Bss Mines & Minerals Pvt. Ltd. And Ors v. Commissioner Central Excise- Nagpur

PER: SANJIV SRIVASTAVA

1. These appeals are directed against order in original No 83/2010/C dated 04.01.2011/15.01.2011 of the Commissioner Central Excise Nagpur. By the impugned order following has been held:

“ORDER

1. I confirm the demand totally amounting to Rs. 59,79,467/- (Rs. Fifty Nine Lakhs Seventy Nine Thousand Four Hundred Sixty Seven only) as against the demand of Rs. 60,22,723/- proposed Vide Show Cause Notice C.No. V(28)15-49/2010/Adj/11389-95 dated 10/05/2010 and order recovery of the same from M/s BSS Mines & Minerals Pvt. Ltd., Plot No. 47/A, Manav Mandir Road, Kalmeshwar Road, Village Yerla, District Nagpur under the provision of Section 11A of the Central Excise Act, 1944 invoking the proviso thereto.

2. I order recovery of the aforesaid amount alongwith interest at the appropriate rate from the Noticee No. 1 under the provisions of Section 11AB of Central Excise Act, 1944.

3. I impose a penalty of Rs. 59,79,467/- on Noticee No. 1 under the provisions of Section 11AC of the Central Excise Act, 1944 which shall stand reduced to 25% under the provisions of Section 11AC of the Central Excise Act, 1944, if paid by the Noticee No. 1 alongwith duty confirmed and interest thereon within 30 days of receipt of this order.

4. I impose a penalty of Rs. 59,79,467/- on Noticee No. 1 under Rule 25 of Central Excise Rules, 2002 for contravention of various provisions of Central Excise Act, 1944 & Central Excise Rules, 2002.

5. I impose a penalty of Rs. 15,00,000/-on Noticee No. 2 under Rule 26 of Central Excise Rules, 2002 for knowingly and deliberately abetting Noticee No. 1 in clandestine removal of excisable goods with intent to evade payment of duty.

6. I impose a penalty of Rs. 15,00,000/-on Shri. Pramod Budharaja, Managing Director [Noticee No. 3] under Rule 26 of Central Excise Rules, 2002 for directly and knowingly indulging in and abetting the acts of omission and commission as discussed above.

2.1 M/s BSS Mines & Minerals Pvt Ltd (Appellant 1) is engaged in manufacture Manganese Oxide (MnO) (CETH 28209000) and Manganese Di Oxide (MnO2) (28201000). The main raw material for them is Manganese Ore (MnO2) which they procure from Appellant 2.

2.2 M/s Goodearth Agrochem Pvt Ltd (Appellant 2) is manufacturer of Manganese Oxide (MnO) (CETH 28209000) and Manganese Di Oxide (MnO2) (28201000). They procure the raw material viz Manganese Oxide (MnO) (grinded and un-grinded), Manganese Di Oxide (MnO2) and Manganese Ore from Appellant 1.

2.3 Shri Pramod Budharaja is one of the Director of Appellant 1 and also of Appellant 2, looking after day to day affairs of both viz purchase of raw material, sale of finished goods, production, clearances and related accounts etc. The directors of appellant 1 and appellant 2 as admitted by appellant 3 in his statement dated 01.12.2009 are as follows:

2.4 Investigations undertaken revealed that the Appellant 2 was receiving excisable goods namely Manganes Oxide (MnO) from the Appellant 1 under the cover of delivery memo without cover of any invoice or without payment of any central excise duty. Statements of the appellant 3, director in both the units was recorded was recorded under section 14 of Central Excise Act, 1944. Statements of Shri Sujit Kumar Das Technical Manager cum Factory Incharge and Shri Vijay Kumar Mantri Manager (Commercial), with Appellant 1, Shri Anand Kashyap Manager (Commercial) and Authorized signatory of Appellant 2 were also recorded.

2.5 After completion of investigations show cause notice dated 10.05.2010, asking the

• Appellant 1 to show cause as to why

o Central Excise duty amounting to Rs. 60,22,723/- (BED Rs. 58,53,738/- + Ed. Cess Rs. 1,17,075/- + S&H cess Rs. D appended to SCN, 51,911/-), as detailed in Annexure in respect of Manganese Oxide removed without payment of duty, in violation of Rule 4, 6, 8, 10, 11 and 12 of Central Excise Rules, 2002, should not be demanded and recovered from Noticee No. 1 under Section 11A of the Central Excise Act, 1944, by invoking extended period of 5 years under proviso to Section 11A of the said Act.

o Interest at the appropriate rate on the above duty amount should not be charged and recovered from them under the provisions of Section 11 AB of Central Excise Act, 1944;

o Penalty should not be imposed upon them under the provisions of Section 11 AC of Central Excise Act, 1944, 2002, for and Rule 25 of Central Excise Rules, 2002, contravention of various provisions of law as mentioned supra.

• Appellant 2 to show cause as to why penalty under Rule 26 of Central Excise Rules, 2002, should not be imposed upon him for his role played in this case as a whole or at various stages for receipt of excisable goods by receiving the same without cover of Central Excise invoices, in acquiring possession of, in transporting, in removing, in depositing or dealing with the excisable goods, knowing and having reason to believe that the goods in question were liable to confiscation under the Central Excise Act, 1944 or Central Excise Rules, 2002.
• Appellant 3 to show cause as to why penalty under Rule 26 of Central Excise Rules, 2002, should not be imposed upon him for his role played in this case as a whole or at various stages for removal of excisable goods by clearing the same under Delivery memo without issuing proper Central Excise invoices, in acquiring possession of, in transporting, in removing, in depositing or dealing with the excisable goods knowing and having reason to believe that the goods in question were liable to confiscation under the Central Excise Act, 1944 or Central Excise Rules, 2002.

2.6 The show cause notice has been adjudicated as per the impugned order referred in para 1 above.

2.7 Aggrieved appellants have filed these appeals.

3.1 We have heard Shri Gajendra Jain and Ms Payal Nahar Advocates for the appellants and Shri Dhirendra Kumar Joint Commissioner, Authorized Representative for the revenue.

3.2 Arguing for the appellants learned counsels submit:-

• Both the show cause notice as well as the impugned order proceeded on the basis of presumption that the appellants had cleared MnO twice i.e., under the cover of DMs and also under the cover of the invoices issued later on. This presumption is not only incorrect on fact but also without any evidence whatsoever.
• Initially due to lack of awareness of the central excise procedures, the staff of the appellants had been following the procedure of issuing DMs for the clearances of MnO. Thereafter at the end of around two/ four weeks or at the end of the month, a person with a decent level of knowledge in accounts i.e., an accountant would visit the factory of the appellants and would issue excise invoices for DMs issued between the last visit and the current visit. The excise duty would be paid for the month based on excise invoices issued for the month on or before the time prescribed. In other words, there was no physical removal of MnO at the time of issuance of invoices and payment of duty.
• In order to prove clandestine removal, Revenue has to produce evidence of purchase of additional raw material, sale of clandestinely removed goods, mode of payment, flow back of the fund, transport report for movement of raw material and finished products, etc. However, no discrepancy, whatsoever, has been found in the records of the appellants relating to raw materials, finished goods, production, clearances, opening and closing stock, etc. there is no evidence either in the form of statement of officers of the appellants or GAPL or any other corroborative evidence to show that the appellants had manufactured and cleared total quantities mentioned in DMs as well as mentioned in the excise invoices issued later on. The allegation of clandestine removal is based solely on DMs and to prove the said allegation, Revenue has again relied solely on DMs.
• It is trite that if an allegation is made on the basis of a document, the same document cannot be solely relied upon without any other corroborating evidence to prove the allegation. Therefore, the finding of clandestine removal of MnO is perverse and without any basis.
• R.A. Castings Pvt. Ltd. [2009 (237) ELT 674 (T)] Affirmed by the Hon'ble High Court at [2011 (269) ELT 337 (ALL) [LQ/AllHC/2010/2398] Maintained by the Hon'ble Supreme Court in [2011 (269) ELT A108 (SC)]

o SRJ Peety Steel Pvt. Ltd. [2015 (327) ELT 737 (T)]

o J.J. Re-Rollers [2017 (348) ELT 99 (T)]

o Kamboj Ispat P. Ltd. & Shri Chatar Singh [2016 (1) TMI 560]

• The invoices issued later on for payment of duty were in respect of the quantities of MnO cleared earlier under the cover of DMs and therefore, the quantities of MnO removed under the cover of DMs are duty paid. This is also evident from statements of Shri Anand Kashyap, Manager (Commercial), Shri Vijaykumar Mantri, Manager (Commercial).
• These statements show that the appellants had cleared the goods manufactured by them to GAPL under DMs and the Central Excise invoices for the same were issued later on. In other words, the quantities of goods cleared by the appellants are
• The co-relation between the various documents maintained by the appellants and GAPL clearly show that invoices were issued and duty was paid only in respect of the quantity of MnO already cleared in past under DMs.
• Revenue has placed reliance on the gate out register of the appellants to allege clandestine removal of goods. It is submitted that the evidence in the form of gate out register (Outward register) maintained by the appellant 1 and the gate in register (inward register) maintained by appellant 2 show that appellant 2 had received only the quantity of goods covered by the DMs issued by the appellants and there was no receipt of any goods when Central Excise invoices were issued by the appellants for payment of duty.
• On comparison of DMs and invoices for the month of April 2009, it would be seen that total MnO dispatched as 43 grade was 172.755 MTs, 40 grade dispatch was 17.686 MTs and 36 grade was 10.84 MTs. For the aforesaid clearances under DMs in the month of April 2009, the appellants have issued 20 invoices for 43 grade totaling 172.755 MTs, one invoice of 40 grade totaling 17.686 MTs and one invoice of 36 grade totaling 10.864
• All the entries in the appellants 1 stock register, gate out register, weighment slip, payment to transporter correlate to the DMs but not a single entry correlating to the excise invoices issued by the appellants can be found. Further, on any date when there is a weighment charge, there is always a DM referring to dispatch of MnO to justify the charge.
• All the entries in the Appellant 2 security register, gate in register, stock register, RG-1, ER-1 correlate to the DMs issued by the appellants but not a single entry co-relating to the excise invoices issued by the appellants can be found.
• Payment to the transporter was made on weekly basis and the total amount of the payment made for a particular week co-relates with the total quantity of the DMs in that week. All the payments of the transportation charges incurred were mentioned in the transport ledger of the appellant company. Also, the total quantity as per transporter bills. matches the total quantity either as per DMs or as per invoices issued, but not both. Hence, the goods have been transported only once.
• The aforesaid facts prove beyond doubt that the quantities covered by the DMs were alone transported and no quantities were cleared under the central excise invoices issued subsequently and that the payment of duty for the entire quantity has already been made. This fact is also supported by the affidavit of the transporter. However, the Commissioner ignored the affidavit of the transporter without giving any finding and mechanically confirmed the demand in the present case.
• No investigation was conducted by Revenue at the Appellant 2 end and MOILS end.
• The appellants have consistently stated that due to availability of limited staff and lack of acquaintance with excise procedures, they were following peculiar practice of initially clearing MnO to GAPL under the cover of DMs and thereafter, consolidated invoices were issued for the purpose of payment of duty and realization of consideration.
• However, the Revenue is using the said flaws in the practice followed to allege clandestine removal. But the Revenue is not producing concrete and positive evidence to prove that the appellant 1 have clandestinely removed MnO to Appellant 2.
• The total quantity of MnO which notice alleges to have been clandestinely cleared by the appellants during the period 5.12.2006 to 23.3.2007 is 709.336 MTs. The Commissioner has accepted the explanation of the appellants so far as DM No.169 issued by GAPL to the appellants for 35.340 MT of Manganese Ore (grade: DB2320) is concerned and has set aside the duty demand to that extent.
• Duty demand to the extent of 71.400 MTs is not sustainable since it pertains to sale of Manganese Ore by the appellants to GAPL.
• After deducting the quantities of 35.340 MTs and 71.400 MTs as referred to above, the balance quantity that remains is 602.596 MTs. During the FY 2006-2007, the appellants have paid duty on total quantity of 644.354 MTs of MnO. The quantity cleared on payment of duty is more than the balance quantity of MnO to the tune of 41.758 MTs.
• If the allegation of the department that the duty paid quantity is besides the quantity cleared on DMs, the total quantity that was required to be dispatched would have been 709.336 + 644.354 MTs = 1353.690 MTs.
• The appellant's factory started production in FY 2004-2005 and the best yield of MnO during the last five financial years is 76%. The Commissioner has not even disputed the said figures of process recovery. During the FY 2006-2007, there was consumption of 850.040 MTs of Manganese Ore and considering minimum 24%-30% of processing loss, the quantity of MnO that could be produced would have been 646.030 MTs only. Taking into consideration the opening and closing stock of MnO, for dispatching 1353.690 MTs of MnO, minimum production of MnO required would have been 1233.673 MTs. For production of a quantity of 1233.673 MTs, Manganese Ore of 1623.254 MTs would have been required (refer page 393 of Vol-II). Thus, with 850.040 MTs of Manganese Ore, it would be impossible for the appellants to produce 1233.673 MTs of MnO. Under similar circumstances, CESTAT in Hiren Aluminium Ltd. [2009 (245) ELT 386 (T)], set aside the demand.
• The allegation that as per P&L account and Balance Sheet for FY 2006- 2007, it appears that appellants have sold 231.335 MT of MnO under the garb of MnO2 without payment of duty by availing the benefit of exemption Notification No.6/2002 dated 1.3.2002, is incorrect and perverse. The demand is on 709.336 MT and not on 231.335 MT of MnO. Further, the duty demand is not based on the profit and loss account, but based on DMs. Therefore, the aforesaid allegation is misleading and irrelevant.
• The Revenue has further alleged that on scrutiny of auditors report and balance sheet, it appears that appellants have shown trading purchase of 197.060 MT of Manganese Ore and sale of 197.060 MT of Manganese Ore but no records maintained by the appellants show that there is trading purchase of Manganese Ore. The appellants had purchased Manganese Ore from MOIL, however, the said Ore was directly consigned to GAPL. In other words, the said Manganese Ore did not physically enter the factory of the appellants. The appellants have maintained proper accounting records for all such purchase and trading sale of Manganese Ore. Further, the fact that appellants have lost royalty refund for the FY 2006-2007 also substantiates the fact that appellants have purchased and sold Manganese Ore to GAPL (refer CA certificate on Page 424 and 425 of Vol-II). Hence, the aforesaid allegation of the department is incorrect and baseless.
• As per the impugned Order, in the months of April 2008, August 2008 & October 2008 and June 2009 there are no clearances in the DSA but certain quantities were dispatched under DMs for the months of April 2008, August 2008 & October 2008 and June 2009. Just like there are no entries in the DSA for the clearances made under DMs for the months of April 2008, August 2008 & October 2008 and June 2009, there are instances where the quantity cleared as per the DSA is much more than the quantity covered by the DMs as may be seen from the comparison of the total quantities as per DSA and those cleared under DMs in the months of May 2008, June 2008, September 2008, December 2008, August 2009, September 2009 and October 2009. This fact shows the inadvertence on the part of the person maintaining the DSA and nothing else.
• Several DMs for the months of April 2008, August 2008, October 2008 and June 2009 cover dispatches of MnO manufactured on job-work basis and hence, are accounted for in the DSA. If the quantities cleared under DMs and those cleared as per DSA are compared in totality financial year-wise, there would be no difference barring the clearances of MnO manufactured on job-work basis. Difference if any is attributable to missing DMs, approximation of weight of MnO contained in each bag and the adoption of average quantity as per the weighment slips accompanying some of the DMs by the Central Excise department while computing the quantity of MnO cleared under the DMs.
• As per Annexure-D of the show cause notice, a quantity of 1635.635 MTs was cleared under the DMS on which central excise duty was not paid. The appellants submit that out of the said quantity, 144.797 MTs is MnO manufactured and cleared on job-work basis and therefore, for this quantity of 144.797 MTs, duty has been paid by GAPL who are the owner of the raw material and of the manufactured goods.
• There are instances where GAPL has supplied manganese ore to the appellants. On receipt of such ore in the factory, the entries that are made in the Raw Material Receipt Register clearly describe the ore not only with its number but it is also prefixed by "GAPL". Thus, in the Record No.34 seized by the Central Excise department from the appellants' factory under Panchnama dated 4.3.2010, there are entries of receipt of “GAPL 1110" and "GAPL 1111". Total quantity of 1110 and 1111 grades of Manganese Ore received from GAPL for job-work during 2008-09 was 218.810 MTs. From this quantity of ore, the appellants had manufactured MnO on job work basis and had returned the same to GAPL. All the DMs under which MnO manufactured on job work basis was cleared, clearly show the description as "MnO 1110" and "MnO 1111". These DMs represent the MnO manufactured on job-work basis. The total quantity represented by these DMs is 144.797 MTs (refer page 396 & 397 of Vol-II).
• The job-work billing has also been done from the appellants to GAPL during 2008-09, clearly establishing that this material was indeed manufactured by the appellants for GAPL on job-work basis. On return of the said quantities of MnO, GAPL has recorded the production of the same in their own RG1 and has cleared the same on payment of duty as and when it was cleared therefrom.
• Total self-production of GAPL during the month of February 2009 is 479.540 MTs and MnO manufactured by the appellants for GAPL on job-work basis is 74.500 MTs, which gives a total figure of 554.040 MTs. This figure exactly matches the total production shown in RG1 record of GAPL.
• There is one more reason to conclude that the appellants have manufactured MnO on job-work basis for GAPL. As explained earlier in para 6.1 and para 6.2 Supra, GAPL would have lost royalty if it had not used manganese ore (procured from MOIL) or if it was used for non- manufacturing activity. Since GAPL has not lost royalty, it is evident that GAPL has not sold the said raw material to appellants and has only sent the said raw material on job-work basis. For this purpose, the appellants have enclosed two certificates of Chartered Accountant. One certificate clearly shows total Manganese Ore purchased by GAPL from MOIL in 2008-09 (refer page 401 to 403 of Vol-II) and the second certificate specifies the quantity of ore on which royalty was lost in 2008-09 (refer page 404 & 405 of Vol-II). However, the Commissioner did not recognize the fact that appellants manufactured MnO on job work basis for GAPL.
• The quantity on which duty has been paid by the appellants is more than the quantity covered by DMs.
• The quantity on which duty has been paid by the appellants is 1523.102 MTs which is more than the quantity i.e., 1490.838 MTs covered by DMs. The submissions made in paras 18.12 to 18.14 supra are reiterated here.
• The total quantity covered by the DMs issued during FY 2009-2010 is 1016.501 MTs. The appellants submit that out of the said quantity, 263.714 MTs is MnO manufactured and cleared on job-work basis and therefore for this quantity of 263.714 MTs, duty has been paid by GAPL who is the owner of the raw material and the manufactured goods.
• The Commissioner has stated that there is suppression of production of 75.862 MTs of MnO and clandestine clearance of 302.800 MTs during the FY 2006-2007, which is based on the auditor's report and the balance sheet of the said year. In the balance sheet the total production is shown as 2255.604 MTs and total sale as 2620.604 MTs. While denying the allegation of suppression of production and clandestine removal, it is submitted that the figures of production and sale as shown in the balance sheet are not of MnO alone but are combined production and sale of MnO and MnO2. This fact is certified by the appellants Chartered Accountant wherein the figures of production and sale of MnO and MnO2 have been separated and the values thereof are separately indicated. It can now be seen that the standalone production and sale figures for MnO as per the balance sheet match those as per the DSA. The Commissioner has rejected the said certificate without any cogent reason and without appreciating the fact that the same Chartered Accountant who had prepared the auditor's report had issued the certificate clarifying the bifurcation of production and sale shown.
• The Commissioner has also given a finding that there is manipulation of financial and Central Excise records which is based on the figures of opening stock, production, clearance and closing stock as shown in the balance sheet vis-à-vis those shown in the Daily Stock Account for the FY 2007-2008. In the said financial year, the figure of production is inflated by a quantity of 129.520 MTs and the figures of clearance tally with the Daily Stock Account. The said balance sheet pertains to financial year 2007-08 i.e., the period for which there is no demand and thus cannot be of any help to the department to prove alleged excess production for the demand period. Further, the inflated figure of production shown in the balance sheet was for correcting the inadvertent mistake of showing less opening balance for the said financial year. All said and done, there is no manipulation in the figures of opening stock, production, clearance and closing stock as shown in the Daily Stock Account. As such the allegation of manipulation of Central Excise records is incorrect and perverse.
• The appellants have not contravened any of the provisions of the Central Excise Act, 1944 and Central Excise Rules, 2002 with an intent to evade payment of duty and therefore extended period of limitation cannot be invoked and penalty is not imposable. In any case, imposing penalty twice is uncalled for.
• Since the duty demand itself is not sustainable in the present case, the appellants are not liable to pay interest.

