Anil G. Shakkarwar ORDER
Archana Wadhwa, Member (J)
1. After hearing both the sides duly represented by Shri Rajesh Chhibber for appellant and Shri Sandeep Kumar Singh, A.R. for Revenue, we find that the appellant's factory, who is engaged in the manufacture of Aluminium Profiles (hollow) of various sizes and specifications, was visited by the Central Excise Officers on 14.05.2015, who conducted various checks and verifications. It was found that Daily Stock Register (RG-1) was written only up to 30.04.2015. On being questioned, Shri Jagdish Prasad, Authorised Signatory, informed the officers that they were maintaining the Stock Position of the finished goods on the Computer installed in their factory on routine basis, and entries in RG-1 Registered were made in 10-15 days period. They also produced a printout of Stock position of the finished goods for the intervening period from 01.05.2015 to 14.05.2015 depicting the day-wise production and clearances of the finished goods.
Physical stock taking of the finished goods was also undertaken by the visiting officers and it was found that there was shortage of Aluminium Profiles (other than hollow) as also of Aluminium Profiles (hollow) involving duty of Rs. 5,01,177/- and of Rs. 58,911/-.
During further search of the factory alleged incriminate documents including one note pad was also recovered. Scrutiny of the same lead the officers to believe that the appellant have cleared their final products without payment of duty to the extent of Rs. 64,64,608/- (sixty four lakhs sixty four thousand six hundred and eight rupees). Statement of Shri Jagdish Prasad, Authorised Signatory was recorded wherein he deposed that entries in the note book appears to have been made by the packing and dispatch staff of his company and related to the details of material packed along with details of dispatch of the material and the figures reflected against the entries T.B.L. denotes the total balance quantity available on a particular date after dispatch and the figures reflected against the entries T. Dispatch denotes the total dispatch quantity up to the date of particular month. Further, on being confronted with certain loose papers resumed by the officers, he deposed that the entries therein were entries by the dispatch staff of his company. On further pointing out to certain print out of loose papers, he submitted that some quantity might have been cleared by them without invoices and without payment of Central Excise duty.
2. On the above basis proceedings were initiated against the appellant proposing confirmation of demand of duty alleging clandestine removal, which in turn was based upon entries made in the note book as also on rough papers. The notice also proposed confirmation of duty to the extent of Rs. 5,60,088.00/- (five lakh sixty thousand and eighty eight) in respect of shortages detected in the stock by the visiting officers. Proposal to impose penalties were also made.
3. The said show cause notice was taken up for adjudication by the Additional Commissioner. The Adjudicating Authority observed that apart from the entries made in the note books and rough papers there is no other evidence of clandestine removal. As regards statement of Shri Jagdish Prasad, he observed that it was clearly mentioned by him that the said note pad was not being maintained by him and the same appeared to be maintained by dispatch staff. The Revenue has not made any further enquiry from the dispatch staff. No investigation was conducted from the two Directors of the Company who were looking after day to day work of the Company and were responsible for the functioning. As such by referring to various decisions he observed that the non-confessional statement of Shri Jagdish Prasad cannot be made the sole basis for upholding the allegations of clandestine removal unless such allegations are proved by the Revenue with corroborative, independent, cogent and concrete evidences. Accordingly, he vacated the show cause notice by observing as under:-
"On an overall view, I find that the case has been made out only on the basis of the statement recorded of Sh. Jagdish Prasad, Authorised Signatory of the unit and no other evidence in the form of raw material, payment received for clandestine removal of goods, how the goods were transported has been brought on record by the Authorities or the investigation team, therefore, relying on the said decision cited herein above I find that the charge of clandestine removal is not proved in the absence of any corroborative evidences to the statement of Sh. Jagdish Prasad, Authorised Signatory. I also find Sh. Jagdish Prasad, Authorised Signatory was not guilty of the charge found against him and he is not liable to the penalty imposed on him."
4. Being aggrieved with the said order of the Original Adjudicating Authority, Revenue filed an appeal before Commissioner (Appeals). The appellate authority observed that the statement of Shri Jagdish Prasad was a confessional statement wherein he admitted clandestine clearances of finished goods and as such statements has not been retracted, the same has to be relied upon to uphold the allegations of clandestine removal. Similarly, in respect of shortages of goods, he observed that such shortages were admitted by Shir Jagdish Prasad and this implies that appellant has accepted its clearances and leads to the fact of clandestine removal. As regards the assessee's stand that the officers did not further enquire from the dispatch person about the loose papers and writing pads, he observed that such contentions of the assessee is deprived of any merit as it was always open to him at the time of the proceedings to deny that the said papers did not belong to the unit or were not made by his staff of the unit. As such he observed that based upon the statement of Shri Jagdish Prasad, Authorised Signatory, it has to be held that assessee has indulged in clandestine removal. Accordingly, he set aside the Order of the Original Adjudicating Authority and confirmed the demand of Rs. 5,60,088/- in respect of shortages detected in the stock of finished goods and of Rs. 64,64,608/- in respect of clandestinely manufactured and cleared finished goods along with confirmation of interest. He also imposed penalty of Rs. 70,24,696/- on the appellants under Rule 25(1) of the Central Excise Rules, 2002 read with Section 11(AC) of the Central Excise Act along with imposition of penalty of Rs. 1,00,000/- in terms of Rule 26 in the Central Excise Rules.
