Whether duty can be demanded for clandestine removal of goods in absence of corroborative evidence

PJ/Case Law /2016-17/3431

Case- COMMISSIONER OF CENTRAL EXCISE, DELHI-IVersus GOLDY ENGINEERING WORKS
Citation-2017 (345) E.L.T. 149 (Tri. - Del.)
Brief Facts-The brief facts of the case are that the Central Excise officers conducted investigation in the premises of both the respondents and recovered certain documents. After follow-up investigation, proceedings were initiated against both the respondents to demand and recover Central Excise duty of Rs. 45,31,574/- and also imposed various penalties. It was alleged that M/s. GoldyEngg. Works have been manufacturing and clearing the moulds for footwear without payment of proper Central Excise duty. The turnover of both the respondents were sought to be combined as they belonged to same person. The duty liability was sought to be determined accordingly for the purpose of Notification No. 8/2003-C.E., dated 1-4-2003. After adjudication, the Original Authority held that both the respondents are to be treated together for arriving at the exemption limit in terms of Notification No. 8/2003-C.E. The duty demand made in the show cause notice was confirmed. Further, cash recovered from the residential premises of the proprietor was ordered to be confiscated. The seized goods were also ordered to be confiscated but allowed to be redeemed on payment of fine of Rs. 4 Lakhs. Penalties were imposed on the various persons. On appeal, the ld. Commissioner (Appeals) set aside the original order and allowed the appeals. Aggrieved by this order, the Revenue is in appeals

Appellant’s Contention-. Ld. AR reiterated the grounds of appeal. He submitted that the Appellate Authority failed to appreciate the statement of CNC Machine Operator regarding continuous operation of the CNC machines, further all the machines are installed in the premises of M/s. GoldyEngg. Works and only some manual processing is done in M/s. A.K. Engg. Works. It was further submitted that the First Appellate Authority did not appreciate the statement of different buyers of moulds, which indicated that the aforesaid goods were all from M/s. GoldyEngg. Works only. The two respondent firms, though shown as belonged to two brothers, in fact, there is only one manufacturing unit. Registration of both the units separately with Income Tax/Sales Tax, MCD and other Government Departments by itself is not a decisive factor in establishing the eligibility of SSI status.

Respondent’s Contention-Ld. Counsel appearing on behalf of the respondent submitted that the First Appellate Authority has examined all the issues now raised in the appeal by the Revenue and arrived at a conclusion. There is nothing in the present appeals warranting inference in the orders of First Appellate Authority. He also submitted a compilation of case laws in his support.

Reasoning Of Judgement-Heard both the sides and examined the appeal records.
Bench has noticed that in the appeals filed by the Revenue, there are certain verbatim repetition of the observations of the Original Authority (for instance para 5 of the Grounds of Appeal). Examining the merits of the appeal, bench has perused the impugned order carefully.
The case against the respondent is for clandestine removal of excisable goods and for combining the turnover of the second respondent with M/s. GoldyEngg. Works to arrive at the SSI exemption limit. The cash seized from the premises of the proprietor of the respondent’s firm as well as the goods seized from the respondent firm were ordered to be confiscated because of the above stated violation by the respondent. The case against the respondent for clandestine manufacturing and clearance was on the basis of private records recovered from M/s. Jai Ambay Etching Centre and four challan books recovered from M/s. GoldyEngg. Works. Bench has perused the findings in the impugned order on this issue. After examination of all the evidences, the First Appellate Authority found that the payment of Rs. 13,59,394/- from September, 2004 to Jan. 2006 as job work charges has not been supported with any evidence. It was concluded that in the absence of any evidence, it cannot be said with certainty that the said payments were made by the respondent to the said job worker towards job charges. Further, the calculation of number of moulds based on the average cost per piece is found to be purely theoretical and imaginary as the Original Authority failed to consider the various factors like types of moulds, nature of material used, etc. Further, it is also not verified whether the work done by the job worker is for new or repaired moulds.
The First Appellate Authority by extensively referring to the observations of the Original Authority categorically held that the Department is not sure about the quantity, description, nature and price of goods alleged to have been manufactured by the respondent during the period from September, 2004 to Jan., 2006. However, the Revenue went ahead and calculated the duty liability without any basic fact. The First Appellate Authority also did not admit the authenticity of the note book recovered from the job worker premises. The author of entries in the note book is not known and was not investigated. Further, regarding the four challan books recovered from the premises of the respondent, it was recorded that the same pertained to only 15 days. The projection of production/clearance for the entire period of two years based on such records is not tenable.
Bench has also noted that the First Appellate Authority also examined at length the relevance of various statements relied upon by the Revenue to sustain the case against the respondent. After careful perusal of the findings, bench was in agreement with the First Appellate Authority to the effect that the Original Adjudicating Authority has merely confirmed the demand based on the allegations in the show cause notice without considering the submissions of the respondent. The important point, which was repeatedly highlighted by the First Appellate Authority, is that the Department did not ascertain the quantity, description, size, quality and value, etc., of the moulds for footwear alleged to have been manufactured and clandestinely cleared. A uniform rate has been adopted with no consideration for these parameters and without any corroborative evidence.
With the above findings, the First Appellate Authority came to a conclusion that the turnovers for the years 2004-05 and 2005-06, as recorded by the Original Authority, were mainly based on the assumptions and presumptions and theoretical calculation of average production/value of clearances. Accordingly, without giving weightage to the presumptive calculation, the aggregate value of clearances of these two respondents were found to be below SSI limit of Rs. 1 crore even taken together. Regarding recovery of cash, bench has noted that there is nothing on record to link the said amount as sale proceeds of clandestinely removed excisable goods. Due explanation has been filed by the respondent to account for said cash claimed to be the sale proceeds of the agricultural land. In the absence of any evidence and also in view of the findings against the Revenue regarding clandestine manufacture and clearance, bench held that the seizure and confiscation of the cash and also of the finished goods are not sustainable.
On careful consideration of the impugned order and the grounds of appeal, bench found no justification to alter the findings of the impugned order. Accordingly, the appeals filed by the Revenue are dismissed.

Decision-Appeals dismissed
Comment-The kernel of the case is thatthere wasnoclandestine removal of excisable goods, as recovery of challan book was made from assessee’s premises and notebook from job workers premises does not amount to proper evidences. Further no investigation were conducted as to author of notebook and Challan book which was pertaining to 15 days cannot be projected for entire 2 year . Further, uniform price adopted for calculating duty without any reference to quantity, description, size and quality of goods. Hence, demand not sustainable. Hence, Revenue appeal dismissed.
Prepared By-Arundhatibajpai

Comments

PJ/Case Law /2016-17/3431

Post a Comment

Query