3.3 During the course of arguments counsel for appellant was asked to submit cross tabulation of the invoices against which the duty was paid with the DM’s for the at least six months which was submitted by them along with 04.01.2023. Revenue was asked to submit the observations on the said cross tabulation.

3.4 Arguing for the revenue learned authorized representative while reiterating the findings recorded in the impugned order submits:

• The matter was referred to the field Commissionerate who have vide letter dated 28.11.2022 reported as follows:

o “In this regard, it is submitted that exercise of correlating the delivery challans with excise invoices is not possible as there is no mention of delivery challan on the excise invoice or vice- versa. Sample copies of an invoice and a delivery challan are enclosed herewith for further action please.”

• As directed by the Hon'ble Bench, the Appellant has submitted the details of Invoices and Delivery Memo issued for 7 months period viz Feb.,2007 & March, 2007, Sept.,2008, Feb.,2009 & March,2009 and April, 2009 & May,2009. The above details/data submitted by the Appellant have been checked the discrepancies in the said statements and documents point out that these documents cannot be correlated.
• It is humbly requested to the Hon'ble Bench that Appeal may be decided considering the above submissions.

4.1 We have considered the impugned order along with the submissions made in appeal, during the course of arguments and the written submissions filed by both the sides.

4.2 Impugned order records the following findings-

“The main issue to be decided in the instant case is:-

1) Whether the Noticee No. 1 by acts of omission and commission, had manufactured and removed 3361.472 MT finished products i.e. MnO valued at Rs. 5,09,00,262/- clandestinely without cover of proper Central Excise Invoices and without maintaining the statutory records and without payment of Central Excise duty amounting to Rs. 60,22,723/- (BED Rs. 58,53,738/- + Ed. Cess Rs. 1,17,075/- + S&H Cess Rs. 51,911/-), during the period from 05.12.2006 to 14.10.2009 in contravention of the provisions of Rule 4, 6, 8, 10, 11 and 12 of the Central Excise Rules, 2002 by suppression and mis-representation of the facts.

2) Whether the extended period of five years is invokable in this case under proviso to Section 11A of Central Excise Act, 1944.

3) Whether interest at the appropriate rate is also liable to be recovered under the provisions of Section 11 AB of the Central Excise Act, 1944.

4) Whether the Noticee No. 1, 2 and 3 have rendered themselves liable to pay penalty under the provisions of Section 11 AC of Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002.

38. Now, I take up the issue for discussions

1) Whether the Noticee No. 1 by acts of omission and commission, had manufactured and removed 3361.472 MT finished products i.e. MnO valued at Rs. 5,09,00,262/- clandestinely without cover of proper Central Excise Invoices and without maintaining the statutory records and without payment of Central Excise duty amounting to Rs. 60,22,723/- (BED Rs. 58,53,738/- + Ed. Cess Rs. 1,17,075/- + S&H Cess Rs. 51,911/-), during the period from 05.12.2006 to 14.10.2009 in contravention of the provisions of Rule 4, 6, 8, 10, 11 and 12 of the Central Excise Rules 2002 by suppression and mis- representation of the facts.
38.1. The Noticee No. 1 has interalia contended that the activities carried out in their factory are of two types. The first category is that of processing of Manganese Ore and the other one is manufacture of Manganese Oxide (MnO). Manganese Ore is the basic raw material required for carrying out both the processes mentioned above. Manganese Ore is basically Manganese Dioxide. Manganese Ore (Chemical Grade) is a rare commodity and is available only to manufacturers who have been allocated quota by MOIL.
Financial year 2005-06:-

38.2. The Noticee No. 1 has further submitted that in the financial year 2005-06, they had opted for total exemption upto first clearances of Rs. 100

Lacs in terms of Notification No. 8/2003-Central Excise. After exhausting the first clearances of Rs. 100 Lacs, they obtained Central Excise registration on 4-7- 2005. There used to be clearances of MnO in clinker form in small lots of 4-6 Tons each and the number of clearances in a day being more, they used to issue a delivery challan at the time of removal of each consignment. However, as the duty for the entire month was required to be paid by 5th of the succeeding month, they used to issue consolidated Central Excise invoices in respect of clearances made under three or four delivery challans. It is observed that the total quantity of clearances under the delivery challans and that cleared on payment of duty was the same.
38.3. I, however, find that the so called practice followed by the Noticee No. 1 in the initial stage of operation in 2005 for clearance of goods & issuance of invoice thereof cannot be taken into consideration while deciding the issue in hand, as the same was out of period of demand. Also, under any circumstances such casual plea on behalf of manufacturer is totally unacceptable as issuance of invoice for clearance of goods is a very basic requirement of Central excise formalities and Noticee no 1 cannot argue that they were ignorant about the same though they were very well aware about the SSI exemption available to them, its limit and due date of payment of duty etc. this is very casual plea and is nothing but an after thought on part of the Noticee No. 1. It is therefore not tenable and not acceptable.
Financial year 2006-07:-

38.4. I observe that Noticee No. 1 vide their submissions dated 03.09.2010 has contended that for the Financial year 2006-07, the quantity of 35.340 MT Manganese DB 2320 alleged to have been cleared vide Delivery Memo No. 169 dated 22.12.2006 has been issued by Goodearth and the goods covered there under are Manganese Ore supplied by the M/s. Goodearth Agro Chem Pvt. Ltd., Nagpur to the Noticee No. 1 on the above said Delivery Challan.
38.5. On perusal of records, I find that the impugned Delivery Memo No. 169 dated 22.12.2006 has indeed been issued by M/s Goodearth Agro Chem Pvt. Ltd., Nagpur indicating 35.340 MT of Manganese DB 2320 to Noticee No. 1. I find that the same was also considered while calculating total clearance of goods on Delivery Memo by Noticee No. 1 to M/s Goodearth Agro Chem Pvt. Ltd., Nagpur while computing demand. I also find that the said Delivery memo was filed in the File 424 seized under Panchanama dated 15.10.2009 / 04.03.2010 along with the Delivery memo issued by the Noticee No. 1 to M/s. Goodearth Agro Chem Pvt. Ltd., Nagpur. therefore held that the said quantity of 35.340 MT of goods under the Delivery Memo No. 169 dated 22.12.2006 was inadvertently considered as supply of goods (MnO) by Noticee No. 1 to M/s Goodearth Agro Chem Pvt. Ltd., Nagpur. The same therefore needs to be abridged from the total demanded quantity of goods cleared by Noticee No. 1 to M/s Goodearth Agro Chem Pvt. Ltd., Nagpur & the duty demanded thereof needs to be accordingly recalculated and reduced.
Quantification of duty:-

38.6. I, therefore, held that Central Excise duty of Rs. 43,256/- [BED - Rs. 42,408/- + Ed. Cess Rs. 848/-] in respect of said 35.340 MT which was demanded as set out in Annexure D of the Show Cause Notice is liable to be reduced from the total demand of central excise duty of Rs. 60,22,723/- of Annexure D. The duty liability under Annexure D will therefore now work out to Rs. 59,79,467/-.

38.7. I further find that the Noticee No. 1 has contended that for the Financial year 2006-07, 71.400 MT of grade DB 2320 mentioned under DM No. 168 & 169 both dated 14.12.2006; 184 dated 16.12.2006 and 185 dated 19.12.2006 were taken into consideration towards total clearance of MnO by them, actually does not pertain to the clearances of MnO, as the same are for clearance of Manganese Ore supplied by MOIL. I however find that Shri. Vijay Kumar Mantri, Commercial Manager and Shri. Sujit Kumar Das, Technical Manager cum Factory Incharge of Noticee No. 1, in their statement in no uncertain terms have admitted that they cleared MnO only from their factory during the period December, 2006 to March, 2007 to the Noticee No. 2, under Delivery Memo, but inadvertently and wrongly mentioned manganese Dioxide instead of MnO on such Delivery memo. Hence the contention of the Noticee no 1 that the clearance of 71.400 MT of grade DB 2320 mentioned under DM No 168 & 169 both dated 14.12.2006; 184 dated 16.12.2006 and 185 dated 19.012.2006 is actually for clearance of Manganese Ore supplied by MOIL is afterthought & therefore, is not acceptable.
Financial year 2008-09 & 2009-10:-

38.8. I also observe that Noticee No. 1 has contented that in the Financial year 2008-09 & 2009-10, they received DB 1110 and DB 1111 higher grade Manganese Ore from M/s. Goodearth Agro Chem Pvt. Ltd. on job work basis
& are actually returned by the Noticee No. 1 after completion of job work to M/s. Goodearth Agro Chem Pvt. Ltd.

38.9. I however find that the Noticee No. 1 has neither produced statutory records, permissions etc. regarding receipt of such raw materials, manufacture of goods out of such raw materials, nor produced any records prescribed under Rule 16 A of Central Excise Rules, 2002 for removal of such raw materials by M/s. Goodearth Agro Chem Pvt. Ltd so as to substantiate their claim of receipt of raw material and manufacture of MnO out of such raw material supplied by M/s. Goodearth Agro Chem Pvt. Ltd. in 2008-2009
& 2009-10 on job work basis. Therefore, the plea of manufacture of MnO on job work basis has only been taken by the Noticee No. 1 to cover up the suppression of procurement of raw material i.e. Manganese Ore, production of Mno out of such suppressed quantity of raw material i.e. Manganese Ore and clandestine removal of such MnO without cover of invoice with intent to evade payment of Central Excise duty thereon

38.10. Even assuming without admitting that they manufactured and cleared such MnO for and on behalf of M/s Goodearth Agro Chem Pvt. Ltd. on job work basis, the Noticee No. 1 ought to have paid the applicable Central Excise duty on account of manufacture and clearance of such MnO after following the procedure envisaged for manufacture of goods on job work basis, which they have failed to do so.

