ORDER
Shiben K. Dhar, Member (T)
1. These appeals arise out of common Order-in-Original No. 23/89, dated 1-1-1990 of Collector of Central Excise, Jaipur.
2. The facts in brief relating to the issue are :
(i) M/s. Shreenath Cement Industries Pvt. Ltd. Bharja, Distt. Sirohi (Rajasthan), the first appellant, are engaged in manufacturing cement at village Bharja Distt. Sirohi (Rajasthan). On receipt of information that the first appellant in collusion with M/s. Ambika Goods (Transport) Co., Saroopganj (Raj.) (the seventh appellant) were engaged in clandestine removal of cement, certain investigations were carried out on the basis of the investigations which resulted in recovery of incriminating documents, it was alleged that M/s. Ambika Goods Transport Co. used to issue separate set of bilties in a manner as to cover tranpsport of non-duty paid cement. Two bilties for instance were issued, one conforming to the Central Excise gate-passes evidencing payment of duty, and another covering transport of non-duty paid cement. M/s. Ambika goods Transport Co. through their proprietor admitted that extra sets of bilties were prepared to cover transport of non-duty paid cement under specific directions of the first appellant. The other appellants who were the dealers of cement received from M/s. Shrinath Cement Industries, the first appellant, stated that a part of the cement used to be covered by Central Excise gate-passes and other part was non-duty paid.
(ii) During the operations carried out at the premises of the first appellant it was found that quantity of raw material indicated in private accounts of the appellants was far in excess of what was indicated in statutory raw material accounts. The explanation of the first appellant that part of raw material received were defective and were thrown away was not accepted on the ground that no such information had been given to the Department. Certain cement bags were also found in excess of the quantity recorded in statutory excise accounts. Further shortage of 11.3 MT of cement was found in the factory.
2.3. Based on these investigations a common show cause notice was issued to all the appellants. The show cause notice charged the first appellant with evasion of duty of Rs. 1,56,053.50 based on the false bilties recovered from the premises of the first appellant and evasion of duty of Rs. 5,65,673.42 on account of raw material accounts and proposed imposition of penalties on all the appellants.
2.4. In the common order dated 1-1-1990, the Collector of Central Excise, Jaipur confirmed the duty to the tune of Rs. 6,99,251.92 and imposed penalty of Rs. 1,25,000/- on the first appellant. Penalty of Rs. 2,000/- was also imposed under Rule 226 of the Central Excise Rules, 1944 on the first appellant and penalties of Rs. 10,000/- on each of the other appellants were imposed.
3. Learned Advocate Shri Kantawala on behalf of the first appellant submitted before us that case has been based merely on assumptions and inferences. The Department has relied upon certain documents issued by third party. Statutory accounts maintained by the appellants do not indicate any clandestine removal. The excess raw material shown in the private accounts was not put to use as it was found defective. Many of the dealers who are alleged to have referred to the transport of non-duty paid cement under false bilties subsequently retracted the statement given by them. The seventh appellant who was the transporter, had a bias against them and that is why he implicated the first appellant. In fact, as regards bilties, such as may have been recovered, from the seventh appellant, the first appellant was not concerned in preparing such bilties. The first appellant categorically denied that he has given any direction to the seventh appellant to issue double set of bilties. There are a number of other cement factories in the vicinity of appellant’s factory and it is quite likely that seventh appellant used to receive non-duty paid cement from such factories and issued second bilty to cover transport of such non-duty paid cement. The learned advocate, on the specific query from the Bench, admitted that the first appellant had not sought cross-examination of the seventh appellant nor had he alleged bias on the part of the seventh appellant during the original proceedings. The learned advocate further submitted that Collector did not apply correct formula while working out quantity of cement from the raw material account and that the quantity of final product will always vary from factory to factory depending upon the efficiency of the unit. Clandestine removal, the learned Advocate submitted, has to be proved from factories’ own statutory records and not from the documents maintained by a third party. No case, according to him, can be made merely on the basis of assumptions and inferences. In any case show cause notice cannot go beyond demanding duty on 3901.196 MT of cement. The advocate cited following cases in support of his arguments :
(1) Oudh Sugar Mills v. UOI – reported in 1978 (2) E.L.T. (J 172) (SC)
(2) M/s. Ebenezer Rubbers Ltd. v. Collector of Central Excise – reported in 1986 (26) E.L.T. 997 (Tri.)
