CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL NEW DELHI. Date of Hearing:11/07/2018 Date of Decision:03/01/2019 Excise Appeals Nos.50610-50612/2015 [Arising out of Order-in-Original No.6/D-I/2015 dated 30.01.2015 passed by the Commissioner of Central Excise, New Delhi] M/s.Rama Industries Appellant Dinesh Goyal Vijay Goyal Rep. by Shri Kamaljeet Singh, Advocate for the appellant. CCE, Delhi .Respondent Rep. by Shri R.K. Mishra, DR for the respondent. CORAM : HONBLE MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) HONBLE MR. C.L. MAHAR, MEMBER (TECHNICAL) Final Order Nos.50014-50016/2019 PER ANIL CHOUDHARY: The issue in the present appeals are whether the appellants i.e. M/s.Rama Industries is liable to pay central excise duty along with interest & penalty on the allegation of clandestine removal of goods and whether the other appellants are liable to be penalized under Rule 26 of the Central Excise Rules, 2002?

2. The facts in brief, as per records are, a search was conducted by the officers of Central Excise on 5.10.2012 at different premises belonging to Shri Sanjay Goyal - Proprietor of Rama Industries, Shri Dinesh Goyal and Shri Vijay Goyal, Brother and cousin of Sanjay Goyal. During the course of search of premises at KD-145 (office premises), Kohat Enclave, Pitampura, New Delhi, the officers resumed some documents/CPU/Hard Disk/CD and also recorded the statement of Shri Vikas Bansal Staff/Relative under Section 14 of the Central Excise Act. The department also searched the factory premises located at Khasra No.77/08/02/09, Ghevora Village near Mundka, Rohtak Road, Delhi where they found one electricity connection of approx.60 KWA bearing electric meter S.No.27128707, one generator set having capacity of 80 KVA installed in the premises, raw material i.e. copper scrap, two oil furnaces, out of which one oil furnace of 4 MT was installed and operational and other was lying un-installed. The officers further found some construction work/repairing work was going on and 4-5 labourers were working near the furnace under installation. Shri Pawan Kumar - Gatekeeper informed that no manufacturing activities were being carried out at the premises since some repairing work was being carried out for last 3-4 days. He also informed that 10 workers were being normally deployed for the job or factory work, in two shifts of 12 hours each. During the course of search, Shri Dinesh Kumar, Supervisor joined the search proceedings. The officers have recorded statement of Shri Dinesh Kumar, Supervisor on the same day, who interalia stated that the unit manufactures copper ingots by melting copper scrap. He had been recently employed since a month. Another search was conducted at C-56, Rohit Kunj, Pitampura, Delhi, residence of Sanjay Goyal, wherein they have recovered certain loose documents [kachcha parchies] and resumed for further investigation. The statement of Smt. Manisha Goyal, Wife of Shri Sanjay Goyal was recorded by the officers of central excise, same day. The officers have also searched the residence of Shri Vijay Kumar Goyal, C-87, Antarisksha Apartments, Sector-14, Rohini, New Delhi, wherein they have recovered & resumed one laptop and one pen-drive. The officers have also recorded inculpatry statement of Shri Vijay Kumar Goyal on 5.10.2012. The department also searched the premises at C-56, First Floor, Rohit Kunj, Pitampura, Near Rani Bagh, New Delhi, wherein they resumed one CPU, a Fujitsu Siemens branded laptop and certain loose papers. The officers have also recorded statement of Shri Dinesh Goyal on 5.10.2012. In furtherance of these investigations, the department had also visited the premises of 3 buyers of copper ingots on 6.10.2012, as named by Vijay Kumar Goyal in his statement.

3. The officers of Central Excise searched the premises of Shri Shivam Electronic Pvt. Ltd., Khasra NO.38/20, Village Mundka, Delhi, wherein Shri Kailash Choudhary, Director has stated that they have not purchased any copper ingots from M/s. Rama Industries. The officers have also searched the premises of M/s.Kaycee Electricals, B-7, Jhilmil Industrial Area, Shahdara, Delhi, wherein no incriminating documents were found. The statement of Shri Jatinder Kumar Aggarwal, Partner of M/s. K.C. Electricals was recorded on 6.10.2012, wherein he denied any purchase or financial dealings with appellant, - M/s. Rama Industries. Similarly, the Department searched the premises of M/s. SSR Industries [M/s. Shahdara Steel Rolling Mills], Delhi and M/s. V.P. Realtors Pvt. Ltd., Delhi but nothing incriminating material/document was found by the officers of central excise. The statements of Proprietor of M/s.SSR Industries & Director of M/s. V.P. Realtors Pvt. Ltd. were recorded, wherein they have denied any purchases from M/s. Rama Industries appellant.

