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Judgment
The appellant herein is the Director of M/s.Rajasthan Industrial Gases Ltd. (RIGL herein) and the company is a 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 Company as well as the appellant being the Director
thereof. Duty of Rs.2,63,42,989/- was demanded, alleging to have not been paid on 9551.278 MT of M. S. Ingots was proposed to be paid alongwith
proportionate interest and imposition of appropriate penalties even on the present appelalnt. 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 the 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 or from
the premises of M/s. RIGL. 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. Ld. Counsel for the
appellant has also impressed upon that the demand of the impugned Show Cause Notice against the main Noticee i.e. M/s. Rajasthan Industrial Gases
Ltd. has already been dropped vide Final Order No.51225/2021 dated 05.4.2021 in Appeal No. E/52064/2-19 (SM). 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
which got recovered from the premises of SSSRM. There appears neither corroborative evidence to support those loose & handwritten documents
nor any evidence to connect them to the alleged guilt of the appellant or to the alleged guilt of M/s. RIGL where the appellant is director. 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 M/s.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 said finding are held
to be definite presumptive findings. The order is not discussing any documents recovered from the premises of the appellant or from the premises of
M/s. RIGL from which could be proved the alleged clandestine removal on part of the appellant. No doubt the adjudicating authority, while confirming
the demand has relied upon the statement of the present appellant. But the perusal of the statement as find mention in Order-in-Original reflects a
clear denial of issuing any invoice to M/s. SSSRM other than those as were mentioned in a chart which was given to the officer at the time of
investigation. The material is deposed to have been delivered by the appellant to M/s. SSSRM against all the invoices of the said chart. Local
transportation was hired for delivering the M.S. ingots. The chart was clearly reflecting all clearances of M.S. ingots from appellant’s premises
and receipt thereof by M/s. SSSRM. Thus, it becomes clear that there is no admission by the appellant for the alleged clandestine removal. Hence, the
onus was upon the Department to produce the positive evidence from the appellant’s record and premises. But, it is simultaneously clear that no
other evidence from the transporter or raw-material provider or the purchaser has been collected by the Department.
Hon’ble High Court of Allahabad in the case of Continental Cement Co. Vs. Union of India reported as 2014 (309) ELT 411 (Allahabad) had
earlier laid down the criteria of investigation to prove the allegation of clandestine sale in following words:
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.
I observe that the Adjudicating Authority below had no sufficient evidence except for some private record from the M/s.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.
Otherwise also the other evidence relied upon by the Department is nothing but a third party evidence. Law in this respect is clear :
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 :
(i) M/s. Moral Alloys Pvt. Ltd. & M/s. Unnati Alloys Pvt. Ltd. â€" Final Order No. 52055-52056/2018 â€" SM dated 29.05.2018.
(ii) Synergy Steel Pvt. Ltd. vs. CGST & CCE, Alwar â€" Final Order No. 50673/2019 dated 15.03.2019;
(iii) Gian Castings Pvt. Ltd. Vs. CCE, Chandigarh â€" 2015 (319) ELT 339 (Tri.- Del.).
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 positive evidence of clandestine manufacture and removal of the goods.
With respect to the issue of limitation, it is held that apparently and admittedly appellant was regularly filing the returns. Hence, the facts were
regularly brought to the notice of the Department. But 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 issued invoking the greater period is therefore, held to be
barred by time. The adjudication based thereupon cannot sustain.
As a result of entire above discussion, the order under challenge fails on merits as well as on technical issue of limitation. Therefore, the same is
hereby set aside and the appeal is hereby allowed.
(Operative part of the order pronounced in the open Court)