Citation Codes

Equivalent Citations

citation codes

Case Number

Excise 519 Of 2007

Advocates

Acts

Section 11A of Central Excise Act, 1944 read with Rule 9(2) of erstwhile Central Excise Rules, 1944. [para 4] VARUN DYES & CHEMICALS PVT. LTD. Vs. CCE, SURAT II 2007 (218) E.L.T. 420
Rule 9(2) of erstwhile Central Excise Rules, 1944 - Rules 4 and 8 of Central Excise Rules, 2002. [para 4] TAKSHILA SPINNERS Vs. CCE, CHANDIGARH 2001 (131) E.L.T. 568
Section 11A of Central Excise Act, 1944. [para 4] T.G.L. POSHAK CORP. Vs. CCE, HYDERABAD 2002 (140) E.L.T. 187
Rules 11 and 25 of Central Excise Rules, 2002. [para 6] K. RAJAGOPAL Vs. CCE, MADURAI 2002 (142) E.L.T. 128
Section 108 of Customs Act, 1962. [para 10] RAMA SHYAMA PAPERS LTD. Vs. CCE, LUCKNOW 2004 (168) E.L.T. 494
Section 11A of Central Excise Act, 1944. [paras 4, 5] D.P. IND. Vs. CCE, ALLAHABAD 2007 (218) E.L.T. 242
CENTRAL EXCISE ACT 1944
Rule 27 of the CESTAT (Procedure) Rules, 1982

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Smart Summary

Legal Opinion Summary: CESTAT (West Zonal Bench, Ahmedabad) — M.V. Ravindran, Member (Judicial)

Factual and Procedural Background

These consolidated appeals arise from Order-in-Appeal No. 51/2007 dated 06.02.2007. Two appeals were before the Tribunal:

Appeal No. E/374/2007 — filed by M/s Shree Maruti Fabrics (the assessee) challenging duty demands and penalties confirmed by the adjudicating authority;
Appeal No. E/519/2007 — filed by the Revenue challenging the grant of cum-duty price benefit and reduction of duty and imposition of a reduced penalty under section 11AC.

The demands against the assessee comprised three sets of alleged liabilities: (i) a demand based on worksheets prepared from bank statements of certain trading firms alleged to be dummy concerns; (ii) a demand based on a collection book; and (iii) a demand based on a register said to contain details of clearances (sale book / sale register). The Revenue relied on those worksheets/statements and certain registers to allege clandestine removals by the assessee through the alleged dummy trading firms.

Legal Issues Presented

Whether the duty demands and penalties premised on worksheets and statements of proprietors of alleged third-party (trading) concerns can be sustained in the absence of corroborative evidence linking those bank receipts to clearances from the assessee's factory and identifying buyers or transporters.
Whether the collection book and sale register pages relied upon by the Revenue have been properly linked to the assessee's clearances such that the corresponding demands are sustainable.
Whether the Revenue's appeal against the grant of cum-duty price and the reduction of penalty under Section 11AC should succeed when the underlying demands and penalties are challenged.
Procedural/administrative questions appearing on the case cover related to Rule 27 of the CESTAT (Procedure) Rules, 1982 (publication / release / circulation of the order), as recorded on the case papers.

Arguments of the Parties

Appellant's Arguments (M/s Shree Maruti Fabrics)

The proprietary concerns relied upon by the Revenue are independent entities and not controlled by the proprietor of the assessee.
The statements of owners of the proprietary units were not made available for cross-examination and therefore cannot be relied upon; many of those statements were allegedly written by Shri Rajesh Patel at the dictation of visiting officers and lack validity.
For some trading firms, no statements were recorded and there is no evidence to show they are dummy concerns.
Statements of Shri Babu S. Patel and Shri Rajesh Patel were allegedly obtained under duress and were retracted the same or next day; lower authorities have not effectively disputed the retractions.
The worksheets and bank statements of third parties, without proof of any buyer or movement of goods from the assessee, cannot furnish a basis for demands of clandestine removals.
The show cause notice failed to demonstrate which trading firm received which amount on behalf of the assessee; entries appear to be placed without basis.
No evidence was adduced of amounts actually received by the assessee in respect of alleged clandestine clearances.
The assessee's factory was not visited to verify production figures or excess production; there was no inquiry into consumption of raw materials or flow of goods to buyers/consignees/transporters.
The adjudicating authority sought comments from the investigating authority but received no assistance; this was relied upon to contend that the demands were erroneous.
The appellant relied on multiple tribunal decisions to support the submission that third-party statements and private records without corroboration cannot sustain a charge of clandestine removal.

