S.S. Garg ORDER
S.S. Garg, Member (J)
1. The appellants have filed these two appeals against the separate impugned orders both dated 21.05.2018 passed by the Commissioner (Appeals) whereby the Commissioner (Appeals) rejected the appeal of the company by confirming the Order-in-Original but in the case of Executive Director Murari Lal Agarwal, the Commissioner (Appeals) has reduced the penalty from 4,69,148/- (Rupees Four Lakhs Sixty Nine Thousand One Hundred and Forty Eight only) to Rs. 3,00,000/- (Rupees Three Lakhs only). Since the investigation and the evidence collected in the present case relates to both the parties, therefore both the appeals are being taken up together for discussion and disposal. Briefly the facts of the present case are that the Appellant No. (1) is engaged in the manufacture of sponge iron falling under Chapter 72 of Central Excise Tariff Act, 1985 and was registered under Central Excise Department and are clearing the goods on payment of excise duty. The officers of the DGCEI, Hyderabad Region conducted investigation at the end of M/s. Shivam Smelters Pvt. Ltd., Gajwel Manda, Medak District and also residence of the Managing Director Shri. Govind Kumar Agarwal on 04.03.2011 and recovered various documents. As part of the investigation, statement of Shri. Govind Kumar Agarwal, the Managing Director was recorded on 04.03.2011 during which he inter alia stated that they have indulged in clandestine clearance of sponge iron and clandestine manufacture and clearance of MS Ingots occasionally due to market conditions. During the course of investigation, statement of Appellant No. (2) was recorded wherein he admitted the clearance of 290 MT of sponge iron to M/s. Shivam Smelters at the rate of Rs. 1400/- per MT. After completion of the investigation, appellants were issued with the show-cause notice No. 14/2013 dated 31.01.2013 by the Deputy Director General of Central Excise Intelligence, Hyderabad proposing to demand Central Excise duty of Rs. 4,69,148/- (Rupees Four Lakhs Sixty Nine Thousand One Hundred and Forty Eight only) along with interest and also proposed to impose penalties under the provisions of Central Excise Act and the Rules made thereunder. Appellant filed detailed reply to the show-cause notice and the Assistant Commissioner after considering the submissions of the appellant vide Order-in-Original dated 30.12.2016/02.01.2017 confirmed the demand as proposed in the show-cause notice apart from imposing penalties on both the appellants. Aggrieved by the said order, appellant filed two appeals before the Commissioner (Appeals) Belgaum and the learned Commissioner (Appeals) vide the impugned order dated 21.05.2018 rejected the appeal of the Appellant No. (1) but in the case of Appellant No. (2), the Commissioner (Appeals) reduced the penalty to Rs. 3,00,000/- (Rupees Three Lakhs only) under Rule 26 of the Central Excise Rules.
2. Heard both the parties and perused the records.
3. Learned counsel for the appellant submitted that the impugned orders are not sustainable in law as the same have been passed without properly appreciating the facts and the law. He further submitted that the demand has been confirmed solely on the basis of the statement of the Managing Director who was made to admit the duty liability by using force. He further submitted that the Managing Director was not questioned with reference to any of the documentary evidences but a bald statement was recorded solely for the purpose of demanding of duty. Except for his statement there is not even an iota of evidence to prove the allegations of clandestine removal on the part of Appellant No. (1). He further submitted that even in the statement of Shri. Govind Kumar Agarwal, Managing Director of M/s. Shivam Smelters, the Appellant No. (1) has not been named from whom he has procured the sponge iron. He further submitted that it is well settled law that duty demand cannot be sustained solely on the basis of the statement recorded during the course of investigation in the absence of corroborative evidences in the form of consumption of electricity, purchase of raw-material, electricity consumption, manpower, capacity of the factory to produce the alleged quantity, mode of transportation, sale of goods, receipt of sale proceeds and other documentary evidences. For this submission, the appellant has relied upon the following decisions:
a. Suntrek Aluminium P. Ltd. Vs. CC, CE & ST, Rajkot - MANU/GJ/0894/2012 : 2013 (288) E.L.T. 500 (Guj.)
