[Order]. - The Revenue is aggrieved with the impugned order setting aside the demand of Rs. 2,96,480/- on the allegation of clandestinely manufacturing and removal of goods vide his Order-in-Appeal Nos. 115-117/2002, dated 26th June, 2002. The three appeals are taken together as it is from a common order passed by confirming duty and imposing penalties.
2. The Revenue contend that it is not possible to prove with mathematical precision the offence committed. It is stated that Shri T. Murugavel had admitted that they have procured raw materials from the local trading companies at Sivakasi; not accounted them and utilised the same for unaccounted manufacture. It is stated that he had admitted that they had not maintained any account for packing materials. It is stated that when an assessee produces and consumes raw materials without maintaining any account, it is not possible for the investigating officers to seize and correlate them to the sale of unaccounted final product. It is further stated that moreover in the case of fireworks, because of its peculiar nature (hundreds of varieties are manufactured), there is no standard input to output ratio. Aluminium Powder and Sulphur are the major raw materials for fireworks, which are measured in Kgs., whereas, the unit of measurement of fireworks are bags, packets and Nos. Hence, no input-output ratio has been formulated for fireworks. Therefore, it appears that non-seizure of non-existent raw material account is not a flaw in the investigation. It is stated that fireworks illicitly removed by the assessee were not available for seizure in the dealer’s premises in various parts of the country and hence, they were not assessed when investigating officers of other Commissionerates, who have conducted the follow-up action. It is stated that all the dealers have admitted that goods were transported to them on “freight to pay” basis and they have paid the freight. They would not have paid the freight, had they not received the consignments. Even though, the offending goods were not seized, the purchasers of the offending goods have given confessional statements. It is stated that the assessee has not accounted for the illicitly manufactured fireworks in any production account and hence the same could not be seized. However, the GC Notes and invoices seized from Lorry transporters and the statements given them prove that the assessee have manufactured and illicitly cleared fireworks without properly accounting them in the production records. Financial flowback cannot be proved in this case because the offence involved is unaccounted production and illicit removal; no assessee will properly account the sale proceeds realised from the illicitly cleared excisable goods. It is stated that Shri T. Murugavel, in his statement dated 22-2-2000 had admitted the offence. Hence, it is stated that the objection raised by the Commissioner (Appeals) on the counts of non-seizure of offending goods, proof of raw materials receipt, production account and flowback is not correct in law. It is also stated that refusal of permission to cross-examine the witnesses, whose statement have been relied upon by the adjudicating authority had clearly specified that as the persons in-charge of the traders have not given any statement or were not mahazar witnesses, the question of their cross-examination does not arise. However, the transporters were called for the purpose of cross-examination. It is stated that the ground taken by the assessee in his plea that they were not involved in the trading activity is only an after thought raised after the issue of show cause notice. It is stated that the investigation conducted by the A.C. Sivakasi proved that the invoices issued by M/s. Sampath Trading Company were bogus because the CST registration for their trading activity was received only on 4-6-98, whereas, the dates of issue of notices were 20-2-98 and 1-3-98 and the address shown in the invoices of M/s. Alpha Agencies was verified and found out that trading company was not functioning from there and hence the Appellate Authority is not correct in his findings. However, it is stated that Shri Paulraj has admitted that GCN was given by them without receipt of the consignees for securing bank loan. The Commissioner asked Shri Paulraj, who replied in the affirmative, as to whether it is a fact that in the statement dated 10-1-2000 given by him he deposed, after being shown the GCNs issued by M/s. A.P. Lorry Agencies covering transport of goods from SSF to various consignees, that the goods, booked by SFF and covered by the GCNs recovered, were in fact delivered to the concerned consignees has replied in the affirmative. It is stated that the Appellate Authority has not given any finding on this important point. It is further stated that initially GCNs were recovered from the transporters, discrepancies with reference to consignees, invoice numbers, quantity of cases booked, serial number of cases, etc., were found, detailed investigation was conducted by officers of the various Commissionerates and detailed work sheet enclosed with the show cause notice. Moreover, the demand has been raised on the basis of receipt of the consignment from the assessee by the Lorry Booking Offices and Dealers. Hence, the order of Commissioner (Appeals) is not correct requires to be set aside.
