Shri Girish Mathur, Prop vs Cce, Indore

[Arising out of Order-in-Appeal No.148 to 150/2010 dated 15.06.2010 passed by the Commissioner (Appeals), Customs, Central Excise & Service Tax, Indore]

For approval and signature:

HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

M/s.Sun Ultra Technologies Pvt. Ltd.

Shri Sunil Gandhi, M.D.

Shri Girish Mathur, Prop. Appellant

Vs.

CCE, Indore  Respondent

Present for the Appellant : Shri Alok Barthwal &

Shri Manish Saharan, Advocates

Present for the Respondent: Ms.Ranjana Jha, JCDR

Coram: HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)

Date of Hearing: 19.08.2015

Pronounced on: 16.10.2015

FINAL ORDER NO. 53205-53207/2015

PER: S.K. MOHANTY

These appeals are directed against the impugned Order dt. 15.06.2010 passed by the Commissioner, Customs, Central Excise & Service Tax (Appeals), Indore wherein the demand of Central Excise duty on charges of alleged clandestine clearance as confirmed by the original authority was upheld. Vide the impugned order, duty of Rs. 13, 85,967/- was confirmed and penalty of equivalent amount was imposed against M/s Sun Ultra Technologies (SUTPL). Further penalty of Rs. 11,00,000/- upon Shri Sunil Gandhi, Director of SUTPL and of Rs. 2,00,000/- upon Shri Girish Mathur, proprietor of M/s G.M. Trading Co. was also imposed.

2. The brief facts of the case are that M/s SUPTL is engaged in the manufacture of Welding rods under the brand name of Thermoweld and Deltatherm Brand. Shri Sunil Gandhi is director of the said concern. M/s Arhat a proprietorship firm owned by Shri S.L. Gandhi, father of Shri Sunil Gandhi is also engaged in manufacture of welding rods and is availing value based exemption. During the visit of the Central Excise Officers to the factory premises of both the concerns, residence of Shri Sunil Gandhi as well as other premises, the officers seized various records and papers which culminated in passing of impugned order against the Appellants. Out of demand of Rs. 13,85,967/- a demand of Rs. 1,91,552/- was made against M/s SUPTL on the basis of page no. 4 to 28 of file marked as A- 9 which was seized from the residence of Shri Sunil Gandhi. It was alleged that the said pages contains details of production, dispatch, receipt, packing and sales statement of Thermoweld and Delta Therm Brand of M/s SUTPL. That these documents were signed by three persons out of which one was Shri Aditya Saxena, the Works Manager of M/s SUTPL. The officers prepared sheets on the basis of said papers and wherever remarks  No invoice was issued was mentioned, the same was confirmed by Shri Sunil Gandhi to have been cleared without payment of duty.

2.1 A demand of Rs. 3,16,139/- was made against M/s SUTPL on the ground that from the invoice file of Arhat found at the residence of Shri Sunil Gandhi, it was found that M/s Arhat has issued invoices bearing same serial number on different dates to different buyers and it appears that the goods manufactured by M/s SUTPL were cleared under the cover of invoices of M/s Arhat. Further the SCN pointed out four invoices of M/s Arhat alleging that in case where No invoice issued is mentioned in sheet prepared on the basis of page no. 4 to 28 of file A - 9, it appears that the goods were found to have been cleared to same parties as welding electrodes under the invoices of M/s Arhat but under less value than that of M/s SUTPL. To support the demand, it was alleged that the receipt of raw material, production and dispatch of semi finished/ finished goods manufactured by M/s Arhat belong to certain dates for month of Oct 2002 for which the production reports of M/s SUTPL were available and appearing at Page 4 to 28 of File  A/9. That the challan receipt of Arhat is signed by Shri Mahavir Prasad Jain, Maintenance Supervisor of Arhat indicated clearance of goods manufactured by Arhat and cleared under challans. Further that the invoices of M/s Arhat were prepared by Shri Aditya Saxena, the authorized signatory and Manager of SUTPL and that Shri M.P. Jain, the Works Manager of M/s Arhat in his statement dt. 29.10.02 stated that all records are maintained by owners. That the file containing invoices of M/s Arhat was recovered from residence Shri Sunil Gandhi. That Shri S.L. Gandhi proprietor of Arhat has stated that all the work of Arhat is looked after by Shri Sunil Gandhi.