b. Continental Cement Co. Vs. UOI - MANU/UP/1995/2014 : 2014 (309) E.L.T. 411 (All.)
c. CC, CE & ST, Ghaziabad Vs. Auto Gollon Industries P. Ltd. - MANU/UP/0003/2018 : 2018 (360) E.L.T. 29 (All.)
d. Surya Alloy Industries Ltd. Vs. UOI - MANU/WB/0157/2014 : 2014 (305) E.L.T. 340 (Cal.)
e. Hi tech Abrasives Ltd. Vs. CCE & Cus., Raipur - MANU/CG/0539/2018 : 2018 (362) E.L.T. 961 (Chhattisgarh)
f. Commissioner of Central Excise, Delhi-I V. Vishnu & Co. Pvt. Ltd. - MANU/DE/3992/2015 : 2016 (332) E.L.T. (793)
g. Triveni Engineering & Industries Ltd. Vs. CCE, Allahabad - MANU/UP/0273/2016 : 2016 (334) E.L.T. 595 (All.)
h. Commissioner Vs. Motabhai & Steel Industries - MANU/GJ/1223/2014 : 2015 (316) E.L.T. 374 (Guj.)
i. Amba Lal Vs. UOI & Others - 2010 (259) E.L.T. 652 (Bom.)
j. CCE, Meerut-I Vs. R.A. Castings Pvt. Ltd. - MANU/UP/3378/2010 : 2012 (26) S.T.R. 262 (All.)
k. Balashri Metals Pvt. Ltd. Vs. UOI - MANU/JH/1147/2016 : 2017 (345) E.L.T 187 (Jhar.)
l. Om Shanti Steel & Casting Pvt. Ltd. Vs. UOI - MANU/JH/1208/2016 : 2017 (347) E.L.T 441 (Jhar.)
m. CCE, Chandigarh Vs. Nachiketa Paper Ltd. - MANU/PH/0499/2007 : 2008 (225) E.L.T. 194 (P&H)
n. Flevel International Vs. CCE - MANU/DE/2747/2015 : 2016 (332) E.L.T. 416 (Del.)
3.1. He also submitted that burden of proving the allegation of manufacture and clandestine clearance is on the Department and in the present case, the Department has failed to prove the same with proper and cogent evidences. For this submission, he relied upon the following decisions:
a. Pacific Pharmaceuticals Pvt. Ltd. Vs. CCE, Bangalore-II reported in MANU/CB/0313/2007 : 2007 (216) E.L.T. 263 (Tri.-Bang.)
b. Vidya Laminates Pvt. Ltd. Vs. CCE, Ahmedabad reported in MANU/CM/0918/2005 : 2006 (197) E.L.T. 260 (Tri.-Mumbai)
c. CCE, Chennai-I Vs. Indian Steel & Allied Products - MANU/CC/0014/2016 : 2016 (344) E.L.T. 292 (Tri.-Chennai)
d. CCE, Raipur Vs. ABS Metals (P) Ltd. - MANU/CE/0631/2016 : 2016 (341) E.L.T. 425 (Tri.-Del.)
e. Bindal Textile Mills Ltd. Vs. CCE, Thane - MANU/CM/7283/2006 : 2016 (338) E.L.T. 428 (Tri.-Mumbai)
3.2. It is his further submission that the investigating authority has not made any attempt to conduct further investigation after recording the statement to prove the allegation of clandestine removal. On the other hand the entire demand has been made solely on the basis of the statement which is not supported by any documentary evidence. He further submitted that the statement of Appellant No. (2) was obtained due to pressure and coercion and undue influence.