38.11. In view of the above, the plea of Noticee No. 1 is nothing but an afterthought and is not at all acceptable.

38.12. It is observed from the para 21 of the SCN that the Noticee No. 1 have contended that they have cleared MnO on Delivery Memo but they have issued Central Excise Tax invoices and paid duty at the end of the month. However, it is observed that the said contention of the Noticee No.1 is incorrect, in as much as in the month of April, 2008, August, 2008, October, 2008 and June, 2009, they have shown 'NIL' clearances in the Daily Stock Account register whereas as per seized records, they have cleared MnO to the tune of 131.140 MT 36.156 MT, 38.18 74.232 MT and 190.690 MT in the respective months, under the cover of Delivery Memo to Noticee No. 2, without following proper Central Excise procedure, without cover of Central Excise Tax Invoices and without proper payment of Central Excise duty.

38.13. In their reply the Noticee No. 1 has submitted that it must have been on account of inadvertence on the part of the clerk maintaining daily Stock Account that the entries of the dispatches were not made by him in Daily Stock Account. Be that as it may, there are instances where the quantity cleared as per the DSA is much more that the quantity covered by the DMs as it is seen from the comparison of total quantities as per DSA and that cleared under DMs in the months of May, 2008, December, 2008 and September, 2009.

38.14. I however on perusal of Annexure B and Annexure C to the SCN find that the Noticee No. 1 have issued 17 Delivery Memo for clearance of 131.140 MT in April, 2008, 5 Delivery Memo for clearance of 36.156 MT in August, 2008, 9 Delivery Memo for clearance of 74.232 MT in October, 2008 & 35 Delivery Memo for clearance of 190.609 MT in June, 2009. I also find that these delivery memos very issued on different dates in the corresponding months. The period of issue is also different i.e. April, 2008, August, 2008, October 2008 & also June, 2009.

38.15. Since, the Noticee No. 1 has persistently taken a plea that they removed the goods on delivery memo only & at the end of month & subsequently they issued the Invoices for the total quantity of goods cleared in the month under delivery memo & paid central excise duty on such cleared quantity, I in order to ascertain the factual position & correctness of the plea of Noticee No. 1, have carefully perused the statutory records of Noticee No. 1 withdrawn during the course of investigation. I find that in one of such statutory records, i.e. Daily Stock Account Register (DSA) maintained by the Noticee No. 1, wherein details of manufacture and clearance of goods during a month to be indicated, they have not recorded the manufacture/clearance of their finished excisable goods i.e. MnO during the month of April, 2008. I find that the opening balance of MnO has been shown as 368.690 MT as on 01.04.2008 and closing balance of MnO is also shown as 368.690 MT as on 30.04.2008 & there are no entries regarding quantity of MnO either manufactured by them or cleared by them during the entire month. I further find that the Noticee No. 1 have cleared the goods in the month of April, 2008 on delivery memo.

38.16. I therefore find it very difficult to accept that such clearances on numerous occasions involving different period is not recorded in the Daily Stock Account inadvertently. So many clearances under Delivery Memo at various occasions involving substantial period and duty liability going unrecorded in the books of account cannot be construed as a genuine explanation for such lapse. The explanation put forth by the Noticee No. 1 is nothing but an afterthought to somehow justify their clandestine clearance under the delivery memo without following the Central Excise procedures such as issue of tax invoice etc with an ulterior motive to evade payment of duty on such clearances. Thus, I find that this is again a casual plea on a very flimsy ground. Such explanation on part of Noticee No. 1 is totally bereft of any substance and is rejected as untenable and unacceptable.

38.17. Further, on perusal of some of entries, for clearance of MnO made by Noticee No. 1, in the DSA register and tax invoices issued for clearance of MnO by the Noticee No. 1, I find that in some instances, for clearance of the goods as indicated in the said DSA register. the Noticee No. 1 has actually issued a Tax Invoice on the said date for quantity of goods indicated in the said DSA register. Thus, the facts on record are in fact contrary to the Noticee No 1’s claim that they use to clear the goods on delivery memo only and at the end of month or subsequently they used to issue tax invoice for the total quantity of goods cleared under such delivery memo during a month.
An illustrative entry is evidenced as under:-

38.18. It is observed that on dated 02.05.2008, the Noticee No. 1 in their DSA has shown total clearance of 9.00 MT of MnO whereas, I also find that on the same date i.e. 02.05.2008 the Noticee No. 1 has issued Tax Invoice No. BSS/08-09/3 dated 02.05.2008 indicating clearance of 9.00 MT of MnO to Noticee No. 2 on payment of Central Excise duty. The tax invoice also indicates that the said goods were transported through vehicle no. MH-22 H- 0181 & the time of removal of said goods have been indicated in the tax invoice as 16.00 hours. Thus, the entry for clearance of 9.00 MT of MnO on 02.05.2008 is clearly corroborated by issuance of tax invoice no. BSS/08- 09/3 dated 02.05.2008 issued by Noticee No. 1.

38.19. However, I further find that the Noticee No. 1 has also cleared 10.26 MT and 5.458 MT of MnO [totally weighing 15.718 MT of MnO] vide Delivery Memo No. 18 and 19 both dated 02.05.2008 through vehicle no. MH-40- 4562 to Noticee No. 2. but, no entries of such clearance have been recorded in the DSA or tax invoice by Noticee No. 1.

38.20. Thus, it is crystal clear that the Noticee No. 1 has not only cleared the goods under Tax Invoice and paid duty thereof but in addition to that they have also cleared goods on delivery memo for which no tax invoice was issued with an obvious intent to evade payment of duty on such goods.

38.21. I, therefore, find that the Noticee No. 1's plea that on the alleged clandestine removal of MnO, duty has already been paid and they have already issued Central Excise Invoices at the end of month or subsequently is incorrect in as much as the Noticee No. 1 has issued Central Excise Invoice & have also issued delivery memo on the same day on numerous other instances for clearance of different quantity of MnO indicating different vehicle nos. as illustrated above. Thus, it is nothing but an after thought on part of Noticee No. 1.
Revenue neutrality:-

38.22. I further find that the Noticee No. 1 in their defence have contended that even if Noticee No. 1 had to pay duty on such clearance of MnO under delivery memo, then such duty paid by them would have been available as Cenvat Credit to Noticee No. 2 & as such it is a case of revenue neutrality and the allegation of clearance of goods without payment of duty with an intent to evade the same, is on the face of it, unsustainable.

38.23. I however find that irrespective of whether payment of duty by an input stage manufacturer is revenue neutral for the final stage manufacture being entitled for Cenvat of duty paid on inputs, does not absolve the input stage excisable goods manufacturer from payment of applicable duties at the time of clearance of excisable goods. Subject to certain condition based exemptions the law requires manufacturers of excisable goods not only to pay the applicable duty at the time of clearances of excisable goods but also requires such manufacturers to follow the procedures prescribed under Central excise Rules & any other applicable rules for procurement, manufacture, job work, clearance, payment of duty etc. In the instant case the Noticee has failed to maintain daily stock account of goods procured, goods produced out of such procured goods and clearance of such manufactured excisable goods on delivery memo, failed to issue tax invoices for clearance of such excisable goods, failed to pay appropriate duty on such clearances within stipulated time. I therefore find that the plea of Noticee No. 1 to the effect that the payment of Central Excise duty on clearances of MnO by them cleared on Delivery Memo is revenue neutral is of no use to them as they have suppressed the procurement of goods and production of finished excisable goods (MnO) and clandestine clearance of such goods under delivery memo and have also miserably failed to discharge the Central Excise duty liability on such clearances. The duty liability was on Noticee No. 1 and they ought to have discharged it willfully at the time of clearance of such goods which they have failed to do so.

38.24. Similarly, though the Noticee No. 1 have contended that in the Financial year 2009-10, the Noticee No. 1 have received DB 1110 and DB 1111 higher grade Manganese Ore from M/s. Goodearth Agro Chem Pvt. Ltd. on job work basis and the total quantity of 263.714 MT of MnO mentioned in document No. 14 of their submission are actually returned by the Noticee No. 1 after completion of job work to M/s. Goodearth Agro Chem Pvt. Ltd., I held that the Noticee No. 1 has failed to produce statutory records prescribed under Rule 16 A of Central Excise Rules, 2002 so as to substantiate their claim of manufacture of MnO in 2009-2010 out of raw material supplied by M/s. Goodearth Agro Chem Pvt. Ltd. on job work basis. And therefore it is observed that it is nothing but a afterthought to cover up the suppression of procurement of raw material i.e. Manganese Ore, production of MnO out of such suppressed quantity of raw material i.e. Manganese Ore and clandestine removal of such MnO.

38.25. Be that may be so, even assuming without admitting that they manufactured and cleared such MnO for and on behalf of M/s Goodearth Agro Chem Pvt. Ltd. on job work basis, the Noticee No. 1 ought to have paid the applicable Central Excise duty on account of manufacture and clearance of such MnO which they failed to do so.

38.26. For this reason I also find that there is no substance in Noticee No. 1's plea that to manufacture such additional quantity of MnO they would have required additional Manganese Ore, procurement of which is not in SCN. It has been further claimed that on the basis of document no. 4 submitted along with reply dated 2.10.2010 the Noticee No. 1 would have required additional quantity of raw material. I find that the documents no. 4 so submitted alongwith reply dated 2.10.2010, is nothing but back calculation of raw material requirement based on production recorded in their statutory records. However, as observed herein above, as the Noticee No.1 have actually not properly maintained their procurement/receipt of raw material, production of finished excisable goods (MnO) thereof and clearance of such excisable goods on delivery memo, I find no substance on Noticee No. 1's plea. Infact, I find that as accepted by Noticee No. 1 and also as is evident from delivery memo S. No. 169 of Noticee No. 2 issued for supply of Manganese Ore to Noticee No. 1, the receipt of which has not been recorded by Noticee No. 1. the Noticee No. 1 have also not recorded the quantity of goods manufactured out of such unaccounted raw material and have also not issued any tax invoice evidencing payment of Central excise duty on clearance of such goods. It thus goes on to show that the Noticee No 1 is in the habit of receiving raw material without accounting for the same in statutory records, manufacture the goods [MnO] out of such unaccounted raw material without recording it in the statutory records and clandestinely clear the goods [MnO] without accounting for such clandestine clearance with an obvious intent to evade payment of Central Excise duty on clearance of such goods.

38.27. I also find that the Noticee No. 1 have contended that as regards suppression of production of 75.862 MT of MnO and clandestine clearance of 302.800 MT of MnO, the figure of production and sale of MnO in the Balance sheet are not of MnO alone but are combined production and sale of MnO and MnO2, which was certified by their Chartered Accountant in their document No. 18, submitted with their written submission. However, from perusal of the Auditor's report and the Balance sheet for the year 2006-07, I find that production and sale pertains to MnO only & therefore the contention of the Noticee No. 1 to that extent is not acceptable.

38.28. It is observed from the written submission made by the Noticee No. 1 dated 03.09.2010, wherein it is interalia stated that the inflated figure of production shown in the Balance sheet for the year 2007-08, they themselves admitted that it was for correcting the inadvertent mistake of showing less opening balance for the said financial year.

38.29. The Noticee No. 1 in their reply dated 03.09.2010 has contended that all payments to the Transportation charges incurred were mentioned in the Transport Ledger of the company. However, I do not find it as an acceptable justification as payments to the transporters can be made by manufacturer as well as by the receiver of the goods. Not only this the payments can be made by the manufacturers in cash also without actually reflecting the same in the books of accounts viz. the manufacturer making payment of clandestinely procured raw material shall always try to refrain from making them appear in the books of accounts. Similarly, it will be every endeavor of the person who is making payment for transportation of unaccounted raw material, clandestine clearance of finished excisable goods, to not to reflect it in the books of accounts. In view of the above, the plea of Noticee No. 1 is not tenable and not acceptable.

39. Clandestine removal:-

39.1. The Noticee No. 1 has also placed reliance on the following judgments & other such judgments to emphasize that the onus of proof of clandestine removal is on the Department.

i. COMMISSIONER OF C. EXCISE, PATNA Versus UNIVERSAL POLYTHELENE INDUSTRIES, 2001 (130) E.L.T. 228 (Tri. - Kolkata)

ii. ICYCOLD COMMERCIAL ENTERPRISE Versus COLLECTOR OF C. EX., CALCUTTA-I, 1994 (69) E.L.T. 337 (Tribunal)

39.2 In this regard, I find that, in the instant case, the department has detected clearance of goods on delivery memo by the Noticee No 1 without issuance of proper tax invoice, without payment of Central excise duty,without following Central excise procedures. I also find that the Noticee No 1 is engaged in procurement of raw material without reflecting it in their statutory books of account, manufacture of finished excisable goods out of such unaccounted raw material & not recording such production in their books of accounts, clandestine clearance of such goods on delivery memo without issuance of proper tax invoice and without payment of duty. I, therefore, find that, in the instant case, the department has adduced enough evidence to substantiate the charge of clandestine clearance with ulterior motive to evade payment of Central Excise duty by Noticee No. 1. The department has therefore fully discharged their onus to prove that the Noticee No. 1 is engaged in clandestine removal of excisable goods with obvious intent to evade payment of Central Excise duty on such goods. I therefore find that the above case laws referred by Noticee No. 1 are of no use to them as are not applicable in the instant case.

39.3.The Noticee No.1 has also placed reliance on the following case laws:-

ALTOS INDIA LTD. versus COLLECTOR OF CENTRAL EXCISE, NEW DELHI, 1996 (85) E.L.T. 147 (Tribunal)

The above case law is not applicable in the instant case as the facts of the case on hand are different from the facts of the case mentioned supra.

In the case law cited by the Noticee No.1, Hon'ble CESTAT has held that mere pre-dating or ante-dating of the gate passes without any other independent evidence, does not mean that there had been double removals, whereas, in the instant case, documentary evidence in the form of delivery memo substantiating clandestine clearance of goods without payment of duty is on record. As discussed above, it is on record that the Noticee No. 1 used to procure raw material and thereafter did not account for such raw material in the books of accounts. It is also established, as discussed, herein above that, excisable goods (MnO) manufactured out of such unaccounted raw materials was also never accounted for in the statutory records, was cleared without payment of duty. This has infact been admitted by the Noticee No. 1 in their written submission that they had received goods i.e. raw material from Noticee No. 2 under Delivery Memo No. 169 dated 22.12.2006. I find that the receipt of which was not accounted for by Noticee No. 1. The Noticee No. 1 further claimed that they received the above raw material from Noticee No. 2 on job work basis and the excisable goods i.e. MnO manufactured out of such raw material was supplied back to Noticee No. 2. I further find that as in respect of receipt of raw material the finished goods i.e. MnO manufactured out of such raw material is also not accounted for. No justification whatsoever has been given by Noticee No. 1 in respect of the same. This goes on to establish that the Noticee No. 1 has not only suppressed procurement of raw material from the department but also suppressed the quantity of excisable goods i.e. MnO manufactured and cleared without payment of duty out of such raw material from the department & such clandestine activity was feebly attempted to be justified by the Noticee No. 1 in the guise of job work which is not tenable as held supra. I therefore find that the above case law also is of no use to the Noticee No. 1 as it is not applicable.

