M/s.Super Iron And Steel Private Limited vs Commissioner Of Central Excise And Customs

The appellants herein are the manufacturers of M.S. Ingots and T.M.T. Bars falling under Chapter 72 of Central Excise Tariff Act, 1985. Acting

upon specific information that M/s. Super Iron & Steel Private Limited are indulging in the clandestine procurement of raw materials, production and

clearance of M.S. Ingots and TMT Bars etc., the Central Excise Officers of Headquarters Preventive Branch, Raipur, visited the premises of one

M/s. Pankaj Ispat Ltd. (in short “PILâ€) and verified the documents and also verified the stock of raw materials as well as the finished goods on

12.04.2012. In the search of the factory premises of M/s. PIL, revealed shortage of 1066.615 MT of MS Ingots valued at Rs.3,57,31,603/-, 9.695 MT

TMT Bars (Atlas Brand) valued at Rs.3,64,290/- and 219.56 MT Sponge Iron valued at Rs.52,07,963/-. The incriminating documents were recovered

vide Panchnama dated 12.04.2012. Statement of Shri Pankaj Agrawal, Director of M/s. PIL was recorded on 19.09.2012 and 02.10.2012 under

Section 14 of the Central Excise Act, 1944. The scrutiny of the documents and further investigation revealed that there are several suppliers of

unaccounted raw-materials to M/s. PIL, and their customers of finished goods included other 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 2011-2012, M/s. PIL had procured a total of 6936.105 MT and 25171.23 MT of unaccounted M.S.

Ingots without accounting for the same in the statutory records. The documents revealed that M/s. PIL had made unaccounted production of 16315.11

MT of M.S. Ingots during 2011-2012 and they clandestinely removed finished

goods.                                           Â

As the name of this appellant also appeared in the seized records of PIL, as supplier of M.S. Ingots, TMT Bars, etc, resultantly, a show cause

notice dated 25/26.08.2015 was served upon the appellant proposing recovery of central excise duty of Rs.26,21,079/- with interest and a penalty of

equivalent amount under Section 11 AC and further penalty on the Director, Shri Amarpreet Singh Chandok. The said proposal was initially dropped

by the Asstt. Commissioner, Raipur vide his order-in-original dated 19.02.2018. Against the said order-in-original dated 19.02.2018, Department filed

appeal before the Commissioner (Appeals). The Commissioner (Appeals) vide impugned order-in-appeal dated 11.07.2018, allowed the appeal filed by

the Department. Being aggrieved, this appeal is preferred by the assessee before this Tribunal.

I have heard Ms. Parul Sachdeva, ld. Counsel for the appellant and Shri P. Juneja, Authorised Representative for the respondent/Department.

It is submitted on behalf of the appellant that the Department has raised a wrong demand/recovery upon the third party documents, recovered from

M/s.PIL. No investigations in the form of search or recoveries from the appellants’ premises were made. There is also no other corroborative

evidence on record, to corroborate the allegations, as have been confirmed by the lower appellate authority. Ld. Counsel further submitted that the

order-in-original was rightly passed by the Asstt. Commissioner, dropping the proceedings. The impugned order is accordingly prayed to be set aside.

The appeal is, therefore, prayed to be allowed.

Per-contra, ld. Departmental Representative for the respondent/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 appellant has supplied unaccounted raw materials (ingots) 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, I hold as under:-

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 (on similar facts) 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 in which this Tribunal have held as follows:-

“9. 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’s

decision in the case of Continental Cement Company Vs. Union of India â€" 2014 (309) ELT 411 (All.) as also Tribunal’s decision in

the case of Raipur Forging Pvt. Ltd. Vs. CCE, Raipur â€"I â€" 2016 (335) ELT 297 (Tribunal-Delhi), CCE & ST, Raipur Vs. P.D.

Industries Pvt. Ltd. -2016 (340) ELT 249 (Tribunal-Delhi) and CCE & ST, Ludhiana Vs. Anand Founders & Engineers â€" 2016 (331)

ELT 340 (P&H). It stands 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 or clandestine manufacture and removal of the goods.â€​

There is no other evidence or documents in the form of stock verification of the raw-materials of the appellant, and the materials supplied to

M/s.PIL, nor any evidence about usage of any transportation by the appellants for transporting the alleged quantity of raw materials 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 Centrl Exciswe &Service Tax, Raipur Vs. P.D. Industries Pvt. Ltd. reported as 2016 (340) ELT 249

(Tribunal-Delhi). 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 realisation 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 Departmentâ€​.

In the result, the impugned order confirming the recovery has no legal basis to be sustained. Accordingly, the impugned order is hereby set aside.

The appeal as well as misc. application stands allowed. Appellant is entitled to consequential benefits.

[order pronounced on 12.08.2021]