Revenue's Arguments

The Revenue's representative submitted that statements of the proprietor and owners of the alleged dummy units admitted clandestine clearances through dummy concerns, and that retraction affidavits filed the next day do not negate the documentary and testimonial matrix supporting the demand.
The Revenue relied on the worksheets and accepted statements to justify the demands, asserting that the acceptance by sister concerns corroborates the worksheet figures attributable to the assessee.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
SHREE INDUSTRIES LTD. Vs. CCE, Ahmedabad 2010 (261) E.L.T. 803 (Tri. - Ahmd.)	Clandestine removal could not be upheld in absence of corroborative evidence; sales on non-duty-paid invoice not verified from buyers; removals not verified from transporters.	The appellant relied on the principle; the court found the lack of corroborative evidence persuasive in holding the demands unsustainable.
K. RAJAGOPAL Vs. CCE, Madurai 2002 (142) E.L.T. 128 (Tri. - Chennai)	Private note-books are not conclusive evidence to prove clandestine removal when the scribe is not examined.	Relied upon by appellant to support the need for corroboration; the court treated such authority as supporting its conclusion that uncorroborated private records/worksheets are insufficient.
J.I. GANDHI SILK MILLS Vs. CCE, Surat 2009 (237) E.L.T. 103 (Tri. - Ahmd.)	Clandestine removal not sustainable in absence of corroborative evidence; benefit of doubt given where factory not visited and statements inconsistent.	Cited by appellant; court applied the underlying principle about absence of corroboration and incomplete investigation in allowing the appeal.
VARUN DYES & CHEMICALS PVT. LTD. Vs. CCE, Surat II 2007 (218) E.L.T. 420 (Tri. - Ahmd.)	Director's statement may raise doubt but cannot be conclusive without corroboration; absence of discrepancy in physical stock supports assessee.	Used to reinforce the need for corroborative evidence; court found these kinds of authorities supportive of setting aside demands.
D.P. IND. Vs. CCE, Allahabad 2007 (218) E.L.T. 242 (Tri. - Del.)	In absence of corroborative evidence like receipt of excess raw materials, power consumption, unaccounted money, duty demand and penalties are not sustainable.	The court noted this principle when evaluating absence of factory/consumption/energy/wage investigations and set aside the demands accordingly.
CCE, Ahmedabad Vs. POLE STAR INDUSTRIES LTD. 2007 (216) E.L.T. 257 (Tri. - Ahmd.)	Impugned removal not proved as clandestine by corroborative evidence; penalty not imposable.	Cited as part of appellant's authorities; the court found the broad principle persuasive in the facts before it.
FENIL UDYOG Vs. CCE, Mumbai 2006 (205) E.L.T. 1067 (Tri. - Mumbai)	Retracted statements require further investigation; demand not sustainable solely on the basis of retracted partner's statement.	The court relied on this principle in treating retracted statements as diminishing evidentiary value and in criticizing the investigation.
T.G.L. POSHAK CORP. Vs. CCE, Hyderabad 2002 (140) E.L.T. 187 (Tri. - Chennai)	Private accounts and note books are not sustainable evidence of clandestine removal unless supported by corroborative evidence (purchase, manufacture, flow-back of money).	Authority used to support the proposition that worksheets and third-party private records require corroboration, a view accepted by the Tribunal.
CCE, Vadodara-I Vs. MILESTONE ORGANIC LTD. 2009 (235) E.L.T. 690 (Tri. - Ahmd.)	Retracted/confessional statements are not sufficient to prove clandestine removal.	Referred to by the appellant; court treated retraction of statements as significant in undermining the Revenue's case.
OPEL ALLOYS (P) LTD. Vs. CCE, Ghaziabad 2005 (182) E.L.T. 64 (Tri. - Del.)	Retraction of statements and related evidentiary issues; subsequent statements may not refer to a retraction and that cannot alone defeat the fact of retraction.	Cited to bolster the submission that retracted statements reduce reliability; the Tribunal accepted that retractions were not effectively rebutted.
RAMA SHYAMA PAPERS LTD. Vs. CCE, Lucknow 2004 (168) E.L.T. 494 (Tri. - Del.)	Statements recorded but deponents not produced for cross-examination cannot be relied upon against the assessee.	Used to support the contention that statements of third parties not subjected to cross-examination could not be the sole basis for demands; court accepted this position.
CCE, Coimbatore Vs. VELAVAN SPIN. MILLS 2004 (167) E.L.T. 91 (Tri. - Chen.)	Records seized from third parties require proof of movement from assessee's premises and enquiry as to ultimate recipient; absence makes demand unsustainable.	Relied upon as analogous authority; the court applied this reasoning in noting no evidence of goods moved from assessee to third parties or consignees.
TAKSHILA SPINNERS Vs. CCE, Chandigarh 2001 (131) E.L.T. 568 (Tri. - Del.)	Adjudication based solely on statements of witnesses not subjected to cross-examination and without corroborative evidence is not sustainable.	Referenced by the appellant; the Tribunal found the lack of cross-examination and corroboration fatal to the Revenue's case.