40) Whether the extended period of five years is invokable in this case under proviso to Section 11A of Central Excise Act, 1944.

40.1. I, find that, in the instant case, there is evidence indicating clandestine clearance of excisable goods by the Noticee No. 1 on delivery memo on numerous instances. I also find that once such documents evidencing clearance of excisable goods without payment of duty are recovered, the onus to explain the same squarely lies on the Noticee No. 1. I, however, find that no plausible explanation has been submitted by the Noticee No. 1. I further find that their Authorised Signatory has also accepted the removal of goods on delivery memo in un- retracted statements. In the circumstances, I find that the fact of clandestine removal of the goods in question has been duly established and therefore I find that the demand of duty on such clandestine removal is liable to be recovered from them.

40.2. I also observed that the non-payment of central excise duty in respect of the disputed goods would have gone unnoticed but for the investigation conducted by the Department. Under the provisions of proviso to Section 11A (1), the period of limitation for recovery of duty is five years 'where such duty has remained non-levied, non-paid, short-levied or short-paid or has been erroneously refunded by reason of fraud, collusion, willful misstatement or suppression of facts, or contravention of the relevant provisions of law with intent to evade payment of duty'. In this case, I note that the Noticee No.1 has not only failed to pay the Central Excise duty but it is observed that the Noticee No. 1 also has suppressed procurement of raw material from the department and suppressed the quantity of excisable goods i.e. MnO manufactured and cleared without payment of duty out of such raw material, from the department & such clandestine activity was feebly attempted to be justified by the Noticee No. 1 in the guise of job work which is not tenable. Therefore I held that in the instant case extended period is applicable under proviso to Section 11A (1) of the Central Excise Act, 1944.

40.3. In this regard, I rely on the decision of the Larger Bench of the Hon'ble Tribunal in the case Mermaid Marine Products Pvt Ltd Vs CCE Cochin reported in 1985 (20) ELT 329 (Tri.LB) wherein it has been held that, "Evasion of tax does not necessarily involve concealment. Even contravention of law to make duty unrealizable is evasion of duty and hence the extended period is applicable under proviso to section 11A (1)".
40.4. Regardless of the intent, mere suppression of fact or mis- statement in the information statutorily required to be supplied to the excise authorities attract a larger period of limitation. Intent is immaterial in so far as fraud, mis-statement or suppression of facts is concerned. In the case of Central India Machinery Co Vs. CCE reported in 1989 (39) ELT 306, the Hon'ble Tribunal held that in case where there is non-levy arising due to the suppression of facts, extended period of five years is applicable.

40.5. I find that the Hon'ble Apex court in the case of Collector of Customs vs D Boormal reported in 1983 (13) ELT 1546 (SC) [LQ/SC/1974/133] , held that department is not required to prove its case with mathematical precision to a demonstrable degree. The law does not require prosecution to prove the impossible. All that is required is the establishment of such degree of probability that a prudent man may, on the basis, believe in the existence of the fact in issue. The Hon'ble court further observed that secrecy and stealth being it's covering guards it is impossible for the preventive department to unravel every link of the process. Many facts relating to this illicit business remain in their special or peculiar knowledge of the person concerned. In the instant case, the ratio of the said judgment is squarely applicable in view of the foregoing discussions.

40.6. The Hon'ble Tribunal in the case of Gulab Chand Silk Mill (P) Ltd. Vs CCE, Hyderabad reported in 2005 (184) ELT 263 (Tri. [LQ/CESTAT/2005/781] -Bang), held that clandestine activity at best can be established only by circumstantial evidences and it will be humanly impossible to establish every link in the chain of clandestine activity without any break. The Hon'ble Apex Court in the case of Maganlal Gulabchand Shah v/s UOI [reported in1997 (93) ECC 185 (SC)] has upheld the decision of the Hon'ble High Court 1992 (59) E.L.T. 235 (Guj.) (Maganlal Gulabchand Shah v. U.O.I.). In that case the Hon'ble Gujarat High Court had held that burden of proof of smuggling of specified goods is sufficiently discharged if the department furnishes prima facie proof of the goods having been smuggled and burden then shifts to the person concerned to discharge on the principle underlying Section 106 of the Evidence Act. The Tribunal further held that the department is not required to prove its case with mathematical precision.

40.7. I further observe that the Hon'ble Tribunal in the case of M/s Siemens Ltd. VS. CCE [reported in 1994 (70) ELT 305] has held that in case of clandestine removal, the department will not be able to produce direct evidence. Such removal can be gathered from the circumstances. The principle underlying section 106 of the Evidence Act, the burden to establish those facts which are within the knowledge of the Respondent, is always on the Respondent concerned and if that respondent fails to establish or explain those facts, an adverse inference can be raised against him.

40.8. I also place reliance on the decision of the Hon’ble Tribunal in the case of C.C.E., Madras v. Madras Chemicals, 1986 (24) E.L.T. 308 (T) wherein the Hon'ble Tribunal has held that "It is therefore the duty of court to sift and scrutinize the evidence carefully and in terms of the felicitons metaphor, separate the grain from the chaff. As the Supreme Court has observed Eldorado of absolute proof being unattainable, the law accepts for it, probability as a working substitute in this work-a- day world. In fine, legal proof is not necessarily a perfect proof but only a prudent man's estimate as to the probabilities of the case"

40.9. In view of the above discussion, I hold that the Noticee No. 1 had indulged in the suppression of production of MnO and clandestine removals thereof with intention to evade the payment of Central Excise Duty leviable thereon and hence invocation of extended period in the show cause notice is tenable. Further the duty as demanded in the show cause notice is also recoverable from the Noticee No 1 in terms of Section 11A of the Central Excise Act, 1944. In view of the aforesaid discussions it is observed that the extended period has been rightly invoked in the case.

41) Whether interest at the appropriate rate is also liable to be recovered under the provisions of Section 11 AB of the Central Excise Act 1944.

41.1. Since the demand is sustainable, interest at the rate as applicable from time to time on the amount of Cenvat credit proposed to be demanded as above, is also to be recovered from the Noticee No. 1 under Section 11AB of Central Excise Act,1944 by following the judgment of the Hon'ble Supreme Court in the case of Commissioner of Trade Tax [UP] Vs Kanhai Ram Thekedar reported in 2005-TIOL-76-SC-CT, wherein it was stressed that the interest amount is inbuilt in the recovery provision itself and there is no requirement of a notice to be given to the assessee for recovery of interest, which the assessee was required by law to pay on the tax admittedly payable but which was paid beyond the time limit.Applying the ratio decidendi derived from the above decision, I hold that the proposal for the recovery of interest under Section 11AB of CEA, 1944 is sustainable.

42) Whether the Noticee No. 1, 2 and 3 have rendered themselves liable to pay penalty under the provisions of Section 11 AC of Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002.

42.1. Penalty on Noticee No.1:-

It is observed that, by acts of omission and commission as discussed supra the Noticee No. 1 has manufactured and removed their finished products i.e. Mno clandestinely without cover of proper Central Excise Invoices and without maintaining the statutory records and without payment of Central Excise duty during the period from 05.12.2006 to 14.10.2009 and contravened the provisions of Rule 4, 6, 8, 10, 11 and 12 of the Central Excise Rules, 2002 by suppressing and mis-representing facts.

42.2. It is also observed that the Noticee No.1 had deliberately suppressed the fact with the sole intention of evasion of Central Excise duty; therefore I find that the Noticee is liable to pay penalty under the provisions of Section
11 AC of Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002.

42.3. As I have already upheld the allegation regarding the offence committed by the Noticee No.1 and as the goods have been cleared clandestinely without payment of duty, the imposition of penalty under various rules read with Section 11AC is sustainable in law by applying the ratio of the judgment of the Hon'ble Supreme Court in the case of Sony India Ltd., Vs CCE, Delhi reported in 2004 (167) ELT 385 (SC) which upheld the imposition of penalty under section 11AC equivalent to the extent of duty demanded.

42.4 Penalty is imposable on surreptitious removal of goods without payment of duty as held by the tribunal in case of Bliss pack vs CCE [1985
(21) ELT 843 (Tri)]. Penalty is imposable where goods are manufactured and removed with intent to evade duty as held by the Hon’ble tribunal in the case of Vee Kay Industries vs CCE [1990 (50) ELT 520 (Tri)]; and in the case of Royal Paints Vs CCE [1988 (33) ELT 794 (Tri)]. Penalty is imposable under Rule 9(2) and 173Q for the contravention of CER as held by the Hon'ble Tribunal in the case of Coolade Beverages Ltd Vs CCE [1999 (110) ELT 862 (Tri.)].

42.5. Non accounting of goods in RG1 is an offence and penalty is imposable under Rule 173Q as held by the Hon'ble Tribunal in the case of Ganga Rubber Industries Vs CCE [1989 (39) ELT 650 (Tri)].

42.6. Further the Hon'ble Supreme Court, in the case of Punjab Tractors Ltd Vs CCE, Chandigarh [2005 (181) ELT 380 (SC)] has held that, "for the violation of rules, the appellant will undoubtedly be liable to pay the penalty as prescribed under the said Rules for such violations".

42.7. Further in the case of CCE Rajkot Vs Deco Ceramics Industries reported in 2003 (156) ELT 611 (Tri.Mum), the Hon'ble Tribunal has held that, "Once the goods have been removed clandestinely, the provisions of Section 11AC of the CEA are attracted."

42.8. In the case of Kejriwal Enterprises Vs CCE New Delhi reported in 2001
(131) ELT 226 (Tri.Del) the Hon'ble Tribunal has held that, "No doubt a fraud has been perpetrated on Revenue and therefore a deterrent penalty is called for. Since the penalty could be much higher and penalty almost equal to the amount of credit taken has been imposed, we do not see any reason to interfere with the imposition of penalty or with the quantum thereof".

42.9. In this case, but for the investigation undertaken by the officers, the mis-deeds of the Noticee No.1 would not have come to light and would have remained un-noticed resulting in huge revenue loss to the Government. Applying the ratio of the above judgment and decisions, I am inclined to impose mandatory penalty on the Noticee No.1 under Section 11AC read with Rule 25 of the Central Excise Rules, 2002 is warranted in this case.
43. PENALTY ON NOTICEE NO. 2

43.1. The Noticee No. 2 has interalia pleaded that all their customers for MnO and MnSO4 are registered with Central Excise and they will get Cenvat Credit for excise duty charged by them on their product. Similarly they will get Cenvat Credit on purchase of MnO. Hence, there is no motive / benefit / desire on their part to procure MnO without Central Excise duty being charged on it & hence neither any act of commission or omission. with regard to removal of MnO on their part. The Noticee No. 2 has further taken plea that penalty under Rule 209A of erstwhile Rules and Rule 26 of present Rule is not imposable in absence of proposal to confiscate any excisable goods in the Show Cause Notice or confiscation ordered or upheld and they also reliance on various Tribunal judgements

43.2 I, find that the fact of clandestine removal of excisable goods by Noticee No 1 to noticee 2 with intent to evade payment of central excise duty has been established beyond doubt. Such procurement of goods by Noticee No 2 is also not reflected in their books of accounts. Thus Noticee No 2 ahs knowingly not followed the Central Excise procedures. It is thus immaterial as to whether the Cenvat Credit was admissible to Noticee No. 2 or otherwise. In the backdrop of the same I have no hesitation to hold that the Noticee No. 2 abetted Noticee No. 1 for clandestine clearance of excisable goods with obvious intent to evade payment of central Excise duty by Noticee No. 1 and have thereby rendered themselves liable for penalty under Rule 26 of Central Excise Rules, 2002. I also find that it has been specifically alleged in the Show Cause Notice that as the goods. in question were liable for confiscation under Central Excise Rules, 2002, the Noticee No 2 was liable for penalty under Rule 26 of Central Excise Rules, 2002 & therefore Noticee No. 2's plea that they were not liable for penalty as no confiscation is proposed or upheld is not admissible.

43.3. I therefore find that the case laws referred by Noticee No. 2 does not in any way useful to them in absolving from imposition of penalty under Rule 26 of Central Excise Rules, 2002 as the Noticee No. 2 have abetted Noticee No. 1 in clandestine removal of excisable goods with intent to evade payment of duty.

44. PENALTY ON NOTICEE NO. 3 MANAGING DIRECTOR OF NOTICEE NO. 1 & 2

44.1. I find that the Noticee No. 3 is a common Managing Director of both Noticee No 1 and Noticee No. 2 and was well aware about the activities of both Noticee No. 1 and Noticee No. 2. The Noticee No. 3 was therefore well aware about the fact that the goods were being cleared by Noticee No. 1 to Noticee No. 2 on delivery memo only without cover of invoice and without payment of duty. I further find that Shri Sujit Kumar Das, Technical Manager
- cum - Factory In-charge of Noticee No. 1 in his statement dated 4th March, on being asked about issuance of Central Excise invoices by Noticee No. 1 in respect of goods cleared on delivery memo, has stated that he is not aware about issuance of such Central Excise Invoices or otherwise by Noticee No. 1 and the same can be explained by their Managing Director Shri Pramod Budharaja. I further find that same was reiterated in the Panchnama proceedings dated 04-03-2010 drawn at factory premises of M/s BSS Mines, Kalmeshwar Road, Yerla, Nagpur. Thus, the plea of Noticee No. 3 that he was not involved in the day to day activities is not acceptable. I therefore find that clandestine clearance of excisable goods [MnO] by Noticee No. 1 on delivery memo without issuance of invoice and without payment of central excise duty was well within the knowledge of Noticee No. 3. The Noticee No.3 was therefore very much aware about such unlawful activity and its consequence leading to confiscation of such goods being cleared without payment of duty. I also find that while proposing penalty on Noticee No. 3, it has been specifically alleged in the Show Cause Notice that the goods in question were liable for confiscation under Central Excise Rules, 2002. I find that the Noticee No 3 is therefore liable for penalty under Rue 26 of Central Excise Rules 2002.

44.2 In this regard, I place reliance on the decision of the Hon’ble CESTAT in the case of Sita Cement vs CCE reported in 2003 (153) ELT 204 (Tri) [LQ/CEGAT/2002/1609] wherein it was held that penalty was rightly imposed on the Director with whose consent and knowledge clandestine removal was carried out.

44.3. In the case of Supreme Petroleum Vs CCE Vadodara reported in 2006
(194) ELT 323 (Tri. Mum) the Hon'ble Tribunal has upheld the imposition of penalty under Rule 26 of CER 2002 on the accountant and the Proprietor of the appellant unit in as much as the transaction had taken place within their knowledge and they were directly connected with the illicit manufacture and removal of goods and illicit receipt of the goods in question.

44.4 Applying the ratio of the above decisions, I hold that SHRI PRAMOD BUDHRAJA played a major role in the modus operandi and hence is liable for penal action under Rule 26 of Central Excise Rules, 2002.”

4.3 From the facts of the case it transpires that the Appellant 1 and Appellant 2 are two companies duly constituted engaged in the identical business. Both the companies have common Director who is Appellant 3. Entire goods whether on job work basis or as produce of appellant 1, have been transported at the instance of appellant 1 to appellant 2 entirely against the Delivery Memo issued by them. There is no case of clearance made to any third person. Further it is evident that no proper one to co- relation can be established between the goods cleared on Delivery Memos and the invoices issued by the appellant.

