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TMI Blog2025 (5) TMI 1281X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the appellants is engaged in the manufacture of re-rolled products i.e. M.S. Rods, Flats, Rods etc. since 1999-2000 at their Rolling Mills located at Beldihi, Dist.- Sundargarh, Odisha. Since 21.1.2008, the appellants started manufacturing M.S. Ingots. Their manufacturing unit of Ingot was also closed w.e.f. July, 2013. * The main raw materials for manufacture of re-rolled products are M.S. Ingot, M.S. Plate, Re-rollable Scrap etc. and the main raw materials for the manufacture of M.S. Ingots are Sponge Iron, Pig Iron, M.S. Scrap etc. * The installed capacity for the manufacture of M.S, Ingot is 800 M.T. per month and installed capacity of their Rolling Mill was 625 M.T. per month. * During the relevant period, officers of the Department visited their factory on different occasions for conducting audit. The officers visited their factory on 24.1.2007, 25.1.2007, 24.10.2009, 25.10.2009, 31.10.2011 and 1.11.2011 and conducted thorough audit of their registers and documents and at no point of time any discrepancy was ever noticed. * The officers of the Department on 16.4.2008 conducted search in the factory premises of the appellants and office premises of Shri Santosh Kum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory are cleared against invoices with appropriate Central Excise duty. He was also made to state in answer to question no. 26 that in certain cases, Central Excise Invoices were not issued which is contradictory to his statement in answer to question no. 24. The statement of G.D. Roy, Supervisor of the appellant was also recorded on 16.4.2008 who only stated in connection with a computer printout that the same was relating to sale made to M/s. Vijay Laxmi Steel Traders. Thereafter, Shri Santosh Kumar Pareek was made to deposit 5 Post Dated Cheques of Rs10,00,000/- each but requested the Department to keep the Cheques pending due to financial crunch and also wrote a letter to the ADG, DGCEI & Others that the statements were recorded from them under threat, coercion and harassment and in a stressful condition but the Department vide letter dated 2.5.2008 contended that the said stand of the appellants' Director was afterthought. However, inspite of financial crunch, the appellant had deposited Rs10,00,000/- during investigation. * Further, Summons were issued to Santosh Kumar Pareek on different dates but he had shown possible reasons and could not appear before the authority. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s recovered from the office of the Directors. * The allegations have been made that the appellant had removed 18309.498 M.T. of final product clandestinely. Such removals have been inferred on the basis of some seized documents. Stock verifications were made but no discrepancies in respect of excess or shortage of raw materials and finished goods were found. The documents were in the nature of note book, diary, loose slips etc. on the basis of which unaccounted clearances have been inferred. The said quantification has been made on the basis of the entries on those rough note books or documents seized from the office premises of the Directors. The Show Cause Notice has been issued invoking extended period of limitation. Allegations against the Directors have also been made inferring their involvement in the alleged removal of goods * The appellant submitted the reply to the said Show Cause Notice vide their letter dated 16.5.2012 denying an disputing the allegations contained in the Show Cause Notice taking the point of non-maintainability of the Show Cause Notice and on merit sating that entire demand is based on assumption and presumption and without any corroborative evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce periodical audits were made and no objection was raised and/or proceedings were initiated earlier at any point of time alleging large scale clandestine activity. The demand is also barred by limitation. * The appellant was issued with an Adjudication Order dated 16.9.2013. By the said Order, the Ld. Adjudicating Authority confirmed the demand and dropped some amount on the ground of double demand, he charged interest and imposed penalty of equivalent amount of demand under Section 11AC of the Central Excise Act, 1944. The Directors were also imposed with penalty of Rs.1,00,00,000/- each. * Hence, the present appeal. * The Ld. Counsel for the appellants submits as under: The order passed by the Adjudicating Authority cannot be maintainable in law on the ground mentioned in the grounds of appeal in the appeal petition. The Adjudicating Authority did not consider the submissions contained in the reply to the SCN and the decision cited and did not deal with the contention of the cross-examination specifically requested in the reply to the SCN. No material based on independent inquiry to corroborate the charge on clandestine removal has been relied upon confirmed by the Adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch had no connection with the business of the company. Some transactions were relating to the company for which goods were cleared on payment of duty. At no point of time, the directors admitted and/or confessed that there was clandestine removal of goods without payment of duty. No documents were also found in respect of receipt of 22.87 crore of un-accounted money. In other words, there is no investigation and/or corroborative evidence in support of the allegation of clandestine removal. The appellant submitted that the said documents are the hand written private diary, were recovered from the chamber of Kishan Pareek. The entries in that documents were also containing the payment of duty and wrong demand of Rs. 2,28,85,582/- out of the demand of Rs. 2,96,06,345/-. Regarding serial no. 3, the documents is nothing but note pad - rough note pad maintained by Kishan Pareek seized from his chamber. The said documents includes the entries for which goods were cleared proper Central Excise invoices but the said amount has also been included in the demand. * Regarding serial no. 4 it is also a note pad seized from the chamber of Kishan Pareek containing some entries including the entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of Section 9D to make the statement relevant and admissible. The Ld. Adjudicating Authority failed to appreciate that none of the directors at any point of time had admitted or confessed that there was clandestine removal of the goods without payment of duty. The statements given