Court's Reasoning and Analysis

The Tribunal's analysis proceeded from the primary evidentiary foundation relied upon by the Revenue — worksheets prepared by Shri Rajesh Patel from bank statements of alleged dummy trading firms that attempted to bifurcate amounts among the assessee and other concerns.

The Tribunal found that although the demands were framed on the basis of those worksheets and statements, the investigation and adjudication failed to establish a crucial factual link: there was no showing of (a) clearance of goods from the assessee's factory in quantified terms, (b) identification or examination of buyers/consignees, or (c) verification from transporters. In short, the amounts in third-party bank accounts were not tied to actual clearances from the assessee.
The Tribunal noted procedural defects in reliance on third-party statements: many proprietors of alleged dummy concerns were not produced for cross-examination, some addresses proved to be false, and certain statements were reportedly written by Shri Rajesh Patel at the officers' dictation. The Tribunal considered that statements of persons who are ostensibly Revenue witnesses should have been made available for cross-examination and could not serve as the sole basis for imposing demands.
The Tribunal gave weight to the fact that critical witnesses (including Shri Babu S. Patel and Shri Rajesh Patel) had filed retraction affidavits the same day or the next day, and that the lower authorities had not effectively rebutted those retractions. The Tribunal treated retractions and the absence of corroborative enquiry as diminishing the evidentiary value of the confessional statements.
The Tribunal further observed that there was no investigation at the assessee's factory to verify production, raw material consumption, electricity consumption, wage payments, or physical stock counts — all of which would be relevant to establish clandestine manufacture and removals. The show cause notice and adjudicating order did not explain how the worksheet amounts corresponded to clandestine clearances by the assessee.
Concerning the second demand (collection book) and the third demand (sale register / sale book for 2002-03 alleged to relate to 2003-04), the Tribunal found that the annexures were not independently corroborated; parties named were not investigated; the entries could not be linked to clearances by the assessee; and, in one instance, the book related to a blower unit alleged to be exempt from excise duty.
Having applied these factual and legal considerations — and having regard to the authorities cited by the appellant emphasizing the need for corroborative evidence and limitations of retracted or un-cross-examined statements — the Tribunal concluded that the demands and consequential penalties were not sustainable.
Because the Tribunal set aside the underlying demands and penalties, it held that the Revenue's appeal against grant of cum-duty price and the reduced penalty under Section 11AC could not succeed and therefore rejected the Revenue's appeal.

Holding and Implications

Core Holding: The Tribunal allowed the appeal filed by the assessee and rejected the appeal filed by the Revenue.

More specifically:

The duty demands and penalties imposed on M/s Shree Maruti Fabrics, being founded on uncorroborated worksheets and third-party statements (some retracted and/or not subject to cross-examination), were held to be unsustainable and were set aside.
The penalties that flowed from those unsustainable demands were also set aside.
The Revenue's appeal against the grant of cum-duty price and the reduction of penalty under Section 11AC was rejected as consequential to the Tribunal's finding that the underlying demands and penalties were not sustainable.
The cross-objection filed in the matter was disposed of in consequence of the above determinations.

Implications: The decision's direct effect is the reversal of the contested demands and penalties against the assessee and dismissal of the Revenue's appeal. The opinion does not purport to lay down any novel or general rule of law beyond applying established authorities that emphasize the necessity of corroborative evidence and the limited value of uncorroborated or retracted statements; the Tribunal disposed of the case on its facts.