4.4 Appellant has through a long drawn process of submissions and arguments sought to establish that out of the ignorance they were clearing the goods on the delivery memo to their sister concern and subsequently issuing the invoices towards such clearance. They have before us by their submissions concluded that they have in fact paid duty on more quantity of goods then what is covered by the delivery memos. Summarizing their arguments year wise in para 21 of their written submissions they have prepared a table which is reproduced below:

4.5 Before we proceed further it is necessary to reproduce the relevant provisions of the Central Excise Rules, 2002 as they existed during the period of demand:

Rule 4: Duty Payable on removal

(1) Every person who produces or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty leviable on such goods in the manner provided in rule 8 or under any other law, and no excisable goods, on which any duty is payable, shall be removed without payment of duty from any place, where they are produced or manufactured, or from a warehouse, unless otherwise provided:

Rule 6: Assessment of duty

The assessee shall himself assess the duty payable on any excisable goods.

Rule 8: Manner of Payment

(1) The duty on the goods removed from the factory or the warehouse during a month shall be paid by [the 6th day of the following month, if the duty is paid electronically through internet banking and by the 5th day of the following month, in any other case] : Provided that in case of goods removed during the month of March, the duty shall be paid by the 31st day of March:

(2) ….

(3) If the assessee fails to pay the amount of duty by due date, he shall be liable to pay the outstanding amount along with interest at the rate specified by the Central Government vide notification under section 11AB of the Act on the outstanding amount, for the period starting with the first day after due date till the date of actual payment of the outstanding amount.
Rule 10 Daily Stock Account -

(1) Every assessee shall maintain proper records, on a daily basis, in a legible manner indicating the particulars regarding description of the goods produced or manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and particulars regarding amount of duty actually paid.

(2) The first page and the last page of each such account book shall be duly authenticated by the producer or the manufacturer or his authorised agent.
Rule 11 Goods to be removed on invoice —

(1) No excisable goods shall be removed from a factory or a warehouse except under an invoice signed by the owner of the factory or his authorized agent -----

(2) The invoice shall be serially numbered and [shall contain the registration number, address of the concerned Central Excise Division,] name of the consignee, description, classification, time and date of removal, mode of transport and vehicle registration number, rate of duty, quantity and value, of goods and the duty payable thereon.]

(3) The invoice shall be prepared in triplicate in the following manner, namely:-

(i) the original copy being marked as ORIGINAL FOR BUYER;

(ii) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER;

(iii) the triplicate copy being marked as TRIPLICATE FOR ASSESSEE.

(4) Only one copy of invoice book shall be in use at a time, unless otherwise allowed by the Assistant Commissioner of Central Excise, or the Deputy Commissioner of Central Excise, as the case may be, in the special facts and circumstances of each case.

(5) The owner or working partner or the Managing Director or the Company Secretary or any person duly authorised for this purpose shall authenticate each foil of the invoice book, before being brought into use.

(6) Before making use of the invoice book, the serial numbers of the same shall be intimated to the Superintendent of Central Excise having jurisdiction.
Rule 12 - Filing of Return

(1) Every assessee shall submit to the Superintendent of central Excise a monthly return in form specified by notification by the Board, of production and removal of goods and other relevant particulars, within ten days after the close of the month to which the return relates.

(2) (a) Notwithstanding anything contained in sub-rule (1), every assessee shall submit to the Superintendent of Central Excise, an Annual Financial Information statement for the preceding financial year to which the statement relates in the form specified by notification by the Board by 30th day of November of the succeeding year.

4.6 CBEC also issued “CBEC's Excise Manual of Supplementary Instructions 2005” clarifying the provisions of the rules stating as follows:
Chapter- 4 INVOICE SYSTEM

1.1 An invoice is the document under cover of which the excisable goods are to be cleared by the manufacturer. This is also the document which indicates the assessment of the goods to duty. No excisable goods can be cleared except under an invoice. The invoice is the manufacturers own document and though the Department has specified the entries thereon, the format etc. is left to the manufacturer's choice.
Chapter-6 RECORDS AND RETURNS of CBEC's Excise Manual of Supplementary Instructions 2005:

1.1 Records are to be necessarily maintained in the course of any business activity. These records are also used to determine the tax liability of the assessee. Earlier, for this purpose the Government had prescribed the records to be maintained, referred to as 'Statutory records'. The statutory records under Central Excise Rules, 1944 were dispensed with in the year 2000 and it was decided to rely on private records of the assessee. This was done as a measure of simplification and for adopting a common accounting system. While framing the Central Excise (No.2) Rules, 2001 (hereinafter referred to as the said Rules), CENVAT Credit Rules, 2001 and other Rules issued. under Central Excise Act, 1944, the Government has continued with the policy of relying on the private records of the assessee.

2. Private records

2.1 The main features of the acceptance of private records are as below: -

(i) The fact that the rules do not prescribe 'statutory records' shall not be construed that no record has to be maintained. Every assessee shall maintain private record.

(ii) The rules which require certain records to be maintained, are self contained and they specify the minimum information that an assessee MUST enter in their own record;

(iii) There is no format for record-keeping,

(iv) This means that the assessee is free to device his record- keeping, depending upon his accounting requirements but shall ensure that the requirements of particular rules are met;

(v) There is a specific requirement about maintenance of "Daily Stock Account' in rule 10 of the said Rules. It provides that every assessee shall maintain proper records, on a daily basis, in a legible manner indicating the particulars regarding description of the goods produced or manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and particulars regarding amount of duty actually paid. The first page and the last page of each such account book shall be duly authenticated by the producer or the manufacturer or his authorised agent. All such records shall be preserved for a period of five years immediately after the financial year to which such records pertain.

(vi) There is no requirement of 'authentication' of records …..

(vii) Every assessee is statutorily required to furnish to the Range Officer, a list in duplicate, of all the records prepared or maintained by him for accounting of transactions in regard to receipt, purchase, manufacture, storage, sales or delivery of the goods including inputs and capital goods.

(viii) Every assessee shall, on demand ……

(ix) Every assessee ……

2.2 Records shall mean all the records prepared or maintained by the assessee for accounting of transactions in regard to receipt, purchase, manufacture, storage, sales or delivery of the goods including inputs and capital goods. All accounts, agreements, invoice, price-list, return, statement or any other source document, whether in writing or in any other form shall be treated as records. Source documents are those documents which form the basis of accounting of transactions and include sales invoice, purchase invoice, journal voucher, delivery challan and debit or credit note.

2.3 Every assessee…..

2.4 Non-maintenance of daily stock account as contemplated under rules or other information mentioned in other rules mentioned above by the assessee in his private records will mean contravention of specified rules attracting appropriate penal action. If such non-maintenance of records is with intent to evade payment of Central Excise duty, the more stringent penal provisions of the Central Excise Act and Central Excise Rules shall be attracted. Trade and industry are advised to ensure that the requisite information as required under amended rules is scrupulously maintained in their identified private records to avoid any penal action.

2.5 The private records relevant for Central Excise including the Daily Stock Account maintained in compliance with the provisions of the said Rules shall necessarily be kept in the factory to which they pertain.

2.6 The manufacturer shall maintain proper records for receipts, disposal consumption and inventory of the inputs and capital goods including the relevant information regarding value, duty paid etc., from the persons whom the inputs and capital goods procured is recorded and the burden of proof regarding the admissibility of the Cenvat Credit shall lie upon the manufacturer taking such credit. (Rule 9 of CENVAT Rules, 2004.). Similarly the records are required to be maintained for receipt, payment and procurement of input services.

4.7 From the above rules and instructions issued by the Central Board of Excise and Customs it is quite evident the goods were necessarily to be cleared on the invoice containing the details as prescribed by the rules. Even if the private records other than the invoice i.e. delivery memo were to be considered as proper documents for the purpose of clearance of the goods then also they should have carried the necessary details. The fact that delivery memos that were used for the clearance of the goods did not contain the details as required in terms of the above stated rules is not in dispute. The contention of the appellant that this omission on their part was for the reason of ignorance of law can never be admitted as valid defence for the reason that appellant were registered under Central Excise from 2005 onwards, and in case they had any difficulty in following any of the provisions or in understanding the same they could have approached the jurisdictional officers. Ignorance of law is not an excuse for conducting the business in manner not sanctioned as per the law. We would rather say the present case is not case of ignorance of law, but of defiance of law, whereby Appellant 1 has by use of this device sought to clear the goods clandestinely, and would sought to cover up lapses in guise of ignorance etc. Counsel for the appellant has labored a lot before us to convince that appellants were innocent victim of ignorance of law and in fact they have paid duty on quantity which exceeded the quantity covered by delivery memos. We have during the course of arguments on appeals asked the appellants t submit the detailed co-relation chart between the delivery memos and the invoices against which the appellant claimed to have paid the duty. After going through the documents and statements submitted the jurisdictional Commissionerate responded stating that “In this regard it is submitted that exercise of correlating the delivery challans with excise invoice is not possible as there is no mention of delivery challan on the excise invoice or vice versa. Sample copies of an invoice and a delivery challan ae enclosed herewith for further action please.”

4.8 We also asked the counsel for the appellants to undertake exercise of correlation for six months on sample basis between the delivery challans/ memos and the invoices we sought the comments of the learned authorized representative on the same. The results of the exercise undertaken are reproduced below:

On examination of the above correlation statements along with the documents submitted in support learned authorized representative has submitted as follows:

i. Cross verification of six months of the documents viz delivery memo and the central excise invoice is not possible.

ii. It has been noticed that in the Invoices both number of bags as well as weight of the Manganese Oxide (MnO) are mentioned. Whereas, in the Delivery Memo, only the number of bags are mentioned except in certain cases where weight is also mentioned. There is also no reference number of Delivery Memo given in the Invoices. Further, the weight of the bags mentioned in all the Invoices is 50 Kgs. But when the weight of the bags given in the DM is calculated, it is coming between 30 to 42 Kgs only. For the month of February, 2007, Appellant has submitted 16 copies of the Invoices (Inv. No. 168 to 183) and 20 Delivery Memo (Sr. No. 228 to 251). It is noticed that in some cases, the date of issue of Invoice and the date of delivery Memo is same. Further, for Invoice No.BSS/INV/06-07/171 which is dated 05.02.2007, the corresponding Delivery Memo was issued on 06.02.2007. It is difficult to understand why there was a need to issue a Delivery Memo subsequently, when Invoice was already issued. It is also noticed that in many cases, the Truck No. given on Invoices is different then mentioned in DM. In many cases, weight is also not mentioned in the DM. It is also to mention that total quantity cleared for the month on Invoices is also not matching with the Quantity cleared on Delivery Memo.

iii. Similarly for the month of March, 2007, Appellant has submitted 25 copies of the Invoices (Inv. No 184 to 208) and 20 Delivery Memo (Sr. No. 254 to 274). It is noticed that for 20 Invoices (Inv Sr. No.
184 to 203), the Delivery Memo has been issued on subsequent date after issue of Invoice. It is not understood why DM was issued in these cases when Invoice was already issued. It is also noticed that in many cases, the Truck No. given on Invoices is different then mentioned in DM. Further, total quantity cleared for the month on Invoices is also not matching with the quantity cleared on Delivery Memo.

iv. For the month of September, 2008, Appellant has submitted 7 copies of the Invoices (Inv. No.049 to 055) and 5 Delivery Memo ( Sr. No. 306 to 310). It is noticed that 5 Invoices (No. 49 to 53) has been issued after the date of DM mentioned in the statement submitted by the Appellant. Further, the total quantity cleared for the month on Invoices is also not matching with the quantity cleared on Delivery Memo.

v. Similarly, for February, 2009, Appellant has submitted 11 copies of the Invoices (Inv. No.096 to 106) and 32 Delivery Memo (Sr. No.
376 to 400 & Sr. No. 110 to117). It is noticed that in this month also, in some cases, the date of issue of DM and Inv. is same. It is also noticed that the total quantity cleared for the month on Invoices is also not matching with the quantity cleared on Delivery Memo.

vi. For the month of March, 2009, Appellant has submitted 12 copies of the Invoices (Inv. No.107 to 118) and 28 Delivery Memo (Sr. No. 118 to 136 &138 and Sr. No.140 to147). It is noticed that Inv. No. 107 and corresponding DM No. 118 are issued on the same day. It is also noticed that in 7 Invoices (Inv. No. 111 tp117), Invoice No. has been tempered and changed with pen. Quantity cleared on Invoices and DM is also not tallying for this month.
vii. For April, 2009, Appellant has submitted 23 copies of the Invoices (Inv. No.001 to 023) and 23 Delivery Memo (Sr. No. 149 to 171). For Inv. No. 001 to 007, the qty. given on the Invoice and corresponding DM is same. But if the weight of MnO is calculated per bag as given in DM, the qty. per bag is coming between 35.6 to 41.3. Whereas, the quantity per bag given in invoice is 50 Kgs. It is also pertinent to mention here that for all the above invoices, DM has been issued on the same day. For DM No. 159 dtd. 15.04.2009, there is no weighment slip, hence its quantity cannot be checked with the corresponding Inv. No.011 issued on same day. Further, the total quantity cleared for the month on Invoices is also not matching with the quantity cleared on Delivery Memo.

viii. Similarly, for May, 2009, Appellant has submitted 5 copies of the Invoices (Inv. No.024 to 028) and 12 Delivery Memo (Sr. No. 172 to 187). It is noticed that in this month also there is mismatch in the quantity cleared on Invoices and DM. Total quantity cleared on Invoices is 59.051 MT, whereas the quantity cleared on Delivery Memo is 65.940 MT'
ix. In view of the discrepancies in the data submitted by the Appellant, as mentioned above, it is not possible to cross verify the quantity of MnO cleared by them on Invoices and on Delivery Memo. Further, since, no reference no of Delivery Memo is given in the Invoices; it is not practically possible to co-relate the quantity given in both the documents.

4.9 From the above it can be concluded that any exercise taken to correlate the delivery memos with the invoices would not yield any results. Further the explanation of assigning certain clearances made on the delivery memos, either in part or in complete towards job work, is based only on some specialized knowledge or the information that is available with the appellants and not disclosed in any transparent manner on the documents. The submissions made on this account which are not based on transparency in the documents cannot be verified. Hence these submissions need to be out-rightly rejected. It needs to be understood that the transparency of the documents produced as evidence and their correlation with the evidences produced by the other side as prime evidence by the other side is basic fundamental of the law of evidences. The documents shrouded with secrecy and having incomplete or no information correlating them directly with the evidences produced by other side in any proceedings cannot be accepted as evidence towards the innocence of the person proceeded against in the proceedings of tax evasion. In the case of D Bhurmall [1983 (13) ELT 1546 (SC)] [LQ/SC/1974/133] , Hon’ble Supreme Court has laid down as follows:

“26. Large scale smuggling of gold or other goods into India may pose a threat to the economic and fiscal interests and policies of the State. Such illicit trade is often carried on by organized international smugglers in the secrecy of the under-world. The more it is organized, the less are the chances of its detection, and greater the difficulty of proving the offences relating thereto. Laws have therefore been enacted in most countries, which mark a partial or wholesale departure in matters relating to smuggling, from the general principle of penal law, viz., that it is for the State or its Department to prove the offence against the accused or the defendant. Thus in England, Section 290(2) of the Customs and Excise Act, 1952 provides that where in any proceeding relating to Customs or Excise any question arises as to the place from which any goods have been brought or as to whether or not any duty has been paid or any goods have been lawfully imported etc., then the burden of proof shall lie upon the other party to the proceeding. In India Parliament inserted Section 178A by the Amending Act 10 of 1957, but it did not in its wisdom, go as far as Section 290(2) of the English Act. Section 178A in terms applies to “gold, gold manufacture, diamonds and other precious stones, cigarettes and cosmetics”. With regard to these specified goods if seized under this Act in the reasonable belief that they are smuggled goods, the burden of proof that they are not such goods shall be on the person from whose possession, they are seized. But with regard to any other goods, the rule in sub-section (1) of Section 178A would not apply unless the Central Government had specifically applied the same by notification in the Official Gazette. It is common ground that at the material time, no such notification applying the Section to the categories of the goods in question had been issued. In respect of such goods the provisions of the Evidence Act and the Code of Criminal Procedure, do not, in terms, govern the onus of proof in proceeding under Section 167(8) of the Act. In conducting these penal proceedings, therefore, the Collector of Customs is to be guided by the basic canons of criminal jurisprudence and natural justice.
….