4. The officers of Central Excise recorded various inculpatory statements of Shri Sanjay Goyal, Vijay Goyal, Nipun Goyal (nephew of Sanjay Goyal) on various dates. Based on the documents recovered & statements recorded, a show cause notice dated 9.5.2013 was issued to the appellant M/s. Rama Industries proposing to levy duty of Rs.6,09,96,299/- along with interest & penalty. Further, penalty under Rule 26 has been proposed on Shri Vijay Goyal & Shri Dinesh Goyal. The appellants denied all allegations made in the show cause notice. However, the ld. Commissioner vide its impugned order confirmed the central excise duty of Rs.6,09,96,299/- along with interest & equivalent penalty and further imposed penalty of Rs. 10 lakhs each on Shri Vijay Goyal and Shri Dinesh Goyal.

5. The appellants being aggrieved are before this Tribunal against the said order.

6. The learned Counsel for the appellants submitted that the ld. Commissioner has not taken into consideration various submissions made by the appellant, which are as follows:- 6.1. That the appellant was only trading in scrap of different kinds purchased from various scrap dealers after segregating it into different types like plastic, iron, copper etc.. The appellant purchased. & installed an old crucible- furnace from a scrap dealer. All the documents regarding purchase & installation of furnace are given in appeal memorandum. 6.2. That the capacity of the furnace is not 4 M.T. but only 800 kgs per heat. It is a well known fact in the copper industry that the capacity of crucible-furnace varies between 800 kgs to 1200 kgs. 6.3. At the time of visit of the officers on 05.10.2012, the furnace was still under installation and the area around the furnace was being levelled and repaired as can be seen from the panchnama. 6.4. That the appellants attendance register was also resumed during the search has not been relied upon in the show cause notice. This register is for around one and a half months prior to date of search and shows that during this period, the appellant had only two to five employees on its rolls which conclusively establishes that no manufacturing activity was being carried out by the appellant. 6.5. That as per page 3 of the panchnama the officers have resumed a Digital Video Recorder installed in the office room of the appellant in which recording of manufacturing activity was being carried out. The DVR recording clearly shows that the appellant was not carrying out any manufacturing activity. 6.6. That the premises of the appellant is agricultural land. It is shown as godown premises in the electricity bills and in the rent agreement with landlord. After search on 05.10.2012, officers of theMunicipal Corporation of Delhi also raided the appellants premises & issued challan stating that premises is a godown. No manufacturing activity was being carried out even at the time of visitof MCD officers. 6.7. That the appellant did not have the facility to manufacture copper ingots even till the date of visit of the officers, thus the allegation that the appellant has manufactured and cleared copper ingots clandestinely during the period from Jan 2012 to Oct 2012 (till 03.10.2012) is not sustainable. Neither any moulds for manufacture of ingot were found. 6.8. That the search in premises of Sh. Vijay Goyal and the statements of Sh. Vikas Bansal do not support the allegation of clandestine manufacture & clearance of copper ingots. 6.9. That the allegation that the electricity connection was of 60 KWA, is wrong. The sanctioned electricity load for the premises at Vill. Ghovra is 21 KVA only as reflected in the electricity bill. 6.10. That as per the statement of Sh. Pawan Kumar- gatekeeper, no manufacturing activity was being carried out at the premises for the last 3-4 days and ten workers were usually deployed for the job. Thus even as per the panchnama, ten workers were deployed for repair work and not in themanufacturing activity. He also informed the officers that the factory works in two shifts of 12 hours each. However, at the time of search, the officers did not find any evidence whatsoever to this effect. 6.11. That the scrap was being purchased from Kabaris for which no bills were raised by the Kabaris. 