Order pronounced: 15.11.2013 — M.V. Ravindran, Member (Judicial). Appeals disposed as above.

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Takshila Spinners v. Cce

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT AHMEDABAD COURT - II Appeal No.E/374/2007, E/519/2007; E/CO/120/2007 Arising out of: OIA No.51/2007, dt.03.02.2007 Passed by: Commissioner of Central Excise & Customs (Appeals), Ahmedabad For approval and signature: Mr.M.V. Ravindran, Honble Member (Judicial)

1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of Seen the order?

4. Whether order is to be circulated to the Departmental Yes authorities? Appellant: M/s Shree Maruti Fabrics Respondent: CCE Ahmedabad-I (and vice versa) Represented by: For Assessee: Shri Alok Barthwal, Adv. For Revenue: Shri G.P. Thomas, A.R. CORAM: MR.M.V. RAVINDRAN, HONBLE MEMBER (JUDICIAL) Date of Hearing:23.08.2013 Date of Decision:15.11.2013 Order No. A/11604-11605/2013 , dt.15.11.2013 Per: M.V. Ravindran

1. These appeals are filed by M/s Shree Maruti Fabrics and the revenue against the Order-in-Appeal No. 51/2007 dt. 06.02.2007. The Appeal No. E/374/2007 has been filed by M/s Shree Maruti fabrics in respect of duty demand and penalties whereas the Appeal No. E/519/2007 of revenue is against the grant of benefit of cum duty price and reduction of duty as well as reduced penalty under section 11AC.

2. In Appeal No. E/347/2007 the appeal is against the three set of demands confirmed against M/s Shree Maruti Fabrics, proprietary concern of Shri Babubhai. S. Patel. The first demand is based upon the worksheet prepared on the basis of bank statements of trading firms said to be dummy concern created by Shri Babubhai Patel. The amounts received in the banks of the alleged dummy concerns has been bifurcated by Shri Rajesh Patel an employee of the Appellant unit amongst the Appellant unit and other two concerns. The demand was proposed in the SCN alleging that the said amounts were sale proceeds of goods cleared by M/s Shree Maruti Fabrics and two other trading concerns. The revenue has relied upon these work sheets to raise the demand against the Appellant. The second demand is based upon the collection book of the Appellant Unit. The third demand is on the basis of register said to be containing details of clearances.

3. The Appellant in reference to demand calculated on the basis of worksheet has contended that the demand is absolutely erroneous as there is no basis of the demands made on the amounts shown in the said work sheets. The Appellant has contended as under:

(i) That the proprietor concerns are not controlled or related to Shri Babu. S. Patel but are independent entities.

(ii) That even though the demands are based upon the alleged statements of these owners but the said owners of proprietary units were not made available for cross examination and thus their statements cannot be relied upon. That the majority of the statements of the owners of the proprietary units was written by Shri Rajesh Patel as per the dictation of the visiting officers and thus has no validity.

(iii) That even in case of some of the trading firms neither the statements of owners were recorded nor is there any evidence that the firms are dummy.

(iv) That the statements of Shri Babu. S. Patel, the proprietor of the firm and Shri Rajesh Patel were obtained under force by the investigation officers. That there statements stands retracted on the same day or the next day and has thus no evidentiary value. That the lower authorities have not disputed the veracity of said affidavits.

(v) That even though the work sheets were prepared, but mere statements and bank accounts of third party i.e proprietary concern cannot be made basis for fastening demand on the Appellant as the investigations has failed to find any single buyer of the goods alleged to be cleared by the Appellant through trading firms.

(vi) That the amount received in the Bank accounts of the trading firms were bifurcated by Shri Rajesh Patel in the worksheets among the Appellant and other two firms, but the fallacy of the investigations gets proved from the fact that the show cause notice even fails to show as to which trading firm has received which amount on behalf of appellant. That thus the entries are Placed entries without any basis only to prove the charges of clandestine removal.

(vii) That the investigation failed to show any amount received by the Appellant unit in respect of alleged clandestinely cleared goods.

(viii) That even the Appellants factory was not visited to verify and ascertain whether there has been excess production.

(ix) There is no evidence regarding, the consumption of raw material used in manufacture of goods, the quantity of goods.