30. It cannot be disputed that in proceedings for imposing penalties under clause (8) of Section 167, to which Section 178A does not apply, the burden of proving that the goods are smuggled goods, is on the Department. This is a fundamental rule relating to proof in all criminal or quasi-criminal proceedings, where there is no statutory provision to the contrary. But in appreciating its scope and the nature of the onus cast by it, we must pay due regard to other kindred principles, no less fundamental, or universal application. One of them is that the prosecution or the Department is not required to prove its case with mathematical precision to a demonstrable degree; for, in all human affairs absolute certainty is a myth, and as Prof. Brett felicitously puts it-"all exactness is a fake". El Dorado of absolute Proof being unattainable, the law, accepts for it, probability as a working substitute in this work-a-day world. The law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue. Thus legal proof is not necessarily perfect proof often it is nothing more than a prudent man’s estimate as to the probabilities of the case.

31. The other cardinal principle having an important bearing on the incidence of burden of proof is that sufficiency and weight of the evidence is to be considered to use the words of Lord Mansfield in Blatch v. Archar (1774) 1 Cowp. 63 at p. 65 “According to the Proof which it was in the power of one side to prove and in the power of the other to have contradicted”. Since it is exceedingly difficult, if not absolutely impossible for the prosecution to prove facts which are especially within the knowledge of the opponent or the accused, it is not obliged to prove them as part of its primary burden.

32. Smuggling is clandestine conveying of goods to avoid legal duties. Secrecy and stealth being its covering guards, it is impossible for the Preventive Department to unravel every link of the process. Many facts relating to this illicit business remain in the special or peculiar knowledge of the person concerned in it. On the principle underlying Section 106, Evidence Act, the burden to establish those facts is cast on the person concerned : and if he fails to establish or explain those facts, an adverse inference of facts may arise against him, which coupled with the presumptive evidence adduced by the prosecution or the Department would rebut the initial presumption of innocence in favour of that person, and in the result prove him guilty. As pointed out by Best in `Law if Evidence’ (12th Edn. Article 320, page 291), the “presumption of innocence is, no doubt, presumption juris : but every day’s practice shows that it may be successfully encountered by the presumption of guilt arising from the recent (unexplained) possession of stolen property,” though the latter is only a presumption of fact. Thus the burden on the prosecution or the Department may be considerably lightened even by such presumption of fact arising in their favour. However, this does not mean that the special or peculiar knowledge of the person proceeded against will relieve the prosecution or the Department altogether of the burden of producing some evidence in respect of that fact in issue. It will only alleviate that burden to discharge which very slight evidence may suffice.

33. Another point to be noted is that the incidence, extent and nature of the burden of proof for proceedings for confiscation under the first part of the entry in the 3rd column of clause (8) of Section 167 may not be the same as in proceedings when the imposition of the other kind of penalty under the second part of the entry is contemplated. We have already alluded to this aspect of the matter. It will be sufficient to reiterate that the penalty of confiscation is a penalty in rem which is enforced against the goods and the second kind of penalty is one in personam which is enforced against the person concerned in the smuggling of the goods. In the case of the former, therefore, it is not necessary for the Customs authorities to prove that any particular person is concerned with their illicit importation or exportation. It is enough if the Department furnishes prima facie proof of the goods being smuggled stocks. In the case of the latter penalty, the Department has to prove further that the person proceeded against was concerned in the smuggling.
…..

37. In the view that the initial onus of proof on the Department can be sufficiently discharged by circumstantial evidence, we are supported by the decision, of this Court in Issardas Daulat Ram’s case, (1962) Supp. (1) SCR
358. There, on September 14, 1954, that is, long before insertion of Section 178A in the Act, a quantity of gold to a refinery in Bombay was sent for the purpose of melting. The Customs authorities seized this gold when it was being melted. The gold was found to be of foreign origin and had been imported into India in contravention of the Foreign Exchange Regulation Act, 1947. The Collector of Customs confiscated it under Section 167(8) of theAct. The legality of confiscation was challenged by a petition under Article 226 of the Constitution before the High Court, on the ground that there was no evidence before the Collector to show that the gold had been imported into India after restrictions had been imposed in March 1947 on its importation. The High Court rejected this contention and dismissed the petition. The same argument was advanced before his Court in appeal by special leave. This Court also negatived this contention. While conceding that there was no direct evidence that the gold had been smuggled after March 1947, it was held that a finding to that effect could be reached by referring to “the conduct of the appellant in connection with (a) the credibility of the story about the purchase of this gold from three parties, (b) the price at which the gold was stated to have been purchased which was less than the market price and (c) the hurry exhibited in trying to get the gold melted at the refinery with a small bit of silver added so as to reduce the fineness of the gold and thus approximate the resultant product to licit gold found in the market”.

38. This rule in Issardas Daulat Ram’s case, (1962) Supp. (1) SCR 358 was reiterated with amplification in M/s. Kanungo & Co’s. case, AIR 1972 SC 1236 = 1983 E.L.T. 1284 (supra). Therein, the appellant was a firm carrying on business as dealer, importer and repairer of watches. On a search of the firm’s premises on October 17, 1959, the Customs authorities seized 390 watches out of which 250 were confiscated on the ground that they had been illicitly imported into India. The firm’s petition under Article 226 of the Constitution was allowed by a learned Single Judge of the High Court and the order of confiscation was quashed on the ground that the Customs authorities had failed to prove illicit importation of the watches. On appeal by the Department, the Division Bench of the High Court reversed the decision of the Single Judge with these observations :
“The watches were seized from the possession of the Respondent No. 1 (appellant) who had not obtained licence of a customs clearance permit for importation of the same. They were of foreign make and must have been imported across the customs frontier. The Explanations offered by the Respondent No. 1 regarding its coming into possession of the same between 1956 and 1957 were found, upon enquiries by the Customs authorities, to be false, the result of these enquiries were communicated to the Respondent No. 1 who was thereafter heard by the adjudicating officer. Yet no attempt was made by the Respondent No. 1 to substantiate its claim regarding lawful importation of the watches........ The Customs authorities came to the conclusion that the said 280 watches were illegally imported and thereupon made an order for confiscation of the same. It is not for this Court, in exercise of its jurisdiction under Article 226 of the Constitution to revise, set aside or quash this order, in the facts of this case.”

39. In appeal on certificate, it was contended before this Court that there was no evidence that these watches had not been illicitly imported into India and that the impugned order wrongfully placed the burden on the appellants. Sikri, C.J. speaking for the Court, repelled this contention thus :

“There is also no force in the second point because we do not read the impugned order as having wrongly placed the burden on the appellant. What the impugned order does is that it refers to the evidence on the record which militates against the version of the appellant had not been able to meet the inferences arising therefrom............ In our opinion, the High Court was right in holding that the burden of proof had shifted on the appellant after the Customs Authorities had informed the appellant of the results of the enquiries and investigations.

This also dispose of the first point. As we have said, the burden was on the Customs Authorities which they discharged by falsifying in many particulars the story put forward by the appellant............... It cannot be disputed that a false denial could be relied on by the Customs Authorities for the purpose of coming to the conclusion that the goods had been illegally imported."

40. In the case before us, the circumstantial evidence suggesting the inference that the goods were illicitly imported into India, was similar and reasonably pointed towards the conclusion drawn by the Collector. There was no violation of the rules of natural justice. The Collector had given the fullest opportunity to Bhoormull to establish the alleged acquisition of the goods in the normal course of business. In doing so, he was not throwing the burden of proving what the Department had to establish, on Bhoormull. He was simply giving him a fair opportunity of rebutting the first and the foremost presumption that arose out of the tell-tale circumstances in which the goods were found, regarding their being smuggled goods, by disclosing facts within his special knowledge.

4.10 In case of Indian Aluminium Company [1991 (55) ELT 454 (SC)] Hon'ble Supreme Court has held as follows:

2. Most of the facts in this case are not in dispute. Admittedly the aluminium raw material was imported by the petitioner Company and octroi duty at the normal rate was paid and no declaration in Form 14 was filed. It is only after the lapse of long time that the petitioner Company has made a claim for refund. The learned Counsel for the petitioner Company submitted that a procedural failure should not disentitle the petitioner Company provided if otherwise the Company could have legitimately claimed. The learned Counsel appearing for the respondent Municipal Corporation submitted that the concessional rate would be available only if the raw material was utilised by the Company for manufacturing goods within the industrial undertaking. If a declaration had been filed in proper Form 14 there could have been a scope for verification and in the absence of such a declaration the question of refunding at this distance of time does not arise. It is also his further submission that the concession should have been availed at the time when it was available. Having failed to avail the question of claiming the same later does not arise and consequently no refund can be claimed.

3. The amended Rules came into force in 1970. Rule 4(2) provides for payment octroi at a lower rate by certain industrial undertakings in respect of the goods mentioned in Part IA of Schedule II to the Rules. Aluminium is at Entry No. 77. Part IA reads thus :
....

The declaration contemplated in Form 14 is to the effect that the goods imported shall not be used for any other purpose for sale or otherwise etc. It can thus be seen that an incentive is sought to be given to such entrepreneurs by such concession if the raw material which is imported is also utilised in the industrial undertaking without selling or disposing of otherwise. That being the object a verification at the relevant time by the octroi authorities becomes, very much necessary before a concession can be given. In the absence of filing such a declaration in the required Form 14, there is no opportunity for the authorities to verify. Therefore the petitioner Company has definitely failed to fulfil an important obligation under the law though procedural. The learned Counsel, however, submitted that even now the authorities can verify the necessary records which are audited and submitted to the authorities and find out whether the material was used in its own undertaking or not. We do not think we can accede to this contention. Having failed to file the necessary declaration he cannot now turn around and ask the authorities to make a verification of some records. The verification at the time when the raw material was still there is entirely different from a verification at a belated stage after it has ceased to be there. May be that the raw material was used in the industrial undertaking as claimed by the petitioner Company or it may not be. In any event the failure to file the necessary declaration has necessarily prevented the authorities to have a proper verification.

4. Shri Ganesh, learned Counsel for the petitioner Company relied on the judgment of this Court in Kirpal Singh Duggal v. Municipal Board, Ghaziabad<$F(1968) 3 SCR 551.> in support of his submission that the non-fulfilment of procedural requirement does not bar the claimant from pursuing his remedy in a court of law. That was a case where the appellant entered into a contract and supplied the goods to the Government. The Municipal Board collected toll when the trucks were passing through the toll barrier. The appellant obtained a certificate that the transported goods were meant for Government work. The appellant claimed exemption on the basis of the certificate but not within time. The Court observed thus :

“But Counsel for the respondent contended that the rules framed by the Government regarding the procedure constituted a condition precedent to the exercise of the right to claim refund and recourse to the Civil Court being conditionally strict compliance with the procedure prescribed the Civil Court was incompetent to decree the suit unless the condition was fulfilled. We are unable to agree with that contention. The rules framed by the Government merely set up the procedure to be followed in preferring an application to the Municipality for obtaining refund of the tax paid. The Municipality is under a statutory obligation once the procedure followed is fulfilled, to grant refund of the toll. The application for refund of the toll must be made within fifteen days from the date of payment of the toll. It has to be accompanied by the original receipts. If these procedural requirements are not fulfilled, the Municipality may decline to refund the toll and relegate the claimant to a suit. It would then be open to the party claiming a refund to seek the assistance of the Court, and to prove by evidence which is in law admissible that the goods transported by him fell within the order issued under Section 157(3) of the Act. The rules framed by the Government relating to the procedure to be followed in giving effect to the exemptions on April 15, 1939, do not purport to bar the jurisdiction of the Civil Court if the procedure is not followed.”

Relying on these observations, Shri Ganesh, learned Counsel for the petitioner Company contended that in the instant case though the procedural requirement is not fulfilled by filing a declaration in Form 14, still that is not a bar to invoke the jurisdiction of the Civil Court or the High Court by way of a writ and seek a refund. We are unable to agree. In Duggal’s case, (1968) 3 SCR 551 [LQ/SC/1968/88] the appellant, as a matter of fact, obtained certificate but failed to make the application for refund within time. It is in that context this Court observed that the Municipality was under a statutory obligation once the procedure followed is fulfilled and if it is not fulfilled the Municipality may decline. The granting of a certificate that the appellant used the goods for Government work made all the difference. But, in the instant case, the non- fulfilment of the requirement even though procedural, has disentitled the petitioner Company because there was no way to verify whether it was entitled for such concession. In HMM Limited and Another v. Administrator, Bangalore City Corporation and Another no doubt the view taken in Duggal’s case was confirmed but it does not made any difference so far as the present case is concerned for the reasons stated above. In that case the question was whether the goods namely Horlicks was consumed within the city or not and there was no dispute as to the quantum which was credited pursuant to the directions of the High Court. Hence no further verification was necessary. Therefore these two cases are distinguishable.

5. However, a concession has to be availed at the time when it was available and in the manner prescribed. The common dictionary meaning of the word “concession” is “the act of yielding or conceding as to a demand or argument, something conceded; usually implying a demand, claim, or request, ”a thing yielded", “a grant”. In the Dictionary of English Law by Earl Jowitt, the meaning of “concession” is given as under :

“Concession, a grant by a central or local public authority to a private person or private persons for the utilisation or working of lands, an industry, a railway waterworks, etc.”