by them should be considered as a whole or to be discarded as a whole. Pick and choose method of the statement and to proceed on such basis are not permissible. The Adjudicating Authority without giving any finding in respect of relevance and accepted of the decision cited in the reply to the SCN has observed in the decision cited by the appellant has not reliable. As the investigation has co-related the various information gathered during such operation and the statement of the concerned person recorded which cannot be ground for denying the ratio of the decision. The contention of the appellant on the point of limitation has also not considered since extended period cannot be invoked in this case since all the facts were within the knowledge of the department which would be appearing from regular visit of the officer of the department as stated supra. Regarding the duplicate demand of Rs. 3,50,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d which were recorded during the course of investigation. 6. To deal such a situation it is the duty of the Adjudicating Authority the allegation of the clandestine removal is to be corrugated by supporting evidence. To allege clandestine removal following tests are to be satisfied as held by this Tribunal in the case of Arya Fibres Pvt. Ltd. versus Commissioner of C.Excise, Ahmedabad-II reported in 2014 (311) E.L.T. 529 (Tri-Ahmedabad) : "40. After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following: (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of: (a) raw materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain re-iterated the same principles, after considering the entire case-law on the subject [Hindustan Machines v CCE, 2013 (294) ELT 43]. Members of Bench having hearing initially differed, the matter was referred to a third Member, who held that clandestine manufacture and clearances were not established by the Revenue. We are not going into it in detail, since the learned Counsels on either side may not have had the opportunity of examining the decision in the light of the facts of the present case. Suffice it to say that the said decision has also tabulated the entire case-law, including most of the decisions cited before us now, considered them, and come to the above conclusion. In yet another decision of a co-ordinate Bench of the Tribunal (Pan Parag India v CCE, 2013 (291) ELT 81), it has been held that the theory of preponderance of probability would be applicable only when there are strong evidences heading only to one and only one conclusion of clandestine activities. The said theory, cannot be adopted in cases of weak evidences of a doubtful nature. Where to manufacture huge quantities of final products the assessee require all the raw materials, there should be some evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw materials valued more than Rs. 1.09 crores. It is the specific plea of the appellants that the inputs are supplied under licence under the Explosives Act and they are required to purchase only through governmental sources. This was explained by the Managing Partner when he was examined by the Investigating officers . Therefore, at the time of investigation, it was the duty of the said officers to have contacted the supplier of Governmental agency and examined them and should have seen through their records as to whether the appellants have purchased such huge quantities of inputs for manufacture of the fireworks. The said non-examination of the supplier of raw material which is controlled and a licensed commodity is fatal to this case and it can be easily concurred that Revenue has not proved the case with regard to the purchase of raw materials for manufacture of final product. 7. It is seen that the appellants have also brought to the notice of the Revenue that fireworks are required to be insured mandatorily while removing the same and various authorities are required to be informed and permission obtained Revenue has not examined this point in the correct perspective. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in the case of Commissioner of Central Excise, Haldia versus Lord's Chemicals Ltd. 2010 (258) E.L.T. 48 (Cal.) the Hon'ble High Court observed as under: "2. Admittedly, a show cause notice was issued on the presumption that the entries, as recorded in the private note book maintained by the labour contractor, should be taken as the clearance figures of finished products from the factory. It is settled law that such presumption is not permissible. The presumption, on the basis of which the show cause notice was issued, was misplaced in the absence of any corroborating, reliable and independent evidence. Therefore, the Tribunal below was right in rejecting the contention of the revenue and in accepting the contention of the assessee. Therefore, the appeal is summarily dismissed. " 11. Therefore, on the basis of private documents recovered from the factory of the appellant cannot be the basis to allege clandestine removal of goods in the absence of satisfying the tests laid down in the case of Arya Fibres Pvt. Ltd. (Supra). Further, in the statements recorded during the course of investigation has been relied the same is not the admissible evidence in the light of the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice was not recorded nor formation of an opinion that it requires to be admitted in the interest of justice. In taking this view, we find support from the decision in the case of Ambica International v. UOI rendered by the High Court of Punjab and Haryana. Reliance has been placed by the Counsel for the Revenue on the decision in the matter of Commissioner of Central Excise v. Kalvert Foods India Pvt. Ltd. (Laws (SC) 2011 838)=2011 (270) E.L.T. 643 (S.C). That decision turned on its own facts. In para 19 of the judgement, it was concluded as below: "19. We are of the considered opinion that it is established from the record that the aforesaid statements were given by the concerned persons out of their own volition and there is no allegation f threat, force, coercion, duress or pressure being utilized by the officers to extract the statements which corroborated each other. Besides the Managing Director of the company of his own volition deposition the amount of Rs. 11 lakh towards excise duty and therefore in the facts and circumstances of the present case, the aforesaid statement of the Counsel for the Respondents cannot be accepted. This fact clearly proves the conclusion that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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