2018 (11) TMI 1147 – DELHI HIGH COURT – TMI – Clandestine removal – Principles of Natural justice – CESTAT rejected the appeal without appreciating the facts and evidence before it – Held that:- No doubt, the CESTAT has not discuss the evidence as greatly as it normally does and is expected to. What is however evident – from a plain reading of paras 6 to 10 is that the main points, which ultimately led the Commissioner to impose penalty and also inflict duty liability were taken into account. It is of course, desirable that the CESTAT as First Appellate Forum should discuss the evidence in some depth.
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This Court is of the opinion that upon a total analysis of the circumstances, especially having regard to the statements made by the various parties including the third parties i.e. the sellers of the raw material, the inference drawn by the Commissioner could not have been faulted – questions of law urged by the appellant are purely factual.
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Appeal dismissed. – CEAC 45/2018,
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e allegations in the show cause notice were briefly that the material included certain loose sheets and diaries, all of which tied up by the statements recorded in the course of the investigation from suppliers of raw materials. The Revenue also relied in the show cause notice, upon the statement of the proprietor as well as his brother. It also relied upon the statement of an employee who worked with the appellant as an Superintendent in the office. The appellant denied allegations of clandestine removal and submitted – besides arguing that the diaries per se did not have any evidentiary value, that the materials on record nowhere justified an inference that clandestine removal has been resorted to. The appellant also produced other documents and materials including electricity consumption bills etc. to say that the activity carried on and the returns filed with the excise authorities did not warrant a finding of clandestine removal or attract a duty liability. It was urged that the b
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er with penalty of equal amount from the appellant. ₹ 15 lacs which was deposited by the appellant was directed to be appropriate towards the amounts due. 4. The appellant approached the CESTAT complaining that the order-in-original recorded perverse finding which was based upon the materials on record. The Tribunal rejected the appeal. The material portion of the Tribunal s order is as follows: 8. The main evidences on which the Revenue's case is based as summarised below. (i) Unaccounted raw material as well as finished goods were found in the factory at the time of search on 08.08.2011. (ii) Some loose slips and sale invoices, recovered from the factory at the time of search indicated clearances of finished products by using invoices in the name of M/s Universal Enterprises, Shahdara to various customers. The firm in the above name was found to be not in existence at the address cited in the invoices. This firm was admitted to be a fake firm as confirmed by Sh. Chittaranja
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the appellant. He also confirmed that the quantum of raw materials as was found in the loose papers recovered from residence of Sh. Lalit Jain was supplied to the appellant. (v) The other suppliers also confirmed the same. During investigation, upon checking the bank account of the appellant, it was found that some of the supplied raw materials found in the loose sheets were paid for by cheque by the appellant. (vi) Certain books/ diaries were also recovered from residence of Sh. Lalit Jain. In such diaries, the details were found regarding sale of finished products. Such diaries recorded partywise, datewise, running account of sale value, receipt of sale proceeds and outstanding balance, for the period 2008-09 to 2010/2011. Upon verification of the bank account of the appellant, it was noticed that many of the sale transactions were found tallied with the credit entries in the bank account. Further, many of the entries found in the diaries were also duplicated in the loose sheets. (vi
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e obtained under duress and dictated to him. (ii) The manufacturing capacity of the factory was not enough to manufacture the quantum of goods alleged to have been cleared clandestinely. It has been argued that with only two extruders and winding machine the quantum of production alleged would not have been achieved. (iii) It has also been argued that the documents recovered from residence of Sh. Lalit Jain do not pertain to the appellant, but pertains to the business of his brother Sh. Prithaviraj Jain who is said to have been working as commission agent. (iv) The adjudicating authority, in the impugned order, has given detailed findings on all the above grounds. The documents recovered from house of Sh. Lalit Jain clearly indicate the names of various raw material suppliers, quantity of raw materials procured and the period during which the same has been procured. The documents also indicate in detailed the various customers with the details of goods cleared as well as the payments r