6.12. That the statement of Sh. Dinesh Kumar, Supervisor is not reliable being false, as is borne out by its contents. He has stated that Sh. Vijay Kumar Goyal is the proprietor of the firm, however the proprietor of the firm is Sh. Sanjay Goyal. Though he has stated that raw material was being purchased from local traders, however no such local traders have been named by him. He has stated that the ingots are supplied by trucks in the night however no transporters have been identified by the Department and no goods have been seized by the Department during the course of their alleged transport without cover of Central Excise invoices. 6.13 That since the truth & veracity of the statements of Sh. Dinesh Kumar and Sh. Pawan Kumar has not been tested by way of cross-examination, no reliance ought to be placed on it. 6.14. That the Katcha Parchies recovered from the residence of Sh. Sanjay Goyal, proprietor of the appellant do not reflect the sale of copper ingots manufactured by the appellant but are regarding the trading of ingots and scrap by Sh. Sanjay Goyal. 6.15 That no reliance can be placed on the spiral notebook recovered from the residential premises of Sh. Vijay Kumar Goyal. The statement of Sh. Vijay Kumar Goyal stating that this notebook contains details of transactions of the appellant Rama Industries is false and has been written as per the wishes of the investigating officers only to buy peace with the Department. Sh. Vijay Kumar Goyal has no relation with the appellant firm and this notebook does not contain any details pertaining to the transactions of the appellant. Moreover, it is well settled by, inter alia, the following judgments that demand of duty on the basis of documents recovered from third party is not sustainable : CCE, Raipur Vs. P.D. Industries Pvt. Ltd. 2016 (3400 ELT 249 (Trib. Delhi) -Karnavati Synthetics Ltd. Vs. CCE 2014 (304) ELT 696 (Trib.) -Sakeen Alloys Pvt. Ltd. Vs. CCE 2013 (296) ELT 392 (CESTAT) 2013 (308) ELT 655 (Guj.) 2015 (319) ELT A117 (SC) -K.V. Textiles Pvt. Ltd. Vs. CCE 2009 (240) ELT 397 (CESTAT) -CCE Vs. Chola Spinning Mills (P) Ltd. 2009 (92) RLT 731 (CESTAT 6.16. That Sh. Vijay Kumar Goyal is not at all aware of any dealings of the appellant, Rama Industries. In his statement dated 05.10.2012, named the three alleged major buyers of the appellants finished goods, however each one of these firms/ companies have denied having purchased any goods from the appellant. It appears that the statement of Sh. Vijay Goyal have been extracted under duress. Moreover, the truth & veracity of the statement of Sh. Vijay Goyal has not been tested by way of cross-examination. Hence no reliance ought to be placed on his statement. 6.17 That no other purchasers have been found by the Department who have purchased any goods or ingots from the appellant. 6.18 That the statements of Sh. Sanjay Goyal, proprietor of the appellant, are neither voluntary nor true and were extracted by the officers under threat of arrest. Sh. Sanjay Goyal retracted from all his through the interim reply dated 16.01.2014. In the case of CCE, Delhi-I Vs. Vishnu & Co. Pvt. Ltd., 2016 (332) ELT 793 (Del.) it has been held that even if the statement is retracted after a period of time, it is no longer safe to rely upon it as a substantive piece of evidence. 6.19. That the relied upon statements are also not corroborated by any material evidence hence no reliance can be placed on them as held in :- -Golden Steel Corpn. Ltd. Vs. CCE, Kolkatta-II 2017 (347) ELT 570 (Trib. Cal.) -Continental Cement Co. Vs. UOI 2014 (309) ELT 411 (All.) -CCE Vs. Renny Steel Castings (P) Ltd. 2013 (288) ELT 45 (P&H) -Suntrek Aluminium (P) Ltd. Vs. CCE 2013 (288) ELT 500 (Guj.) -CCE Vs. Aggarwal (Plastic) India 2007 (8) ELT 95 (CESTAT 6.20. That it is alleged that as per the resumed records, the appellant has procured 170303.5 kg (approx.) of scrap during the period Jan2012 to March 2012 out of which 161788.32 kgs of copper ingots were allegedly manufactured by taking the ratio of copper scrap to ingots as 100:95. It is well settled that demand on the basis of any standard input-output ratio is not sustainable as held in inter alia, the following judgments : -Klene Paks Ltd. Vs. CCE 2009 (94) RLT 474 (CESTAT) -Nav Bharat Engg. Works Vs. CCE 2009 (94) RLT 255 (CESTAT) -Gobind Rubber Industries Vs. CCE 2005 (192) ELT 775 (CESTAT) -Hindustan Coco Cola Beverages 2006 (205) ELT 700 2012 (284) ELT 254 (CESTAT) 6.21. That the calculation of the duty demanded is contained in the chart at para