2.2. A demand of Rs. 8,78,276/- was made on the ground that M/s GM Trading Co., New Delhi and M/s Trading house, Haryana are consignment agents of the Appellant M/s SUTPL and the same are owned by Shri G.M.Mathur. That during scrutiny of records resumed from various premises certain documents i.e stock statements, sales registers, cash, petty cash, group sundry debtors for a fortnight indicated the details which prima facie leads to draw an inference that it belongs to a firm which is receiving electrode from Gwalior and selling to the various parties as per details in sales register during a particular period. It appears that the said documents belong to consignment agent M/s GMT. That M/s GMT did not submit the details of deposit in the bank for the said period. That some of the details mentioned in the sales register were found tallied with the invoices issued by M/s GMT as welding rods. That Shri Sunil Gandhi was shown the stock statement for the period 16.09.2002 to 30.09.2002 to which he in his statement dt. 27.11.2006 stated that the said documents possibly may belong to any of our customer as these printouts has no mention of the firm/ company to whom they belong and it is not possible to ascertain their identity particularly since apparently these papers are four years old and if it is assumed that these statements belong to their customer, then it may be taken as that Gwalior means sales, goods returned means goods returned to Appellant. That proprietor of M/s GMT Shri Girish Mathur refused that the sales register for the period 01.06.02 to 15.06.2002 and the invoice no. 1226 issued by G.M.T belong to them. It was alleged that it appears that the said documents i.e. Stock statements, sales register etc. kept in the files A-8,A-4 and A-9 belonged to M/s GMT and the same were prepared by them for reconciliation of sale and purchase made by M/s GMT (Delhi & Ballabgarh/ Faridabad) in accordance with the conditions of the C & F agreement made with M/s SUPTL. On the basis of said stock statement, it was alleged that M/s SUPTL has cleared welding electrodes to M/s GMT and a duty of Rs. 8,78,276/- was made.

3. The learned Advocate Shri Alok Barthwal appearing for the Appellants submitted that demands are based upon assumption and surmises with no cogent evidence. He submit that in case of demand of Rs. 1,91,552/- none of the persons has stated which can support the revenues case. That Shri Sunil Gandhi never stated that there is any clandestine removal. That even the officers did not put him to question as to whether the goods has been removed without payment of duty. That he was only asked as to whether the details in sheet are as per the page no. 4 to 28 of File A-9 to which Shri Sunil Gandhi had clearly stated that the pages are not part of their accounting record. In this context he draws my attention to question no. 2 and 3 of his statement dt. 21.11.2006. He submits that there is not a single evidence to show that the goods were manufactured or removed from factory. Hence the demand is not sustainable.

3.1. He further submits that the demand of Rs. 316,139/- is also illegal. That if the invoices of M/s Arhat is found from the residence of Shri Sunil Gandhi, it cannot be assumed that the goods manufactured by M/s SUTPL were cleared under the cover of invoices of M/s Arhat. That it can be seen from the statement of Shri S.L.Gandhi who at that time was 70 years of age that he was helped by his son Shri Sunil Gandhi to look after his business. That comparison of invoices of M/s Arhat with page no. 4 to 28 of File A  9 seized from residence cannot be a ground to demand duty as there is no evidence that such pages contain actual details of raw material receipt, production and dispatch of goods. He further submits that if invoice of M/s Arhat is prepared by employee of M/s SUTPL, it cannot be a ground to demand duty from M/s SUTPL. That Shri Mahavir Prasad Jain employee of M/s Arhat was also questioned, but nowhere has he stated that the invoices of M/s Arhat were issued to clear goods manufactured by M/s Arhat. He submits that there is no inculcatory statement or instances to prove the allegation of the revenue.

