Case Law Details
Sohni Ceramics Vs C.C.E. (CESTAT Ahmedabad)
Appellants’ submission is that Order-in-Original dated 30.8.2018 confirmed duty demand without considering evidences in terms of the mandatory provisions under Section 9D of Central Excise Act 1944. There is no clear evidences of removal of goods from factory premises, except statements relied upon, whose examination/cross examination has not been allowed u/s 9D of Central Excise Act 1944. Invoices found are pink coloured [Duplicate for transporter], but it is not coming out from records that goods were actually transported out of factory against those Invoices relied upon. Invoices pink coloured [Duplicate for transporter] are found in factory, hence, it can also be inferred logically that goods were not transported out of factory against the said Invoices named as parallel Invoices in facts of this case. Duty demand of Rs.8,66,588/- is confirmed without ascertaining actual manufacture of goods and removal thereof from factory. Revenue has relied upon statements, without cogent evidence of receipt and consumption of quantity of basic raw materials and packing materials required for manufacture of goods cleared on parallel Invoices, payment for procuring excess raw materials and packing materials used for manufacture of goods cleared. Duty of excise is levied on manufacture of goods and without proving manufacture first, alleged clandestine removal of goods on the parallel Invoices is also not proved. Investigation has not discharged burden to prove clandestine manufacture and clearance of the goods clandestinely twice on such parallel invoices. There is no corroborative evidence of removal of goods twice on the same Invoice or on parallel Invoices and receiving payment twice for Invoices. I find that except statements, there is nothing on record to establish Revenue’s case of clandestine manufacture or removal of goods from Appellant’s Factory, in the facts of this case.
It is well settled by decisions of Tribunals and higher forums that for cases of such alleged clandestine manufacture and clearances, fundamental criteria have to be established by the Revenue and there should be tangible evidence of clandestine manufacture and clearance of such goods and not undue inferences or unwarranted assumptions. There should be clinching positive evidence on record in support of case of clandestine manufacture and clearances. Statements made under Section 14 of Central Excise Act, 1944 becomes admissible evidence, when person is examined and his/her cross examination is allowed under Section 9D of Central Excise Act 1944. Adjudicating Authority has not allowed Cross Examination of all witness under Section 9D ibid, despite directions by this Tribunal. In absence of Cross Examination, statements used against appellants to confirm demand have to be discarded as per the settled law. Thus, in absence of clear evidence of manufacture, transporting goods twice on same or parallel Invoice or receipt of such goods and payment made twice by buyer, alleged charge of clandestine removal or on parallel Invoices is not proved, in the facts of this case.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
M/s Sohni Ceramics and its partner Dineshbhai Patel, have filed appeals against Order-in-Appeal No. AHM-EXCUS-003-APP-163-165-2018-19 dated 31-12-2018 issued by Commissioner(Appeals) of Central Excise, Ahmedabad, wherein demand of excise duty Rs. 8,66,588/- is confirmed with interest and penalty against M/s Sohni Ceramics and also a Separate penalty Rs. 2,00,000/- is imposed on Shri Dineshbhai Patel.
1.1 Brief facts are that appellant was engaged in manufacturing of Ceramic Floor Tiles of Chapter 69 of the Central Excise Tariff Act, 1985. Search was conducted on 01-01-2010 by Central Excise officers in Appellant’s factory which resulted in recovery of some pink coloured invoices marked as DUPLICATE FOR TRANSPORTER for months of November 2009 to December 2009, which allegedly not tallied with regular sales invoices. Revenue’s case is that appellant had clandestinely cleared Ceramic Tiles involving Central Excise duty of Rs. 14,04,620/- against said parallel Invoices recovered from Labourer’s room in factory. During Investigation statements of partners and others were recorded. The excise duty demand of Rs. 14,04,620/- was worked out as per Annexure A-1, A-2 and A-3 to SCN No. IV/16– 57/PI/Gr.V/2010-11 dated 04-07-2013 for period November 2009 to December 2009. During the investigation, two post dated cheque No. 171436 dated 15-01-2010 for Rs. 5,00,000/- and cheque No. 171437 dt. 2501-2010 for Rs. 5,00,000/- were taken by Revenue and proposed for appropriation of Rs. 10,00,000/- in SCN against the duty liability of Appellant M/s Sohni Ceramics.
1.2 The SCN was objected by appellants, but, adjudicated vide Order-In-Original dated 29-9-2014 by Additional Commissioner of Central Excise, Ahmedabad-III who had confirmed entire duty demand with interest and imposed equal penalty under Section 11AC of Central Excise Act, 1944. Rs. 10,00,000/- deposited was appropriated. The Order-In-Original dated 29-92014 had imposed separate penalty of Rs.3,50,000/- each on the partners Shri Dineshbhai Patel, Mansukhbhai Patel and Ishwarbhai Patel, under Rule-26 of Central Excise Rules 2002, which was upheld by O-I-A dated 31-032015, except in case of Shri Ishwarbhai D. Patel, who had expired on 31-012015, hence the penalty proceedings against him were dropped. Hence, 3 Appellants had filed Appeals before this Tribunal, which were remanded back to Original Adjudicating Authority, vide final order No A1/13199-13201/2017dt. 11-10-2017, for fresh adjudication, following decision of Hon’ble High Court in Jindal Drugs – 2016(340) ELT-67(P&H) and the provisions of Section 9D of the Central Excise Act 1944.