(x) That there is no enquiry as to how the goods changed the hands nor any corroborative/tangible evidence from the consignee or the transporters.

(xi) There is no evidence of consumption of raw material.

(xii) That even in the proceedings before Commissioner (Appeals), it can be seen from para 10 of the OIA that the Appellate authority had sought comments of the adjudicating authority on the points raised in the Appeal memo and also two reminders were issued but no reply, comments or assistance was offered by the investigation or adjudicating authorities. This shows that the demands are erroneous.

(xiii) The Appellant also relied upon following judgments in support of their contention to state that the third party statements without any verification and evidences cannot be a ground to alleged clandestine removal : SHREE INDUSTRIES LTD. Vs. CCE, AHMEDABAD 2010 (261) E.L.T. 803 (Tri. - Ahmd.) Sales affected on non-duty paid invoice not verified from buyers and removal of goods not verified from transporters - No investigation carried on excess production removed without payment of duty - HELD : Charge of clandestine removal could not be upheld in absence of corroborative evidence - Rules 11 and 25 of Central Excise Rules, 2002. [para 6] K. RAJAGOPAL Vs. CCE, MADURAI 2002 (142) E.L.T. 128 (Tri. - Chennai) Private note-books not a conclusive piece of evidence to prove clandestine removal - Scribe of notebook not examined J.I. GANDHI SILK MILLS Vs. CCE, SURAT 2009 (237) E.L.T. 103 (Tri. - Ahmd.) Statement of excise incharge of appellant-company also not reliable, number of pieces admitted by him to have been cleared without payment of duty not tallying with number of pieces disclosed by proprietor of shop - Appellants factory not visited and put to search by Department nor statement of Director or partner recorded - Clandestine removal of fabrics not sustainable in absence of any corroborative evidence - Benefit of doubt given to appellants - Demand not sustainable - Section 11A of Central Excise Act, 1944 read with Rule 9(2) of erstwhile Central Excise Rules, 1944. [para 4] VARUN DYES & CHEMICALS PVT. LTD. Vs. CCE, SURAT II 2007 (218) E.L.T. 420 (Tri. - Ahmd.) Directors statement accepting clearance of goods without payment of duty can raise doubt against the appellant but cannot be taken as a conclusive proof of removal - No other corroborative evidence on record to show clandestine manufacture and removal of final product - Fact that no discrepancy was found in physical stock of either the raw material or final product also lends credence to appellants stand - Benefit of doubt given to appellant - Section 11A of Central Excise Act, 1944. [paras 4, 5] D.P. IND. Vs. CCE, ALLAHABAD 2007 (218) E.L.T. 242 (Tri. - Del.) In absence of sufficient corroborative evidence like receipt of excess raw materials, power consumption, receipt of unaccounted money, demand of duty, interest and penalty not sustainable - Provisio to Section 11A, Sections 11AB and 11AC of Central Excise Act, 1944. [para 12] Evidence - Sufficiency of - Clandestine removal - Merely on basis of private records, clandestine clearances cannot be upheld - It has to be established beyond reasonable doubt and not on basis of preponderance of probabilities - Sufficient corroborative evidences necessary. [para 12] CCE, AHMEDABAD Vs. POLE STAR INDUSRIES LTD. 2007 (216) E.L.T. 257 (Tri. - Ahmd.) Impugned removal not proved as clandestine by other corroborative evidence - Penalty not imposable - Impugned order upheld - Section 11AC of Central Excise Act, 1944. [para 6] FENIL UDYOG Vs. CCE, MUMBAI 2006 (205) E.L.T. 1067 (Tri. - Mumbai) Held - Demand and penalty - Clandestine removal - Evidence - Statement, retracted statement - Demand confirmed solely on the basis of the statement of partner which has been retracted by filing affidavit by one of the partner who was mainly looking into the business - Since statement was retracted within 2-3 days, there was obligation upon the department to further investigate - There being absence of any other corroborative evidence, demand not sustainable solely on the basis of retracted statement - Section 11A of Central Excise Act, 1944. [para 4] T.G.L. POSHAK CORP. Vs. CCE, HYDERABAD 2002 (140) E.L.T. 187 (Tri. - Chennai) Clandestine Removal - Accounts and Records - Private accounts - Charge of clandestine removal based merely on note books maintained by workers and other private accounts, not sustainable unless supported by corroborative evidence with regard to purchase of raw material, manufacture of final goods, flow-back of money, or any seizure or statements from purchasers CCE, VADODARA-I Vs. MILESTONE ORGANIC LTD. 2009 (235) E.L.T. 690 (Tri. -Amd.) Evidence - Statement - Retracted statement - Confessional statement which in any case stands retracted, not sufficient to prove the charge of clandestine removal. [para 4] OPEL ALLOYS (P) LTD. Vs. CCE , GHAZIABAD 2005 (182) E.L.T. 64 (Tri. - Del.) The Appellants on the other hand brought on record the postal receipt on record to prove that the affidavit was despatched to the Commissioner which has not been controverted by Revenue. Evidence - Statement, retraction of - Statements subsequent to retraction of - Absence of any reference in subsequent statements to the retraction of first statement made earlier cannot be a ground to doubt the fact of retraction when subsequent statements recorded in form of questions and answers only when assessee could not have mentioned about retraction made by him as he was only answering questions put to him - Section 108 of Customs Act, 1962. [para 10] RAMA SHYAMA PAPERS LTD. Vs. CCE, LUCKNOW 2004 (168) E.L.T. 494 (Tri. - Del.) Evidence - Witnesses - Statement recorded but deponents not produced for cross-examination - Such statements could not be relied upon against assessee. [para 9] Clandestine removal - Onus of proof - Records seized from third party - No evidence produced to show movement of goods from premises of assessee to that party and no enquiry made as to who ultimately received those goods CCE, COIMBATORE Vs. VELAVAN SPIN. MILLS 2004 (167) E.L.T. 91 (Tri. Chen.) Demand - Clandestine removal - Evidence - Private note books and some statements relied by Revenue - Figures do not tally with seized private note books and no systematic method of maintaining records, noted - Commissioner (Appeals) found that investigating authority has not properly investigated and not brought forth corroborative evidence on record to prove purchase of raw materials, manufacture of goods, payment made to labourer, use of electricity and sale of final product - In absence of all relevant evidence, no fault committed by Commissioner in setting aside demand - Rule 9(2) of erstwhile Central Excise Rules, 1944 - Rules 4 and 8 of Central Excise Rules, 2002. [para 4] TAKSHILA SPINNERS Vs. CCE, CHANDIGARH 2001 (131) E.L.T. 568 (Tri. - Del.) Held - Adjudication - Demand - Clandestine Removal - Evidence - Statements, cross-examination, corroboration, absence of - Adjudication based on the statements only of witnesses who could not be cross-examined, coupled with total lack of any corroborative evidence, not sustainable as legally statements of such persons who failed to submit themselves for cross-examination could not be accepted or taken into evidence -