4. On the other hand the learned AR defended the impugned order and submitted that the Managing Director of appellant No. (1) has admitted the clearance of sponge iron to the extent of 290 MT clandestinely without payment of duty and once the Director of the company has admitted the liability, there was no need to prove the same. He further submitted that the document recovered from the residence of Govind Kumar Agarwal also established the receipt of sponge iron from the appellant. For this submission, he has relied upon the following case-laws:
a. CCE, Mumbai Vs. Kalvert Foods India Pvt. Ltd. - MANU/SC/0921/2011 : 2011 (270) E.L.T. 643 (S.C)
b. Sri Rama Machinery Corporation Ltd. Vs. CCE, Chennai-I - MANU/CC/0151/2016 : 2017 (348) E.L.T. 540 (Tri.-Chennai)
c. CC, Mangalore Vs. Jindal Vijayanagar Steel Ltd. - MANU/KA/3034/2011 : 2017 (346) E.L.T. 378 (Kar.)
d. JSW Steel Limited V. Commissioner - 2017 (346) E.L.T. A138 (S.C)
e. CCE & C, Aurangabad Vs. Padmashri V.V. Patil S.S.K. Ltd. - MANU/MH/0502/2007 : 2007 (215) E.L.T. 23 (Bom.)
f. CCE & Cus., Calicut Vs. General Manager, Telecom, BSNL - MANU/KE/0468/2008 : 2009 (14) S.T.R. 450 (Ker.)
5. After considering the submissions of both the parties and perusal of the material on record, I find that the entire case against the Appellant No. (1) was built on the basis of the statement of the Director Murari Lal Agarwal and there is no other evidence to establish the factum of clandestine clearance. Further I find that the charge of clandestine clearance cannot be established merely on the basis of statement of the Director who has alleged coercion and undue influence exhorted on him for extracting confession. Further I find that consistently Courts have held that duty demand cannot be sustained solely on the basis of statement recorded during the course of investigation in the absence of corroborative evidences in the form of consumption of electricity, purchase of raw-material, electricity consumption, manpower, capacity of the factory to produce the alleged quantity, mode of transportation and sale of goods, receipt of sale proceeds and other documentary evidences. Further I find that in the case of Continental Cement Company cited supra, the Hon'ble High Court of Allahabad in paras 12 & 13 has held as under:
"12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed 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. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects:
(i) To find out the excess production details.
(ii) To find out whether the excess raw materials have been purchased.
(iii) To find out the dispatch particulars from the regular transporters.
(iv) To find out the realization of sale proceeds.
(v) To find out finished product receipt details from regular dealers/buyers.
(vi) To find out the excess power consumptions.
13. Thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department."
5.1. Further I find that in the statement of Shri. Govind Kumar Agarwal which was recorded on 04.03.2011 wherein he has mentioned the name of various parties mainly M/s. KMMI Sponge Iron, Bellary, M/s. BMMI Sponge Iron, Bellary, M/s. Jindal Sponge, Bellary, M/s. Sree Rayalaseema Green Steloy Ltd., Kurnool etc. whereas the name of the appellant does not figure in the statement. Further I find that there is a discrepancy in the quantity of the sponge iron alleged to have been purchased from the appellant. As per the Department, the Managing Director has admitted the duty liability to the extent of 290 MT whereas the duty demand has been confirmed on 293.42 MT of sponge iron which is neither admitted nor corroborated with any documentary evidence. Further I find that it is also settled law that allegation of manufacture and clandestine clearance, the burden lies on the Department to prove the charge against the assessee with proper and cogent evidence but in the present case the Revenue has not conducted complete investigation and relied upon merely the statement of the Executive Director and confirmed the duty demand which in view of the decisions cited supra is not sustainable in law. Further I find that once the demand is not sustainable, penalty is not imposable on the Appellant No. (1) and Appellant No. (2) in view of the decisions in the case of Jindal Praxair Oxygen Co. Ltd. Vs. CCE - MANU/CB/0133/2007 : 2007 (208) E.L.T. 181 and Goa Bottling Co. Ltd. - Vs. CCE - 2006 (206) E.L.T. 950.
6. In view of my discussion above, I am of the considered view that the impugned orders are not sustainable in law and therefore I set aside both the impugned orders by allowing the appeals of the appellants.
(Order was pronounced in Open Court on 14/06/2019)
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