9911796707
TMI Blog2024 (5) TMI 1055X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture and surreptitious removal of their finished products, the DGCEI had conducted simultaneous searchs on 20.01.2007 at the factory and office premises, residential premises of the partners and other related persons. Various documents were recovered and seized. 2.2 During the course of investigation it was found that the appellant was engaged in trading of different goods of iron and steel and one Shri Biplab Mondal, proprietor of Appellant No.4 admittedly managed and controlled all the purchases and sales of those traded goods. The address of the company has been declared and shown to be at Kona, Benaras Road, P.S.-Liluah, Howrah-711323, which is used to be official address of M/s. Bharat Suppliers. During the investigation at the premises of Kona, Benaras Road, P.S.-Liluah, Howrah claimed to be under control and occupation of the appellant No.4, was visited and the enquiries made therein revealed that the premises was actually under control and occupation of M/s. Bengal Iron Corporation, appellant No.1 since last 10 years and no other company have ever owned the premises at that address. It was also revealed in the investigation that the premises at the aforesaid address ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acturing activity. Certain details of bank accounts of M/s. Bharat Suppliers were also found and the statements of account from banks was also obtained, wherein it has been found that M/s. Bharat Suppliers received payment of sale of goods from different buyers and depositing the said in their bank account. After depositing the said amount in the banks they withdrew the said amount in cash. As during the course of investigation, it has been admitted by appellant No.2 & 3 that they were dealing on behalf of M/s. Bharat Suppliers, therefore, it was concluded as under:- "From the statements by Shri Radhe Shyam Agarwala, and his son Shri Prakash Agarwala, both partners of the company and that Shri Biplab Mondal, proprietor of M/s. Bharat Suppliers, it is thus very much clear that the Noticee No.1 had deliberately indulged in the fraudulent practices of clandestine manufacture and surreptitious removal of their finished goods during the material period by adopting a novel modus - operandi of dispatching their finished excisable goods under the guise of goods sold by a trading company, namely M/s. Bharat Suppliers by way of suppression of material facts, mis-declaration / mis-statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese appellants are before us. 4. The Ld.Counsel for the appellants submits that the impugned order has been passed on assumption and presumption. The same is not tenable. It is his submission that there is no material on record and nothing has been disclosed either in the show cause notice or the impugned order which even prima facie establishes that any part of the sale amounts collected/realized/encashed by the appellant No.4 relates to any excisable goods manufactured and cleared from appellant No.1 at any point of time. The case made out against the appellant in both the impugned order and in the show cause notice is fabricated and is based on unwarranted assumptions and presumptions, impermissible in law. Even the relied upon documents do not in any manner whatsoever support the findings made in and the purported demand confirmed by the said order. All clearance of goods manufactured in the appellant firm's factory during, inter alia, the material period was upon due compliance with the requirements therefore under the Act, including payment of appropriate central excise duty thereon. No evidence to the contrary has been disclosed. It is his submission that it has been found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arriving at such baseless and patently incorrect finding, there is also no detail disclosed in either the show cause notice or the impugned order as to what were the excisable goods allegedly manufactured and cleared by the appellant firm on which no duty was allegedly paid, what were the quantities thereof, how and in what manner the amounts deposited in the banks of Bharat Suppliers detailed in Annexures Cl, C2 and C3 were correlated with goods manufactured and allegedly cleared by the appellant without payment of duty and how and in what manner, inspite of Sri Biplab Mondal of Bharat Suppliers specifically stating in his statements recorded under Section 14 of the Act that the amounts deposited by him in the said banks related to goods purchased by him from several parties and thereafter sold by him (which fact has not been disputed or denied in either the show cause notice or the impugned order), they were goods manufactured and cleared by the appellant. Moreover, there is nothing disclosed in the show cause notice or in the impugned order as to during which period the alleged goods had been manufactured and/or removed from the factory. 