4. In case of demand of Rs. 42,000/- on the basis of collection book showing outstanding payment, the Appellants contention is that the said book pertains to a blower unit M/s Shriram enterprise which being blower unit is exempted from payment of excise duty. That the said book contains purchase of cotton and details of cotton mix sending for process and hence does not pertain to the Appellant.

5. A demand of Rs.3,37,500/- is on account of clearance of cotton yarn for the year 2002-03. The Appellant has stated that the register pertains to year 200203 whereas the demand is made for the year 2003 -04, hence the demand is erroneous; that there are only two pages where name of Shri B.S. Patel is shown who is having other firms; that there is no ground that the said pages has any connection with the Appellant. The first page of the annexure is details of purchases made by Shri B.S. Patel from various firms and second page is detail to sell. The payment has been received in cheque but no investigation about as to where the cheques were deposited; that there is no evidence that this amount pertains to any clandestine clearance of the Appellant unit. The Appellant has also filed written submission and requested to take the same on record.

6. The Ld. DR would take me through the facts of the case. The revenues contention is that the proprietor of the unit in his statements and the owners of the alleged dummy units have accepted the clandestine clearances through dummy concerns. That the retraction affidavits even though on the next day do not serve any purpose as the documents, evidences and subsequent statements of other persons does not help them all.

