[Order per : S.L. Peeran, Member (J) (Oral)]. - The appeal of the assessee and the Revenue arise from a common Order-in-Original No. 64/94, dated 26-12-94. The Commissioner of Central Excise, Hyderabad has confirmed duty demand of Rs. 68,35,193/- under Section 11A read with Rule 9(2) of C.E. Rules, 1944 and imposed a penalty of Rs. 50,000/- under Rule 173Q of C.E. Rules. The findings recorded insofar as these demands are concerned are reproduced herein below :-

I have carefully gone through the case proceedings. I find that the show cause notice proposes to demand duty from M/s. T.G.L. Poshak Corporation as detailed below.

(i)       An amount of Rs. 3,08,284/- being the duty alleged to have been not paid on 162.255 MT of vanaspathi cleared from the factory without payment of Central Excise duty. This amount is arrived at based on certain details contained in the exercise note recovered from the factory at the time of search.

(ii)     An amount of Rs. 68,35,193/- being the duty alleged to have been not paid on 3597.470 MTs cleared from the factory without payment of Central Excise duty. This amount is arrived at basing on the following documents :

(i) Confidential file.

(ii) Selective operational date returns submitted to Banks.

(iii) Balance Sheets for 1990-91 and 1991-92.

(iv) Consortium Meeting file.

With reference to the first demand mentioned above, assessee has claimed that the duty has been demanded based on the figures given in the exercise note book and that the figure given therein are only the orders received for execution and not the orders executed. This argument of the assessee cannot be accepted. The data given in the note book clearly indicates the details of sales such as the number of tins, price fixed and in some cases details of the truck by which the goods are sent. In spite of having all these details the assessee is trying to take shelter on the ground that the department has not produced the Central Excise gate pass details etc. When goods are cleared under Central Excise gate pass there will not be a need for demanding duty and duty is demanded precisely for the reason that goods are cleared without payment of duty and Central Excise gate passes. Therefore, the allegations made in the show cause notice with reference to the first charge merits to be confirmed.

With reference to the second demand the party has inter alia stated in his submissions at various stages as follows :

(i)      That the contents relied upon in the show cause notice for demanding the duty are prepared for submitting them to banks.

(ii)     The power consumption figures would reconcile with the RG-1 production figures if average power required for production of 1 Tin of Vanaspathi is taken into consideration.

(iii)    They have not produced any power using the generator.

(iv)    No further evidence is produced regarding production and clearance.

(v)     Documents filed to bank cannot be relied upon for demanding Central Excise duty. They have relied upon certain case laws also.

2. Ld. Counsel Shri K.R. Natarajan submits that demands cannot be confirmed based on recovery of exercise note books and certain balance sheets maintained by the party and in the absence of any corroborative evidence. He submits that large number of judgments were cited on this very issue to show that demands cannot be confirmed on the basis of seized, exercise documents maintained by the workers. However, the Commissioner has not recorded any finding nor he has discussed the judgments, although all the statements and the judgments cited by them have been noted in his order. Ld. Counsel relies on the following judgments to support his plea that demands cannot be confirmed. The citations furnished in the tabulated form by the Counsel is reproduced below :-

3. Ld. Counsel submits that the appeal of revenue is required to be dismissed for the simple reason that revenue is seeking confirmation of the portion of the order by which the Commissioner has dropped the proceedings for lack of evidence. The relevant portion of the order dropping the proceedings are produced herein below :-

“I have carefully gone through the entire records of the case. The department’s only strong point on which demand is made is that there are certain records/returns submitted to the banks, which indicate a higher production/clearance figures. On careful examination, I find that the department has not investigated the following aspects :

(i)       To find out further above the production details.

(ii)     To find out further whether raw materials have been purchased as reflected in the relied upon documents, or not.

(iii)    To find out the dispatch particulars from the lorry booking offices/regular transporters.

(iv)    To find out about the realisation of sale proceeds.

(v)      To find out about the power generation from generator.

(vi)    To find out finished product receipt details from regular dealers.

Gist of some of the case laws relied upon is reproduced below. CEGAT in the case of Punjab Oil and Silicates Mills v. Collector of Central Excise has held that statements given to Department of Industries cannot be relied upon to demand differential duty without corroborative evidence. CEGAT in the case of V.K. Thappy v. Collector of C. Ex. has held that duty cannot be demanded where other parameters such as excess power consumption, raw material consumption etc. are not proved.

