M/S Rajputana Steel Casting Pvt.Ltd vs Commissioner, Central Excise & Service ...

Appeal No.E/466-469/2009-SM [Arising out of OIA No.Commr.(A)/197 to 200/VDR-II/2008, dt.28.11.2008, passed by Commissioner (Appeals), Central Excise & Customs, Vadodara]

M/s Rajputana Steel Casting Pvt.Ltd., Shri Girish B. Prajapati, Shri B.D. Mehta, Shri Shankarlal D. Mehta Appellants

Vs

Commissioner, Central Excise & Service Tax, Vadodara-II Respondent

Represented by:

For Appellant: Shri D.H. Dharmadhikari, Advocate For Respondent: Shri Jitendra Nair, Authorised Representative

For approval and signature:

Honble Mr. H.K. Thakur, Member (Technical)

1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of Seen the order?

4. Whether order is to be circulated to the Departmental Yes authorities?

CORAM:

HONBLE MR. H.K. THAKUR, MEMBER (TECHNICAL)

Date of Hearing:16.06.2015 Date of Decision:23.06.2015

Order No.A/10846-10849/2015, dt.23.06.2015

Per: H.K. Thakur

The main Appellant M/s Rajputana Steel Casting Pvt.Ltd. has filed appeal No.E/466/2009 against OIA No.Commr.(A)/197 to 200/VDR-II/2008, dt. 28.11.2008 issued on 05.11.2008. Shri Shankarlal D. Mehta, Director and Shri Girish B. Prajapati (Manager) of the main Appellant have filed appeals with respect to the penalties imposed by the Adjudicating authority and upheld by the First Appellate Authority, under the above mentioned OIA. Appellant M/s Super Forge India Ltd has also filed appeal with respect to penalty imposed by the Adjudicating authority.

2. Shri D.H. Dharmadhikari (Advocate) appearing on behalf of the Appellant argued that the main Appellant is manufacturing Stainless Steel Ingots by using Stainless Steel Scrap, S.S. Turning Scrap, Chromium, Silicon, Aluminum etc. That the case of the Revenue is that the main Appellant has clandestinely removed 5,70,870 kgs of S.S. articles without payment of duty and also wrongly availed CENVAT Credit on 1,740 kgs of Nickel Cathode found short by the Departmental officers. That demand on S.S. articles is based on a diary maintained by Mr.B.D. Patel, Excise Assistant of the main Appellant. It was strongly argued by the learned Advocate that the said diary contained the entries for which orders were received telephonically and these goods are also reflected in the statutory records as per the cross examination of Shri B.D. Patel as per answer to Q.No.13. That as per answer to Q.No.21 of the cross-examination at Para 2.6.2 of the OIO, excise documents are prepared for each dispatch. It was also strongly argued by the learned Advocate that the main Appellant produced a Chartered Engineers certificate dt.10.10.2007 to the effect that the monthly production capacity of the main Appellant is only 225 MT which is supported by the appropriate quantities specified in the monthly returns filed by the main Appellant. That Appellant prepared a reconciliation statement and produced the same before the Adjudicating authority under a letter dt.12.10.2007 which has been brushed aside by the First Appellate Authority on the ground that the annexure to the letter is not furnished. It was the case of the learned Advocate that on the basis of Chartered Accountants certificate and the monthly returns filed periodically, the main Appellant has no capacity to make S.S. Steel articles in excess of 225 MT per month. That clandestine removal on the basis of a diary without corroborative evidences; like procurement of excess raw material, transportation of finished goods, excess power used etc; is not sustainable. That entries made in the diary are only with respect to orders booked and not clandestine manufacture and clearances. That the demand solely based on a private diary and few confessional statements is not sustainable in view of the following case laws:-

i) CCE Vs Sakeen Alloys Pvt.Ltd.