7. I find that the demands are based upon the worksheets prepared by Shri Rajesh Patel wherein he has bifurcated the amount received by the Appellant and other two concerns on account of receipt of clandestine removal. Even though the demands are based upon the worksheets and statements, however the investigation does not show as to how the goods or what quantities of goods were cleared by the Appellant and who are the buyers. When there is no evidence of clearance of goods from the factory of the Appellant nor there is any buyer the demand cannot be sustained on the basis of mere bank statements of the owners of the alleged dummy concerns. I find that the adjudicating authority has stated that though the proprietor of the dummy concerns were called for cross examination thrice but as their addresses shown in the bank statements were false hence they could not be found and that the revenue has made all efforts to secure there availability for cross examination. The adjudicating authority has also held that the Appellant during personal hearing did not press for cross examination. On this aspect I find that when the revenue has recorded the statements of these alleged dummy concerns at the time of investigation, in that case these persons could also be made available for cross examination as they were revenues witness. Thus the statements of these persons cannot be sole basis for fastening demand on the Appellant. It is more so that when the Appellant has contended that some of these statements were written by Shri Rajesh Patel. I also find that the statements of Shri Babu. S. Patel and Shri Rajesh. S. Patel were retracted on the same day or next day, which has not been effectively rebutted by the lower authorities. These retraction affidavits cannot be simply brushed aside by holding that there are statements of other persons or documents. I also find that though the demands were made on clandestine clearances, but there are no investigations nor any evidence regarding clearance of goods from the Appellants factory. The lower authorities have held that the other two concerns have accepted the clearances which show that the figures arrived in the worksheet in respect of the Appellant are also correct. In this context I find that only on the basis of acceptance of clandestine clearances by sister concern it cannot be said that the amount shown in the worksheet in respect of Appellant unit pertain to clandestine clearance of Appellant. The show cause notice or the orders passed by the adjudicating authority does nowhere shows as to how the said amounts pertain to clandestine clearance by the Appellant. It is more so that not a single buyers statement was recorded nor it is shown as to who are the buyer of said goods. The amounts received in the bank accounts of third party i.e proprietors of alleged dummy concerns cannot be said to be pertain to alleged clearance of goods of Appellant unless the buyers of the goods or any evidence in respect of clearance is produced. The revenue has recorded the statements of many persons, however not a single buyer of the goods was enquired. The duty demand can be sustained only when the goods are manufactured and cleared. However in the instant case there is not a single consignee of the goods, no transporter of the goods. No investigation has been done at the factory as to the manufacture of the goods. There is no investigation as to how the raw materials were procured, the consumption of electricity, the payments of wages etc. The show cause notice or the adjudication order even does not show how the amounts received in the Bank accounts of these dummy concerns were transferred to Appellants account, if any. I therefore agree with the submissions made by the Appellant and hold that the demands are not sustainable.

8. In case of second demand based upon collection book, it is found from the said annexure that apart from alleging the said pages to be pertaining to Appellant, no independent investigation has been carried out. Nor the parties whose details were found were investigated. In such case the demands being uncorroborated with any evidence are not sustainable. In case of demand on account of sale book for the year 2002 03, it is observed that the said annexure contain only two pages. However the investigation does not show as to how the pages are related with the clearances made by the Appellant. There is no investigation to know the nature of the transactions nor any investigation with the buyer of the goods inspite of the fact that the said page contain the names of the buyers as well as cheque numbers. In such situation when the pages cannot be linked or corroborated with any evidence of removal of goods, the demands have no basis. Accordingly the demand is set aside.

9. I also find that since the demands are not sustainable, as a consequence the penalties are also not sustainable and are thus set aside. I therefore allow the appeal filed by M/s Shree Maruti Fabrics with consequential relief.

10. The Appeal No. E/519/2007 has been filed by the revenue is against the Order-in-Appeal wherein the Commissioner (Appeals) has granted the benefit of cum duty price and 25% penalty under Section 11AC. I find that since the demand and penalties themselves are not sustainable in view of my above observation, consequentially the revenues appeal in respect of cum duty price and penalty needs to be rejected. I therefore reject the appeal filed by the revenue.

11. In sum, in view of the peculiar facts and circumstances of this case, appeal filed by the assessee is allowed and appeal filed by the Revenue is rejected.

12. The cross objection filed also stands disposed of. (Pronounced in Court on 15.11.2013) (M.V. Ravindran) Member (Judicial) cbb 13

Takshila Spinners v. Cce

Legal Opinion Summary: CESTAT (West Zonal Bench, Ahmedabad) — M.V. Ravindran, Member (Judicial)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments (M/s Shree Maruti Fabrics)

Revenue's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Takshila Spinners v. Cce

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