In the absence of above investigations, further corroborative evidence, and the case laws referred to, I find it difficult and would be unfair to demand duty from the assessee merely based on the figures given to the banks, without corroborative evidence. Though there appears to be a suspicion regarding the clandestine clearances of the goods, in the absence of detailed investigations and corroborative evidence the benefit of doubt has to be extended to the party.”

4. Ld. Counsel submits that the above judgments would clearly apply to the above extracted finding as the department has not produced any evidence to support the case of clearances.

5. Heard Ld. SDR, Shri G.S. Menon, who reiterates the departmental view. He contends that there are statements and several registers maintained by the party which clearly indicated that they had manufactured and cleared the goods. He refers to the evidence which was culled out by the investigating agencies which clearly showed the manufacture of ‘vanaspati’ during the period in question. He submits that the Commissioner has not given details on the evidence and therefore matter has to be readjudicated by taking into consideration the evidence which is already noted by him in his order. He also refers to the grounds of appeal which are reproduced below :-

(A)          The demand for Rs. 68,35,193/- was towards the duty on the clearance of vanaspati without payment of duty made during the period of 1990-91 & 1991-92 (upto 31-1-92). The demand was based on the excess clearances shown by a set of private records when compared with the clearances shown by RG-1 register. The set of private records are :-

(1)      Confidential file which contain production & clearance particulars of vanaspati and other products during the period 1990-91 and 1991-92 as shown to the bank and as shown in the Central Excise records.

(2)      Select operational Data Returns which are the monthly production and clearance details filed with bank. These figures tallied with those found in the confidential file.

(3)      Consortium Meeting file which is a correspondence file with bank for working capital and contained the production and clearance figures.

(4)      Balance sheet for the years 1990-91 and 1991-92 whose figures tallied with those shown in confidential file and select data returns submitted.

(B)           It is evidence from the three sets of private records and balance sheets for the year 1990-91 and 1991-92 that the figures in each of the private records had tallied with each of the other records. Same production and clearance figures being present in 4 sets of records gives the strength of corroborative evidence. These records clearly show that more clearances were effected than what was shown in the statutory record i.e. RG-1 register. Hence the veracity of private records need not be doubted and the figures taken from the private records appear to be having the strength of corroborative evidence and hence the demand of Rs. 68,35,193/- made on the basis of figures shown by private records requires to be confirmed. As this demand is dropped, the order appears to be not proper to this extent.

6. We have carefully considered the submission and perused the impugned order. Insofar as the assessee’s appeal is concerned, we notice from the extracted portion of the Commissioner’s order that Revenue is solely relying on the exercise note books mainly balance steets. The Tribunal in large number of cases which have already been noted above in the tabulated list of citations furnished by the Counsel has held that unless there is clinching evidence on the nature of purchase of raw materials, use of electricity, sale, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of note books maintained by some workers. The facts in the case of Aswin Vanaspati Industries would be identical to the facts herein as in that case also the allegation was with regard to removal of Vanaspati based on the inputs maintained. The Tribunal went in great detail and have clearly laid down that unless department produces evidence, which should be clinching, in the nature of purchase of inputs and sale of the final product demands cannot be confirmed based on some note books. A similar view was expressed by the Tribunal in the other judgments noted supra. The citations placed would directly apply to the facts of this case. Hence, following the ratio of the cited judgments, the assessee’s appeal is allowed.

7. Insofar as the Revenue’s grievance on the Commissioner’s dropping the proceedings is concerned, we notice from the extracted portion of the Commissioner’s order that Commissioner has duly considered the note books relied upon by the department that they are not in the nature of purchase and removal of goods which was only certain balance sheets and certain private registers which does not prove the case of the department with regard to purchase of raw material, manufacture of final goods and clandestine removals. There is no seizure of goods or statements from the purchaser of goods who have paid money and the amounts received by them, appellants have also not recovered, nor there is any proof that amount said to have been received has flown back. Therefore, the dropping of proceedings, is proper and legal, we do not find any merit in the revenue appeal and same is rejected.