Raju ORDER
Ramesh Nair, Member (J)
1. The present appeals have been filed by M/s. Vandevi Texturizers Pvt. Ltd. and Shri Sanjay Ratan Prakash Aggarwal, Chief Executive Officer of M/s. Vandevi Texturizers Pvt. Ltd. against the Order No. RS/94-98/SRT-II/07 dated 26.02.2007 passed by the Commissioner (Appeals), Surat - II. The brief facts of the case are that the Appellants are engaged in the manufacture of Polyester Knitted Fabrics from Polyester Yarn. They are clearing their finished goods to other 100% EOUs against CT-3 certificates. During the relevant period they had cleared goods to EOU unit M/s. Sunshine Overseas, Navsari which is also an 100% EOU. Investigations were carried out at M/s. Sunshine Overseas, during which statement of Partner, Rasid Sadatali Saiyed was recorded wherein he stated that he was holding 90% shares in M/s. Sunshine Overseas and 10% shares were held by Shri Sushil Bansal. That the real owner of the firm is Shri Harron Bhai, who is taking 90% profit. He also stated that they were purchasing fabrics from Surat and after cutting and stitching, they manufacture Scarfs and Dupattas, which were exported. From January 2003, they received fabrics of different types under the cover of annexures issued by the Central Excise and they were showing fictitious names and addresses of the buyers at Bhiwandi on the Central Excise DTA invoices as no goods were delivered. He also stated that Shri Haroon Chhaya, owner of M/s. Al Amin Exports and Shri Irfan Bhai are looking after all monetary dealings of M/s. Sunshine Overseas. Statements of Shri Irfan and Shri Haroon were recorded wherein they stated that the entire operations of M/s. Sunshine were looked after by them. That they were not holding any position in firm but were looking after entire work. No material was received by them against CT-3 issued in favour of M/s. Sunshine. They were making exports out of raw material received from M/s. Bilal Latif Memon. Investigation at Appellant firm M/s. Vandevi Texturizers was carried out wherein their Manager, Shri Hariram Chaudhary was recorded wherein he stated that the goods were cleared on paper and were not physically delivered to M/s. Sunshine and the goods were sold in the open market. The Chief Executive Officer Shri Sanjay R.P. Agarwal of M/s. Vandevi Texturizers in his statement also stated that they prepared the documents reflecting clearances of goods from the factory but the same were sold in the open market and proceeds were returned in cash. He was not able to identify the customers to whom the goods were sold. The Officers also recorded the statements of the transporters and other persons. Based upon the investigation, M/s. Vandevi Texturizers were issued show cause notice demanding duty amounting to Rs. 34,86,256/- on 231415.217 kg of Polyester Yarn alleging the same was not used in manufacture of fabrics but were diverted in the open market. It was also proposed to confiscate the same and to impose penalty u/s 11AC of Central Excise Act and Rule 26 of Central Excise Rules, 2002. Penalty on other Appellant was also proposed. Vide Adjudication Order dated 31.03.2006, the demands as proposed were confirmed and penalty was imposed upon M/s. Vandevi Texturizers Pvt. Ltd. and other Appellants. The diverted goods were also ordered to be confiscated with an option to redeem the same on payment of redemption fine. Against the said order, the Appellants filed the appeal before the Commissioner (Appeals), who vide impugned order-in-appeal upheld the Order-in-Original against the present Appellants. Hence the present appeals before us.