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the residence of Shri Lalit Jain do not pertain to the appellant, but pertains to the commission agent business said to have been run by Shri Prithaviraj Jain, brother of Shri Lalit Jain. This contention has been dealt with in para 16 of the impugned order. The Revenue has sent repeated summons to Sh. Prithaviraj Jain to seek his clarifications in connection with discrepancies in the statements made by Sh. Lalit Jain and Sh. Prithaviraj Jain. Shri Prithaviraj Jain has chosen to disappear from the scene and absent himself. Accordingly, the adjudicating authority rightly did not place credence on the statements given by Sh. Prithaviraj Jain. 12. After considering the totality of facts and circumstances of the present case, we come to the conclusion that in the light of the evidences placed on record by the Revenue in the form of documents as well as various inculpatory statements, we are of the view that the allegation that the appellant has procured raw materials, manufactured wires an
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o glaring discrepancies. In this regard, it was highlighted that as against the total sum of over ₹ 6.1 crores, allegedly paid, the appellants allegedly had a turnover of ₹ 5.21 crores. Learned counsel submitted that this was an inherent improbability, which exposes the findings of the Revenue. He submitted that, since the CESTAT did not apply its mind, its findings are perverse. 6. The Commissioner in the order-in-original took note of the fact that the seizures of the documents and other materials (including loose sheets, invoices, diaries etc.) were tied up by the statements of the raw material suppliers. At one stage, the appellant had urged that the material belongs to one Prithvi Raj Jain, his brother. However, the statement of Prithvi Raj Jain did not fully corroborate the version given by Lalit Jain, the proprietor of the appellant. The order-in-original noted importantly as follows: 14. It is submitted by RCI in defense that the documents on the basis of which dema
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name of the item, size, quantity, rate, value and name of the party. Shri Lalit Jain confessed that M/s Universal Enterprises was a fake firm created by him and sale affected through these invoices had not been accounted for in their books of accounts. Further, the impugned documents (three Scholar Fancy Memo Book) resumed very clearly mention the names of the buyers. These parties are buyers as these very parties are reflected in the sale invoices of RCI. I further find that names of these very buyers are mentioned in the loose pages 1 to 7 of S.No. 6 of Annexure 'A' to panchnama dated 8.8.11 drawn at the residence of Shri Lalit Jain, proprietor of RCI. The clinching evidence is that in these 1 to 7 pages some payment was shown to have been received from these very parties by cheque/DD on various dates. These payments on verification by the Department were found to have been credited in the bank account of RCI, details of which were supplied to RCI as Annexure-III. Similar is
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s i.e., three Scholar Fancy Memo Book (diaries) contain party-wise and date wise running account which is clearly sale value, receipt of sale proceeds and outstanding balance. Shri Lalit Jain explained that the entry occurring like 364=25, 482=22, 52771=5S on page22, 16 and 27 of diary (Scholar Fancy Memo Book) No.1, 2 and 3 were to be read as ₹ 36,425/-, ₹ 48,222 and ₹ 52,77,158/- respectively; that due to stiff market competition they used to purchase unaccounted raw material from the suppliers in cash and accordingly sale of finished goods i.e. PVC wire and cable was made in cash only and that they did not maintain any record in respect of goods sold without bills. The above goes to prove that the transactions shown in the resumed documents were very clearly related to sale of wire and cables and purchase of raw materials only. Thus, there is sufficient evidence on record to show that the amount mentioned in the resumed documents represented value of the wire and c
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ous motive to help his brother Shri Lalit Jain, he was summoned to appear on 22.10.2012, 31.10.2012, 7.11.2012, and 20.11.2012. However, the summons was received back undelivered with the remarks from the postal authorities that-no such person resided at that address. Further, on22.03.13 summons were sent through special messenger who met Smt Jyotsna Jain wife of Shri Lalit Jain who informed that Sh. Prithviraj earlier used to reside with them but since last one and a half year he had shifted to Rajasthan. She could not give the present address of Sh. Prithvirai, Moreover, Sh. Lalit Jain, in his statement dated 11.04.13 had given address of Sh. Prithviraj as Village Bharini, District Jallore, Rajasthan. Again summons was dispatched on the given Rajasthan address on 16.04:13 but the same were also returned back undelivered. Thus, it is apparent that Sh. Prithviraj intentionally avoided his appearance before the department and facts disclosed by him in his statement dated 4.1.12 cannot b
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Metals, who admitted having received the amounts mentioned on page 6 (of loose page 1 to 7) in cash and cheque for supply of bare copper wire was seized both from the factory premises of M/s Balaji Metals and RCI. Thus, the documents were clearly related to RCI and contained details of raw material suppliers and buyers and the monetary value of the raw material received in cash and wire and cables supplied in cash. 17. Referring to typed and in English language statements dated 11.4.2013 and 17.5.2013 of Shri Lalit Jain, it is argued that he could neither type nor had working knowledge of English and these statements were just placed before him and he was made to put his signatures. I find from statement dated 11.4.2013 of Shri Lalit Jain that he admitted at the start of the statement that "I am 8th pass. I can read and write Hindi and understand English". He also wrote in his own hand "Seen & Read" before putting his signatures in English . Further, on panchnam