16 of the show cause notice. The first five entries of this table are on the basis of Annexure B to the show cause notice and show sale of 161789 kgs of copper ingots involving duty of RS. 77,10,255/-. The last four entries are on the basis of the contents of the spiral note books and show sale of 941029 kgs of copper ingots involving duty of Rs. 5,32,86,044/-. 6.22. As per the said Annexure B, the appellant has allegedly procured 170303.50 kg. of copper scrap and manufactured 161788.32 kgs of copper ingots from this scrap (ratio of scrap : ingots :: 100:95). This annexure has a note at the end stating that while preparing this annexure, the loose parchies showing purchase of other items like PVC have not been taken. 6.23. However, a perusal of the loose slips establishes that a large number of these loose papers which have been taken in Annexure`B are for purchase of pipe, telephone wire PVC wire, plastic etc..The chart and photocopies of loose slips annexed with the appeal show that even in respect of the loose papers which have been taken into consideration for preparing Annexure `B of the show cause notice, the goods purchased are PVC wire, telephone wire, pipe etc. in a large number of parchies. As per this chart prepared by the appellant, the total purchase of copper scrap by the appellant is only 60.787 M.T. out of which, only 57.847 M.T. of ingots could have been manufactured after allowing 5% burning loss. Without prejudice to the noticees contention that they have not evaded any payment of duty, it is submitted that the duty on this quantity of copper ingots is only Rs. 27 lakhs. Thus if at all it can be held that the appellant has cleared any goods without payment of duty of excise then, demand only in respect of 57.847 M.T. can be confirmed against the appellant on basis of loose purchies The impugned order is silent on this contention of the appellant. 6.24. That Annexure A of the show cause notice is a chart showing sale of copper ingots which has been prepared on the basis of spiral note book sopra group 2011. This chart shows sale of copper ingots during the period July 2012 to Sept 2012. Without prejudice to the appellants contention that no reliance can be placed on the said spiral note book, it is submitted that the department has neither led any evidence to show procurement of unaccounted copper scrap during this period nor co-related the alleged sale with the production capacity of the appellant. In the absence of this evidence, the allegation that the appellant has manufactured and cleared copper ingots clandestinely is not sustainable. 6.25 That demand of duty on the basis of assumptions and presumptions is not sustainable as has been held in, inter alia, the following cases : -Cera Boards & Doors Vs. CCE 2010 (249) ELT 550 (CESTAT) -U.P. State Sugar Corpn. Vs. CCE 2000 (117) ELT 83 (CESTAT) -Dulichand Silk Mills (P) Ltd. Vs. CCE 2001 (133) ELT 468 (CESTAT 6.26. That the valuation of the alleged quantity of copper ingots manufactured by the appellant has been done on the basis of invoice of M/s. Mohit Rollers (P) Ltd. (third party). However these are for copper wire rods whereas the appellant has allegedly manufactured copper ingots. The impugned order is silent on this contention of the appellant. 6.27. That the allegation of clandestine clearances is not supported by any corroborative evidence. At the time of search, no manufacturing activity was being carried out. One furnace was lying uninstalled. One furnace was in the process of being installed. No stock of copper ingots was found. No moulds, bamboo and charcoal for manufacturing copper ingots were available in the premises. The stock of raw material was only 2400 kgs. The capacity of the furnace is alleged to be 4 MT. Thus the stock-in-hand was not sufficient even for one heat. Moreover, no workers were present in the premises. The only labour found in the factory was carrying out construction /repairs around the furnace. No statements of any of these labourers were recorded. The officers have not seized any stock of ingots in the unit of the appellant or during the course of their transit from the appellants unit to any other premises or in the premises of any alleged purchaser of the appellant. No enquiry has been made from any transporters who have transported scrap to the premises of the appellant or ingots from the premises of the appellant. No enquiry has been conducted from any scrap dealer. Not even a single purchaser of ingots has accepted having received goods from the appellant, nor has been identified. The three buyers of copper ingots named by Sh. Vijay Kumar Goyal have denied having purchased any copper ingots from the appellant as per the entries contained in the spiral note book recovered from the residence of Sh. Vijay Goyal. No unaccounted cash was recovered during the search. For the period Jan 2012 to April 2012, only the record of purchase of scrap has been found but no proof of production has been found and no record of sale of ingots has been found. For the period July 2012 to 05.10.2012, the record (Katcha Parchies) resumed, allegedly show sale of ingots but there is no evidence to establish procurement of corresponding quantity of scarp. There is also no evidence of utilization of labour, or electricity or any money receipts for the goods allegedly cleared clandestinely. In the absence of corroborative evidence, the demand of duty is not sustainable as held by, inter alia, the following judgments : -Arya Fibres Pvt. Ltd. Vs. CCE, Ahmedabad 2014 (311) ELT 529 (Trib.) -CCE Vs. Renny Steel Castings (P) Ltd. 2013 (288) ELT 45 (P&H) -Suntrek Aluminium Pvt. Ltd. Vs. CCE 2013 (288) ELT 500 (Guj.) -Kuber Tobacco Products Ltd. Vs. CCE 2013 (290) ELT 545 (Tribunal) -Popular Iron & Steel Co. Vs. CCE 2013 (291) ELT 542 (Tribunal)