4. It was urged by the learned SDR Shri K.N. Gupta that there is irrefutable evidence in the form of seized bilties and the categorical statement of the second appellant. As to know modus operandi involved in clandestine removal of cement, two sets of bilties seized and the statement given indicate how the part consignment of cement was covered by duty paying documents and the other part was sought to be covered by another set of bilties merely to cover transport of non-duty paid cement. There is no evidence nor it was even alleged that seventh appellant had any enmity or bias against the first appellant. In such circumstances, there was no reason for the seventh appellant to falsely implicate the first appellant. In fact seventh appellant categorically stated that the bilties are used under specific directions of the first appellant. It is not merely the bilties seized from third parties which indicate evasion. These are in fact corroborative evidence for the evasion which is revealed from statutory account itself. There is no satisfactory explanation given for the disparity between raw material quantity as recorded in private accounts of the appellants and that recorded in the statutory account. It is clear that the excess quantity of cement produced from raw materials not accounted in statutory accounts was removed without payment of duty and how transport of such non-duty paid cement was covered is clearly revealed though the modus operandi of maintaining two sets of bilties. That raw materials in excess were used in producing non-duty paid cement which was clandestinely removed is also proved by other supporting evidence in the form of excess gunny bags found in the factory and shortage of cement. All these things put together clearly establish a pattern: excess raw materials not accounted was used in manufacturing cement which was removed without payment of duty and the transport of such cement was covered by double set of bilties. In regard to appellants, other than first and seventh appellant, SDR submitted that subsequent retraction from the statement has no value but he conceded that he is not strongly pressing the case against these appellants who were in any case not concerned in producing and removing from the factory non-duty paid cement.
5. We have given careful consideration to the submissions made by both the sides. It is admitted position that private raw materials accounts maintained by the first appellant indicate quantity much in excess of that recorded in statutory accounts. The appellants did not make any remark about the defective quantity in statutory accounts nor did they intimate the Department the fact of having discarded excess defective raw materials as indicated in their private raw material accounts. It is not merely the consumption of raw material that the case is based on. The Revenue has produced corroborative evidence in the form of excess gunny bags and the shortage in stock of cement. It is against this back-drop that the statements of other appellants, particularly that of seventh appellant, have to be looked at. We do not find much force in the contention of learned advocate that the seventh appellant had bias against the first appellant and therefore, implicated him. Such a plea was never taken in original proceedings nor were they, as admitted by the learned advocate, subjected to any cross-examination. The plea of bias advanced at this stage, therefore, does not have much force. The position that emerges here is that private accounts indicate the receipt of raw materials in excess of that recorded in the statutory accounts, excess unaccounted gunny bags are found in the premises and shortage of fully manufactured cement has not been properly explained. There is also no serious defect in working out the quantity of cement that would have been produced from the raw material received and recorded in the private raw material accounts of the first appellant. It is not merely third party accounts that have been relied upon by the Revenue in establishing clandestine removal. The statutory accounts themselves coupled with excess and shortages point to clandestine removal particularly in the context of the fact that such discrepancies have not been fully established. There is no error therefore, in the findings of the Collector in regard to non-duty paid cement 3901.196 MT derived from raw material accounts.
5.1. Collector in his order, however, has observed that raw material received pertained to period November, 1986 to March, 1987 and quantity of cement held to have been removed on the basis of bilties and other documents recovered from the second appellant pertained to period November, 1985 to September, 1987. Collector has therefore, deducted the quantity calculated to have been removed on the basis of these bilties during November, 1986 to December, 1986 on the ground that such quantity would have been merged with the quantity calculated to have been removed on the basis of private raw 18/731 material accounts. Collector therefore has confirmed the duty to the tune of Rs. 6,99,251.92 on the reduced quantity of 4740.496 MT which includes 11.3 MT of cement found short at the time of physical verification.
5.2. We find in this case that the Collector for a part of the period has relied on bilties and for other part rejected those bilties and relied only on raw material accounts. We have, in foregoing paras, held that there is no serious infirmity in the Collector’s orders in basing his conclusion on the basis of private raw material accounts for the reason that other corroborative evidence in the form of excess gunny bags, shortage of fully accounted cement and the seized documents from a third party and the statement recorded during the course of investigation clearly pointed to a pattern indicating pre-ponderance of probability in this case. In the light of this, it will not be fair to rely on raw material accounts for the period which is in favour of the Revenue and reject such raw material accounts for the other period. There is no evidence in the form of raw material accounts but there is evidence only in the form of bilties. In establishing a case one cannot rely on one set of documents for one period and reject that set of documents for another period and depend on another set of documents merely because that set is more beneficial particularly when there is no corroborative evidence to support during that period. We therefore, hold that duty can be demanded only on 3901.196 MT of cement.
5.3. In regard to appellants other than first and seventh, we find that there is no direct evidence to attract Rule 229(A) and we are, therefore, not inclined to uphold penalties on them. Accordingly we pass the following order :-
1. Duty demand on 3901.196 MT cement only is confirmed.
2. Penalty on M/s. Shree Nath Cement Industries is reduced to Rs. 65,000/- and penalty of Rs. 2,000/- under Rule 226 is set aside.
3. Penalty on M/s. Ambica Goods Transport Company is reduced to Rs. 2,000/-.
4. Penalty on other appellants i.e. M/s. Shree Kishan & Co., Kailash Cement Works, R.K. Timber Mart, Mukesh Kumar and Co. & Bhupat Ram Ramachander, are set aside.