M/s Rajasthan Industrial Gases Ltd., vs Commissioner, Central Goods and Service Tax

The appellant herein is manufacturer of M. S. Ingots. Acting upon an intelligence that M/s Shree Sharma Steel Rolling Mills Pvt. Limited (SSSRM herein) Jaipur were indulging in suppression of production and clandestine removal of bars/ rods, that the premises of SSSRM was searched on 10.09.2005. Certain loose documents were recovered from the premises under resumption memo prepared on the spot on 10.09.2005 itself. Some other documents in the form of hand written ledger books pertaining to the period from April, 2005 were also recovered on the same date from the same premises. After examination of various records with respect to the documents recovered, show cause notice dated 12.06.2009 was served upon the appellant demand of duty of Rs. 2,63,42,989/- alleging to have not been paid on 9551.278 MT of M. S. Ingots was proposed alongwith proportionate interest and appropriate penalties. The said show cause notice has been adjudicated by the order under challenge bearing No. JAI-EXCUS-000-COM-11-18-19 dated 31.01.2019 wherein demand of duty amounting to Rs. 5,54,829/- as not been paid on 201.165 MT of MS Ingots alongwith interest and the penalty of the equal amount was confirmed. Still being aggrieved, the appellant is before this Tribunal.

I have heard Ms. Priyanka Goel, ld. Counsel for the appellant and Ms. Tamanna Alam, Authorised Representative appearing for the Department.

It is submitted on behalf of the appellant that the Commissioner has erred in confirming the duty even for an amount of Rs. 5,54,829/- as there is no evidence on record against the appellant. Apparently, the present case is based upon the search as was conducted in the premises of SSSRM and on the basis of the loose documents recovered from their premises. Admittedly, there is no evidence collected from the appellant or its premises, the entire case is on the basis of wrong allegation based upon the documents recovered from third party. The demand is liable to be set aside on this score. In addition, it is submitted that the demand for the period June, 2005 to September, 2006 has been raised by a show cause notice of the year 2009, there has never been any suppression on part of the appellant nor the Department has produced any evidence. It is submitted that excise returns were being filed regularly by the appellant. All facts and figures were regularly being noticed by the Department. Hence, Department has wrongly invoked the extended period of limitation. The demand is liable to be set aside on this score as well. Learned Counsel accordingly, prayed for allowing the appeal.

Learned Authorised Representative Ms. Tamanna Alam on the other hand rebutted the submissions. It is mentioned that the Commissioner has thoroughly examined the evidence and confirmed the demand only on 201.165 MT of M.S. Ingots against the proposed demand on alleged clandestine removal of 9551.278 MT of MS ingots. She accordingly prayed for dismissal of the appeal.

After hearing both sides and on perusal of record specially the show cause notice as was directed to be produced on record vide the previous order dated 04.03.2021, it is observed that the premises of SSSRM were search on 10.09.2005. The documents recovered from the premises, based whereupon the show cause notice was issued, admittedly are in the form of loose parchies and in the form of hand written ledger book that too those got recovered from the premises of SSSRM. There appears no corroborative evidence to support those loose & handwritten documents. Nor any evidence to connect them to the alleged guilt of the appellant. The statement of appellant, Smt. Sunita Devi, was recovered in June, 2005. There appears no acknowledgement on her part about she being involved in the alleged collusion with SSSRM for the alleged clandestine removal except for the raw material to have been delivered to SSSRM. In such circumstances, I am of the opinion that the entire burden was that of the Department to prove that the appellant have been clearing the raw material from their premises and were getting the same delivered to SSSRM without discharging their liability.

From the order-in-original it is observed that the demand against the appellant has been confirmed solely on the ground that the Director of the appellant could not indicate any reason as to why the entries in the private record of SSSRM mention appellant's name, the same finding are definitely presumptive finding. The order is not discussing any documents of the appellant proving the alleged clandestine removal on part of the appellant. The Adjudicating Authority has merely relied upon the statement of the Director. Resultantly the confirmation of demand is merely based on third party evidence. The law in this respect has clearly been settled by Hon'ble Allahabad High Court in the case of Continental Cement Company vs. Union of India -2014 (309) ELT 411 (All.) wherein it has been held-

"that the findings of clandestine removal cannot be upheld based upon the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods. Any demand and the proportionate penalty on the Director of the manufacturer is not sustainable. Order under challenge is therefore held to suffer infirmity to this extent. There is plethora of judgements to hold that stand upon the charges as that of clandestine removal, there has to be some clinching evidence and the demand cannot be confirmed based on presumptions and assumptions. The charge of clandestine removal is a serious charge, which is required to be proved by the Revenue by tangible and sufficient evidence. It was clarified by the Hon'ble Tribunal that mere statements of buyers that too based on memories were not sufficient without support of any documentary evidence".

As was observed in that case, in the present case also there is no evidence either from the transporter or inquiry with respect to the output of SSSRM. In such circumstances, I am of the opinion that the allegation of clandestine clearance even for the quantity as that to 201.165 MT has wrongly been confirmed. The demand thereof is therefore held to be wrongly confirmed. The decision of Hon'ble Rajasthan High Court in the case of R.M. Brothers Pvt. Limited is also relied upon wherein it has been held that demand of duty cannot be made only on the basis of electrical consumption and such demand has been dropped. I observe that the Adjudicating Authority below had no sufficient evidence except for some private record from the SSSRM premises. In the given circumstances and relying upon the above case laws, I am of the view that the demand even against a smaller quantity of 201.165 MT of ingots though much larger quantity of 9551.278 MT of ingots was otherwise alleged to have clandestinely removed, has wrongly been confirmed.

With respect to the issue of limitation, apparently and admittedly appellant was regularly filing the returns. There is nothing produced on record by the Department to show any positive act on part of the appellant which may amount to suppression of relevant facts. Resultantly, the demand for a period of more than one year could not have been made. Department could not have invoked the extended period of limitation. Show cause notice is therefore held to be barred by time. The adjudication based thereupon cannot sustain. As a result of above discussion, the order under challenge is hereby set aside and the appeal is hereby allowed.

(Dictated and pronounced in open Court)