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Judgment
,,,,,
The appellant company and its Director, Shri Pankaj Tekriwal are in appeals against the impugned order-in-original, whereby excise duty has been",,,,,
demanded Rs.41,76,213/- along with equal amount of penalty on the allegation of clandestine manufacture and removal. Personal penalty of",,,,,
Rs.50,000/- has been imposed on the appellant â€" Director, Shri Pankaj Tekriwal under Rule 26 of Central Excise Rules.",,,,,
The appellant company is engaged in the manufacture of M.S. Ingots, Runners & Risers and Steel Shots and Grits, which are dutiable. They are",,,,,
availing facility of cenvat credit on the inputs used in the manufacture of aforementioned final products. They were having two induction furnace for,,,,,
manufacture of M.S. Ingots of capacity 3.0 M.T. each. The main raw materials /inputs are Sponge Iron, Iron Scrap, Pig Iron, etc.",,,,,
Revenue having intelligence that induction furnace units, in general, which were engaged in the manufacture of M.S. Ingots, were engaged in",,,,,
clandestine manufacture and removal and were not disclosing their true production and clearance to the Revenue. Revenue conducted search and,,,,,
inquiry with one Shri S.K. Pansari, Proprietor of M/s.Monu Steels (a broker engaged in the business of facilitating sale and purchase transactions of",,,,,
Iron & Steel products on behalf of manufacturer, seller and purchaser of Iron & Steel products on commission basis) and the office premises of",,,,,
M/s.Monu Steels were searched by the central excise officers on 15.01.2007. The search was conducted in the presence of Shri S.K. Pansari,",,,,,
Proprietor and two independent panchas and drawn panchnama on 15.1.2007. During the course of search, an amount of Rs.3,50,000/- was recovered",,,,,
from the premises along with incriminating documents like diaries, files, ledger, etc. As M/s. Monu Steels could not give satisfactory reasons, as to",,,,,
source of amount, it was seized by the central excise officers, on the assumption that the amount is part of the sale proceeds of clandestinely removed",,,,,
excisable goods, on which the manufacturers have not paid the due central excise duty. Show cause notice dated 10.07.2007 was issued for",,,,,
confiscation of the aforesaid amount of Rs.3,50,000/- under Section 121 of the Customs Act, 1962 (vide Notification No.68/63 CE dated 4.5.63",,,,,
amended) read with section 12 of the Central Excise Act, 1944 (as amended) and for imposition of penalty under provisions of Rule 26 and 27 of",,,,,
Central Excise Rules, 2002 on M/s.Monu Steels.",,,,,
Further, the statement of Shri S.K. Pansari, Proprietor of M/s. Monu Steels, Raipur was recorded on 15.01.2007 under Section 14 of the Central",,,,,
Excise Act, 1944, wherein he inter alia stated as under:-",,,,,
i) That he is working as Commission Agent for the last 2-3 years for his firm - M/s. Monu Steels, Near Deshbandhu Complex, Raipur (C.G.).",,,,,
ii) That the buyers and sellers contact him over phone for the purchase or sale of iron and steel products.,,,,,
iii) That the rate of goods and his commission is finalized over phone,,,,,
iv) That on finalization of deal, the seller supplies goods to buyer and he takes the details of such supplies, and enters in his diary.",,,,,
v) That the buyers sometimes send the payment directly to the suppliers and sometimes the payments are sent to him for disbursement to the,,,,,
suppliers, and in such case, he contacts the seller and makes the payment.",,,,,
vi) That in case of ingots, he gets commission from both buyers and sellers as well.",,,,,
vii) That in case of sponge iron, he gets commission from seller only",,,,,
viii) That he receives the payment from the buyers either in cash or through cheque.,,,,,
ix) That he receives the dispatch details from sellers over phone and makes the entries thereof in his diaries, which includes the name of buyer, name",,,,,
of seller, date, bill no., quantity , bill amount etc. and such entries are noted in his diary, and that normally he does not receive the copies of invoices",,,,,
issued by manufacturer or sellers.,,,,,
x) That he has used many abbreviations in his diaries and records like (o), “®â€, “NDâ€, Ëx†and “FOR†which means as under :-",,,,,
“(o)â€means material without bill, on which duty of excise has not been paid",,,,,
“®†means Regular payment means payment in 10-15 days,,,,,
“ND†means : Payment on next day.,,,,,
“Ex†means : the material is purchased from the spot (i.e. factory gate),,,,,
“FOR†means the delivery of material is on FOR basis.,,,,,
xi) That all the entries in his records relates to the year 2006.,,,,,