6. Further, there is no material disclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing decisions: (i) CCE Vs. Bihariji Manufacturing Co. Pvt. Ltd., 2015 (323) ELT A23 (SC) affirming CCE Vs. Bihariji Manufacturing Co. Pvt. Ltd., 2015 (323) ELT 106 (Del) rejecting the appeal of the Revenue against the order of the Tribunal in Bihariji Mfg. Pvt. Ltd. Vs. CCE, 2005 (186) ELT 587 (T) (ii) Maan Aluminium Ltd. Vs. CCE, 2015 (322) ELT 184 (SC) (iii) Commr. of Central Excise Vs. Lord's Chemicals Ltd., 2010 (258) ELT 48 (Cal), affirming CCE Vs. Lord's Chemicals Ltd., 2009 (245) ELT 695 (T-Kol) (iv) Commissioner of Central Excise Vs. Brims Products, 2011 (271) ELT 184 (Pat) (v) Commissioner of C. Ex. Vs. Laxmi Engineer Works, 2010 (254) ELT 205 (P&H) (vi) Commissioner Vs. Vikram Cement (P) Ltd., 2014 (303) ELT A82 (All), affirming Vikram Cement (P) Ltd. Vs. Commissioner of Central Excise 2012 (286) ELT 615 (T) (vii) Portland Cement (I) Ltd. Vs. Commissioner of C. Ex, 2015 (326) ELT 304 (T) (viii) Commissioner Vs. Sakeen Alloys Pvt. Ltd. 2015 (10) TMI 558 -SC affirming CCE Vs. Sakeen Alloys Pvt. Ltd. 2014 (5) TMI 606 GUJARAT HIGH COURT affirming Sakeen Alloys Pvt. Ltd. Vs. CCE, 2013 (296) ELT 392 (T) (ix) Principal Commissioner Vs. Shah Foils Ltd., 2021 (37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above are contained in the statement of Sri Prakash Agarwala, the appellant no. 3, dated 22nd July 2009. In his statements, it is in clear and ambiguous terms explains the reason why Lamba Trading might have sent the two letters to the appellant's partner Shri Prakash Agarwala. There has been no denial of the correctness of these statements in the show cause notice or in the said order nor any evidence to the contrary has been disclosed. They have been ignored on mere surmises, which is impermissible in law. 10. The fact that the money belonged to Bharat Suppliers alone is not only evidenced by two documents dated March 21, 2006 and August 28, 2004 themselves and related to goods sold by the said Bharat Suppliers to Lamba Trading in its own capacity, the same is also evidenced from Sri Biplab Mondal's (proprietor of M/s. Bharat Suppliers) statements, inter alia, dated 30th April 2007. As a matter of fact, summarising the statements, the show cause notice itself acknowledges the fact that Sri Biplab Mondal and Bharat Suppliers had business transactions with Lamba Trading, Lucknow and such transactions were done through brokers. As such and even otherwise, none of these relied u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said Nandan Mukherjee. It is because of this reason that the torn invoices of Bharat Suppliers were found in the appellant's factory. As acknowledged by the appellant's partner, Radheshyam Agarwala, in his statement dated 20th January 2007, the goods recorded in these challans had been removed from the appellant's factory premises by Bharat Suppliers. Although it was not clear whether excise duty liability on the said goods were discharged in respect of the said goods, Sri Radheshyam Agarwala undertook that "in the event of any central excise duty liability" in respect of the said goods removed "under those challans of Bharat Suppliers" was required to be paid, we would pay the same. The duty amount involved under these three challans amounted to Rs. 1,38,340/-. 13. Contrary to the misconceived and erroneous allegation made in several places in the show cause notice and finding in the impugned order that the undertaking on the part of Sri Radheshyam Agarwala amounted to "confession" on his part about goods being manufactured and sold by the appellant without payment of duty through Bharat Suppliers and/or was an undertaking to pay such duty as would be demanded, a mere perusa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /materials of any kind whatsoever which corroborates the alleged inference sought to be drawn from the said statement of Radheshyam Agarwala. Thus, the decision of the Supreme Court relied upon in the said order is clearly distinguishable and has no manner of application whatsoever to the instant case. 16. Similarly, the decision of the Punjab and Haryana High Court relied upon in the said order is clearly distinguishable and has no manner of application whatsoever to the instant case. In that case, there was no request for cross examination of the persons whose statements had been relied upon and it is in this premises that the Hon'ble Punjab and Haryana High Court was of the view that the relied upon statements therein retained their evidentiary value. In the instant case specific request for cross examination of persons whose statements have been relied upon were made but the same was denied on patently illegal and wrongful reason. It is settled law that no reliance can be placed upon statement(s) of persons whose cross examination(s) was sought for but denied without any justifiable or valid reason or basis being disclosed. 