Meera Pipes Pvt Ltd Vs C.C.E. (CESTAT Ahmedabad)
Conclusion: In present facts of the case, it was observed that cross examination of witness is mandatory in terms of Section 9D of the Central Excise Act, 1944. Also, it was observed that private notebook relied on without recording statements and its authors there was no legally admissible evidence to draw inference of clandestine removal.
Facts: The brief facts of the case are that the appellant M/s. Meera Pipes Pvt. Ltd. is engaged in the manufacture of SS Pipes falling under Chapter 73 of Central Excise Tariff Act, 1985. They are availing the benefit to SSI Exemption from duty and also from obtaining Central Excise Registration as they claimed that the clearance value not exceed the threshold limit under the exemption notification. On 27.11.2013, the officers of the DGCEI visited and searched the factory of the appellant and also made coordinated search at various premises. The officers have drawn the panchnama on 27.11.2013 at factory premises of the appellant regarding search carried out by them. The officers have also seized stock of finished goods lying in the factory under the belief that the clearance value during 2012-13 & 2013-14 has exceeded the limit of SSI Exemption notification and hence liable to confiscation. Thereafter, two different show cause notices were issued, one for seizure portion and other for demand of duty and proposing penalty on the appellant as well as on others. The Show Cause Notice has relied upon various documents recovered from various places during the investigation.
The Adjudicating Authority i.e. Commissioner passed Order-In-Original confirming the demand with interest and penalty and also imposing redemption fine in lieu of confiscation of the goods.
The matter then reached before the Hon’ble Tribunal, which considered the submission of both sides and have observed that the panchnama drawn in the factory for recovery of the document which included the vital documents i.e. diaries marked as A/2, and A/3, appellant have strongly submitted that it is not shown from where these diaries were recovered and from whose possession. Therefore, to this extent even the recovery of diaries marked A/2 & A/3 was considered to be under suspicion. Further, it was observed that the Director has appeared before the investigation agency and given his statement. There are certain documents recovered from transporter and dealer and their statements were recorded. Since the appellant Director has categorically denied about the diaries A/2 & A/3, the Adjudicating Authority was supposed to cross examine the witness such as transporters and dealers. They being a third party witness and records recovered from a third party evidence however, the Adjudicating Authority has denied the cross examination. Once the Director of the appellant company has clearly disowned the diary and contents therein, it is incumbent of the Adjudicating Authority to cross examine third party witness to bring the truth of the diary on record. However, by not allowing the cross examination, the Adjudicating Authority has violated the basic requirement of cross examination for admitting any evidence such as statement of third part.
After placing its reliance on the Judgment of HI Tech Abrasives Ltd. VS. CCE [(362) E.L.T. 961 (Chhattisgarh)], it was held by the Hon’ble Tribunal that it is the settled law that in terms of section 9D, it is mandatory on the part of the Adjudicating Authority to cross examine the witness or admitting their statements as evidence. It was further observed that in the same judgment it was also held that private notebook relied on without recording statements and its authors there was no legally admissible evidence to draw inference of clandestine removal. In the present case, though the statements of the appellant director was recorded but he has categorically denied the ownership and authorship of the diaries therefore, the diaries cannot be relied upon as admissible evidence.
After relying upon some more Judgments it was observed that, it is settled that statements of dealers and transporters and the documents recovered from them cannot be relied upon as evidence since, no cross examination have been carried out by the adjudicating authority from the dealers and transporters as mandated under Section 9 of the Central Excise Act therefore, without cross examination neither the statements nor the documents recovered from transporter and dealers can be relied upon.
Further, there was no corroboration or investigation in the manufacturing capacity of the plant and electricity consumption to reinforce their case that the appellant has a capacity to manufacture the quantity which was alleged to have been cleared clandestinely. For this reason also, clandestine removal was not established.