xii) That the payment of goods mentioned against (o) is made in cash by the buyer either to the seller or to him, and he disburses the payment to the",,,,,
seller in such cases.,,,,,
xiii) That the amount of Rs.3,50,000/- recovered from his premises pertains to cash balance of his firm.",,,,,
Again Shri S.K. Pansari, Proprietor of M/s.Monu Steel in his statements recorded on 19.09.2007, 21.09.2007, 30.05.2008 and 2.6.2008 under",,,,,
Section 14 of the Central Excise Act, 1944 reiterated his submissions made by him in his statement on 15.01.2007 and also explained about the details",,,,,
of entries found mentioned in the records/diaries recovered from his office premises under Panchnama on 15.01.2007. He also identified the names of,,,,,
units mentioned in the diaries/recovered, supra, which apart from other ingot manufacturing units, included this appellant - M/s. Hi Tech Abrasives",,,,,
Ltd. He also explained about the mode and method of transactions entered into by him with the ingot manufacturing units as regards sale of MS Ingots,,,,,
through him on commission basis.,,,,,
The scrutiny of records/documents withdrawn / recovered from the premises of M/s. Monu Steels, Raipur vide Panchnama dated 15.01.2007,",,,,,
revealed that apart from other ingot manufacturing units, M/s. Hi Tech Abrasives Ltd., Raipur (C.G.) had also cleared/sold M.S. Ingots through M/s.",,,,,
Monu Steels (Proprietor, Shri S.K. Pansari), Raipur on commission basis. The details of such sale transactions of appellant were found entered in the",,,,,
diaries/files recovered under Panchnama dated 15.01.2007 from the office premises of Monu Steels on 15.01.2007. These details include the details of,,,,,
total ordered quantity, name of manufacturer/consignor, name of purchaser/consignee. Transaction code as given by Mr.S.K. Pansari, date of",,,,,
removal, quantity of goods removed , rate, date of receipt, amount received, date of payment, amount paid, etc.",,,,,
In order to verify the genuineness of such transactions undertaken by appellant through Monu Steel and to verify as to whether proper cenral excise,,,,,
duty has been paid by them on such clearances of MS Ingots, summons were issued upon appellant, inter alia, asking them to furnish their sales details",,,,,
pertaining to the period 2006-2007.,,,,,
In pursuance to the summons, Shri Manish Pandey, the Authorised signatory of appellant submitted the documents called, for on 15.06.2009",,,,,
.Further, statement of Shri Manish Pandey, Authorised Signatory of appellant was also recorded under Section 14 of the Central Excise Act, 1944 on",,,,,
15.06.2009 before the Superintendent (Prev.), Central Excise Hqrs., Raipur, wherein he deposed that the documents/records being submitted are in",,,,,
relation to production, storage and removal of goods by M/s.Hi Tech Abrasives Ltd., and expressed their willingness to cooperate with the",,,,,
investigation and also undertook to discharge any duty liability that may arise out of examination of the documents / records being submitted by them.,,,,,
The details of entries mentioned in the private records recovered by the Central Excise Officers on 15.01.2007 from the office premises of M/s.,,,,,
Monu Steels (Proprietor Shri S.K. Pansari), wherein the details of clearances of MS Ingots by M/s.Hi Tech Abrasives Ltd. through Monu Steels,",,,,,
consisted the details viz. name of manufacturer/consignor, name of purchaser/consignee, transaction code as given by Mr. S.K. Pansari, date of",,,,,
removal, description of goods removed , quantity of goods removed, rate PMT, total ordered quantity, date of receipt of goods by consignee, amount",,,,,
received, date of payment, amount paid, etc. have been compiled.",,,,,
When the sales details of MS Ingots pertaining to appellant as mentioned in the records recovered from Monu Steels were compared vis-Ã -vis,,,,,
the sale details of appellant, as furnished by them, under statement dated 15.06.2009, it was observed that invoices have been issued and duty has",,,,,
been paid in respect of some of the clearances as detailed in Annexure ‘A’ to show cause notice. As per the details of clearances of MS ingots,,,,,
by appellant through Monu Steel as per recovered records, which reveals that M/s.Hi Tech Abrasives Ltd. had removed/cleared 2047.599 ingots",,,,,
valued at Rs.3,64,91,442/- to various parties during the period 2006-2007, through M/s.Monu Steels (Prop. Shri S.K. Pansari) clandestinely (as per",,,,,
Annexure ‘C’ to show cause notice), without payment of central excise duty and without issue of any central excise invoice.",,,,,
Statement of Shri Pankaj Tekriwal, Director of M/s. Hi Tech Abrasives Ltd. was recorded under Section 14 of the Central Excise Act 1944 on",,,,,
