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TMI Blog2024 (2) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... tator' (also known in trade parlance as 'Tar Catcher'), Electromagnets for Liquid /Slurry Applications, Electromagnets for power Applications, Ball Mills for Grinding etc. falling under Chapter 84 and 85 of the First Schedule to the Central Excise Act, 1985. On the basis of intelligence that M/s. P.P are engaged in manufacture and clandestine removal of excisable goods i.e. Tar Catcher without obtaining Central Excise Registration and without accounting the same in the statutory records, a team of officers of Anti-evasion Section, Central Excise, Commissionerate, Rajkot, carried out search of the factory premises of M/s. P.P. on 11.10.2013 under panchnama. During the search various documents were resumed. Also the finished goods i.e. Tar Catcher valued at Rs. 25 Lakh which were found in the factory premises at the time of search, were placed under seizure, under a reasonable belief that the same were manufactured in contravention of the provisions of Central Excise law and would have been removed clandestinely. Search was also conducted at the residential premises of the Shri Anand Rameshbhai Vashadia, Director and two note books having date-wise entries and file containing 'Estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner has confirmed the demand on the basis statements of parties/buyers, one supplier of raw material, and one director of the appellant and except these statements there is no evidence in support of the case of clandestine manufacture and removal. But these statements are not admissible as evidence because the mandatory procedure laid down under Section 9D of the Central Excise Act is not complied with by the Adjudicating authority. The statements recorded by the investigating officers are therefore of no evidentiary value, and no central excise demand is sustainable on the basis of such inadmissible evidence. He placed reliance on the following Judgments:- Forward Resources Pvt. Ltd. Vs. Commissioner, Surat -I- 2023(69)GSTL 076 Reynolds Petrochem Ltd. Vs. Commissioner, Surat -2023(68)GSTL 292. Shree Hari Steel Industries & Others Vs. Commissioenr, Bhavnagar - 2022(8)Tax Management India 1251 J.P. Iscon Pvt. Ltd. -2022(63)GSTL 64. G-Tech Industries Vs. Union of India - 2016(339)ELT 209(P&H) 2.2 He further submits that in the present case, admittedly, none of the persons whose statements were recorded during the investigation were examined as witness and there is nothi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantial quantum of alleged evasion, sufficient number of buyer, sufficient number of raw material suppliers and transporter etc. must be adduced by the revenue. A case of the clandestine activities has to be established by the revenue by leading cogent, reliable and independent evidence. Such case cannot be mode out only on statements recorded by the investigating officers. The customer/ buyers who are alleged to have paid cash must be located, statements of such persons must be recorded for proving cash payment by them, the amount of cash transaction should also be established as actually received by the assessee, and such evidence has to be brought on record. In absence of such evidence, a case of clandestine activities is not acceptable. He placed reliance on the following decisions:- Grace Castings Ltd. Vs. Commissioner, Ahmedabad 2019(369)ELT 751 (Tri.-Ahmd) Commissioner Vs. Motabhai Iron & Steel Industries -2015(316)ELT 374 (Guj.) S.M. Energy Teknik & Electronics Ltd. Vs. Commissioner, Vadodara 2015(328)ELT 443(Tri. Ahmd) Mahesh Silk Mills Vs. Commissioner of Central Excise -2014(304)ELT 703 (Tri. Ahmd) Commissioner Vs. Mahesh Silks Mills -2015(319)ELT (A52)- Gujar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gating to Rs. 26,03,35,513/- during the period of 21 months, and therefore the demand of central excise duty of Rs. 3,21,68,909/- is confirmed without any jurisdiction and without any justification. For establishing the case of clandestine manufacture and removal of excisable goods, the revenue is under obligation to establish with evidence that the manufacturer had procured adequate raw materials for manufacturing such goods; the revenue is also under obligation to establish with evidence that infrastructure like labour force, electricity, and fuel etc, were actually employed and utilized for manufacturing the concerned quantity of goods; the revenue is also under obligation to identify and locate the buyers to whom such goods were supposed to have been sold and delivered; the revenue is also under obligation to establish with evidence like transport, loading staff etc. that such goods were actually transported from the manufacture's premises to the buyer's place; it is also incumbent upon the revenue to establish with evidence that the manufacturer had made payment for raw materials used in manufacture of the goods and that the buyers had made payment to the manufacturer in cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s received against such quotation price were also mentioned in note books, the transaction mentioned in the note books were not actual sales, and that goods were actually not delivered/sold to the customers in some cases where advance payment was received. We also gone through the said disputed Note Books and find that the said note books not clearly shows fact/details about the details of alleged clandestine manufacture and clearance of the disputed goods. It is an admitted position of facts that out of 176 parties found by the revenue officers in said two note books, only five parties were contacted during the investigation and there is no evidences of the remaining parties. 