On the basis of above observations, the Hon’ble Tribunal allowed the Appeal of the Assessee.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the case are that the appellant M/s. Meera Pipes Pvt. Ltd. is engaged in the manufacture of SS Pipes falling under Chapter 73 of Central Excise Tariff Act, 1985. They are availing the benefit to SSI Exemption from duty and also from obtaining Central Excise Registration as they claimed that the clearance value not exceed the threshold limit under the exemption notification. On 27.11.2013, the officers of the DGCEI visited and searched the factory of the appellant and also made coordinated search at various premises. The officers have drawn the panchnama on 27.11.2013 at factory premises of the appellant regarding search carried out by them. The officers have also seized stock of finished goods lying in the factory under the belief that the clearance value during 2012-13 & 2013-14 has exceeded the limit of SSI Exemption notification and hence liable to confiscation. Thereafter, two different show cause notices were issued, one for seizure portion and other for demand of duty and proposing penalty on the appellant as well as on others. The Show Cause Notice has relied upon various documents recovered from various places during the investigation.
The Adjudicating Authority i.e. Commissioner passed Order-In-Original confirming the demand with interest and penalty and also imposing redemption fine in lieu of confiscation of the goods. The Commissioner has also imposed personal penalty on the directors of the appellant and also on the others. The ground for confirmation of demand is that the appellant have clandestinely removed the goods which resulted into exceeding the threshold limit of SSI Exemption due to which the appellant is not eligible for SSI Exemption. The appellant M/s. Meera Pipes Pvt. Ltd along with others being aggrieved by the Order-In-Original filed the present appeals before this tribunal.
02. Shri Vijay B. Joshi, learned counsel appearing on behalf of the appellant submits that the panchnama dated 27.11.2013 is not genuine. Consequently, the evidences/records shown as drawn from the factory as Annexure ‘A’ to panchnama and also record shows as recovered from weighbridge & transporter are also under serious doubts and not genuine. He submits that there is a computer printout of panchnama dated 27.11.2013, the said panchnama shows as started at 12.45 Hrs. On 27.11.2013 at the outside of the factory of the appellant and after completion of some formalities as per Para 1 of the panchnama regarding search the officers and panchas entered in the factory and also did other formalities as mentioned at Para 2 & 3 and took the round in the factory and enquired about the manufacturing. Thereafter, at 15.45 Hrs entry of two other officers from outside shown in the panchnama and only then search proceeding shown as started and recorded the withdrawal of records. Thereafter, it mentioned about physical workout of stock of finished goods and raw materials lying in the factory and noted as per Annexure B & C to the panchnama, he said no variation was found in the stock. He submits that suddenly the officers explained that as per the records found during the search M/s. Meera Pipes Pvt. Ltd. have manufactured and cleared finished goods more than 900 MT. during April-2013 to 27.11.2013 as against sales of approximate 70MT. shown in the invoice and accordingly finished goods placed under seizure stating that SSI exemption from duty and registration not available to the unit assuming the clearance value exceeded the SSI limit.
2.1 He submits that the entire process of panchnama shown to be completed at 22.10 hrs on same day i.e.27.11.2013. In the above backdrop it is his submission that it is not possible to do entire process, formalities, search, stocktaking, segregation of records, alleged calculation of clearance, etc., shown in the panchnama, even the time shown in the panchnama which seems the search was predetermined. He further submits that no statement of any person of the factory of the appellant was recorded. Shri Ashuram Vishnoi, Director of the appellant company shown to be presented during the search in the panchnama and nowhere it is recorded that he has not cooperated during the search. Even subsequently on 13.12.13 he appeared before officer obeying the summon issued to him for his statement, the statement also shows the same and while recording the statement he denied to admit the Diary No. A/2 & A/3 of panchnama and its contents as it was not owned or written by him. Thus, his denial of said diary cannot be said non-cooperation but the officers alleged the same as he has not admitted. He submits that there is no admission by any person of the appellant company about the details of Diary A/2 & A/3 therefore, the same cannot be admitted acceptable as evidence against the appellant.
