M/s.Sourabh Rolling Mills Pvt. Ltd. vs Commissioner Of Central Excise, Raipur

Appellants herein are the manufacturers of MS ingots falling under Chapter 72 of Central Excise Act, 1985. Acting upon specific information that M/s.Pankaj Ispat Ltd., Raipur (PIL in short) is indulged in the clandestine procurement of raw-material production and clearance of MS ingots and TMT Bars, flats, challans etc., that the Central Excise Officers of Headquarter Preventive Branch, Raipur visited the premises of M/s. PIL inspected and verified the documents and also verified the stock of raw-material as well as the finished goods on 12.04.2012. Shortage of 1066.615 M.T. M.S. Ingots valued at Rs.3,57,31,603/- and that of 9.695 MT TMT Bar valued at Rs.3,64,290/- and 219.56 MT Sponge Iron valued at Rs.52,07,963/- was noticed. The incriminating documents were recovered vide Panchnama dated 12.04.2012. Statement of Director of M/s.PIL, namely, Shri Pankaj Agrawal, was recorded on 19.09.2012 and 02.10.2012 under Section 14 of the Central Excise Act, 1944. The Scrutiny of documents and further investigation revealed that the suppliers of unaccounted rawmaterial to M/s.PIL and their customers of finished goods included manufacturers /dealers commission agents etc., were also involved in evasion of payment of Central Excise Duty, while facilitating M/s. PIL to remove the finished goods clandestinely.

It was also observed that during the period 2011-12 M/s. PIL had purchased unaccounted raw-material i.e. MS ingots from the appellant herein. Resultantly, a show cause notice No.10826 dated 13.07.2016 was served upon the appellant proposing the recovery of Central Excise duty of Rs.24,52,947/- from them alongwith the interest and the penalty on the appellant company and penalty on the Director Shri Mahender Gupta. The said proposal was initially dropped by the Assistant Commissioner, Raipur vide order No.06/ADJ/AC/RD-II 2018 dated 17.04.2018. Against the said Order-in-Original, Department filed appeal before Commissioner (Appeals), however, Commissioner (Appeals) vide impugned Orderin-Appeal allowed the appeals filed by Department. Being aggrieved, an appeal was preferred by the assessee before this Tribunal.

I have heard Mr. Bipin Garg's Junior (Ms. Jwaria Kainaat), ld. Counsel for the appellants and Ms. Tamanna Alam, Authorized Representative for the Revenue.

It is submitted on behalf of the appellant that the Department has raised a wrong recovery relying upon a third party evidence i.e. documents recovered from M/s. PIL. No investigations in the form of search or recoveries from the appellant premises were made. There is no other corroborative evidence on record to prove the allegations as have been confirmed by the lower appellate authority below. She further submitted that Order-in-Original was rightly passed by Assistant Commissioner dropping the proceedings. Order is, accordingly, prayed to be set aside. Appeal is, therefore, prayed to be allowed.

Per-contra, ld. D.R. for the Department has submitted that the Officers of Headquarters, Preventive Branch had conducted massive investigation and searches in the premises of M/s.PIL and recovered voluminous incriminating documents sufficiently proving that the appellants have supplied unaccounted raw-material to M/s. PIL. The order under challenge has discussed the clear involvement of the appellant facilitating the clandestine removal of the finished goods to M/s. PIL. There is no infirmity in the order under challenge. Same is, accordingly, prayed to be upheld.

After hearing the rival contentions of both the sides, I hold as follows:-

Since the sole challenge to the order is its reliance upon third party evidence, it is necessary to check the evidentiary value of the third party evidence. The relevant case law in the case of Bajrangbali Ingots & Steel Pvt. Ltd. & Suresh Agarwal vs. CCE, Raipur in Appeal No. E/52062 & 52066/2018 heard on 16.11.2018, which is held as follows:-

The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established. Reference can be made to Hon'ble Allahabad High Court decision in the case of Continental Cement Company Vs. Union of India - 2014 (309) ELT 411 (All.) as also Tribunal's decision in the case of Raipur Forging Pvt. Ltd. Vs. CCE, RaipurI - 2016 (335) ELT 297 (Tri.-Del.), CCE & ST, Raipur Vs. P.D. Industries Pvt. Ltd. - 2016 (340) ELT 249 (Tri.-Del.) and CCE & ST, Ludhiana Vs. Anand Founders & Engineers - 2016 (331) ELT 340 (P&H). It stand held in all these judgements 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.

There is no other evidence or document in the form of stock verification of the raw-material of the appellant and the material supplied to M/s. PIL nor any evidence about usage of any transportation by the appellants for transporting the alleged quantity of raw-material to M/s.PIL. In absence thereof the documents recovered from M/s.PIL cannot be held against the appellant.

It is well settled law that there has to be some concrete evidence which would show clandestine manufacture of goods, as was reiterated by Tribunal, Delhi in the case of Commissioner of Central Excise & Service Tax, Raipur vs. P.D. Industries Pvt. Ltd. reported as 2016 (340) ELT 249 (Tri.-Del. ). Earlier also in the case of Continental Cement Company vs. Union of India reported in 2014 (309) ELT 411 (All.), Hon'ble High Court of Allahabad has held:-

"12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects :

(i) To find out the excess production details.

(ii) To find out whether the excess raw materials have been purchased.

(iii) To find out the dispatch particulars from the regular transporters.

(iv) To find out the realization of sale proceeds.

(v) To find out finished product receipt details from regular dealers/buyers.

(vi) To find out the excess power consumptions.

Thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department."

In the result, the order confirming the recovery has no legal basis to sustain. Accordingly, the impugned order is hereby set aside. The Appeal stands allowed.

[Pronounced in the open Court]