4.1 We also find that appellant filed a reply to show cause notice before the Learned Commissioner with various documents including affidavits of 107 persons/ parties whose name appeared in said disputed two Note Books. By these affidavits, the concerned persons clarified that they had not purchased or received any Tar Catchers from the appellant. We also observed that revenue itself excluded the 15 entries of 15 parties of the said Note Books while issuing show cause notice. Thus, the authenticity of said N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Learned Commissioner has confirmed the demand of duty on the basis of statement of five parties/ buyers, one raw material supplier and one director of the appellant. Appellants had specifically requested for cross examination of the said witnesses, but the witnesses were not offered for cross examination and the impugned order does not contain any reason for denial of this opportunity. Clearly, adjudicating authority has not followed the procedure as prescribed under Section 9D of the Central Excise Act for placing reliance on the statements of said witnesses. In this connection we note that denial of cross-examination and relying on the statements, put the impugned order in legal jeopardy. The provisions of Section 9D of the Central Excise Act, 1944 is very clear and by now, it is well-settled legal position that the Adjudicating Authority, if he intends to rely on the contents of any statement recorded under the Central Excise Act, 1944, then the procedure, as prescribed under Section 9D, has to be followed scrupulously. In fact, in a decision, the Hon'ble Punjab & Haryana High Court in the case of Jindal Drugs Pvt. Ltd. - 2016 (340) E.L.T. 67 (P&H) held that Adjudicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Central Excise Rules if there is no corresponding material of clandestine clearance also available. Unaccounted production goes in tandem with clandestine removal and evidence of both has to be present in a given case to avoid the charge to be determined on an assumption/presumption. Applying the tab for liability to confiscation in this case under Rule 173Q(1), we find the test to be not positive. The confiscation arrived is to be not upheld & is to be set aside." 4.5 Similarly in the case of Commissioner of Central Excise & Customs v. Resham Petrotech Ltd. [2010 (258) E.L.T. 60 (Guj.)], the Hon'ble High Court of Gujarat held as under :- "3. As can be seen from the impugned order of Tribunal and the record, the respondent has tendered explanation as to why the necessary entries were not made in the statutory records. The said explanation has not been disproved by any evidence to the contrary. The Tribunal has found that the explanation tendered is reasonable and does not warrant any confiscation of goods. 4. It is an accepted position that the liability to pay duty arises at the point of time when the goods are to be removed from the factory premises. Admittedly, the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner as well as the Tribunal that no case was made out to impose penalty. The finding recorded that no case was made out for imposition of penalty is not shown in any manner to be perverse. 12. In view of the above, we find no merit in this appeal and the same is accordingly dismissed." 4.7 In the case of Commissioner of Central Excise, Hyderabad v. Srinivasa Frozen Foods Ltd. [2010 (262) E.L.T. 594 (Tri. - Bang.)], also, CESTAT held as under :- "5. I have considered the submissions made at length and perused records. The issue involved in this case is regarding the confiscation of the goods which were found unaccounted in the RG-1 of the respondent. It is undisputed that these goods were found in the factory premises of the respondent. The allegation in the show cause notice that these goods were kept without entering in the records, with an intention to clear the same without payment of excise duty, is not supported by any evidence. Further, it is also seen that as regards the allegation of the clandestine removal in respect of other show cause notice, which also was issued based upon the very same investigations and visit by the officers, the respondent had settled the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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