3.2. As regard demand of Rs. 8,78,276/- he submits that though the SCN states that the documents have been seized from various places, but no panchnama was prepared to show or to prove as to from where the said documents i.e stock statements, sales registers, cash, petty cash, group sundry debtors were seized. That though some register of stock statement relied upon for making demand against M/s SUTPL were matching with the sales register of M/s G.M.Trading but it can be seen that Shri G.M.Mathur, the proprietor of M/s G.M Trading refused that the records belong to his firm. That Shri Mathur when asked about the brand names of welding electrodes of M/s Arhat clearly stated that since they have sold goods of M/s Arhat in very less quantity, hence he does not remember the brand name of goods of M/s Arhat. That this statement of Shri Mathur conclusively shows that the clearance of goods of M/s SUPTL under the cover of invoices of M/s Arhat is without any basis. That only on the basis of stock statement which is of third party, the demand cannot be confirmed against M/s SUTPL. He submits that there is no evidence of receipt of raw material in excess by M/s SUTPL, the production of any excess goods, transportation of goods, receipt of payment of any goods alleged to have been removed clandestinely which can support the case of the revenue. He also draws my attention to the decision of the Tribunal in case of confiscation of excess stock in same investigation wherein the redemption fine and penalty was reduced holding the same as irregular maintenance of accounts. He also submits that in the said confiscation case as apparent from the Tribunals order, the Commissioner (Appeals) had set aside the personal penalty upon Shri Sunil Gandhi which clearly shows that there was nothing malafide on the part of Shri Sunil Gandhi. The Ld. Counsel also relied upon the following judgments in support of his contention :

* T.G.L. Poshak Corporation Vs. CCE, Hyderabad

2002 (140) ELT 187 (Tri-Chennai)

* Gurpreet Rubber Industries Vs. CCE, Chandigarh

1996 (82) ELT 347 (Tribunal)

* Suzuki Synthetics Pvt. Ltd. Vs. CCE, Ahmedabad

2015 (318) ELT 487 (Tri-Ahmd)

* CCE, Ludhiana Vs. Raj Lakshmi Dyeing & Printing Mills

2014 (312) ELT 379 (Tri. - Del)

* Kalindi Ispat Pvt.Ltd. Vs. CCE, Raipur

2014(309) E.L.T. 204 (Tri- Del)

* CCE, Raipur Vs. Shree Nakoda Ispat Ltd.

2014 (308) E.L.T. 612 ( Tri  Del.)

4. The learned Commissioner (A.R.), Mrs. Ranjana Jha appearing for the Revenue has reiterated the findings recorded in the impugned order.

5. Heard the learned Counsel for the parties and perused the records. I find that demand of Rs. 1,91,552/- is based upon the pages seized from the residence of Shri Sunil Gandhi, director of M/s SUTPL. The lower authorities accepted the reasoning of the show cause notice that in the sheet prepared by the officers on the basis of such papers wherever remark invoice not issued was mentioned by the officers, the goods were clandestinely cleared. However accepting the submission of the Appellant I find that merely on the basis of these papers allegedly containing the production and dispatch and in absence of any corroborative evidence or statement of any employee/ director of Appellant company accepting such clandestine removal, it cannot be concluded that M/s SUPTL has removed these goods without payment of duty. I also find that no evidence has been shown that these goods were cleared to some person and how such alleged clandestine removal has been suppressed. Further I find that Shri Sunil Gandhi in his statement dt. 21.11.2006 refused those papers to be pertaining to any accounting. I am thus of the view that duty demand of Rs. 1,91,552/- is not sustainable. I agree with ratio of tribunal judgment in the case of M/s T.G.L.Poshak Corporation (Supra), wherein the tribunal set aside the demand on the ground that charges of clandestine removal based merely note books maintained by the workers and other private accounts not sustainable unless supported by corroborative evidence with regard to purchase of raw material, manufacture of final goods, flow back of money or any seizure of statements from purchasers.

