TaxTMI 
TaxTMI 
2024 (1) TMI 672
X X X X Extracts X X X X
X X X X Extracts X X X X
....iled by the department, challenging the Order-in-Original no. RPR/EXCUS/000/COM/CEX/007/2019 dated 9.01.2019 passed by the Commissioner whereby substantial portion of the duty demand was dropped. 2. The respondent company namely, M/s. Nutan Ispat & Power (P) Ltd. (NIPL) is engaged in the manufacture of Iron and Steel products, namely Sponge Iron, Mild Steel Ingot, Rerolled products falling under chapter 72 of Central Excise Act 1985. The group companies having three units ,i.e., Indo Lahari Bio Power Ltd, (ILBP), Nutan Ispat & Power Pvt. Ltd (NIPL) and Lahari Laminates Pvt. Ltd (LLPL) of which Shri Pradeep Kumar Agrawal is a common Director. The Melting Division of M/s. Indo Lahari Bio Power Ltd was merged with M/s. Nutan Ispat and Power Pvt. Ltd. with effect from 1.12.2010. 3. On receipt of an intelligence that NIPL is engaged in s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....etically for taking revenge on the company. 5. Statement of Shri Pradeep Kumar Agarwal was recorded on 16.04.2012 where he stated that he looks after the entire business activities of both the companies ILBP and NIPL and Sri Sarma was a Director in the company since 2003 to 12.12.2011. He further stated that Sri Sharma was not authorised to sign the documents relating to the Central Excise Department, he looked after the administrative work and after his resignation from director-ship, he is still doing the same job. He was not involved in the purchase of material and sale of finished goods. With regard to the notebooks number 1, 2, 6 and 7, he stated that they are not authentic records of the company and were not prepared under his instructions and therefore he has no knowledge in that regard. 6. To ascertain the transportation of clandestine clearance during the period July 2010 to June 2011 from ILBP and NIPL, transport company, namely, M/s Amar Freight....
X X X X Extracts X X X X
X X X X Extracts X X X X
....14,58,125/- + Ed. Cess - Rs.2,29,163/- + SHE Cess - Rs.1,14,581/-) (Rupees One Crore Eighteen Lakh One Thousand Eight Hundred Sixty Nine Only) on 3781.705 MT of MS Ingots, 15.46 MT of Sponge Iron -1 grade and 46.01 MT of MS Scrap-End cutting. iii. I drop the demand of Central Excise Duty of Rs.73,57,648/- (Basic Rs.71,43,348. - + Ed. Cess - Rs.1,42,867/- + SHE Cess - Rs.71,433/-) ( Rupees Seventy Three Lakh Fifty Seven thousand Six Hundred Forty Eight only) on 3356.25 MT of Sponge Iron and 257.70 MT of Waste and Scrape. iv. I drop the demand of Central Excise Duty of Rs.72,04,802/- (Basic - Rs.69,94,954/- + Ed. Cess - Rs.1,39,899/- + SHE Cess - Rs.69,949/- ) (Rupees Seventy Two Lakh Four Thousand Eight Hundred Two Only) on 2772.88 MT of MS ingot. v. I order recovery of interest at appropriate rate on the amounts of Central Excise duty of Rs.1,47,514/- and Rs.76,871/-, total amounting to Rs.2,24,385/- (Rupees Two Lakh Twenty Four Thousand Three Hundred Eighty Five only) from M/s. NIPL, the notice no.1 under Section 11AB/11 AA of the Central Excise Act, 1944. vi. I impose penalty of Rs.2,24,385/- (Rupees Two Lakh Twenty Four Thousand ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....removal of goods more than what the books of accounts show. 10. The respondents have raised an objection that the case of the Revenue is based on third party records,i.e., the notebooks recovered from the residence of Sh. Sarma but the same cannot be treated as substantive evidence in the absence of any corroborative evidence. The burden of proof was on the Revenue and they have failed to discharge this burden by leading any cogent evidence for arriving at the findings of clandestine removal. He referred to series of decisions in support of his contentions. The further contention on behalf of the respondents is that Shri S.V.S Sarma had retracted his statement and hence its reliability should have been evaluated on the basis of some corroborative evidence and referred to the decision of the Delhi High Court in the case of Commissioner of Central Excise vs Shakti Zarda Factory - 2015 (321) ELT 438. He also objected that the statement of Sh Amarnath Jha, Proprietor of the transport company is not admissible without following the procedure prescrib....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... between the documents recovered during the search and activities being carried on in the factory of production; etc. Needless to say, a precise enumeration of all situations in which one could hold with activity that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of note books or diaries privately maintained or on mere statements of some persons, may even be responsible officials of the manufacturer or even of its Directors/partners who are not even permitted to be cross-examined, as in the present case, without one or more of the evidences referred to above being present." (Emphasis laid) Also, the decision of the Chhattisgarh High Court in Hi-Tech Abrasives Ltd. vs CCE, Raipur - 2018 (362) ELT 961 reiterated the parameters or nature of evidence to be satisfied or collected with regard to the admissibili....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cording to them were unaccounted purchase of raw materials or sale of finished goods leading to the inference of clandestine clearance. The fact is that the entries in the notebooks would not match with the statutory records as they were not actuals but were fabricated or hypothetical as admitted by the writer of these notebooks Sri Sarma. Moreover, no investigation has been made by the department to verify the correctness of the entries. It was obligatory on the department to establish the truthfulness of the entries made in the notebooks by bringing on record independent evidence showing receipt of unaccounted raw material from various parties and also of sale of unaccounted finished goods. 