The said order of Commissioner (Appeals) is impugned before Tribunal.
5. We have heard Shir Rajesh Chhibber appearing for appellant and Shri Sandeep Kumar Singh for the Revenue.
6. On going through the impugned order passed by the Original Adjudicating Authority as also by Commissioner (Appeals) we find that the Additional Commissioner in his order has vacated the show cause notice by observing that apart from the statement of Shri Jagdish Prasad there is no other corroborative evidences on record to establish clandestine manufacture and removal of the goods. On the other hand Commissioner (Appeals) has strongly relied upon the statement of said deponent by observing that he has accepted the clandestine removal. Further we note that as recorded in the order of the Original Adjudicating Authority as also as pleaded by the appellant, the said statement cannot be held to be confessional inasmuch as it is clearly deposed by Shri Jagdish Prasad that details in writing pad and slip pad etc. appears to be in the handwriting of dispatch and packing staff. Revenue has made no further efforts to get in touch with the said dispatch and packing staff or to find out who actually is the writer of the entries in the note pad. No enquiry stand made even from the Directors or from any other person/staff of the assessee. The entire case of the Revenue is based upon the not so confessional statement of Shri Jagdish Prasad.
Apart from the fact that the statement of Shri Jagdish Prasad was not confessional, we observe that even if the said statement is held to be confessional statement accepting clandestine removals the same cannot be made the sole basis for upholding the allegations of clandestine activity of the appellant. The deponent of the said statement was never put to Examination-in-Chief or cross examination and as such veracity of his statement has never been tested. Otherwise also it is well settled law that clandestine removal allegations cannot be upheld on the basis of the sole statement of one of the employees, unless the same are corroborated by other independent evidences.
The Hon'ble Allahabad High Court in the case of Continental Cement Company v. Union of India reported as MANU/UP/1995/2014 : 2014 (309) E.L.T. 411(All.) has held that clandestine removal is required to be proved by clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, transportation, the mode and flow back of funds. Such charge is a serious charge required to be proved by Revenue by tangible and sufficient evidences and mere statement of some of the buyers given on the basis of their memories are insufficient without support of any documentary evidences. Further, Tribunal in the case of Commissioner of Central Excise, Raipur v. Heliwal Polypackers Pvt. Ltd. reported as MANU/CE/0319/2016 : 2016 (340) E.L.T. 204 (Tri.-Delhi) has again re-iterated the legal position that the corroborative evidences in the shape of buyers, Transporters, Raw material suppliers etc. are required to be produced by the Revenue upon whom the burden is cast heavily. To the same effect is the Tribunal's decision in the case of Commissioner of Central Excise, Ludhiana v. Raj Lakshmi Dyeing & Printing Mills reported as 2014 (312) E.L.T. 379 (Tri.-Del.) as also in the case of Commissioner of Central Excise, Ludhiana v. Renny Steel Castings (P) LTD. reported as MANU/CE/0328/2011 : 2011 (274) E.L.T. 94 (Tri.-Del.), as confirmed by the Hon'ble Punjab & Haryana High Court reported as Commissioner of Central Excise, Ludhiana v. Renny Steel Castings (P) Ltd. reported as MANU/PH/2788/2012 : 2013 (288) E.L.T. 45 (P & H).
In view of the forgoing we find that the Revenue has failed to produce any evidence to establish clandestine removal on the part of the appellant. The Order of Commissioner (Appeals) lacks merits and is accordingly set aside and the order of the Original Adjudicating Authority is restored.
7. Similarly in respect of the shortages, it is well settled that mere shortages cannot lead to the allegation of clandestine removal in the absence of any other evidences to reflect upon the fact that such shortages has occurred on account of clandestine clearances. Reference can be made to Hon'ble Allahabad High Court's decision in the case of Commissioner of Central Excise, Kanpur v. Minakshi Castings reported as 2011 (274) E.L.T. 180 (All.). Accordingly, we set aside that part of the impugned order also vide which the demand stands confirmed on the said ground and restore the order of the Original Adjudicating Authority.
8. Inasmuch as demand has been set aside, the penalties imposed upon the appellant is also required to be set aside. We order accordingly. In a nutshell the impugned order passed by Commissioner (Appeals) is set aside and appeal is allowed by restoring the Order of the Original Adjudicating Authority.
(Pronounced in Court on 24/08/2018)
© Manupatra Information Solutions Pvt. Ltd.