3. On hearing the learned Counsel Shri Muthu Venkataraman and Shri C. Mani, learned DR and on going through the records and on a careful consideration, I notice that the Asstt. Commissioner did not allow for cross-examination of all the traders, who are supposed to have lifted the goods and sold it in the market. Only one transporter allowed for cross-examination. It is stated by the assessee that they were also dealing in the goods and the places were pertaining to the independent trading activity. These points were negativated by the Assistant Commissioner in his order. While this point has been examined by Commissioner (Appeals). The Order-in-Original proceeds only on the basis of the admission of the lorry transporter which is now stated rescinded and resiled. Shri Paulraj also stated that the activity was done by the appellants for the purpose of taking enhanced banking facility. Learned DR pointed out that no such statement was given by other transporters but had given the statement that the goods were delivered to the customers and freight had been accepted. The learned Counsel pointed out that the other traders were not called for cross-examination despite the request made in this regard. On a perusal of the order-in-original, I noticed that only one transporter Shri Paulraj was called for cross-examination, who has clarified the circumstances under which the documents were made to enable the assessees to take more loan from the bank. In the absence of a corroborative evidence of purchase of raw material, manufacture of final goods and sale of the same clandestinely, the Commissioner had no other option but to accede to assessees plea that there was no manufacture and clearance of goods in the matter. There is suspicion that the appellants have clandestinely sold the goods. It is well laid down principle that there mere suspicion however grave it might be it cannot take the place of proof [Gian Mahtani v. State of Maharashtra - (S.C.)]. It has been held in the case of Utkal Galvanizers Ltd. & Others - (T) = 2003 (58) RLT 669, that merely showing higher turnover figures in the bank balance sheet for the purpose of taking loan from the bank is not a ground to hold clandestine manufacture and removal of goods. Further, it is contended that it is not possible to bring evidence of non-seasonal and non-existent raw material to account. They have also stated that non-seizure of offending goods, proof of raw materials receipt, production account and flowback is not available and it cannot be produced. However, they stated that it is not necessary to prove clandestine removal. I notice that this has been the ground for setting aside the allegation of clandestine removal. It is well laid down that for confirming demands on the allegation of there is clandestine removal of goods, there should be proof and evidence of purchase of raw material, sale of final goods clandestinely. In the absence of these evidence, the Commissioner was justified in setting aside the order. On a careful consideration of the ground, I notice that there is no concrete evidence cited in the matter. The Revenue has not examined the customers who have purchased the goods. The ld. DR pointed out to the allegation in show cause notice and finding recorded in the order-in-original. On this point, the plea of assessee is that these bogus invoices were made for the purpose of seeking enhance the banking facility and the said plea has been accepted. There is no corroborative evidence of any sort, in the matter hence the Commissioner is justified in dropping the proceedings. There is no point in remanding the matter as prayed by ld. DR as the Revenue is not in a position to establish the facts as required, which are fatal to the investigation. Learned DR pointed out that Shri Paulraj has resiled from his statement only on one ground but the evidence shows that he has delivered goods to places like Bangalore, Mumbai, Badravati and other places which has not been resiled and he submits that these circumstances are sufficient to confirm the demands. I notice that Commissioner (Appeals) has given very strong reason and in the grounds of appeal itself it is stated that it is not possible to produce evidence of raw material account, proof of receipt of raw materials, production account flowback in the matter. I notice that they have also not produced all the traders for cross-examination. In view of the circumstances and lack of evidence, the benefit of doubt has to be given to the assessees. There is no infirmity in the impugned orders. Hence, the Revenue appeal is dismissed.