2.2. He further submits that similarly the document shown as recovered on 27.09.12 from the transporter Jay Bhavani Freight Carriers, Mumbai & Ahmedabad much prior to investigation started against the appellant without ownership or admission by the appellant company not admissible as evidence against the appellant. All records of transporter referred/relied upon in the notice and by the Commissioner are of the transporter only and not of the appellant and therefore, it is not admissible as evidence without any admission by the appellant. He submits that when the Commissioner alleged the clearance without payment of duty through the said transporter, no penal action proposed in the notice alleged by the Commissioner in the Order under Rule 26 of Central Excise Rules even other dealers found from the said document of transporter are penalized by the Commissioner. The Commissioner has also erred in imposing personal penalty on directors, suppliers and dealers on the above grounds as well, while adjudicating they denied the allegation made against them. He further submits that the entire demand of clandestine removal was made mainly on the basis of diaries i.e. A/2 & A/3 seized under panchnama dated 27.11.2013. He submits that there is no mention in the panchnama that from which place these diaries were recovered and from whose possession. The Director of the appellant company has categorically denied the ownership and also doubted their genuineness therefore, these diaries cannot be relied upon for confirming the demand. He submits that the commissioner made the comparison of purchase records and seized diaries and observed that M/s. Meera Pipes Pvt. Ltd. has never disputed procurement of raw material and sales of finished goods through official invoices which are also shown in diaries accordingly, the commissioner has given his finding that is established that the procurement of raw material and clearance of finished goods shown in two diaries hence, it was held that the diaries belong to M/s. Meera Pipes Pvt. Ltd. He submits that since the director categorically denied the ownership or authorship of these two diaries thereafter, the contents of diaries is immaterial. He submits that there is a serious lacuna and doubt in the entire proceedings of panchnama. Since the panchnama itself is not proper and is fabricated one, all the records seized under panchnama particularly the diaries A/2 & A/3 are also under serious doubt. Accordingly, on this basis case of clandestine removal cannot be established. He also pointed out that while drawing the so called panchnama, no statement or admission of director recorded about these two diaries which were heavily relied upon. Even on 13.12.2013 while recording the director’s first statement, the director categorically denied about ownership and the facts of the diaries except the doubtful recovery of these diaries there is no evidence or statement brought on record regarding the ownership of the diaries by the appellant.
2.3 He submits that as regard the documents of Shri Ram Weigh Bridge which were heavily relied upon to establish the illicit procurement of raw material, he submits that the documents of Shri Ram Weigh Bridge are not admitted anywhere by the appellant. Even the comparative chart prepared by the Investigating Officer regarding entries of two diaries and weigh bridge slips also not admitted or confirmed by the appellant. He submits that the investigation at Shri Ram Weigh Bridge is also under serious doubt as for the reason that though the officers visited on 27.11.13 when no document was found subsequently, again on 29.11.2013 during the visit to Shri Ram Weigh Bridge they gathered/created evidences as per their requirement against the appellant. He further submits that the documents and statements procured from Shri Ram Weigh Bridge are not admissible as evidence against the appellant particularly in absence of cross-examination of the person of Shri Ram Weigh Bridge and in absence of any admission about its contents by the appellant.
2.4 He submits that the Commissioner has also erred in relying the documents and statements of raw material suppliers. The language of statements of most of the suppliers is very similar as can be seen from the statement recorded and also reproduced in the Show Cause Notice of the supplier that they have sold goods to various buyers but seems to be got admitted regarding delivery to M/s. Meera Pipes Pvt. Ltd. He submits that the aforesaid statements have not been admitted by the appellant about the delivery of goods directly to M/s. Meera Pipes Pvt. Ltd. without invoices. He submits that enquiry was made from one supplier M/s. Kansara Popatlal Tribhovandas Metal Pvt. Ltd., the Director of the said supplier stated that they have delivered the goods to the appellant with invoices.
2.5 As regard the statement of one of the buyers namely Adooram Devasi, Proprietor of M/s. Priyanka Metal, it is submitted that he has stated about the purchase of goods through Shri SK Devasi however, no enquiry was made with Mr. SK Devasi. The statement of Adooram Devasi, Proprietor of M/s. Priyanka Metal is not admissible as evidence. He submits that most of the statements of the buyers recorded by showing the copy of two diaries and the statement of transporter and admission taken about its correctness but nowhere any specific admission recorded about purchase from M/s.MEERA PIPES P. LTD. without invoice. He submits that all the statements of suppliers as well as buyers relied upon by the Commissioner against the appellant is not correct and not admissible as the same have been retracted through their reply to the notice and also to their cross examination denied by the Commissioner.
