Commissioner of C. Ex., Ludhiana vs Renny Steel Castings (P) Ltd.

Ajay Kumar Mittal, J.—The revenue has preferred this appeal u/s 35G of the Central Excise Act, 1944 (in short ""the Act"") against the order

dated 29-6-2011 2011 (274) ELT 94 Annexure A.4 passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (for brevity,

the Tribunal"") in Central Excise Appeal No. 2004 of 2005, claiming following substantial questions of law:-

(i) Whether in the facts and circumstances of the case, the Hon''ble Tribunal is correct in not accepting that the entries in the ""notebook"" can be

relied upon as evidence of clandestine removal of excisable goods without payment of duty in the light of modus operandi confirmed by

corroborative evidence collected by the department as under:-

(a) in the form of enquiries conducted from the District Transport Authorities and Municipal Authorities in respect of mentioning of fake registration

number of vehicles on Octroi receipts.

(b) double clearance on the same set of invoice by changing the time of preparation/removal on the said invoices.

(c) confessional statements of S/Shri Avtar Singh, Contractor and Shri John Masih, Kanda incharge with regard to maintaining the ""note book.

(ii) Whether, in the facts and circumstances of the case, the Hon''ble Tribunal was justified in holding that there was no corroborative evidence

sufficient to prove clandestine removal of goods and evasion of Central Excise duty.

Briefly, the facts as narrated in the appeal may be noticed. The respondent-company M/s. Renny Steel Castings (P) Limited is engaged in the

manufacture of non-alloy steel ingots falling under sub-heading No. 7206.90 of the First Schedule to the Central Excise Tariff Act, 1985. On 20-

5-1996, officers of the Central Excise Headquarters Preventive intercepted one truck bearing Registration No. PB-10U-9913 which was coming

back to the factory of the respondent after delivering the goods to M/s. Saeco Iron & Steel Mills, Ludhiana but carrying back the original,

duplicate and triplicate copies of invoice No. 85, dated 20-5-1996 issued by the respondent. In the follow up action, 15.410 MT of non-alloy

steel ingots received by M/s. Saeco Iron and Steel Mills Ludhiana were seized as the same were received without any document. Show Cause

Notice dated 14-11-1996 was issued to the respondent on 14-11-1996. The respondent deposited the sum determined by the authority vide

order dated 19-2-1999. During the follow up action, the officers also visited the factory premises of the respondent and certain incriminating

documents were recovered from a room situated near the boundary wall on the day of the visit i.e. 20-5-1996. Statements of some employees of

the respondent-company were recorded and after scrutiny of the documents recovered, it was revealed that the respondent had been indulging in

the evasion of Central Excise duty in a clandestine manner. It was found that the respondent had clandestinely cleared 2145.030 MT of steel ingots

without payment of duty amounting to Rs. 32,64,395/- from 19-1-1996 to 19-5-1996. Accordingly, Show Cause notice dated 1-2-2000,

Annexure A.1 was issued to the respondent to show cause as to why Central Excise duty amounting to Rs. 32,64,395/- be not recovered from it

under Rule 9(2) of the Erstwhile Central Excise Rules, 1944. Interest and penalty were also proposed to be imposed upon the respondent. The

adjudicating authority vide order dated 7-4-2004, Annexure A2 confirmed the demand of Rs. 71,015/- only and imposed penalty of equal

amount. Aggrieved by the order, the department filed an appeal before the Commissioner (Appeals) who vide order dated 14-1-2005, Annexure

A.3 rejected the same. The department filed second appeal before the Tribunal. Vide order dated 29-6-2011, Annexure A.4, the Tribunal

dismissed the appeal. Hence this appeal by the department.

Learned counsel for the appellant-revenue submitted that the adjudicating authority as well as the appellate authority have erroneously decided

the issue against the revenue. According to the counsel, once certain entries were there in the note book which was found in possession of the

respondent-assessee, the authorities below were not justified in holding that there was no clandestine removal of excisable goods.

After hearing learned counsel for the appellant and perusing the record, we do not find any merit in the appeal.

The findings recorded by the Tribunal read thus:-

6.1 We have carefully considered the submissions from both sides and perused the records. It is on record that when the officers visited the

factory premises on 20-5-1996, there was no discrepancy of stock noticed. There was no seizure of any consignment while being transported

without excise invoices. What has been alleged is that a consignment has been sent along-with invoices and the same were delivered to one M/s.

Saeco Iron and Steel Mills and the invoices in original, duplicate and triplicate were brought back alongwith empty trucks. This may lead to a

suspicion that perhaps the invoices were meant to be used for transportation of the goods once again. Suspicion cannot take the place of evidence.

6.2. The department alleged recovery of private records which were maintained by Shri John Masih/Shri Avtar Singh. How Shri John Masih was

concerned with maintaining the heat records of the furnace has not come out during investigation. Shri John Masih was only a kanda incharge. In an

affidavit dated 16-9-2002, he had stated that he had no exact knowledge about the production of the goods in the factory. Further, there is no

evidence relied upon to show that Shri Avtar Singh was contractor working for the respondent company. It has been claimed that there was no

written contract between Shri Avtar Singh and the company for engaging Shri Avtar Singh as contractor. In view of the matter as above, the

authorities below have rightly held that the private records said to have been maintained by them cannot be relied upon.

6.3. It is not the case of the department that these entries were got explained by the authorized signatory or the director or any other responsible

person of the company. It is also not the case of the department that the entries mentioned in the private records were corroborated by conducting

investigation with the transporters or the recipient of allegedly clandestinely removed goods. It is not the case of the department that evidence was

produced in respect of any particular invoice that consignments have been cleared more than once using such invoice. The department having

recovered private documents, in our considered opinion, failed in conducting investigation in the relevant direction.

6.4. It is not a case that any authorized person of the company admitted to unaccounted production and clandestine removal and therefore the

officers felt that there was no need for further investigation. The authenticity of the documents seized and the veracity of the entries made therein

have not been corroborated by any meaningful investigation, even though show cause notice has been issued nearly after three and half years after

the commencement of investigation. If the private records indicate the position as claimed by the department it is a clear case of failure to gather

necessary evidence to support the allegation.

6.5. As already mentioned there was no difference in stock found by the officers on the date of visit. The authenticity of documents relied upon and

the locus standi of the persons who have explained the documents have not been brought out. There is no admission of unaccounted production

and clandestine removal by any of the authorized persons. There is no corroborative evidence relied upon in support of entries in the private

records sought to be relied upon especially when their authenticity is in serious doubt.

The Tribunal while dismissing the appeal of the revenue noticed that there was no discrepancy in the stock which was found by the officers of

the Excise department on the date of the visit on 20-5-1996 to the premises of the respondent. The revenue had never seized any consignment

which might have been transported by the respondent without proper excise documents. No definite material had been gathered or produced by

the department on the basis of which it could be concluded that there had been clandestine removal of goods by the assessee. The revenue had

sought to make additions only on the basis of certain entries in the note book which they were not able to corroborate from any other independent

evidence. The action of the department was on the basis of suspicion alone. Law does not permit additions to be made on that basis. The revenue

is required to substantiate with certain material that there has been an attempt to evade excise duty.

In the light of the findings recorded by the Tribunal which have not been shown to be erroneous or perverse, no question of law much less

substantial arises for consideration in this appeal. Accordingly, the appeal is dismissed.