ORDER
S.S. Kang, Member (J)
1. Appellants filed these appeal, against the adjudication order passed by the Commissioner of Central Excise.
2. Brief facts of the case are that appellants are engaged in the manufacture of cycle parts forgings and auto parts forgings. The cycle parts forgings are exempted from payment of excise duty, whereas auto parts forgings are liable to pay exemption duty. The premises of appellants firm was visited by the Excise officers from 8.6.93 to 10.6.93. On physical verification of the stock, it was found that certain quantity of auto parts forgings were not accounted for in their statutory record and certain quantity of auto parts forgings were cleared without payment of duty. It was also found that appellants cleared the scrap and raw material in contravention to the Central Excise Rules. A show cause notice dated 3.12.93 was issued to the appellants and the adjudicating authority confirm the demand and imposed the penalty. The appellants filed appeal and the same was dismissed by the Commissioner (Appeals).
Thereafter, on further investigation, it was found that appellants were clearing auto parts forgings under the guise of cycle parts forgings to their trading firm and the trading firms further sold these auto parts forgings to various customers. A fresh show cause notice was issued on 17.7.95 to the appellants demanding duty from the manufacturer firm after taking into consideration the sale of auto parts forgings by the trading firms. The show cause notice also contains proposal for imposing of penalty. The Commissioner of Central Excise confirmed the demand and imposed penalties.
3. The present appeal is in respect of the show cause notice issued on 17.7.95.
4. The learned Counsel appearing on behalf of the appellants submits that the impugned order is passed on the assumption that appellants are not manufacturing cycle parts forgings and they were clearing only the auto parts forgings under the guise of cycle parts forgings. Their contention is that in the earlier show cause notice dated 3.12.93 it is admitted by the Revenue that they were manufacturing cycle parts forgings also, Annexure ‘C to the show cause notice is the statement of physical verification done by the department and shows the material meant for forgings of auto parts and cycle parts forgings lying in the factory and this statement shows that 34380 MT of raw material for cycle parts forgings were present in the factory of the appellants. The contention of the Counsel is that when the Revenue in the earlier proceedings which are arisen out of the same verification Revenue admitted that appellants were manufacturing cycle parts forgings. Hence now in the present proceedings, which were initiated in pursuance to the second show cause notice, they cannot say that appellants were not producing cycle parts forgings.
5. Appellants also submitted that the trading firm were also purchasing the auto parts forgings from the market, therefore, volume of sale by the trading firm cannot be made basis for the demand from the manufacturing unit. He further submitted that the statements recorded by the Revenue officer at the time of visit of factory also shows that they were selling their cycle parts forgings to various customers other than their trading firms and no investigation was conducted from the customers to whom the cycle parts forgings were sold by the manufacturing unit. Learned Counsel submits that the Commissioner in the impugned order relied upon the technical opinion by General Manager of Research and Development Centre for Bicycles and Sewing Machines, Ludhiana to conclude that the raw material used by the appellants is not for cycle parts forgings. The contention of the appellants is that the statements recorded by the Revenue authorities at the time of the visit, the stands taken by the appellants is that cycle parts forgings were manufactured out of round of 36 mm to 56 mm and auto parts forgings were manufactured by using of round of 15 mm to 155 mm. The contention of the Counsel is that as per the expert opinion rods of 25 mm diameter and 32 mm dia. are used for the manufacture of cycle cranks. The submission of the Counsel is that at the time of the cross-examination the General Manager of Research and Development Centre for Bicycles and Sewing Machines, Ludhiana admitted that his opinion is based on the survey and normal practice adopted by the cycle parts manufacturers. His submission is that therefore, the opinion relied upon by the Revenue is not a definite opinion to say that from the raw material appellants are using, no cycle parts forgings can be manufactured.
6. The learned SDR appearing on behalf of the Revenue submitted that appellants adopted a modus operandi to remove excisable goods i.e. auto parts forgings to their trading firm by showing as cycle parts forgings which are exempted from payment of duty. The raw material found in the factory is fit for manufacture of auto parts forgings and this is supported by the expert opinion of Research and Development Center for Bicycles and Sewing Machines, Ludhiana. His submission is that the appellants are also manipulating the GP-I books. In one copy they were showing cycle parts forgings evidences clearing non-dutiable goods and in the second copy of GP-I, the appellants were showing clearances of cycle cranks forgings. For this he relies upon to GP-I number 9 dated 15.4.93 and No. 43 dated 2.6.93.
7. In rebuttal, learned Counsel appearing on behalf of the appellants admitted that there is a mistake in these two G.P. Is by the excise clerk.
8. Heard both sides.
9. In this case the allegation against the appellants is that manufacturing unit was clearing auto parts forgings under the guise of cycle parts forgings. Cycle part forgings are exempted from payment of excise duty hence appellants were evading excise duty.
10. Shri Narsi Das Garg in his statement dated 24.5.95 mentioned that maximum quantity of cycle parts forgings manufactured by them were sold to M/s. Jain & Company, Jain Colony, Dhaba Road, Ludhiana and six other customers. No investigation is made from M/s. Jain & Company and from other customers regarding the facts mentioned in the statement made by the appellants. The Revenue is only relying on the fact that the trading firm had not proved the fact regarding purchase of auto parts forgings other than from manufacturing unit and the total sale made by the trading firm was taken into consideration for assessing the duty on manufacturing firm. The question remains whether the manufacturing firms manufactured the cycle parts forgings or only manufacturing auto parts forgings. No investigation is conducted from the workers/employees of the manufacturing firm regarding this aspect. Appellants also specifically mentioned before the Revenue that for cycle parts forgings, they were using round of 36 mm to 56 mm and auto parts forgings they were using round of 15 mm to 155 mm. An expert opinion which is based only on market survey does not opine that the raw material which is said to be used in the manufacture of cycle parts forgings is not fit for manufacture of the cycle parts forgings. It is a settled law that suspicion, however grave, cannot take place of evidence to prove the charges.
11. In the earlier show cause notice dated 3.12.93 which was issued in pursuance to the same visit admitted shortages of the cycle parts forgings and also some variations in the inputs for cycle parts forgings. This also proves the fact that appellants are also engaged in the manufacture of cycle parts forgings. Therefore, we do not find any evidence to show that appellants were clearing auto parts forgings under the guise of cycle parts forgings.
12. Regarding the allegation that appellants were maintaining two sets of GP-Is. There are only two GP-Is which shows the clearances of auto parts forgings and no duty has been paid and this fact was admitted by the appellants as a mistake of their excise officer. Therefore, the demand in respect of invoice Nos. 9 and 43 of Rs. 48,253 is upheld. The demand of remaining amount of duty is set aside and consequential penalty is also set aside. The appeals are disposed of as indicated above.