M/S Batra Plywood Industries Pvt. Ltd vs Commissioner Of Central Excise And Service Tax, Panchkula

P. Anjani Kumar, Member (T)

This appeal is directed against the impugned order dated 7.11.2017 passed by Commissioner of Central Tax, Panchkula.

The appellant is engaged in the manufacture of plywood and board etc.; officers of DGCEI conducted an investigation against M/s Dechem Plastic Pvt. Ltd, M/s Ashoka Drugs and M/s Shiva Chem and have recorded statement of one Shri Ashok Aggarwal; Shri Ashok Aggarwal has admitted to have supplied formaldehyde to various manufacturers of plywood as mentioned in the weighment slips recovered from them; Shri Aggarwal also admitted that the transactions were in cash; the appellants are one such receivers of formaldehyde; Revenue recorded the statement of Shri Yogesh Batra, Director of the appellant wherein he submitted that he did not purchase any formaldehyde from M/s Dechem Plastic Pvt Ltd, M/s Ashoka Drugs and M/s Shiva Chem. without the cover of invoice; Revenue calculated the amount of plywood that could have been manufactured by the appellants using the quantity of formaldehyde alleged to have purchased from Shri Ashok Aggarwal; on the allegation that the appellants have manufactured and cleared 9382.41 sqm of plywood and 9906.57 sqm of block board evading Central Excise duty of Rs.2,09,04,500/-, the impugned show-cause notice was issued and demand was confirmed by the impugned order along with interest and penalty. Hence, this appeal.

Shri Naveen Bindal, learned Counsel for the appellants, submits that though Shri Ashok Aggarwal provided proof of supply of formaldehyde to 26 manufacturers, show-cause notices were issued to only 07 manufacturers; out of these 07 show-cause notices, 02 show-cause notices, issued to M/s Mahalakshmi Industries and M/s LRB Industries, were dropped by the Joint Commissioner and the same was accepted by the Department. On appeals filed by the various appellants, This Tribunal has dropped the proceedings against M/s Volcano Plywood Industries, M/s Sant Gianashwar Kwatra vide Final Order No.60024-60025/2022 dated 11.01.2022; against Virgo Boards vide Final Order No.63304/2018 dated 11.10.2018 and against Star Plyboards Ltd. vide Final Order No.60308/2023 dated 30.08.2023.

Learned Counsel further submits that the Department did not conduct any investigation regarding the actual transport of the formaldehyde claimed to have been supplied by Shri Ashok Aggarwal; the drivers or the transporters were not questioned; no investigation of procurement of other raw materials like wood, veneer, phenol, melamine etc. was conducted; manufacture and sale of the final products was not established and also the financial transactions and therefore, Department has not made out any case of clandestine removal with clinching evidence. He also submits that the statement of Shri Ashok Aggarwal was recorded in 2014 and show-cause notice was issued on 30.03.2016 that is after two years and therefore, extended period cannot be invoked.

2.Shri Siddharth Jaiswal, assisted by Shri Anurag Kumar, learned Authorized Representatives for the Department, reiterates the findings of the impugned order and submits that as per the information available with them, Department has filed appeal or in the process of filing appeal against the said orders of the Tribunal.

Heard both sides and perused the records of the case. We find that the facts of the case and the evidence produced by the Department in the cases discussed above are identical. We find that Revenue alleges clandestine removal only on the basis of the alleged supply of one of the raw materials as per the weighment slips recovered from Shri Ashok Aggarwal. As the Tribunal found in other cases, in the impugned case also, Department did not find it convenient to investigate the actual receipt of formaldehyde by the appellants from Shri Ashok Aggarwal, leave alone the establishment of purchase of other raw materials, consumption of electricity, deployment of labour, manufacture of excisable goods, clandestine removal, sale of excisable goods and receipt of sale proceeds etc. Department argues that a case of clandestine removal cannot be and need not be established with a mathematical precision. While we accept the proposition, we are of the considered opinion that a serious charge like clandestine removal cannot be leveled on the basis of a mathematical calculation i.e just by calculating a quantum of plywood that could have been manufactured using the alleged receipt of formaldehyde. Therefore, we find no reason, whatsoever, to take a different view than the one taken by us in the cases cited above. In view of the same, we find that the Department has not made out any case of clandestine removal against the appellants and therefore, the impugned order is not sustainable and is liable to be set aside.

In the result, the appeal is allowed.