23.10.2009, wherein, he inter alia deposed that he is the Director of the company since 2001 and he looks after the purchase of sponge iron and sales",,,,,
of MS ingots in addition to the overall management of the company like production, sales, etc., and that their company is engaged in the manufacture",,,,,
of MS Ingots. They have two furnaces of 3.0 MT each and the furnace is of ‘Inductotherm make’. The main raw materials in the manufacture,,,,,
of MS Ingots are - Sponge Iron, C.I. Scrap and additives like Silico Manganese, Ferro Silicon, Aluminium Shots, Fluxes, Metcoke, Calcined Petroleum",,,,,
coke, etc. That after having seen all the entries pertaining to his unit and satisfying himself that Annexure-A has been prepared on the basis of such",,,,,
entries, he reiterated that they had not cleared /removed MS Ingots through the said commission agent without issue of sales invoices or without",,,,,
payment of central excise duty.,,,,,
On being specifically asked during the course of recording of statement dated 23.10.2009 and upon his denial, having only genuine transactions",,,,,
through M/s.Monu Steels, (Prop. Shri S.K. Pansari), Shri Pankaj Tekriwal was shown the copy of statement of Shri S.K. Pansari recorded under",,,,,
Section 14 of the Central Excise Act, 1944 on 15.01.2007, wherein Shri S.K. Pansari has Stated that he has correctly entered in his records all the",,,,,
transactions of sale of MS ingots undertaken through him by various manufacturers. He was asked to clarify entries as recorded in the,,,,,
registers/diaries recovered by the central excise officers.,,,,,
In reply, Shri Pankaj Tekriwal deposed that whenever they had any transactions with or through the said M/s.Monu Steels (Prop. Shri S.K.",,,,,
Pansari), Raipur they have recorded the same on their books of accounts, issued sales invoices and paid central excise due on the same. Regarding",,,,,
other entries as detailed in the records, he showed his inability to offer comments as these entries have been made by M/s.Monu Steels (Prop. Shri",,,,,
S.K. Pansari), Raipur and this aspect can better be commented by him. In reply to the question that why the name of his company has been",,,,,
mentioned in the diary of M/s.Monu  Steels. Shri Tekriwall submitted that this aspect can very well be explained by Shri S.K. Pansari only.,,,,,
As per standard, the electricity consumption for the manufacture of 1 MT of MS Ingots is around 830 Units/MT. The monthly average",,,,,
consumption of electricity and production of MS Ingots by appellant reveals that during the period 2005-2006 to September, 2009, the electricity",,,,,
consumption (per MT of MS Ingots) varied from a high of 2718 MT to 760 units/MT, which clearly indicates that the daily stock account (RG-I) and",,,,,
the production of MS Ingots have been doctored to suit their malafide intention to remove MS Ingots without payment of duty clandestinely, since the",,,,,
parameters for production of mild steel in an induction furnace, is more or less same over a period.",,,,,
Acting upon another intelligence that one M/s. Kailash Traders, Prop. Shri Kailash Agarwal was also working as a commission agent and was",,,,,
involved in arranging purchase and sale of sponge iron for manufactures, inter alia, involved in abetting clandestine removal of final products viz.",,,,,
sponge iron, through parallel invoices, etc. The Central Excise Officers conducted the search of the premises of M/s.Kailash Traders (Noticee No.4)",,,,,
on 20.12.2006 and proceedings were recorded under panchnama dated 20.12.2006 and seized incriminating documents viz. ledgers, diaries and loose",,,,,
sheets in respect of sales and purchases of sponge iron by various manufacturers.,,,,,
Statement of Shri Kailash Agarwal, Prop. Of M/s.Kailash Traders, Raipur was recorded on 20.12.2006, wherein, he inter alia stated that:-",,,,,
(a) He is the proprietor of his firm, M/s.Kailash Traders and was working as Commission Agent.",,,,,
(b) That he brokers sale and purchase of sponge iron between the sellers and purchaser over telephone.,,,,,
(c) Sometimes the sellers do not intimate the bill no./invoice nos. and in such case, he does not show bills nos. in his records. However, he receives the",,,,,
dispatch details from sellers in such cases.,,,,,
In further statement of Shri Kailash Agarwal recorded on 7.8.2007, stated that :-",,,,,
(a) That the removals of sponge iron from the manufacturers premises against which invoices have been issued are duly informed to him. It might be,,,,,
that some removals were either made without payment of duty or were made under parallel invoices.,,,,,