1.3 Accordingly, in second round of litigation, cross examination of 7 witnesses was allowed. The case was adjudicated under the Order-In-Original No. CEX-003-ADC-AJS-005-18-19 dated 30.8.2018, which has dropped duty demand of Rs. 5,38,033/- and confirmed demand of Rs. 8,66,588/- along with interest and has imposed penalty on M/s Sohni Ceramics, Mansukhbhai Patel and Dineshbhai Patel. However, on Appeal, Order-In-Original dated 30.8.2018 was upheld except dropping penalty on Mansukhbhai Patel by O-I-A No. AHM-EXCUS-003-APP-163 to 165-2018-19 dt. 31-12-2018. Hence, these 2 Appellants only are before this Tribunal now.
02. Shri P. P. Jadeja, Authorized Representative appearing on behalf of Appellants, reiterated all the grounds of Appeal and submissions with prayer to drop duty demand and the penalties imposed. Appellant have defended case against them mainly on the following submissions:-
a) There was no clandestine manufacture and removal of any goods.
b) There was no shortage of finished goods or raw material during search on 01-01-2010 and/or found in the investigation carried out.
c) All Witnesses not examined or cross-examination allowed for all, in terms of Section 9D of the Central Excise Act 1944.
d) Revenue has not discharged their burden to prove their case of alleging clandestine manufacture and removal of goods in question.
e) Findings for dropping demand of Rs. 5.38 lacs are sufficient to drop remaining amount of Rs. 8.66 lacs, which is confirmed.
03. Shri Ghanshyam Soni, Joint Commissioner (AR), appearing on behalf of Revenue reiterated findings of the authority below and has submitted that case of Revenue is fairly proved by documents and statements. Hence, submissions made by Appellants are untenable and accordingly he submitted that both the Appeals may be rejected.
04. Heard both sides and perused records. I find that Appellant’s Factory was searched on 01-01-2010 and some Invoices pink coloured [Duplicate for Transporter] were found. Inculpatory statements of partners were recorded. But, no variation in inventory of finished goods or raw materials was found during search. In follow up actions, business premises of the three dealers namely M/s Arbuda Marketing, Himatnagar, M/s Jain & Jain, Himatnagar and M/s Trimurti Enterprise, Himatnagar were searched and their relevant purchase & sales Bills were withdrawn for months August 2009 to December 2009. No offending goods were recovered from any of these premises or from any other premises. During Enquiries with Transporters, the document like bilty issued to Appellant for November 2009 and December 2009 were also withdrawn. During inquiry at Buyer’s end, Statements of 9 persons were recorded. SCN for the duty demand of Rs. 14,04,620/- was issued on 04-072013.
4.1 In second round of litigation, the case was taken up for fresh adjudication by jurisdictional Additional Commissioner of Central Excise, Gandhinagar Commissionerate situated at Ahmedabad. Cross examination of only 7 witnesses was allowed as shown in para 8.2 of the Order-In-Original dated 30-08-2018, out of which 5 remained present for cross examination on 20-06-2018 before the Additional Commissioner and all of them denied the details mentioned in their statements. Details of cross examination of these persons is also reflected in Para 11 (a) to (g) of the said Order-In-Original. Total duty demand in Annexure A-3 is dropped, which is not subject matter in these Appeals. The duty demand confirmed in second round is Rs. 8,66,588/-, shown in Annexure A-2 alleging clandestine removal of finished goods, based on copies of Invoices seized from the factory, which have not tallied with regular sales invoices. The duty demand in Annexure A-2 was for total 123 Invoices, out of which demand for 8 Invoices has been dropped. The duty confirmed is for 115 Invoices [123 – 8 = 115] referred to in Annexure A-2. Adjudicating authority has noted in para 15.3 of Order-In-Original dated 31-08-2018 that number of buyers listed in SCN is 97. Statements of only 9 buyers are recorded. Out of these 9 persons, names of 3 buyers are appearing in Annexure A-2 i.e. (1) Shri Dinesh C. Patni Partner of M/s Sigma Tiles, (2) Shri Dharmesh Piyush Shah Partner of M/s Simandhar Developers and (3) Shri Amratlal Sheshmal Shah Prop of M/s Wardhman Ceramics, Surat. However, adjudicating authority has already dropped the duty demand in respect of the Invoices of the said M/s Sigma Tiles, M/s Simandhar Developers and M/s Wardhman Ceramics as shown in Table in para 14.2 of the said Order-In-Original dated 31-08-2018. Statement of other buyer referred to in Invoices shown in Annexure A-2 have not been recorded and hence it can be concluded that there is no confirmation of receipt of goods by remaining buyers of goods under the said parallel Invoices. Revenue has not produced any clinching positive evidence of such receipt of goods by those buyers. Revenue has not proved their case in respect of 115 Invoices, where duty is confirmed by Order-In-Original dated 31-08-2018. There is no evidence either in the form of their statements or any other corroborative evidence in respect of those 115 Invoices and buyers who are shown in Annexure A-2 as buyers of goods in respect of Invoices. The Commissioner (Appeals) has also not examined these facts critically.