17. The show cause notice and/or the said order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 20. He further submits that in passing the impugned order the Commissioner has purported to rely upon alleged statements of persons recorded during the course of investigation by DGCEI, which were relied upon documents on the basis whereof allegations were made in the show cause notice and findings have been recorded by the Commissioner in the impugned order. However, inspite of specific request made in clear terms in the reply to the show cause notice filed for allowing cross examination of the said persons, the Commissioner wrongfully and illegally, on a patently flimsy and ex-facie untenable reasoning that since such request for cross examination was not repeated subsequently by the appellant, no opportunity of cross examination was required to be afforded. This is impermissible in law and has by itself vitiated the impugned order and has rendered the same illegal, untenable and unsustainable. In this regard reliance is placed upon inter alia the following decisions:- (i) Kiran Nagindas Vora vs Commissioner of Customs 2015 (322) ELT 97 (Bom) (ii) Mahek Glazes Pvt. Ltd. vs Union of India 2014 (300) ELT 25 (Guj) 21. He further submitted that without prejudice to the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, there can be no demand of any interest under Section 11AB of the Act. The said provision has no manner of application whatsoever and demand to die contrary made in the said order is erroneous and sustainable. 24. He further submitted that for the reasons aforestated, it is clear and evident that there has been no contravention by the appellant of any provision of the said Rules or the Act and findings to the contrary in the impugned order are misconceived, without any substance or merit whatsoever. In the premises, the imposition of penalty upon the appellant firm under Section 11 AC of the Act is contrary to law, untenable and unsustainable. The condition precedent for invocation of the said provision has not been and cannot be said to have been satisfied in the instant case. 25. The penalties imposed upon the appellant Nos. 2, 3 and 4 all under Rule 26(1) of the said Rules, are also untenable and unsustainable. The reasons therefor are set out detail in their respective appeals, which are reiterated. 26. On the other hand, the Ld.AR for the department supported the impugned order by saying that it is a fact on record that the business premises shown by proprietor of appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellant No.1 has procured raw material for manufacturing such a huge quantity and labour to manufacture the said finished goods + consumption of electricity and mode of transportation of the finished goods. Admittedly, Revenue has not established the fact that appellant No.1 was having the capacity to manufacture extra quantity alleged to be clandestinely removed or not. Moreover, it is not coming out from the investigation that how the appellant No.1 procured raw material and from whom. How the payment thereof was made by the appellant No.1. Moreover, whether extra labour has been employed or not? What was the electricity consumption of the clandestinely removed goods? All these facts are missing. 31. The case of the Revenue is based on only the statement of buyers and the appellants. The statements of the appellants have been retracted, but statements have not been tested in terms of section 9D of the Central Excise Act, 1944 to know the veracity of the statements by examination in chief and after examination in chief of all third party statements, cross-examination of the said statements is required to be done. All these aspects are missing in this case. 32. From the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the responsibility of ensuring the presence of such persons for crossexamination was of the noticees themselves. 41. What the above submission overlooks is the 'reliability' of such statements. Once it is shown that the maker of such statement has in fact resiled from it, even if it is after a period of time, then it is no longer safe to rely upon it as a substantive piece of evidence. The question is not so much as to admissibility of such statement as much as it is about its 'reliability'. It is the latter requirement that warrants a judicial authority to seek, as a rule of prudence, some corroboration of such retracted statement by some other reliable independent material. This is the approach adopted by the CESTAT and the Court finds it to be in consonance with the settled legal position in this regard. 