2. Shri H. Ganguly, Ld Counsel appearing for the Appellants submits that the allegations against them were of clandestine removal of duty -free procured raw materials of quantity approximately 2.31 lakh kg of Polyester Yarn and that no manufacturing activity was undertaken by the Appellants and there was no movement of finished goods from the Appellant's factory to M/s. Sunshine. He submits that during the impugned period, they had supplied finished goods to M/s. Sunshine Overseas against CT-3 Certificates and as per details of invoice, AR-3, D-3 declarations, they also maintained statutory registers viz. In-bond Register, Daily Issue of Raw Material Register, Daily Stock Register, Export Register, Wastage Register etc., as prescribed in terms of Manufacture & Supply Operations in Warehouse Regulation Rules, 1966 and also filed periodical returns showing manufacturing and supply of finished goods to the recipient of 100% EOU viz. M/s. Sunshine Overseas. Only on the basis of statements allegations were made against Appellant. There is no evidence of removal of duty free raw material by the Appellant i.e. movement of goods, any identified buyer or recipient of goods, any amount being received by the appellants on account of removal, or transportation of goods. During the visit to the Appellant factory and preparation of panchnama, no discrepancy was found in stock of raw material, finished goods and inventory record. There is no dispute about the fact that the Appellant had maintained properly all the statutory records. They also followed the procedures of Removal of Finished Goods to Other 100% EOUs in terms of Rule 20 of Central Excise Rules, 2002 and CBE&C Circular No. 579/16/2001-CX : MANU/EXCR/0045/2001 dated 26.06.2001, which prescribes the removal of finished goods under the prescribed AR-3 Form - in quadruplicate, distribution of copies of AR-3s, accountal of goods in warehouse, responsibility of the consignor and the consignee and in particular the requirement that the consignor should receive the duplicate copy of the warehouse certificate, duly endorsed by the consignee, within 90 days of the removal of the goods and that if such warehouse certificate is not received within 90 days, the consignor shall pay appropriate duty leviable on such goods. They also filed monthly returns prescribed under Rule 17 (3) of the Central Excise Rules 2002 showing manufacture and clearance of finished goods and also filed quarterly and half yearly returns with the offices of the Development Commissioner, KFTZ in terms of FTP. The show cause notice and the adjudicating authority, though relied upon the statement but the same cannot be made basis for demanding duty from the Appellant as the same are not corroborated by any single evidence. Even the cross examination of such persons were not allowed which is a violation of the mandatory requirement under Section-9D of the Central Excise Act. He also points out that Shri Sanjay Aggarwal had given contradictory statements. In his statement dated 25.6.2003, Shri Aggarwal had deposed about clandestine removal of manufactured goods, Polyester Gray Fabrics, but after nearly 2 years he changed his version and deposed that the goods removed was of Polyester Yarn in his statement dated 12.03.2005. Even in statement dated 25.06.2003 of Shri Hari Ram Chaudhary, Manager of the Appellant concern, there was admission about manufacture and illicit removal of Polyester Grey Knitted Fabrics. Thus, the statements are contradictory. That Shri Aggarwal had also filed two affidavits dated 1.7.2003 and 4.3.2005 retracting his statements and in such case in absence of cross examination his statement cannot be relied upon.
2.1. He also points out that the transporter's statement was also contradictory. Shri Sayed, Tempo driver, in his statement dated 12.7.2003 and Shri Akbar Shaikh Umar, Tempo owner, in his statement dtd 19.8.2003 did not say anything about transportation of raw material, whereas in March 2005, Shri Vijay Purohit, the Tempo owner based upon his memory in his statement stated that the Tempo was used for transportation of Polyester Yarn and not Polyester Knitted Grey Fabrics. However, when he was questioned about names of the consignor, he stated that he did not remember the place where he had delivered the goods. That there are 46 consignments of finished goods, which were transported through different vehicles, but only one single recorded statement dated 11.3.2005 involving one transporter and two tempos cannot automatically prove that all other vehicles were used to transport Polyester Yarn in the alleged clandestine manner. He submits that in above circumstances and in absence of cross examination, the statements of persons connected with M/s. Sunshine Overseas or transporter cannot be basis for making demand against Appellant unit.
2.2. The Ld. Counsel further submits that though the Revenue's case is that there was no manufacture and removal of finished goods, but no evidence has been brought on record, but say that there was "No Manufacture" or disapproved documents available on record showing the effect of manufacture and clearance of finished goods. He also relies upon the judgments in case of SUNSHINE OVERSEAS vs CCE - MANU/CS/0167/2011 : 2011 (268) ELT 374 (Tri), and NITIN TEXTILES - 2010 (261) ELT 181 (Tri). He submits that in view of above facts, the impugned order is not sustainable and is required to be set aside.
3. On the other hand Shri L. Patra, Ld Assistant Commissioner (AR) appearing for the Revenue submits that from the statements of partners of M/s. Sunshine Overseas and the statement of Shri Sanjay Ratan Aggarwal, it is apparently clear that no manufacturing activity took place in the factory of the Appellants and the Polyester Yarn was cleared in the open market by the appellant firm. That the partners of Sunshine Overseas in their statements have stated that they were receiving amount on account of showing supply of Polyester Fabrics in their factory whereas they were purchasing cheap quality raw material from the market and after manufacturing of goods, they were clearing the same for exports. They have also stated that they have not received any Polyester Fabrics from the Appellant. He reiterates the findings of the impugned order and supports the same.