14. The law on the issue is well settled that onus to prove clandestine removal must be discharged by sufficient, cogent and unimpeachable evidence as observed by the High Court of Gujarat in Commissioner of Central Excise vs. Saakeen Alloys Pvt. Ltd. 2014 (308) ELT 655 which is affirmed by the Apex Court as reported in 2015(319) ELT A 117. In Mahesh Silk Mills vs. Commissioner of Central Excise, Mumbai - 2014(304) ELT 703, the Tribunal reiterated :- "that evidence o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... It stands held in all these judgements that the findings of clandestine removal cannot be upheld based upon the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods." We thus agree with the contention of the respondent that the notebooks are not reliable piece of evidence as the revenue failed to investigate so as to corroborate the entries in the private records. C. Statement retracted 15. The undisputed fact is that on the search of the residential premises of Sri Sarma on 9.12.2011, seven notebooks and some loose papers were seized and his statement was recorded on the spot where he stated that notebooks numbers 1, 2, 6 and 7 are relating to the party wise finished goods sold and payments received and raw materials purchased and payments made against them and the entries made therein tally with the books of audited accounts of respective companies and that entries made by him were as per the direction of Shri Pradeep Kumar Agarwal. But in his subsequent statement dated 10.04.2012 and 11.04.2012, and also in his cross examination, he accepted that during his directorship, no goods were ever clea....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... next day i.e. 10.12.2011 and under what circumstances, the search operation could have started from his residence at first point of time. Ans. That I on my own had contacted one Shri Viblav Das who was working in M/s.Lahri laminates and also looking after Central Excise work of the said company. He knew one Shri B.K. Jena an Excise Officer and thereafter information was passed on to the Preventive Wings who was first visited my residence on 9.12.2011, seized the records by drawing a pachnama and by recording my statements. On the basis of the said seizure of records, the Preventive Wing visited the factory next day. Q.No.11. Please explain why you have taken contradictory stand after five months of case booked against M/s.Nutan Ispat & Power Pvt. Ltd. Ans. I wanted to take revenge and accordingly, I deposed accordingly. However, said incident my family advised me that whatever I had done was not proper as company had reposed great faith in me and took care of me for more than twenty years, hence when my second and third statements were recorded, I stated the correct facts. Q.No.12. Do you agree that you had mixed the genuine transactions....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ter this date. These all substantiates the contentions of the notice-I in respect of the mischievous act of his employee Shri S.V.S. Sarma. It is also equally true that Shri Pradeep Kumar Agrawal, Director of M/s.NIPL and M/s.ILBP have no control over the note books recovered from the residential premises of Shri S.V.S. Sarma and which was claimed to have been written by him in his own handwriting with a dishonest motive. This has also been established form the aforesaid unearthed truths that even, he was not having any knowledge about the same. Undoubtedly, these seized note books are private third-party records, which cannot be used against the NOticeeNo.1 and 4 unless and until some primary or secondary or corroborative evidence have been brought on record, which could substantiate the entries contained in these note books. But it is observed that no such evidence has been discussed in the impugned show cause notice. However, after the tendering of statement dated 11.04.2012 of Shri S.V.S. Sarma, results of cross-examination of Shri S.V.S. Sarma and submission of Shri S.V.S. Sarma made in his defence submission, which w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onfirmed, solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence." Similarly, in Commissioner of Central Excise, Delhi vs. Vishnu & Company Pvt. Ltd., (supra), Delhi High Court reiterated the principle that it was for the department to explain why the entries in the documents were not further investigated by them and why someone in a responsible position in the company was not examined to establish the link between such evidence and the respondent there. Having held that the department did not carry its investigation to their logical end, the Court concluded that the charge against assessee was not proved. The relevance of the recovery of documents have been stated to be the starting point of investigation and the investigating agency is expected to make enquiries from relevant factors and certain loose sheets or non-statutory documents require corroboration which the revenue is required to provide, the relevant para from the decision in Commissioner of Central Excise, Raipur vs M.S.P. Steel & Power Lt....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... CCE, Mangalore - 2010 (262) ELT 1058 (Tri-Bang.), the Tribunal was dealing with a Pocket Diary of the accountant of the assessee and it was observed that diary itself is not an official record of the assessee as it is a private diary and contains personal details including private transactions engaged in by Sri Ashraf, which is not acceptable without corroboration. Thus, it was incumbent on the revenue to have conducted further investigation as per the parameters laid down in various decisions to unearth reliable evidence to corroborate the contents of the notebooks and in the absence thereof the burden is still on the revenue and has not been shifted to the respondents. The notebooks recovered here can at best raise a suspicion in the minds but is not sufficient to prove the charges of clandestine removal as observed in Ashutosh Metal Industries vs. Commissioner of C.EX & ST, Delhi - 2018 (15) GSTL 38. We would also like to take note of the observations made by the Delhi High Court in the case of Vishnu and Company Private Limited (supra), as far as the CE Act is concerned, there is no such provision that raises a presumption and shifts the burden on the person who is charg....