goodearth Agrochem Private Limited, Bramhanwada and Trading Invoices has been raised by them directly on M/s. Goodearth Agrochem Private Limited, Bramhanwada. 4.19 In our view, by clearing the goods on the delivery memo, which cannot be co-related with the duty paying documents is an act of clandestine clearance and demand of duty against such clearances needs to be made by invoking the extended period of limitation as provided by the proviso to Section 11 A (1) of the Central Excise Act, 1944. Since we uphold the demand of duty by invoking extended period of limitation, in view of the decision of the Hon ble Supreme Court in case Rajasthan Spinning and Weaving ..... X X X X Extracts X X X X X X X X Extracts X X X X
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