[2014 (308) ELT 655 (Guj.) ]

ii) Sakeen Alloys Pvt.Ltd. Vs CCE Ahmedabad [2013 (296) ELT 392 ((Tri-Ahmd)]

iii) CCE Ludhiana Vs Renny Steel Castings Pvt.Ltd.

[2012 (283) ELT 563 (Tri-Del)]

iv) CCE Coimbatore Vs Sangamitra Cotton Mills Pvt.Ltd.

[2004 (163) ELT 472 (Tri-Che.)]

v) Gujarat Texspin Ltd Vs CCE [2003 (160) ELT 193 (Tri-Mum)]

vi) Krishna & Co. Vs CCE Jaipur [1998 (97) ELT 74 (Tribunal)]

vii) Caress Industries Vs CCE Chennai [2002 (147) ELT 1035] (Tri-Che.)]

2.1 The learned Advocate appearing on behalf of the Appellant also argued that CENVAT Credit of Rs.1,10,978.00 demanded with respect to shortage of raw material stock is only due to difference in weighing and is negligible and CENVAT Credit recovery of such minor differences is not sustainable.

3. Shri Jitendra Nair, learned Authorised Representative appearing on behalf of the Revenue made the Bench go through Paras 5.6 (viii), 5.9, 5.11 and 5.13 of the OIA dt.28.11.2008 passed by the First Appellate Authority to argue that all the contentions raised by the Appellants have been duly considered by the lower authorities and appeals have been correctly rejected.

4. Heard both the sides and perused the case records. The issue involved primarily is these appeals is whether the Appellant has clandestinely manufactured and removed 5,70,870 kgs of S.S. articles on the basis of a diary maintained by an employee Shri B.D. Patel, who was working as Excise Assistant of the main Appellant. It is the case of the Revenue that the S.S. Articles mentioned in the diary maintained by Shri B.D. Patel are clandestinely manufactured and cleared by the main Appellant in addition to the quantity of S.S. Articles mentioned in the statutory records. On the other hand, the main Appellant is of the argument that their production capacity per month is only 225 MT/month as per the Chartered Engineers certificate, which is also supported by the quantities indicated in monthly Excise returns submitted. It is also the case of the main Appellant that the demand of clandestine removal cannot be considered as sustainable only on the basis of private records and few statements without other corroboration as per various relied upon case laws.

4.1 It is observed from the Chartered Accountants certificate dt.10.10.2007 that Appellant has been certified to have a monthly production capacity of 225 MT. Approximately same quantities of S.S. articles have been reflected in the monthly returns filed by the Appellant during the relevant period. The quantity manufactured by the main Appellant as per ER-1 return is 656.66 MT for the relevant period and an additional quantity of 570 MT has been alleged to have been clandestinely manufactured and cleared by the main Appellant in the relevant period, which comes to nearly 90% more than the capacity certified by the Chartered Engineer. It is observed that when the CA's certificate was produced by the Appellant then at that time, the factory was in working condition for any verification and contrary study. The said certificate could have been contested by Revenue either for some factual study or by obtaining a contrary opinion by an expert in that field. Without any contrary expert opinion, it is not justified on the part of the lower authorities to brush aside such a certificate given by the Chartered Engineer which is the quantitatively comparable to the quantities manufactured by the Appellant and shown in the monthly returns.

4.2 Another argument taken by the Appellant is that clandestine removal cannot be sustained on the basis of statements and private records maintained by an employee in the absence of any evidence of procurement of excess raw materials, use of extra power and transportation of finished goods etc. In the present proceedings, there is no indication of excess raw materials procured and extra power used. There is no seizure of clandestinely removed finished goods or seizure of any cash from clandestine transactions involved in such suspected clandestine removals. Under similar factual matrix, this Bench in the case of Sakeen Alloys Pvt.Ltd. Vs CCE Ahmedabad [2013 (296) ELT 392 (Tri-Ahmd)], after discussing several case laws on the issue in Paras 9 & 10, held in Para 11 as follows:-