(b) Whenever the seller does not intimate the invoice number in respect of the removals of sponge iron, the code mark “R†has been mentioned",,,,,
by him in his records/diaries against each of such transactions.,,,,,
(c) That whatever tax evasion is done by the manufacturers of sponge iron, is evident from his records, he stated that he has not been benefited out of",,,,,
such evasion of tax, but has only received his commissions for brokering of deals.",,,,,
,"Qty. Removed
in MT",Total Value,"C. Excise
Duty",Cess,Total Duty
Quantification of
demand in Annexure
â€" C to SCN",2047.599,36491442,5838631,116773,5955404
Less: invoices submitted
by the notice",587.245,10055520,1608883,32178,1641061
Less: Double entries in
Annexure- C to the
SCN.",44.440,846289,135421,2709,138130
Total MS Ingots,1415.914,25589633,4094327,81886,4176213
Ld. Counsel for the appellant urged that the allegations made in the show cause notice and confirmed by the lower authority are denied and not,,,,,
admitted. The show cause notice as well as the orders passed by the lower authority is illegal and not sustainable. The Adjudicating Authority erred in,,,,,
confirming the duty demand on the ground of assumption and presumption only. All the evidences placed and discussed by the authorities were related,,,,,
to the third party, recovered from premises of broker - M/s.Monu Steel without any corroborative evidence. The various statements furnished by Mr.",,,,,
S.K. Pansari are of a general nature, and do not reflect any concrete evidence in the case of the appellant. It has been held that in various rulings, that",,,,,
the demand cannot be confirmed on the basis of records seized from the premises of third parties, without any corroborative evidence, by the",,,,,
Department.,,,,,
To support his contention, he relied upon the following case laws:-",,,,,
(a) Rudra Ventures Pvt. Ltd. -2016 (344) ELT 472 (Tribunal),,,,,
(b) CCE, Raipur Vs. P.D. Industries Pvt.Ltd.-2016(340) ELT 249",,,,,
(c) Raipur Forging Pvt. Ltd. -2016(335) ELT 297 (T),,,,,
(d) CCE Vs. Chola Spinning Mills Pvt.Ltd.-2009(246)ELT 267 (Tribunal-Chennai).,,,,,
(e) Agrasen Syntex Pvt.Ltd.-2003(154)ELT 431.,,,,,
In all the above cases, the Hon’ble Courts and Tribunal have held in clear terms that no duty can be demanded from a",,,,,
manufacturer on the basis of documents, which were not seized from their premises.",,,,,
Ld. Counsel also urged that the entire case has been made out on the basis of third party documents and the statements of their proprietors,,,,,
(outsiders) recorded therein. Appearance of names in private records, raises doubt only, but it is not substantive evidence. It is urged that there is no",,,,,
confessional statements by any suppliers for delivery of sponge iron (without bill) at the unit of the appellant. Accordingly, ld. Counsel prays for",,,,,
allowing their appeals with consequential benefits.,,,,,
Ld. Authorized Representative for the respondent - Revenue relies upon the impugned order and prays for dismissal of the appeals.,,,,,
Having considered the rival contentions, I find that the demand has been confirmed only on the basis of the unsubstantiated evidence being the",,,,,
private records of the two brokers viz. M/s.Monu Steels and Kailash Traders and the statement of their proprietors. I further find that the author of,,,,,
private records of M/s. Monu Steels - Mr. Bal Mukund was never examined by the Revenue. Further, M/s. S.K. Pansari during his cross examination",,,,,
has admitted that the said records were maintained under his instructions by Shri Bal Mukund Pansari. Further, Revenue have failed to find out any",,,,,
inconsistency in the records of the appellant, nor there is any seizure of any consignment of goods being raw materials or finished goods, being",,,,,
transported without the documents or clandestinely.,,,,,
I further observe that although the third party records are good evidence of suspicion of clandestine activity, but the same cannot be adopted for",,,,,
concluding the charge of clandestine removal in the absence of corroborative evidence. Further, in spite of the names being found of the parties, to",,,,,
whom the alleged clandestine removal has been despatched, there is no further inquiry made from the alleged receivers of goods. Accordingly, I hold",,,,,
that the demand against the appellant is not sustainable, in absence of sufficient evidence of clandestine manufacture and removal of the goods.",,,,,
Accordingly, the appeals are allowed and the demand including the penalty is set aside against both the appellants. The appellants are entitled to",,,,,
consequential benefits in accordance with law.,,,,,
[order pronounced on 05.11.2020.],,,,,