42. The contention that it is the responsibility of the noticees to produce the witnesses for cross-examination is a strange one considering that they are witnesses of the Department and that their statements are being relied upon by the Department in support of the SCNs. Since it is relying on such statements, it is the responsibility of the Department to ensure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no reason to hold that the Appellant has dealt with M/s. SFL. Thus in both cases i.e. "Bombay Sales" and "Smi Cash Sales" apart from the statements which are even contradictory no corroborative evidence. The Appellant has placed reliance upon various judgments to canvas their point that in absence of corroborative evidence no demand can be made. We find that no corroborative evidence has been stated in show cause notice in the form of receipt of unaccounted raw material, transportation of unaccounted such raw material to SFL factory, consumption of unaccounted raw material, production of unaccounted finished goods, production record of unaccounted finished goods, use of consumables, extra labour and excess consumption of electricity, clearance of goods from the factory, receipt of cash from even a single person on account of alleged clandestine sale. We also find that the revenue did not undertake any investigation at the end of M/s. SFPL from where the clearance of goods has taken place. When the brokers had stated that the delivery was taken from Vasai Godown which was under the ownership of M/s. SFPL, the officers should have made investigation. Thus in such circumstances, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. 354 (T), Sharma Chemicals v. CCE, 2001 (130) E.L.T. 271 (T), Resha Wires Pvt. Ltd. v. CCE, 2006 (202) E.L.T. 332 (T), Atlas Conductors v. CCE, 2008 (221) E.L.T. 231 (T), Vishwa Traders Pvt. Ltd. v. CCE, 2012 (278) E.L.T. 362 (T), CCE v. Vishwa Traders Pvt. Ltd. 2013 (287) E.L.T. 243 (Guj.), CCE Swati Polyester, 2015 (321) E.L.T. 423 (Guj.), Commissioner v. Swati Polyester - 2015 (321) E.L.T. A-217 (S.C.), Flevel International v. CCE, 2016 (332) E.L.T. 416 (Guj.), CCE v. Renny Steel Casting (P) Ltd., 2012 (283) E.L.T. 563 (T), CCE v. Akshay Roll Mills Pvt. Ltd., 2016 (342) E.L.T. 277 (T), Industrial Filter & Fabrics Pvt. Ltd. v. CCE, 2014 (307) E.L.T. 131 (T), CCE v. Birla NGK Insulators Pvt. Ltd., 2016 (337) E.L.T. 119 (T), CCE v. Ganesh Agro Steel Industries, 2012 (275) E.L.T. 470 (T), UOI v. MSS Foods Products Ltd., 2011 (264) E.L.T. 165 (P & H), CCE v. Sree Rajeswari Mills Ltd., 2009 (246) E.L.T. 750 (T), CCE v. Sree Rajeswari Mills Ltd., 2011 (272) E.L.T. 49 (Mad.), Shardha Forge Pvt. Ltd. v. CCE, 2005 (179) E.L.T. 336 (T), Arya Fibres Pvt. Ltd. v. CCE, 2014 (311) E.L.T. 529 (T), TGL Poshak Corporation v. CCE, 2002 (140) E.L.T. 187 (T). In view of said judgments we find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cleared without payment of duty; i) links 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 admissibility of evidence to allege clandestine manufacture and removal of goods. The High Court o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce 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 of only one diary cannot be made the basis for establishing clandestine manufacture and removal of the fabrics. It has been re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 cleared from the factory of the NPL without payment of duty and also that the notebook did not show the actual sale or clearances of the goods or payments, received or ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so 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 undertaken by Nutan Ispat and Power Pvt. Ltd. with some fabricated entries as you were having control of all the account books of maintained by the company. Ans. Yes. I agree that said note books contain the details of recorded transactions of Nutan Ispat & Power Ltd. as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises 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 would prevail over the statement dated 9.12.2011 of Shri S.V.S. Sarma, the facts remained that since most of the entries in note book no.1,2,6 and 7 were fabricated and not actual, no inference or conclusion could be drawn regarding the purchase of raw materials and sale of finished goods by the Noticee No.1 and 4 and in absence of any material evidences, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Ltd. - 2017 (357) ELT 275 is quoted below : "9. Admittedly in the present case, apart from shortages, the investigators have not gone ahead to find out the evidences to corroborate the charge of clandestine removal with positive and tangible evidences. The Tribunal in the case of CCE v. Sai Iron (India) Ltd. [2005 (67) RLT 97 (Tri.)] held that even if the assessee fails to explain the shortages themselves, the cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation 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 charged with clandestine removal of excisable goods. We are of the considered opinion that since the department has failed to discharge its burden to prove the allegations of clandestine removal by any corroborative evidence, the demand is unsustainable. 19. Though details of several transporters had been mentioned, the Department had chosen only one transport company M/s. Amar Freight Carrier and has relied on some Loading advices and Bilities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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