5.1. The second demand of Rs. 3,16,139/- has been made against the Appellant on two ground. The first portion of demand has been made on the ground that from the invoice file of M/s Arhat found from the residence of Shri Sunil Gandhi, it was found that M/s Arhat has issued more than one invoice under same serial number. The second portion of demand is on the ground that in the sheet prepared by the officers on the basis of papers seized by the officers wherever the remark no invoice issued was mentioned, it was found that in some cases on the same day the goods were cleared under the invoices of M/s Arhat. Here I find that only for the reason that M/s Arhat an unregistered unit issued few invoices under same serial number cannot be interpreted to the extent that the goods manufactured by M/s SUTPL were cleared under the invoice of M/s Arhat. No modus operandi has been brought on record. Further as regard second portion of demand that in the sheet prepared on the basis of papers allegedly containing details of raw material, production and dispatch wherever remarks no invoice issued was given are clearance of goods manufactured by SUTPL by M/s Arhat, I find that in absence of any evidence of any of the units, the allegation cannot sustain. There are no evidence that any of the units has forged their documents to show that the goods were manufactured by M/s Arhat. Thus it is only a farfetched assumption without any evidence and cannot be accepted. Except some alleged production details which has not been accepted by any of the person and even the persons whose signatures were found to be on such papers were not questioned regarding authenticity of such report, the demand cannot be made. It is an accepted fact that M/s Arhat a proprietorship firm of father of Shri Sunil Gandhi was carrying out production and was eligible for exemption from payment of duty. Further it is also an accepted fact that Shri Sunil Gandhi was helping his father Shri S.L.Gandhi in running after the business of M/s Arhat. I am thus of the view that allegation of clearance of goods under the cover of invoices of M/s Arhat without any evidence does not sustain. and thus no demand can be made.

5.2. In case of demand of Rs. 8,78,276/- I find that the demand is based upon the stock statement which is alleged to be of M/s G.M.Trading company a proprietorship concern of Shri G.M. Mathur. Reliance has been placed upon the sales register, certain bank slips contending that some of the entries of such sales register and stock statement are matching with each other. Further corroboration of some other documents seized from different premises has also been compared to canvass the case of the revenue. I find that in the show cause notice it is nowhere coming as to from which place these documents were seized. No panchnama has been relied upon in the show cause notice. Further it is not known as to who is the author of such documents. I find from the stock statement that nowhere the statement shows as to which concern such statement belong. It is alleged that stock statement belong to M/s G.M.Trading company. However I find that the officers did not investigated about such stock statement from M/s G.M.Trading Co. Although the statement of Shri G.M. Mathur was recorded, however no question were asked to him regarding such statement. He was only asked question regarding sales register to which he refused. In absence of any corroboration of the said stock statement with the records of the M/s SUTPL and any other corroborative evidence, I am of the view that the demand cannot survive.

5.3 I find that the ratio of judgment in the case of Suzuki Synthetics (Supra) is applicable in present case. It was held by the Tribunal that demand cannot be made on the basis of chits recovered from the table of folding clerk of finished stock department in absence of incriminating statement of any person and in absence of any excess consumption of electricity, unaccounted raw material or statement of supplier or buyer of finished goods. It was held that investigation was not taken to the logical end by recording statements of individuals and hence clandestine manufacture and removal not proved. I find that the ratio of said judgment is applicable in this case also. Further in case of Raj Lakshmi Dyening & Printing Mills (Supra) it was held that on the basis of private records without being corroborated by any independent evidence, allegation of clandestine removal cannot be upheld. Agreeing with the ratio of aforesaid judgments I hold that the demand against M/s SUTPL is not sustainable.

5.4 I also find that in present case, the revenue did not bring any corroborative evidence such as excess receipt of raw material, employment of labour, receipt of goods by any consignee, transportation of goods to the buyers, receipt of sales proceedings by M/s Sunultra which can support the case of the revenue. Further Shri Sunil Gandhi or any employee of M/s SUTPL was neither questioned about removal of goods without payment of duty neither they accepted any clandestine removal.

6. In view of above findings, I hold that the demand and penalty against M/s SUTPL is not sustainable. I further hold that penalty against Shri Sunil Gandhi and Shri Girish Mathur is also not sustainable. In view of my observations and findings, I thus set aside the impugned order and allow all the appeals with consequential relief to the Appellants.

(Pronounced in the open Court on 16.10.2015)

(S.K. MOHANTY)

MEMBER (JUDICIAL)

Anita

??

??

??

??

0 2 E/3305,3306 & 3307/2010 EX. [SM]