11. From the above settled law, it is clear that in a clandestine removal case, the facts of clandestine removal of excisable goods cannot be established only on the basis of certain statements which are retracted later but there has to be positive evidences like purchase of excess raw materials, shortage/excess of raw materials/finished goods found in the stock/factory premises of the appellant, excess consumption of power like electricity, any seizure of cash during the investigation when huge transactions are made in cash. In the present case also, it is observed, from the annexures to the show cause notice dated 1-5-2009 issued to the appellants, that there were huge cash transactions to the tune of Rs. 11.23 Crores. When such large number of transactions involving huge amounts are being undertaken in clandestine removal activities, it is very likely that some cash would have been seized. There is not a single instance where either seizure of cash is made or any clandestinely removed goods are seized or raw materials/finished goods were found either short or in excess in the factory premises of the appellant or at any other place.

As per the Panchnama drawn at the factory premises it is shown that there was no excess/shortage of the raw materials or finished goods found. The documentary evidences collected from the business premises of M/s. Sunrise Enterprise and the statements recorded by investigation, can at the most raise a reasonable doubt that some clandestine removal activities are undertaken by the appellant. However, such a suspicion or doubt has to be strengthened by positive evidences which seem to be lacking in this case. Any suspicion whosoever cannot take the place of evidence regarding clandestine removal of excisable goods. Moreover, after having positive evidences, quantification of duty on clandestinely removed goods also becomes essential. As already mentioned above, the stock lying in the stock yard of M/s. Sunrise Enterprise, Mehsana was found containing the goods received from M/s. Sakeen Alloys Pvt. Limited under proper invoices. When the goods received under proper invoices are found in the stock yard of M/s. Sunrise Enterprise, then it is possible that out of such goods certain quantities were sold to various customers by accepting payment in cash.

In such a situation, the quantification undertaken by the investigation becomes doubtful and incorrect. For this purpose cross-examination of the person Incharge looking after the records of M/s. Sunrise Enterprise was must, which was not allowed by the adjudicating authority. In view of the above observations, the demand of duty of Rs. 1,85,10,861/- is not sustainable and is required to be set aside.

4.2.1 Revenue took the above order passed by this Bench before the Hon'ble Gujarat High Court in CCE Vs Sakeen Alloys Pvt.Ltd. [2014 (308) ELT 655 (Guj.)], and Hon'ble High Court, inter alia, held as follows in Para 10 and the appeals filed by the Revenue were rejected:-

10. All the appeals are based predominantly and? essentially on factual matrix. The Tribunal elaborately and very correctly dealt with the details furnished by both the sides and rightly not sustained the demand of Rs. 1.85 Crores, which had no evidences to bank upon. Confessional statements solely in absence of any cogent evidences cannot make the foundation for levying the Excise duty on the ground of evasion of tax, much less the retracted statements. To the extent there existed substantiating material, Tribunal has sustained the levy. No perversity could be pointed out in the approach and treatment to the facts.

4.3 In view of the above observations and settled proposition of law in the present proceedings on the basis of few confessional statements, diluted by cross-examination of those witness, cannot be made the basis of clandestine manufacture and clearances of excisable goods and accordingly duty demanded by the Revenue is not sustainable. The appeals filed by the main Appellant to that extent and the appeals filed against penalties imposed upon the other Appellants, with respect to such duty demanded, are allowed.

5. So far as disallowing CENVAT Credit of Rs.1,10,978.00 and imposition of equivalent penalty upon the main Appellant is concerned, it is observed from the case records that this issue has not been agitated by the Appellant before the lower authorities. Therefore, the grounds taken before this Bench, that such shortage of inputs is negligible and should be ignored, is rejected as not entertainable as the same was not agitated before the lower authorities.

6. In view of the above observations, the appeals filed by the Appellants are allowed only to the extent indicated in Para 4.3 above, with consequential relief, if any.

(Pronounced in Court on 23.06.2015)

(H.K. Thakur) Member (Technical)

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