a HIGH COURT OF CHHATTISGARH AT BILASPUR TaxCase No.7 of 2009 APPELLANT: RESPONDENT: APPELLANT: RESPONDENT: APPELLANT: RESPONDENT: Union of India, Through Commissioner, Central Excise and Customs, Central Excise Bhawan, Dhamtari Road, Tikarapara, Raipur (CG) 492 001 Versus M/s Ambattur Petrochem Ltd. 17/19, Industrial Area, Rawabhata, Raipur (CG) TaxCase No,8 of 2009 Union of India, Through Commissioner, Centra! Excise and Customs, Central Excise Bhawan, Dhamtari Road, Tikarapara, Raipur (CG) 492 001 Versus M/s Prakriti Industries, 9B, Industrial Area, Rawabhata, Raipur (CG) AND Tax Case No.9 of 2009 Union of India, Through Commissioner, Central Excise and Customs, Central Excise Bhawan, Dhamtari Road, Tikarapara, Raipur (CG) 492 001 Versus M/s Mohini Industries, 9A, Industrial Area, Rawabhata, Raipur (CG) Present: Shri Bhishma Kinger, counsel for the appellant. Shri Rahul Tamaskar, counsel for respondent in Tax Case No.7/09. Djvision Bench: Hon'ble Shri Dhirendra Mishra & Hon'ble Shri R.N. Chandrakar. JJ. JUDGMENT (26-3-2010) 1. The aforesaid appeals are being disposed of by a common order, as all these appeals are directed against the common order dated 29-9-2008 passed by the Customs, Excise & Service Tax Appellate Tribunal, Principal Bench, New Delhi (for short 'the Tribunal') and the Tribunal has dismissedall the three appeals preferred by the Revenue against the order of the Commissioner (Appeals). These appeals have been preferred under Section 35-G of the Central Excise Act, 1944 (for short 'the Act') on the following substantial question of law:- • Whether the Central Excise duty which was assessed by the adjudicating authority of finished excisable goods, which was removed clandestinely by the respondents is recoverable? 2. Briefly stated facts, as projected in the impugned order, are that the respondents are engaged in the manufacture of goodsclassifiable under Chapter 38, 29 and 28 ofthe Schedule to the Central Excise Tariff Act, 1985. On 2 February, 2001, the Central Excise OfHcers visited the factories of the respondents and conducted stock veriflcation and found variation in physical stock of raw materials and finished goods compared to book balance. They aiso recovered a record containing 'Labour Bill of Sanjay Singh" from the premises of respondent No.1. They recorded the statement of Shri Sanjay Singh, who employed labours for loading and unloading of goods at the factories of the respondents. They also recorded the statement of Shri Prasoon Kumar, Proprietor of respondent No.1, i.e. M/s Prakriti Industries. Thereafter, three show cause notices were issued separately to the jespondents proposing demand of duty on the basis of the 'Labour Bills of Shri Sanjay Singh', The Adjudicating Authority confirmed the demand of duty and imposed penalty of equat amount along with interest by separate adjudication orders. The Commissioner (Appeals) set aside the adjudication orders and allowed the appeals filed by the respondente. The appeal preferred by the appellant was further dismissed by the impugned order. % 3. Shri Bhishma Kinger, tearned counset for the appellant, vehemently argued that 'Labour Bill of Sanjay Singh' was recovered under Panchanama proceeding. The contents were certified to be true by said Sanjay Singh in his statement dated 2 February, 2001 recorded under Section 14 bf the Act. The aforesaid document ctearly shows that respondents secretly and clandestinely removed manufactured goods leaving no trace of consumption of raw materials and sale details. The set of documents i.e. 'Labour Bill of Sanjay Singh" and his statement could not be brushed aside'only on the ground of absence of record and other corroborative evidence as manufacturer clandestinely removing the goods would leave no trace of consumption of raw materiais and sale details. The shortage of stock of raw materials was aiso found in physical verification. Variation in the stock of flnished goods and inputs during physical verification is sufRcient to prove that the respondents were engaged in removing the gaods clandestinely without entering the same in their statutory records. Sanjay Singh was employed as a labour by M/s Prakriti Industries, Raipur who also worked simutteneously for all the 3 unitsand with his cooperation the respondents avaited exemption from excise duty. The finding recorded by the Commissioner (Appeals) and subsequently confirmed by the Tribunal is based on incorrect interpretation of the statute and therefore erroneous and improper. The question of law as proposed arises for adjudication. 