2.6 As regard the document recovered from M/s. JBFC he submits that even from the scanned copy of the documents procured from M/s. JBFC as well as some other transporter reproduced in the impugned Order-In-Original does not contain any name of the appellant or its persons. The commissioner while observing that as per statement of Manager of M/s.JBFC, ‘C-Ahmedabad’ denotes the loading from chhatral where the factory of M/s. Meera Pipes P. Ltd. is located, is also not correct and all the documents as well as statements of M/s. JBFC produced by the Investigation against the appellant are totally baseless and just to prove the production of the appellant. He submits that it is fact that there are so many manufacturers of SS Pipes at Chhatral therefore, ‘C-Ahmedabad’ cannot prove the loading from M/s. Meera Pipes P Ltd. Moreover, the documents procured from M/s.JBFC were much prior to the search made at the place of the premises of the appellant M/s.Meera Pipes P Ltd. as in OIO it is stated that during the search on 27.09.2012 at M/s.JBFC, various documents regarding clearance by M/s. Meera Pipes P Ltd. were also recovered for the period from 22.10.2011 to 20.09.2012. Regarding the clearance of 987.84MT of SS pipes, he submits that nowhere any such documents in the name of M/s. Meera Pipes P Ltd. mentioned or any other supporting evidence of M/s. Meera Pipes P Ltd. found and just on the basis of statement of the persons of M/s. JBFC, the clandestine clearance was confirmed by the Commissioner.
2.7 He also submits that the Commissioner has denied the cross-examination of the persons of M/s.JBFC though the documents and statements are heavily relied upon by the Commissioner therefore, the Commissioner has grossly erred in relying upon the third party evidence by denying their cross-examination and without any admission by the appellant.
2.8 He further submits that normally in the case of clandestine removal, the transporter who indulge in transporting illicit goods are also penalized under Rule 26 of Central Excise Rules, whereas in the present proceeding no Show Cause Notice has been issued to the transporter and particularly to M/s. JBFC for proposing penalty under Rule 26 even though there is alleged clearance of 987.824 MT tons through M/S. JBFC. This act of the Investigating Officer also shows that they have taken the advantage from transporter just to prove their act to book and confirm a case against the appellant. Therefore, the appellant submits that the evidence of M/s.JBFC are not at all admissible particularly, in absence of their cross-examination and their involvement in the present proceeding.
2.9 He submits that the commissioner has also erred in not considering the submission about manufacturing capacity of the factory of the appellant. The appellant submits that being an SSI Unit they have not such a huge manufacturing capacity. Even, no evidence produced by the department for such alleged manufacture by way of evidence of capacity of machine, consumption of electricity, working hours of the factory, etc. there is also no evidence found during the panchnama while taking physical stock of raw material and finished goods regarding illicit quantity of raw material purchased or excess production of goods other than quantity recorded in the private record.
2.10 He submits that whatever documents brought/reproduced at Para 71 of the Order, the said documents have not been referred in the Show Cause Notice. The Commissioner has calculated the huge quantity of 56447.580 Kgs. as illicit clearance of finished goods to Mumbai based buyer during September-2013. In this regard there is no admission by the appellant regarding diaries relied upon as well as any other documents as referred by the Commissioner. There is no single statement recorded from the parties mentioned in the record relied upon by the Commissioner in para 71.
2.11 He submits that in absence of any admission regarding the receipt of material by the so called buyer the said documents are not admissible as evidence against the appellant. He further submits that the Commissioner has wrongly relied upon the statements of various persons of transporters without granting any cross examination of the said persons. Being a third party documents, without cross examination the same cannot be admissible as evidence.
2.12 He submits that the Commissioner has also erred in deciding at para 76 of the order that during the period from 01.04.2013 to 27.11.2013 M/s. Meera Pipes P Ltd. illicitly procured 874268.160Kgs of raw material and illicitly manufactured and clandestinely cleared 940518.224 Kgs of finished goods. It is not possible in the metal industries to produce more quantity of finished goods than the quantity of raw material and on this ground also observation of the Commissioner is totally incorrect and without going through the process of manufacture as there is always a processing loss in the metal industries. He submits that since clandestine removal is not established the confiscation of finished goods placed under seizure at the time of panchnama on 27.11.2013 and imposing redemption fine and penalty on the appellant is totally incorrect and illegal. He submits that since the appellant have not crossed the SSI exemption limit of Rs. 1.5 crore under SSI exemption notification No. 8/2003 the appellant was not required to obtain any Central Excise Registration under Central Excise Rules. Accordingly, the demand, interest, penalty and redemption fine are not sustainable. He prays to set aside the impugned order and allowed the appeal.
In support of his above submission, he placed reliance on the following judgments:-