4.2 Findings in the second round, after cross examination under Section 9D, for dropping duty demand of Rs. 5,38,033/- are quite fair, reasonable and judicious, as reflected in Para 14.1 to 14.5 of Order-In-Original dated 30-08-2018. These findings and decisions relied upon in para 14.6 to 14.9 are sufficient for dropping the remaining duty demand of total Rs 8,66,588/-, as no supportive cogent, unimpeachable relevant and credible evidence are on record to prove clearance of the finished goods on parallel invoice as per Annexure A-2. Appellants’ submission is that Order-in-Original dated 30.8.2018 confirmed duty demand without considering evidences in terms of the mandatory provisions under Section 9D of Central Excise Act 1944. There is no clear evidences of removal of goods from factory premises, except statements relied upon, whose examination/cross examination has not been allowed u/s 9D of Central Excise Act 1944. Invoices found are pink coloured [Duplicate for transporter], but it is not coming out from records that goods were actually transported out of factory against those Invoices relied upon. Invoices pink coloured [Duplicate for transporter] are found in factory, hence, it can also be inferred logically that goods were not transported out of factory against the said Invoices named as parallel Invoices in facts of this case. Duty demand of Rs.8,66,588/- is confirmed without ascertaining actual manufacture of goods and removal thereof from factory. Revenue has relied upon statements, without cogent evidence of receipt and consumption of quantity of basic raw materials and packing materials required for manufacture of goods cleared on parallel Invoices, payment for procuring excess raw materials and packing materials used for manufacture of goods cleared. Duty of excise is levied on manufacture of goods and without proving manufacture first, alleged clandestine removal of goods on the parallel Invoices is also not proved. Investigation has not discharged burden to prove clandestine manufacture and clearance of the goods clandestinely twice on such parallel invoices. There is no corroborative evidence of removal of goods twice on the same Invoice or on parallel Invoices and receiving payment twice for Invoices. I find that except statements, there is nothing on record to establish Revenue’s case of clandestine manufacture or removal of goods from Appellant’s Factory, in the facts of this case. It is well settled by decisions of Tribunals and higher forums that for cases of such alleged clandestine manufacture and clearances, fundamental criteria have to be established by the Revenue and there should be tangible evidence of clandestine manufacture and clearance of such goods and not undue inferences or unwarranted assumptions. There should be clinching positive evidence on record in support of case of clandestine manufacture and clearances. Statements made under Section 14 of Central Excise Act, 1944 becomes admissible evidence, when person is examined and his/her cross examination is allowed under Section 9D of Central Excise Act 1944. Adjudicating Authority has not allowed Cross Examination of all witness under Section 9D ibid, despite directions by this Tribunal. In absence of Cross Examination, statements used against appellants to confirm demand have to be discarded as per the settled law. Thus, in absence of clear evidence of manufacture, transporting goods twice on same or parallel Invoice or receipt of such goods and payment made twice by buyer, alleged charge of clandestine removal or on parallel Invoices is not proved, in the facts of this case.
4.3 Separate penalty is imposed on Shri Dineshbhai Patel, which is not justified following the decision of the Hon’ble Gujarat High Court in the case of Pravin N. Shah v/s UOI – 2014 (305) ELT-480 (Guj) and in Rathi Re-Rolling Mills v/s CCE – 2015 (327) ELT-18 (Bom). Such penalty imposed on Shri Dineshbhai Patel deserves to be set aside and I do so.
4.4 Hence, as per the above discussions and findings, I hold that Order-in-Appeal No. AHM-EXCUS-003-APP-163 to 165-2018-19 dated 31-12-2018 by the Commissioner (Appeals) of Central Excise, Ahmedabad to the extent it confirms duty, interest and penalty is not sustainable in the facts of this case. Consequential interest and penalty imposed on both the Appellants does not survive. Therefore, impugned Order-in-Appeal No. AHM-EXCUS-003-APP-163 to 165-2018-19 dated 31-12-2018 deserves to be modified to the above extent and I do so.
05. Appeals by both Appellants are allowed with consequential reliefs, if any, as per the law.
(Pronounced in the open court on 29.04.2022)
