Commissioner of Central Excise vs Vidya Laminates Pvt. Ltd.

The following questions have been proposed for the admission of this appeal:

(1) Whether Tribunal is justified in holding the purchase bills in the name of party and proof of evidence of payment details as insufficient for proving the receipt of raw material by the assessee and if its subsequent use in manufacturing and illicit clearance of goods?

(2) Whether the Tribunal was justified in holding that the burden of proof to establish clandestine manufacturing and removal of final product from the said raw material lies solely and exclusively on the Department to the extent 100% and cannot be shifted to the assessee, who has failed to prove the use in manufacture or sale of the same as such?

(3) Whether the learned Tribunal has erred in not holding that once the Department has discharged the burden of proof of clandestine removal of the final product by cogent evidences such as purchase bills, receipt of raw materials, statements of chemist etc. burden has shifted on the shoulder of the assessee to prove that there was no clandestine removal and that the assessee has failed to discharge the burden of proof on its shoulder?

Whether proper duty has been paid on the goods removed after production or not, that issue has been considered by the Tribunal in paragraphs 7 to 13 of its order, which are reproduced below:

The issue involved is of duty of unaccounted removal of plastic laminated sheets made out on the basis of Chemist''s statements of use on 260 gmms of base paper required to manufacture laminated sheet on theory and also production emerging of first grade quality sheet would be 70% and second and third grade sheet would be 15% each, as deposed by the Chemist.

The Id. Commissioner made an observation under the sub-heading "Grading of Sheets" at page 7 of the impugned order as follows:

During the course of detection and further investigation Department had recorded statement of Shri Suthar, Chemist of the firm, wherein he had stated that normal course of production of first grade quality sheets would be 70% and second and third quality sheets would be 15% each. However, based on statement and further course of investigation, it was found that the assessee had cleared clandestinely first grade sheets in the guise of IInd and IIIrd grade sheets and thereby evaded Central Excise duty of Rs. 43,56,765/-. The party''s defence to the above aspect is that chemist is primarily concerned in manufacturing line and is not a proper and authorized person to state anything regarding grading of sheets, but they failed to suggest who else could be. However, they had submitted in their defense replies that Shri Vishnubhai Patel is the proper person to say anything regarding grading of sheets and the investigation filed miserably to extract confession from him regarding the percentage of 1st, IInd and IIIrd grade sheets manufactured by them. Hence, grading of sheet based on solitary confession of unauthorised person like Shri Suthar, Chemist, does not cements the allegation made in the notice.

Further the observation of the Id. Commissioner in the next para is as follows:

...Even if the party''s argument that Shri Vishnubhai Patel is proper and authorised person to say anything about the grading of sheets as if having an intentional decree on same is taken for granted, the silence kept by him during the course of recording statement to come with actual fact regarding grading of sheets points the needle of suspicion on behalf of their master and is a clear calculated defence strateg.

But the facts on record show that no such statement of Shri Vishnubhai Patel was recorded. Therefore, the said person keeping silence about grading of sheets in his statement does not arise. Therefore, that the Id. Commissioner apparently lost sight of the same and made accusation against the appellants as a defence strategy raising suspicion on the alleged statement of Shri Vishnubhai Patel when in fact no such statement is existing on record.

In regard to base paper not accounted in the books of accounts, which was purchased from M/s. Visnagar Taluka Audyogic Sahakari Mandali Ltd. and used in the manufacture of laminated sheets which were cleared clandestinely, the observation of the Id. Commissioner is as follows:

I fail to understand what type of proof conclusive proof or a proof beyond pole of reasonable doubt is desired in such proceedings. The theory of strict liability of criminal law is not attracted in proceedings like this before me. When the purchase bills were in the name of M/s. Vaidya Laminates, payment details also stand reflected in the books of accounts of supplier. If they have sold base paper as such then it was on them to show and establish accordingly. Otherwise it would be validly presume that it was used in manufacture of clandestine manufacture and removal, offence of criminal nature or lesser than that of what is called white color crime, the tax evasion is also done in darkness of night. No one leaves wide hole of evidence to be easily trapped in.

As send from the aforesaid observation the Id. Commissioner is in doubtful state of mind as to the application of level of degree of evidence or proof required to establish the clandestine manufacture and removal as they are not criminal proceedings and while holding so, he had thrown the burden on the assessee to establish the said fact and raised presumption as against the assessee on the sole ground that purchase bills were in their name and payment details also stand reflected in the books of accounts of supplier; if they have sold based paper, it is for them to establish the same fact.

The ld. Commissioner erred in his observation and not applying the principle of degree of proof, which is equally applicable to the assessee as in the case of the Department. The Department alleges clandestine removal of the goods, prima facie, has to prove the same by proper and cogent evidence when it is the contention of the assessee that part of the base paper was not utilized in the capital consumptions and sold outside while maintaining the record, the same is to be taken into consideration. It is absolutely not proper in raising adverse presumption about the same.

Whether proper duty has been paid after production or not, is basically a question of fact. Nothing has been shown that the finding is perverse. From the discussion it cannot be said that the finding of the Tribunal is perverse. No substantial question of law does arise. The appeal stands dismissed.