R.M.S. Khandeparkar, J. (President)

1. Since common questions of law and facts arise in both the appeals, they were heard together and are being disposed by this common order.

2. We have heard Shri A.K. Mishra, learned Advocate for the Appellants and Shri Nitin Anand, learned DR for the Respondent.

3. The present appeals arise from the order dated 20-12-2004 passed by the Commissioner (Appeals), Delhi. By the impugned order, the appeals filed by the Appellants against the order of the original authority have been dismissed. The Additional Commissioner, Delhi by his order dated 5-3-2004 had confirmed the duty amount of Rs. 17,88,262/- against the Appellants in relation to the goods which were cleared without payment of duty during the period 1999 to 2001 along with interest and imposed the equal amount of penalty. An amount of Rs. 2,50,000/- voluntarily paid by the Appellants was ordered to be adjusted and appropriated towards the duty amount payable under the order. The partner of the Appellants has also been subjected to imposition of penalty of Rs. 10,000/-.

4. The Appellants M/s. Sri Sai Enterprises are engaged in the manufacture of Manmade fabrics laminated with PU Foam classifiable under Tariff Heading 5903.00 of the First Schedule to the Central Excise Tariff Act, 1985. The Appellants were availing MODVAT credit on one of the raw materials i.e. PU Foam used in the manufacture of the final product.

5. On the basis of the intelligence report, the premises of the Appellants were searched on 1-2-2001 in the presence of two witnesses and Shri Raj Kumar, Partner of the Appellants firm. During the course of search, physical stock checking of the finished product as well as raw material was undertaken and the same disclosed 1230 m.t. of Man-made laminated fabric in excess of the quantity recorded in the RG.I register in respect thereof and 117.2 kgs. of PU Foam was found short of the recorded balance in RG-23 Part I register. Accordingly, show cause notice came to be issued on 23-7-01. Meanwhile a statement was also recorded of Shri Raj Kumar, Partner of the firm on 1-2-01.

6. The proceeding was contested by the Appellants without success as the adjudicating authority under order dated 5-3-04 demanded duty and imposed the penalty as stated above. The appeal carried against the same did not yield fruitful results to the Appellants. Hence the present appeals.

7. Only issue which arose for consideration in the matter before the lower authorities as well as, which arises for consideration in these appeals, is whether the Appellants had suppressed production of certain quantity of the final product manufactured by the Appellants in order to remove the same clandestinely by showing excess consumption of PU Foam.

8. Both the authorities after considering the entire materials on record including the statement of Shri Raj Kumar and the production report on the basis of test conducted by the Department and by taking into account that one Foam Roll weighing 20 kg. with thickness of 1.8 mm and length of 415 meters have arrived at concurrent findings about the clandestine manufacture of the final product and clandestine clearance thereof and the said production being suppressed from the Department.

9. Indeed the statement of Shri Raj Kumar, the partner of the Appellants firm recorded on 15-2-01 which was carried out in the premises of the Appellants had clearly stated thus:

I further stated that sometimes raw material PU Foam of excess thickness is received instead of 1.8 mm as ordered whereas he sends after converting it into 1.8 mm thickness due to which length of Foam Roll is effected and length is reduced. On being asked I stated that there is no mention of thickness and length of sheet on the bills received from M/s. Sheela Foam, therefore, I could not produce any document/evidence in relation to my aforesaid statement.

Regarding consumption of PU Foam in excess of the actual I have to state that at the demand of the buyers we have to sell some goods without bill. We show the Foam used in such clearances in this manner. I do not keep any details of such sales. On being asked I state that this type of buyers demand mostly of 4 mm variety and I deliver the goods according to their convenience. Further I state that due to fire in August, 1999 in my factory PU Foam and Fabric were gutted; the information of which was not given by me to any Department. Apart from this in April - September, 2000, I have sold approximately 3 tons of PU Foam to Shri Kasturi Lal whose address is not known to me at present.

10. In fact the statement of Shri Raj Kumar was also recorded on the day of search conducted in the premises i.e. on 1-2-2001. In the said statement he had clearly stated that:

Thereafter they(officers) conducted search of the factory and asked to count final product and raw material. I have taken them to factory premises and help them to count the goods. They opened one Foam Roll on which production report SR # 44 dated 24-1-2001 was affixed, and got the same weighed and found the weight 20 kg. Thickness of this was 1.8 mm and length was 415 meters as measured on the machine.

The Officers counted finished products and raw material and found 1230 meter of final product in excess. I cannot say anything about this mistake and explain the same after verification. Similarly 117.2 kgs. of foam was found short on which MODVAT credit of Rs. 3,657/- has been reversed in RG-23A Part-11 voluntarily.

11. The show cause notice was issued to the Appellants on 3-7-2003. Reply to the show cause notice was submitted by the Appellants on 17-12-2003. It is pertinent to note that even in reply to the show cause notice, the Appellants did not dispute the correctness of the statement made on 1-2-2001 and/or 15-2-2001. Undoubtedly in the case of allegation of clandestine manufacture and removal of the goods by an Assessee the initial burden lies upon the Department to prove the same. But in a case where the Assessee himself admits certain basic facts which lead to clear conclusion about clandestine manufacture and clandestine removal of the goods from the factory, onus obviously shifted upon the Assessee to disprove the facts established by the Department on the basis of admissions made by the Assessee.

12. In the case in hand, the Appellants had clearly admitted on 15-2-01 that PU Foam in excess quantity was being received by the Appellants in their factory, that they were manufacturing the final product which was not limited to the quantity of final product as disclosed in the statutory records, that some of the buyers required such final product without being covered by any invoice or bill and that accordingly such product was being supplied to those buyers by the Appellants after being manufactured in the factory of the Appellants. Further, the Appellants were not maintaining any details of such clearances. There was clear admission of these facts on 15-2-2001 and it was nowhere the case of the Appellants that the statement was incorrectly recorded by the Department. In these circumstances, apart from the said admission, the Department having undertaken the experiment in relation to 20 kg. Roll to ascertain the final product which could be manufactured by utilizing the said raw material and on the basis of it having ascertained the quantity of clandestine removal of the goods, which is again supported by established formula in that regard which has been referred to in the order passed by the original authority, we find no fault in the findings arrived at by the authorities below. In this regard, the Appellants have clearly failed to disapprove the material brought on record by the Department, including clear admission on the part of the Appellants on the relevant issue in the matter. Being so, we do not find any case for interference in the matter and hence the appeals are dismissed.