7. The learned AR appearing for the Revenue submitted that the ld. Commissioner has passed a very reasoned order and rightly held that the appellant have indulged in clandestine removal of goods. The ld. AR has relied upon the decision of this Tribunal in the case of CCE, Delhi-I Vs. Praveen Kumar & Company - 2015 (328) ELT 220 (Tribunal-Delhi), H.R. Siddique Vs. Director, Enforcement Directorate 2015 (318) ELT 182 (Delhi) & S.N. Ojha Vs. Commissioner of Customs 2016 (331) ELT 33 (Delhi) to support his plea, that if a statement is retracted about after 2 years, without any basis, then the said retraction has no legs to stand, and if any retraction is belatedly made, then the burden is on the person to show that the statements have been recorded under threat or coercion. He further submitted, there are enough evidence on record to establish clandestine removal of goods. Therefore, prays for rejection of appeals.

8. Considered the rival contention & perused the records. We find that demand has been confirmed on the basis of entries in spiral note book recovered from the residential premises of Shri Vijay Kumar Goyal and other loose documents (slips) recovered from the premises of Shri Sanjay Goyal. The said records have been disputed by the appellant by showing various infirmities in their reply & during the course of argument. We further find that there are names of suppliers & buyers mentioned in the said records, however, during the course of investigation of the named buyers by the Revenue, the said buyers have denied to have purchased any goods from the appellant. The Revenue has not been able to identify any buyer of the said goods. We also find that no investigation has been conducted as regards supplier of raw materials to the appellant. WE find that the Honble Allahabad in the case of Continental Cement Company Vs. UOI 2014 (309) ELT 411 (Allahbad) has laid down various parameters to establish clandestine removal of goods. However, in the present case, no such evidence has come on record. The ld. AR is mainly relying on the statement of various persons to conclude that clandestine removal of goods have been established and nothing more is required to prove. We find that it is well settled law that only on the basis of statements, huge demand cannot be confirmed, especially when statements have been retracted and no cross- examination has been given of the witnesses. It is well settled law as held by the Honble Supreme Court of India in the case of Andaman Timber Industries Vs. CCE, Kolkata- II 2015 (324) ELT 041 (SC) , that if cross-examination is denied, then the said statements cannot be relied upon. We also find that the Honble High Court of Delhi in the case of CCE, Delhi-I Vs. Vishnu & Company Pvt. Ltd. 2016( 332) ELT 793 (Delhi) has held that even if statement is retracted after long period of time, then it is no longer safe to rely upon such statement as the question is not of admissibility but of its reliability. We find that such statements cannot be relied upon. We also find that some of demand has been calculated on the basis of input-output ratio. We agree with the counsel for the appellant that demand cannot be calculated on the basis of input- output ratio, as held by this Tribunal in the case of Kline Paks Ltd. Vs. CC 2009 (94) RLT 474 (CESTAT). The appellant have led cogent evidence being bill for acquisition of furnace in recent, furnace past contract given for its installation, etc. Such evidence was not found untrue. Further as per the panchnama, the furnace was under installation. No supporting raw material, moulds, labour etc was found, essential for manufacture of ingots. No ascertainment of furnace capacity by an expert was done. In the inspection by officers of Municipal Corporation of Delhi, in the near vicinity of date of panchnama, no manufacturing activity was found. The Calculation of purchase of copper scrap have also been included.

9. Thus, the whole case of Revenue is based on assumption and presumption on unreliable evidences. In view of above, we set aside the impugned order and allow the appeals of the appellants with consequential relief. [Order pronounced on 03.01.2019.] (ANIL CHOUDHARY) MEMBER (JUDICIAL) (C.L. MAHAR ) MEMBER (TECHNICAL)