4. Heard both the sides and perused the case records. We find that the allegation of clearance of Polyester Yarn by the Appellants in the market has been made on the ground that the partners of M/s. Sunshine Overseas in their statements stated that they did not receive any Polyester Fabrics. Further the statement of Shri Sanjay Ratan Aggarwal, Chief Executive Officer of the Appellant firm M/s. Vandevi Texturizers has also been relied upon that they did not consign Polyester Fabrics to M/s. Sunshine Overseas but diverted Polyester Yarn in local market. Against the above background we find that during investigation the Appellant factory was also searched and no incriminating documents or evidences were found, which shows that the Appellant did not clear Polyester fabric to M/s. Sunshine Overseas and instead cleared Polyester yarn in local market. Stock of raw material and finished goods etc. were found to be in order. Even, the statutory records were found to have been correctly maintained by the appellant firm and the same has nowhere disputed. It is observed that except placing reliance on the statement of the partners of M/s. Sunshine and Chief Executive Officer of the Appellant firm and two tempo owners, no other evidence on record has been brought to show that the appellant has not cleared Polyester Fabrics to M/s. Sunshine Overseas. The statements of Shri Sanjay Aggarwal CEO of the Appellant firm are contradictory. Whereas in his statement dt 25.6.2003 he stated about removal of manufactured goods i.e., Polyester Grey Fabrics but after 2 years he changed his version in statement dated 12.3.2005 that the raw material was cleared by the Appellant. Similarly statement dt 12.7.2003 of Tempo Driver Shri Saiyad and statement dtd 19.8.2003 of Shri Akbar Sahid Umar, tempo owner, they did not say anything about transportation of raw material. It was only in March 2005 that statement of Shri Vijay Purohit, Tempo owner was recorded who on the basis of memory though stated that they had transported Polyester Grey Fabrics and not Polyester Yarn, but could not say as to where such goods were consigned. In such case the statements made by the transporters cannot be made basis for making allegation to clandestine diversion of raw material by the Appellant. It is also a fact on record that though 46 consignments of finished goods were transported through different vehicles, but only one statement dated 11.3.2005 of Shri Vijay Purohit has been relied upon to allege removal of Polyester Yarn in clandestine manner. We also find that Shri Sanjay Aggarwal vide affidavit dt 1.7.2003 and 4.3.2005 had retracted the statements made by him before the investigating officers. Once the statements has been made basis for alleging clandestine clearance, the adjudicating should have granted cross examination. The Appellant during the adjudication proceedings, had sought cross examination of the persons, whose statements were relied upon in the show cause notice. The same was necessary in terms of Section 9D of the Central Excise Act which was not allowed. In our view when the demands and the allegation of removal of Polyester Yarn was based upon the statements of the persons in that case, it was mandatory for the adjudicating authority to grant the cross examination of such persons whose statements are sole evidence to make allegations against the Appellant. In absence of same the statements cannot form basis for alleging contravention of law by the Appellant.
5. We further find that the Appellant Unit has cleared the goods against CT-3 Certificates and the goods were certified to be warehoused by the jurisdictional Excise authority of M/s. Sunshine Overseas. The documentary evidences in the form of CT-3, AR-3, D-3 Declarations, maintenance of statutory registers, filing periodical returns, which are undisputed clearly shows that the manufacture and supply of finished goods to M/s. Sunshine Overseas has not been negated by the Revenue with the assistance of any corroborative evidences. Even during the investigation, no buyer of Polyester Yarn has been brought on record to show that the Appellant had cleared said raw material clandestinely to any person. There is no evidence of transportation of any raw material or sale of such goods to any buyer or unaccounted receipt of any cash amount from any person on account of such sale of raw material. Once the goods were certified to be warehoused by the consignee, the consigner, i.e. the appellant, cannot be held responsible for contravention of law. In such case, no demand can be made against the Appellant. Our views are also based upon the judgments in case of M/s. Sunshine Overseas - MANU/CS/0167/2011 : 2011 (268) ELT 374 (Tri) and Nayna Textiles - 2010 (261) ELT 181 (Tri).
6. In view of our above findings we thus hold that the demand against the Appellant Unit and penalty against all the Appellants are not sustainable. We therefore set aside the impugned order and allow all the appeals which are before us with consequential reliefs, if any.
(Order pronounced in the open court on 12.09.2019.)
© Manupatra Information Solutions Pvt. Ltd.