6. The expressions “rebate” and “concession” in the commercial parlance have the same concept. In Halsbury’s Laws of England, 4th Edn. Para 198 it is observed as under :

“Application for rebate. - When a rating authority receives an application for a rebate it has a duty to determine whether the residential occupier is entitled to a rebate and, if so, the amount to which he is entitled; and it must request him in writing to furnish such information and evidence as it may reasonably require as to the persons who reside in the hereditament, his income, and the income of his spouse. Unless the rating authority is satisfied that the residential occupier has furnished all the information and evidence it requires, it is under no duty to grant a rebate.” (emphasis supplied)

7. In Kedarnath Jute Manufacturing Co. v. Commercial Tax Officer, Calcutta and Ors. the appellant which was a Public Limited Company, sought exemption under the provisions of the Bengal Finance (Sales Tax) Act, 1941 in respect of certain sales but did not produce before the Officer the declaration forms from the purchaser dealers required to be produced under the proviso to that sub-clause granting exemption. It was contended on behalf of the appellant that proviso to the sub-clause was only directory and the dealer is not precluded where the proviso is not strictly complied with from producing other relevant evidence to prove that the sales were for the purposes mentioned in the said sub-clause. The contention on behalf of the respondent was that the dealer can claim exemption under the sub-clause but he must comply strictly with the conditions under which the exemption can be granted. Rejecting the appellant’s contention, this Court held thus :

“Section 5(2)(a)(ii) of the Act in effect exempts a specified turnover of a dealer from sales tax. The provision prescribing the exemption shall, therefore, be strictly construed. The substantive clause gives the exemption and the proviso qualifies the substantive clause. In effect the proviso says that part of the turnover of the selling dealer covered by the terms of sub- clause (ii) will be exempted provided a declaration in the form prescribed is furnished. To put it in other words, a dealer cannot get the exemption unless he furnishes the declaration in the prescribed form.”
It was further held as under :

“There is an understandable reason for the stringency of the provisions. The object of Section 5(2)(a)(ii) of the Act and the rules made thereunder is self- evident. While they are obviously intended to give exemption to a dealer in respect of sales to registered dealers of specified classes of goods, it seeks also to prevent fraud and collusion in an attempt to evade tax. In the nature of things, in view of innumerable transactions that may be entered into between dealers, it will well-nigh be impossible for the taxing authorities to ascertain in each case whether a dealer has sold the specified goods to another for the purposes mentioned in the section. Therefore, presumably to achieve the two-fold object, namely, prevention of fraud and facilitating administrative efficiency, the exemption given is made subject to a condition that the person claiming the exemption shall furnish a declaration form in the manner prescribed under the section. The liberal construction suggested will facilitate the commission of fraud and introduce administrative inconveniences, both of which the provisions of the said clauses seek to avoid.”

It can thus be seen that the submission namely that the dealer, even without filing a declaration, can later prove his case by producing other evidence, is also rejected. This ratio applies on all fours to the case before us. As already mentioned the concession can be granted only if the raw material is used in the industrial undertaking seeking such concession. For that a verification was necessary and that is why in the rule itself it is mentioned that a declaration has to be filed in Form 14 facilitating verification. Failure to file the same would automatically disentitle the Company from claiming any such concession.

8. In any event the petitioner Company cannot claim concession at this distance as a matter of right. In Orissa Cement Ltd. v. State of Orissa & Ors AIR 1991 SC 1676 [LQ/SC/1991/192] it was observed thus :

“We are inclined to accept the view urged on behalf of the State that a finding regarding the invalidity of a levy need not automatically result in a direction for a refund of all collections thereof made earlier. The declaration regarding the invalidity of a provision and the determination of the relief that should be granted in consequence thereof are two different things and, in the latter sphere, the Court has, and must be held to have, a certain amount of discretion. It is well-settled proposition that it is open to the Court to grant, mould or restrict the relief in a manner most appropriate to the situation before it in such a way as to advance the interests of justice.”

4.11 In case of Mihir Textiles [1997 (92) E.L.T. 9 (S.C.)], Hon'ble Supreme Court has observed as follows:

12. In support of that contention, counsel invited our attention to the decision of a Constitution Bench of this Court in State of U.P. v. Manbodhan Lal Srivastava, 1958 SCR 533 [LQ/SC/1957/93] , wherein their Lordships were considering the implication of non-compliance with the conditions provided in Article 320(3) of the Constitution on an order imposing punishment to a Government servant without reference to the Public Service Commission. While considering that question learned Judges made a reference to the Privy Council decision in Montreal Street Railway Company v. Normandin - AIR 1917 PC 142 and the Federal Court decision in Biswanath Khemka v. Emperor - AIR 1945 FC 67 [] . The Constitution Bench held that the provisions of Article 320(3) are not mandatory and non-compliance of those provisions does not afford any cause of action in a court of law. Privy Council in the above quoted decision has observed that the question whether provisions in a statute are directory or imperative depends upon the object of the statute and no general rule can be laid down. “When the provisions of the statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of this duty would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty and at the same time would not promote the main object of the legislature, it has been the practice to hold such provisions to be directory.” This is not a case where a certain provision is mandatory or directory. Here the question is whether concessional relief of duty which is made dependent on the satisfaction of certain conditions can be granted without compliance of such conditions. No matter even if the conditions are only directory.

13. In Formica India Division v. Collector of Central Excise, 1995 (77)

E.L.T. 511 (SC), non-compliance with Rule 56A of the Central Excise Rules, 1944 was held to be insufficient to deny the benefit of a notification to the assessee. But the said benefit was afforded on the special circumstances of a case as could be seen from the following words :

“The circumstances in which the appellants did not pay the duty on the intermediary product before putting the same to the captive consumption for producing that stage, the appellants contested the correctness of the classification and had, therefore, not paid the duty on the intermediary product. When it was found that they were liable to pay duty on the intermediary product and had not paid the same, but had paid the duty on the end product, they could not ordinarily have complied with the requirements of Rule 56A.”

Nor can we find support from the ratio in B.O.I. Finance Ltd. v. The Custodian & Others, JT 1997 (4) 15, that “infringements of the instructions issued by the Reserve Bank of India under the Banking Regulations Act prohibiting the banks from entering into buy-back arrangements do not invalidate such contracts entered into between the banks and it’s customers”, as it involved a question of invalidation of the contract. Here neither the contract nor the import is invalid or illegal and the question is only whether the importer is entitled to the concessional duty.

4.12 Following this decision Hon'ble Himachal Pradesh High Court has in the case of Indian Overseas Corporation held as follows:

8. The law is well settled that when an assessee wants to take benefit of any rebate he must satisfy all the conditions which are necessary for availing the rebate. Reference in this behalf may be made to Mihir Textiles Ltd. v. Collector of Customs, Bombay, 1997 (92) E.L.T. 9 (S.C.), wherein the Apex Court held as follows:-

“12. xxx. xxx.. xxx...

This is not a case where a certain provision is mandatory or directory. Here the question is whether concessional relief of duty which is made dependent

on the satisfaction of certain conditions can be granted without compliance of such conditions. No matter even if the conditions are only directory.”

9. In fact, a learned Division Bench of this Court in Ex. Reference No. 16 of 2000, Commissioner, Central Excise, Chandigarh v. M/s Chandra Laxmi Tempered Glass Co. Pvt. Ltd., Barotiwala, decided on 4-7-2008, held as follows:-

“Undoubtedly the requirement of the language is clear and unambiguous. The provisions of Statute and the Notification, keeping in view the object and the purpose, had to be fully complied with in letter and spirit. The requirements are mandatory and are not procedural as is sought to be argued on behalf of the assessee. The Legislative intent, the object and purpose is to check the defrauding of the Government by the assessees resorting to similar double credits against single consignment by falsification of documents by various methods. The legislature only requires four particulars to be pre-printed, which in any event are within the prior knowledge of and pertains to the person issuing the invoice. Therefore, there is no justification for not complying with the same. The requirement of the law is that invoices were to be pre-printed and not hand written. The Legislative intent is evident from every word used in the Statute. The same has to be complied with. If the view taken by the Tribunal is accepted it would render the Statute redundant. Therefore, on the principle of Golden Rule of Interpretation, the view taken by the Tribunal is unacceptable.”

4.13 In case of Irbaz Shoe Co. [2019 (365) ELT 263 (Mad)] [LQ/MadHC/2018/3758] Hon'ble Madras High Court has held as follows:

22. It is well settled that the stringency and the mandatory nature of any notification is decided on the basis of the purpose it seeks to achieve. The purpose of Notification No. 43 of 2001, dated 26-6-2001 is to ensure that excise duty should not be evaded under the garb of export sales. The Hon’ble Apex Court in Indian Aluminium Company Limited v. Thane Municipal Corporation reported in 1992 Supp (1) SCC 480 in Paragraph No. 6 at Page No. 488 and Paragraph No. 3 at Page No. 485, has observed as under :-
…….

23. The Learned Counsel appearing for the appellant has placed reliance on a judgment dated 12-6-2017 passed by the Division Bench of this Court in
C.M.A. No. 3044 of 2011 [2017 (355) E.L.T. 45 (Mad.)], wherein, this Court observed ‘as under :-

13. Therefore, what emanates from the facts obtaining in the present case is that, there was a non-disclosure of information by the Assessee. The Assessee has taken a stand that, since, it was always below the monetary limit fixed for clearances qua SSI Units, it never had an occasion to make any disclosure via a classification list.

13.1 In our view, this cannot be construed as suppression of fact, within the meaning of Section 11A( 1) of the 1944 Act. Mere non-disclosure of facts, in such like circumstances, cannot constitute suppression of facts. Given the way the Section is framed, the expression “suppression of fact”, appears in the company of words and expressions, such as, fraud, collusion, willful misstatement. Therefore, the expression “suppression of facts”, has to take colour from the words whose company, it appears in. A mere non- disclosure of information, when there is no obligation in law to furnish the same, will not amount to, in our opinion, fraud or collusion or even, willful misstatement and, hence, trigger the extended period of limitation [See Collector of Central Excise, Hyderabad v. M/s. Chemphar Drugs and Liniments, Hyderabad, 1989 (40) E.L.T. 276 (S.C.).; Padmini Products v. Collector of C. Ex., 1989 (43) E.L.T. 195 (S.C.) and Pushpam Pharmaceuticals Company v. Collector of Central Excise, Bombay, 1995 (78)
E.L.T. 401 (S.C.)].

24. The ratio of the said judgment, cannot be applied to the facts of the case for availing benefit of Rule 19 of the Central Excise Rule. The purpose of Notification No. 43 of 2001, dated 26th June, 2001, is to ensure prevention of evasion of duty under the garb of export sales. Keeping the purpose in mind, it is not sufficient for a manufacture to come up and say that all the goods manufactured by him have been exported and therefore, he is entitled to the benefit of Rule 19 of Central Excise Rules. If such a view is taken that the conditions prescribed in Notification No. 43 of 2001, is only procedural then the entire purpose of issuing the said Notification, would be defeated.

25. The appellant has removed the goods without informing the Department. The appellant has also not registered under Rule 9 of the Central Excise Rules. The contention, even if the appellant is not registered under Rule 9, still the appellant can avail exemption from paying excise duty cannot be accepted. The removal of goods came to light only after the visit of the officers to the factory and perusal of the documents. Complete non- adherence to the procedure, which has been prescribed to avail exemption from payment of excise duty leads to a presumption that this was done with intend to evade payment of duty and therefore, the authorities were justified in invoking Section 11-A for recovery of excise duty.

26. None of the conditions prescribed in Notification No. 43 of 2001 have been followed, the appellants are not entitled to exemption from payment of duty under Rule 19 of Central Excise Rules. The order of the Customs, Excise and Service Tax Appellate Tribunal in confirming the levy of duty by invoking extended period of limitation, does not requires any interference.

4.14 The case made out against the appellants by the revenue is in respect of the documents – delivery memos recovered from their premises which were used by the Appellant 1 for transportation/ clearance of the impugned goods from their premises to the premises of Appellant 2. It is also interesting fact that Appellant 1 and Appellant 2 though separately constituted companies have common director who is Appellant 3 and who is only active Director looking after the work of both the companies. It is more interesting to note that the entire product line of the Appellant 1 and Appellant 2 including the inputs and raw materials of both the units is identical. It is also evident that the invoices produced as evidence of payment of duty cannot be correlated with the delivery memos for the want of necessary details correlating the two. In our view even the person preparing the invoice was having the delivery memos while preparing the invoice cannot be concluded. In short the invoices produced were not prepared taking into account the delivery memos, and the real basis on which the invoice were prepared is not forthcoming. From the facts stated above, investigation conducted, evidences collected both documentary and circumstantial], omission, commission and admissions, as narrated in the aforementioned paras, it appears to that Appellant No. 1 has deliberately and willfully suppressed the production and clandestinely cleared the Manganese Oxide falling under CETH No. 2820 manufactured by them and removed 3361.472 MT valued at Rs. 5,09,00,262/-, without payment of Central Excise duty of Rs. 60,22,723/- (BED Rs. 58,53,738/- + Ed. Cess Rs. 1,17,075/- + S&H cess Rs. 51,911/-), during the period from 05.12.2006 to 14.10.2009, without issuing Excisable invoices, without maintaining the statutory records with intent to evade payment of Central Excise duty. They thus, contravened the provisions of Rule 4, 6, 8, 10, 11 and 12 of Central Excise Rules, 2002 reproduced above. The duty so evaded is recoverable from them by invoking extended period of five (5) years under proviso to Section 11 A of Central Excise Act, 1944.

4.15 Appellants have contended that extended period of limitation cannot be invoked in the present case for the reason that what so ever duty would have been p[aid by the appellant 1 would have been available to Appellant 2 as CENVAT Credit. Hence the entire exercise is revenue neutral and there is no ground for the appellants not to pay the duty in respect of the alleged goods cleared to appellant 2. We do not find any merits in this submission of the appellant 1, in view of the decision of larger bench of tribunal in case of Jay Yushin holding as follows:

13. In the light of the above discussion, we answer the reference as under:

(a) Revenue neutrality being a question of fact, the same is to be established in the facts of each case and not merely by showing the availability of an alternate scheme;

(b) Where the scheme opted for by the assessee is found to have been misused (in contradistinction to mere deviation or failure to observe all the conditions) the existence of an alternate scheme would not be an acceptable defence;

(c) With particular reference to Modvat scheme (which has occasioned this reference) it has to be shown that the Revenue neutral situation comes about in relation to the credit available to the assessee himself and not by way of availability of credit to the buyer of the assessee’s manufactured goods;

(d) We express our opinion in favour of the view taken in the case of M/s. International Auto Products (P) Ltd. (supra) and endorse the proposition that once an assessee has chosen to pay duty, he has to take all the consequences of payment of duty.

4.16 In case of clandestine clearance against the delivery memo there could be no claim of CENVAT credit. The claim of revenue neutrality cannot be accepted in such case. In case of Star industries [2015 (324) E.L.T. 656 (S.C.)] Hon’ble Supreme Court has held as follows:

35. It was submitted by the learned counsel for the assessee that the entire exercise is Revenue neutral because of the reason that the assessee would, in any case, get Cenvat credit of the duty paid. If that is so, this argument in the instant case rather goes against the assessee. Since the assessee is in appeal and if the exercise is Revenue neutral, then there was no need even to file the appeal. Be that as it may, if that is so, it is always open to the assessee to claim such a credit.

4.17 In case of Bajaj Auto Ltd. [2010 (260) E.L.T. 17 (S.C.)], Hon’ble Supreme Court has held as follows:

“12. Section 11A of the Act empowers the central excise officer to initiate proceedings where duty has not been levied or short levied within six months from the relevant date. But the proviso to Section 11A(1), provides an extended period of limitation provided the duty is not levied or paid or which has been short-levied or short-paid or erroneously refunded, if there is fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty. The extended period so provided is of five years instead of six months. Since the proviso extends the period of limitation from six months to five years, it needs to be construed strictly. The initial burden is on the department to prove that the situation visualized by the proviso existed. But the burden shifts on the assessee once the department is able to produce material to show that the appellant is guilty of any of those situations visualized in the Section.