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my signature and it is recorded as per facts". I further find that the statements were tendered on 11.4.2013 and 17.5.2013 and this is the first time after over a year that an effort has been made to retract from them. Such belated retraction has no meaning. 18. Further argument of RCI is that the statements of the raw material supplies namely Shri Mahesh Kumar Taparia of M/s Taparia Polymers and of Shri Vimal Taparia of M/s Ankur Plastics cannot be used against them. I do not agree. In fact both these suppliers in their unretracted statements tendered under Section 14 of the Central Excise Act, 1944 admitted having sold PVC to RCI on kachi parchi. These statements are corroborated by the fact of seizure of unaccounted PVC made from factory premises of RCI on 8.8.2011 weighing 2920 kg. valued at ₹ 1,31,400/- and are admissible as evidence. Regarding statement of Shri Naresh Gupta proprietor of M/s Balaji Metals, who admitted having supplied bare copper wire to RCI and also
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nducted investigation at buyer's end as well as from the transporters but did not bring on record the result of such investigation. I find that the Department is at liberty to prove its case by any means consistent with the Central Excise law, The evidence available against RCI has been supplied to them and they have been given an opportunity to rebut the allegations leveled. Further, -copies of all the non-relied upon documents have also been returned to Shri Lalit Jain, proprietor of RCI on 12.12.2103. I note that Shri Lalit Jain stated on 8.8.2011 that the transporter M/s S.R.D. Transport did not issue any bilty for the transportation of goods. 20. Next argument of RCI is that the unit is working on two extruders and maximum capacity of such extruder is not more than 20-25 bundles of cables of size Tffii-ri1f the extruders run continuously for 8 hrs that the unit worked in one shift only and did not have Generator Set in the factory. 20.1 I find from record that on 8.8.2011 when
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cable referred to by RCI in defence, is known as 14/11, as stated by Shri Lalit Jain in reply to questionNo.2 of statement dated 11.4.2013. Wire and cable of this l rnm (14/11) size is also mentioned in S.B. Electrical, Erode account and 152 bundles were cleared on 1.7.2011 and 207 bundles on 11.7.2011. Further, needless to say that this is clearance made to one party only. Unaccounted raw material collectively valued at ₹ 3,27,960/- was also seized on 8.8.2011. I further observe that though stated to be working for 8 hours only, nothing prevented RCI from working round the clock. In the light of above discussion I find that RCI had the capacity to produce wire and cables of the value alleged in the SCN. It is further contended that their electricity expenses were in the range of ₹ 10,000/- to ₹ 20,000/- per month as per the sub-meter installed in the factory. I find the ledger account of Power & Electricity for the year 2006-07 to 2011-12 submitted along with re
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t evidence on record to prove that the documents resumed pertained to RCI, purchase of unaccounted raw material and sale of wire and cable by them and that statement of Shri Prithviraj was untruthful and baseless. I observe that unaccounted receipt of raw material as reflected in the resumed documents stand corroborated as detailed in paragraph 10 to 10.3, 11 to 11.2 and 12 above. Further, clandestine removal is also corroborated in the manner explained in paragraph 13 to 13.6 and discussions and findings above. Reliance has been placed by RCI on a number of case laws. The decisions in these cases appear to have been rendered in the unique facts and circumstances of the case and are, therefore, distinguishable. I have discussed all these points canvassed by RCI as mentioned above and in my humble view there is no merit in the arguments advanced. 7. It is evident that when the appellant s premises were visited by the anti-evasion team, manufacturing activity was carried out. According t
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s of the loose sheets and the documents. He further noted that certain payments against raw material suppliers namely Naresh, Taparia, Omex and buyers namely Classic, Sasi Elec.Vinayalca, Paras Elec., Vikram Elec., Deepak Elec. were made by cheques/DDs. These were found to have been credited/debited in the bank accounts of the appellants. This according to the Commissioner constituted evidence to establish that purchase of raw material to produce the machinery have been corroborated. Furthermore, the three diaries i.e. the Scholar fancy memo book clearly mention the names of the buyers. The names of these parties were reflected in the sale invoices. 8. Initially, the proprietor Sh. Lalit Jain stated that his brother Prithvi Raj Jain was unemployed and dependent on him. Sh. Prithvi Raj Jain, on the other hand, stated that he was a commission agent and the documents pertain to purchase and sale of the household goods of different persons. The Commissioner deduced that Sh. Prithvi Raj Jai
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