4. Shri Rahul Tamaskar, learned counsel appearing for respondent in Tax Case No.7/09, submitted that the appellate Commissioner and the Tribunai on the basis of material available on record have set. aside the order of the adjudicating authorHy byrecording a finding of fact that largerquantity of Chtorinated gas cannot be obtained from open market as the procurement of chlorine gas requires fulfillment ofvarious legal formalities. Noqueries were conducted from respondents No.2 and 3. There is no material that the respondente had knowledge of maintenance of 'Labour Bill of Sanjay Singh'. No material was placed by the Revenue that the goods were cleared outside of the factory to the customers. Mere slips of statements are not sufficient for confirmation of demand on the allegation of clandestine removal and to substantiate the allegation of clandestine removal, the evidence in the form of receipt of raw materials, shortage thereof, excess use of electricity, excess/shortage of inputs in stock, flow back of funds, purehase of final products by parties alleging receipt and removal of goods ete are necessary. 5. We have heard teaned counsel for the parties. 6. The proceedings were initiated against the respondents on the basis of record namely, 'Labour Bill ofSanjay Singh' recovered from the premises of M/s Prikriti Industries during the visit of officers on 2-2-2001 . The documents revealed unloadlng, manufacturing and shifting of goods to ttie adjacent unite during the period October to December, 2000. The aforesaid removals were not recorded in the statutory records of the respondents and no invoices were issued. Accordingly, 3 show cause notices were issued for demand of duty of Rs.3,02,817/- and Rs.1,52,800/- on the finished goods and inputs respectively. The respondents denied the charges. The adjudicating authority relying upon the document 'Labour Bilt of Shri Sanjay Singh' and statement of Shri Sanjay Singh recorded under Section 14ofthe Act, and rejecting the defence of the respondents, held that central excise duty of Rs.3,02,817/- under Section 11-A of the Act and'Cenvat eredit of Rs.1,52,800/- underRute 57AH ofthe Central Excise Rules, 1944 (for short 'the Rules, 1944') read with Section 11-A of the Act was imposed with interest on the aforesaid amount under Section 11-AB of the Act. An equal amount of penalty was also imposed under SecBons 11AC of the Act read with Rule 173Q ofthe Rules, 1944. 7. The Commissioner (Appeals) dropped the proceedings vide order dated 31 Mareh, 2006 and observed that variation in stock noticed at the time ofstock taking was negligible as comparpd to the alieged quantities that have been produced. The departmental officers have not come across any document to indicate variation in stock to that extent though the raw materials except for chlorine and controlled commodities, but such huge quantities of raw materials would not be freely available in the market and would have to be procured by the appellant from well established units which would be received under proper document. Such large quantities of chlorine gas cannot be obtained from the open market as the procurement of chtorine gas requires fulfillment of various legal fonnalities and accordingly held that the ctandestine production of such large quantiUes of goods in 3 months is not corroborated by any evidence of purchase of raw materials etc. There is no evidence of sale of such goods and also of cash or financiai transactions which would lead one to believe clandestine manufacture and clearance of goods and recorded a finding of fact that no extra production of goods has taken place and consequently the clearance. Even the removat of raw materials does not get proved. 8. Learned Tribunal concurring with the finding of fact recorded by the Commissioner of Appeals also observed that the separate show cause notices were issued against shortage/excess of stock verification and ttie said proceedings are still pending. The present proceedings were initiated on the basis of document "Labour Bills of Sanjay Singh" recovered from the premises of respondent No.1. l.t was finally observed that Commissioner (Appeals) rightty obseroed that such larger quantity of chlorinated gas cannot be obtained from the open market as the procurement of chlorine gas requires fulfillment of various legal formalities. Since no enquiries were conducted from respondents No. 2 and 3, there is no WB^^.^^^^^^^ ^:;^^;Si^^E^^^ ^^^^j%^w^^r^^ material that respondents had knowledge of maintenance of 'Labour Bills of Sanjay Singh'. The order passed by the Commissioner (Appeals) has been upheld and the appeal preferred by the department was dismissed. 9. From perusal of the ordere passed by the forums below, H: is manifestly clear ttiat the Commissioner (Appeals), after elaborately considering maferial available on record, has recorded a finding of fact that clahdestine manufacture of excisable goods and its removal from the factory premises is not proved. Merely on the basis of document "Labour Bitls of Sanjay Singh" and his statement and without any further enquiry and corroborative evidence, it cannot be held that the extra production of goods has taken place and consequentty the clearance. Even the removat of raw materials does not get proved. 10.0n the basis of aforesaid discussion, we are of the opinion that the substantial question of lawas proposed by the appellant is a question of fact and no substantiat question of law arises for adjudication of these appeals. 11. The appeals areaccordingly dismissed. Sd/- Dhirendra Mishra Judge Baru'e Sd/- R.N. Chandrakar Judge