13. Interpreting this provision, this Court in Collector of Central Excise, Hyderabad v. Chemphar Drugs and Liniments, Hyderabad, (1989) 2 SCC 127 [LQ/SC/1989/101] = 1989 (40) E.L.T. 276 (S.C.), held : (when the period prescribed was six months prior to it being made one year by the Finance Act, 2000, with effect from 12-5-2000) :

“In order to make the demand for duty sustainable beyond a period of six months and up to a period of 5 years in view of the proviso to sub-section
(1) of Section 11A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, before the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful mis-statement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case.”

14. In the case of Cosmic Dye Chemical v. Collector of Central Excise, Bombay, (1995) 6 SCC 117 [LQ/SC/1994/814] = 1995 (75) E.L.T. 721 (S.C.), it is held :

“Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word “wilful” preceding the words “mis-statement or suppression of facts” which means with intent to evade duty. The next set of words “contravention of any of the provisions of this Act or rules” is again qualified by the immediately following words “with intent to evade payment of duty”. It is, therefore, not correct to say that there can be a suppression or mis-statement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11-A. Mis-statement or suppression of fact must be willful.”

15. In Anand Nishikawa Co. Ltd. v. Commissioner of Central Excise, Meerut, (2005) 7 SCC 749 [LQ/SC/2005/954] = 2005 (188) E.L.T. 149 (S.C.), this Court has observed :

“...we find that “suppression of facts” can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty, when facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to wilful suppression. There must be some positive act from the side of the assessee to find wilful suppression.’’

16. In our view, on a reading of the relevant provision the extended period of limitation as provided by the proviso to Section 11A(1) of the Act, can only be invoked when there is a conscious act of either fraud, collusion, wilful mis-statement, suppression of fact, or contravention of the provisions of the Act or any of the rules made thereunder on the part of the person chargeable with duty or his agent, with the intent to evade payment of duty. In the present case, the Tribunal while considering this issue has not stated whether or not there were any such circumstances which would not allow the revenue to invoke extended period of limitation. It only observes in its order since both the assessees are situated under the jurisdiction of the same division and as such it cannot be reasonable to conclude that the revenue was not aware of the transactions. Since this is not what is envisaged under the proviso to Section 11A(1) of the Act, we cannot agree with the reasoning and the conclusion reached by the Tribunal.”

4.18 Appellants have in their submissions do not dispute the fact about the clearance of the goods against delivery memos without issuance of the invoices. The fact which was admitted by the Manager (Commercial) in his statements recorded. The relevant text from the impugned order is reproduced below:

“20. Statement of Shri. Vijay Kumar Mantri, Manager (Commercial), of the Noticee No. 1, was recorded on 10.03.2010 u/s 14 of the Central Excise Act, 1944, wherein he stated that he is working as Manager (Commercial) in Noticee No. 1, since. last 5 years. Shri. Vijay Kumar Mantri further stated that M/s. B. S. S. Mines & Minerals Pvt. Ltd., situated at Plot No. 47/A, Manav Mandir Marg, Village - Yerla, District Nagpur and M/s. GoodEarth AgroChem Pvt. Ltd., Plot No. 51, Mouza Brahmanwada, District Nagpur, are related companies having common directors. Shri. Vijay Kumar Mantri further stated that the Noticee No. 1 is engaged in manufacture of Manganese Oxide (MnO) by way of procuring Manganese Dioxide (MnO2) from M/s. Manganese Ore India Ltd. (MOIL). On being asked Shri. Vijay Kumar Mantri stated that from January 2007 onwards, 99% of MnO manufactured by the Noticee No. 1 is sold to M/s. GoodEarth AgroChem Pvt. Ltd., Brahmanwada. Shri. Vijay Kumar Mantri also informed that the Noticee No. 1 is also engaged in trading activity of MnO, for which the Noticee No. 1 issues Commercial Invoices.

In the statement dated 10.03.2010, on being asked to explain the procedure followed in dispatch of MnO, Shri. Vijay Kumar Mantri stated that when the finished goods i.e. MnO are sold, a Delivery Memo is prepared and the goods are sent to Noticee No. 2 without issuing Central Excise Invoices. This process was carried out for the period 2006-07, 2008-09 and 2009-10 (up to October 2009). He further added that from October 2009 onwards till date, the finished goods are sold on Tax invoices without issuing delivery memo. Shri. Vijay Kumar Mantri further stated that after the goods are despatched to M/s. Goodearth Agrochem Private Limited Brahmanwada, for a month on Delivery Memos, some Central Excise invoices for the sold quantity of finished goods of different grades are prepared on monthly basis and Central Excise duty is paid accordingly, for the material sent under various delivery memos. Shri. Vijay Kumar Mantri also stated that, for the dispatches to M/s. Goodearth Agrochem Private Limited Brahmanwada from the Noticee No. 1, only the Central Excise invoice is prepared and finished goods are not sent with the Central Excise Invoices, since the material mentioned in the invoices was already sent under delivery memos. On being further asked Shri. Vijay Kumar Mantri stated that at the time of preparation of Central Excise invoices, the sale of finished goods is shown as despatched in the RG1.

On being asked about the description of goods shown as Manganese Dioxide (MnO2), in the Delivery Memo issued by M/s. BSS Mines & Minerals Pvt. Ltd. to M/s. Goodearth Agrochem Private Limited Brahmanwada for the period January' 2007 to March' 2007, Shri. Vijay Kumar Mantri stated that the goods despatched in Delivery Memo are actually Manganese Oxide (MnO) but were wrongly written as Manganese Dioxide and M/s. BSS Mines & Minerals Pvt. Ltd. has prepared Tax invoice and the description of goods is shown as Manganese Oxide (MnO) only and they have also paid Central Excise duty on the clearance of the same.

On being asked whether Daily Stock account is maintained for different grades of MnO, Shri. Vijay Kumar Mantri stated that finished goods i.e. MnO is sent to laboratory for analysis and as confirmed by the Lab Incharge, they prepare the delivery memo of that particular grade of MnO and at the end of the month, some Central Excise invoices are prepared for different grades of MnO, but Daily Stock account is not maintained by them for different grades of MnO, since the rate of duty is same for all the grades of MnO, however the value is derived as per the grade of MnO as per analysis report.

Another statement of Shri. Vijay Kumar Mantri, Manager (Commercial), of the Noticee No. 1, was recorded on 13.04.2010 u/s 14 of the Central Excise Act, 1944, wherein he stated that from December 2006 onwards, 99% of the finished goods i.e. MnO is sold to M/s. Goodearth Agrochem Private Limited only. On being asked about the procedures followed in despatch of finished goods etc., Shri. Vijay Kumar Mantri stated that when the finished goods i.e. MnO are cleared / dispatched, a Delivery Memo is prepared and the goods are sent to M/s Goodearth Agrochem Pvt. Ltd., Bramhanwada without issuing Central Excise Invoices. This process was carried out for the period. 2006-07 (from December 2006 to March 2007), 2008-09 and 2009-10 (up to October 2009). Shri. Vijay Kumar Mantri further stated that no clearances or dispatches against the Delivery Challans were shown in the Daily Stock Account. Further on being asked whether Tax Invoices were issued, for the exact quantity of MnO cleared on Delivery Memo, by M/s. BSS Mines & Minerals Pvt. Ltd., Yerla to M/s. Goodearth Agrochem Private Limited, Bramhanwada, Shri. Vijay Kumar Mantri stated that after the goods are despatched to M/s. Goodearth Agrochem Private Limited Brahmanwada, for a month on Delivery Memo, some Central Excise invoices for the sold quantity of finished goods of different grades were prepared on monthly basis and Central Excise duty is paid accordingly, for the material sent under various delivery memos.

On being asked whether production and clearances of 231.335 MT of MnO2 valued at Rs. 32,27,945/-, as per Commercial Invoices, cleared to M/s. Goodearth Agrochem Private Limited Brahmanwada, has been shown in Daily Stock account for the year 2006-07, Shri. Vijay Kumar Mantri stated that the said clearances were neither shown in the Daily Stock account nor they have issued any Tax invoices, as MnO2 is exempted goods as per Central Excise Tariff General Exemption No. 52, Chapter 26 vide Notification No. 6/2002 dated 01.03.2002 as amended by Notification No. 5/2005 dated 01.03.2005.

On being asked that as per notes to account, para 06- Trading Materials of Auditor's report and Balance Sheet for the year 2006-07 and Para 05- Production Sales and Stock of Manganese Oxide (MnO) of Auditor's report and Balance Sheet for the year 2006-07, it is noticed that there is production of 2255.604 MT and sale of 2620.604 MT of Manganese Oxide (MnO) valued at Rs. 2,16,97,153/- whereas as per their Sale Invoices of manufacturing sale is of Manganese Oxide 2317.804 MT valued at Rs. 1,75,15,303/- and is of Manganese Dioxide 302.440 MT valued at Rs. 41,81,850/-, which totally comes to 2620.604 MT valued at Rs. 2,16,97,153/-, Shri. Vijay Kumar Mantri stated that they have wrongly mentioned the production of 2255.604 MT of MnO and clearances of 2620.604 MT MnO in their Balance Sheet and Auditors report for 2006-07. I further state that in fact the production of MnO (Grinded + Un-grinded) is 2179.742 MT and clearances of MnO is 2317.804 MT only. Thus the clearance of MnO2 of 302.440 MT is included in the said clearances shown in the Balance Sheet. No bifurcation of MnO, MnO2 and Manganese Ore is shown in the Balance Sheet; only the total quantity cleared is shown.

On being further asked that though in the year 2006-07 they have shown Trading purchase of 197.060 MT and Trading sale of 197.060MT Manganese Ore, in their Balance sheet, but there is no Trading purchase of Manganese Ore, Shri. Vijay Kumar Mantri stated that though they have not shown separately the purchase of 197.060 MT of Manganese Ore as Trading purchase, but the Manganese Ore purchased from MOIL, has been directly cleared from MOIL to their related company namely M/s. Goodearth Agrochem Private Limited, Bramhanwada and for which they have issued commercial invoices. Shri. Vijay Kumar Mantri added that they have directly sold Manganese Ore to the tune of 1247.660 MT, 1017.670 MT and 269.810 MT, falling under CETH No. 2620, showing Trading sale in the year 2007-08, 2008-09 and 2009-10 (up to October 2009), respectively, under the cover of commercial invoices to their related company namely M/s. Goodearth Agrochem Private Limited, Bramhanwada, from the purchase of Manganese Ore from MOIL.

On being asked that though in their Balance sheet of 2007-08, opening stock of manufactured goods i.e. MnO is shown as 70 MT, but as per Daily stock account, the opening stock of MnO is shown as 199.520, please explain why there is difference of 129.520 MT. Also Shri. Vijay Kumar Mantri was put to explain that though in Balance sheet of 2007-08, the production of MnO is shown as 341.380 MT, whereas as per Daily stock account the production is shown as 211.860, please explain why there is difference of 129.520 MT. Also Shri. Vijay Kumar Mantri was put to explain that whereas the closing balance of MnO shown as 369.380 MT is tallied in Balance sheet as well as in Daily stock account, Shri. Vijay Kumar Mantri stated that in the Balance sheet they have not considered sinters and reverse forms of MnO in the Opening stock of 2007- 08 lying their factory, which has been adjusted in the production figures in the year ending in the balance sheet of 2007-08, by way of adding left quantity of 129.520 MT MnO in the production of 2007-
08 and hence there is difference in production of 129.520 MT in the Daily Stock account register and Balance Sheet.

Shri. Vijay Kumar Mantri further stated that they have sold MnO to the tune of 477.080 MT and 982.287 MT, as trading sales in the year 2008-09 and 2009-10 (up to October 2009) respectively, to their related unit namely M/s. Goodearth Agrochem Private Limited, Bramhanwada, on commercial invoices, purchased by them from various other parties. Though the delivery memos and invoices were consigned to them but the said goods were directly unloaded at M/s. Goodearth Agrochem Private Limited, Bramhanwada.

Shri. Vijay Kumar Mantri further stated that they have not informed regarding the Sr. Nos. of Invoice Book used for Commercial / Trading Sale to the Central Excise Department. Also Shri. Vijay Kumar Mantri stated that they have not submitted the details of production, clearances, dispatches, storage of MnO2 and Manganese Ore (Trading sales) and MnO (Trading sales) in monthly returns filed by them with the Central Excise Department. Shri. Vijay Kumar Mantri also stated that they have not maintained the receipt and storage of raw materials i.e. Manganese Ore, in proper statutory format, this is because the material has never physically entered in the factory premises of M/s. BSS Mines & Minerals Pvt. Ltd., Yerla and the same

has been delivered directly to M/s. Goodearth Agrochem Private Limited, Bramhanwada and Trading Invoices has been raised by them directly on M/s. Goodearth Agrochem Private Limited, Bramhanwada.”

4.19 In our view, by clearing the goods on the delivery memo, which cannot be co-related with the duty paying documents is an act of clandestine clearance and demand of duty against such clearances needs to be made by invoking the extended period of limitation as provided by the proviso to Section 11 A (1) of the Central Excise Act, 1944. Since we uphold the demand of duty by invoking extended period of limitation, in view of the decision of the Hon’ble Supreme Court in case Rajasthan Spinning and Weaving Mill [2009 (238) ELT 3 (SC)], penalty imposed on Appellant 1, under Section 11AC is justified. Since we uphold the penalty imposed under section 11AC of the Central Excise Act, 1944 on Appellant 1, we do not find any justification for imposition of same amount of penalty under Rule 25 of the Central Excise Rules, 2002. Thus the penalty impose under Rule 25 on the Appellant 1 is set aside.

4.20 Appellant 2 is the receiver of the goods cleared by the Appellant 1 against delivery memos. The finding recorded by the Commissioner, to the effect that these goods do not get reflected in their book of accounts is not challenged. Appellant 2 has knowingly dealt with goods which were liable for confiscation knowingly and hence penalty imposed under Rule 26 is upheld.

4.21. Appellant 3 is the Director with both Appellant 1 and Appellant 2. He is responsible for the entire operations of both the units. All the activities of the clearance of the goods against delivery memos etc., were undertaken a with his knowledge as he was the one responsible for the activities of both the units. For his acts of omission and commissions which lead to the clearance of the goods against the delivery memos without payment of duty as leviable, have made the goods liable for confiscation. Thus penalty imposed upon him under Rule 26 cannot be faulted with.

4.21 Appellant have in their submission relied upon certain decision which we do not find relevant for arriving at the findings as recorded in previous paras hence no separate finding is recorded in respect of each the decision. Commissioner has in the impugned order considered the submissions made by the appellant in respect of requirement of the raw material and production being a impossibility and have rejected the same. We do not find any reason to differ from the findings recorded in the impugned order. Further in our view the issues of clandestine clearance and suppression of production are question of facts and have to be determined on the basis of the facts individual case and not on the basis of precedent decisions. The precedence could be on the question of law and not for findings to be recorded on the facts. We do not find any perversity in the findings of facts recorded in the impugned order, which in our view satisfy the test of rationality and reasoning of prudent man.

5.1 Appeal No E/594/2011 field by the Appellant 1 is partly allowed by setting aside the penalty imposed under rule 25 of Central Excise Rules, 2002.

5.2 Appeal No E/595, 596/2011 filed by Appellant 2 and Appellant 3 are dismissed.