ATMARAM TRIPATHI DIRECTOR OF TRINETRA TEXTURISERS PVT LTD V. COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX SURAT II

TAXAP/406/2018

AI Insights

The case involves Trinetra Texturisers Pvt Ltd, which faced allegations of clandestine removal of goods without payment of excise duty. The initial inquiry by the Department led to a show cause notice and subsequent penalties based on the alleged production capacity of a machine used in the factory. The Tribunal initially remanded the matter for a re-determination of the production capacity, but upon finding the machine non-functional, the Department did not verify similar machines elsewhere. The High Court criticized the Department's approach and the Tribunal's reliance on the Department's findings without further verification, leading to the setting aside of the Tribunal's orders.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 745623 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 13-03-2020
• Assessment Year: misc
• Other Referred Cases: R.K.Mill Board (P) LTD. Versus Commissioner of Central Excise, Meerut, Shivam Casting Versus Commissioner of Central Excise, Commissioner of Central Excise Versus Saaken Alloys Pvt. Ltd.
• Laws Referred To: Central Excise Act, 1944
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NIRZAR DESAI
• Assessee Lawyers: NIRAV SHAH
• Keywords: Clandestine Removal; Confiscation; Excise Duty; Penalty; Production Capacity
• Section: 173Q(1); 11-AB; 11A(2); 35G; 173E; 173Q(2)(a)

Judgement Text

"C/TAXAP/405/2018 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 405 of 2018 With CIVIL APPLICATION (FOR STAY) NO. 1 of 2018 In R/TAX APPEAL NO. 405 of 2018 With R/TAX APPEAL NO. 406 of 2018 With CIVIL APPLICATION (FOR STAY) NO. 1 of 2018 In R/TAX APPEAL NO. 406 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA =================================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? =================================================================== TRINETRA TEXTURISERS PVT LTD Versus COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX SURAT II ============================================================================== Appearance: MR NIRAV P SHAH(6475) for the Appellant(s) No. 1 MR NIRZAR S DESAI(2117) for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 13/03/2020 COMMON ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. Since the substantial questions of law involved Page 1 of 35 C/TAXAP/405/2018 JUDGMENT in both the captioned Tax Appeals are the same, those were heard analogously and are being disposed of by this common judgment and order. 2. The Tax Appeal No.405 of 2018 is treated as the lead matter. 3. This appeal under Section 35G of the Central Excise Act, 1944 (for short the ‘Act, 1944’) is directed against the order passed by the Customs and Service Tax Appellate Tribunal (for short ‘the CESTAT Tribunal’), Ahmedabad, dated 21st September, 2017 in the Appeal No.E/607,608/2008. 4. On 19th April, 2018, a Co-ordinate Bench of this Court passed the following order: “Counsel for the appellant submitted that before the Central Excise, Customs & Service Tax Appellate Tribunal, the appellant had raised several grounds of facts and law. The Tribunal, however, dealt with only one of the issues; namely, of ascertaining the production capacity of the machinery. Though several other legal issues arose out of the order in original passed by the Commissioner after the remand made by the Tribunal, the Tribunal did not examine these issues though argued before it. Notice for final disposal, returnable on 20th June 2018.” 5. Both the tax appeals are admitted for the consideration of the following substantial questions of law : “(i) Whether or not the Hon’ble Tribunal erred in law in not considering Page 2 of 35 C/TAXAP/405/2018 JUDGMENT remand order of the Tribunal and confirming the demand beyond the scope of remand proceedings? (ii) Whether or not the Hon’ble Tribunal erred in law in not considering production capacity on the basis of certificate of various authority and confirming demand beyond the production capacity on assumption basis? (iii) Whether or not the Hon’ble Tribunal erred in law in not permitting determination of production capacity on identical machine at any other factory? (iv) Whether or not the Hon’ble Tribunal erred in law in not considering other legal submissions of production capacity under rule 173E?” 6. Both the Tax Appeals are taken up for final hearing forthwith, as the notice was issued for final disposal. 7. The appellant of the Tax Appeal No.405 of 2018 is a Company, incorporated under the Companies Act, whereas, the appellant of the connected Tax Appeal is a Director of the Company. The appellants are in the business of manufacturing Texturized Yarn. The appellants are assessees under the Act, 1944. The appellants have a factory situated at Village:Karanj, District:Surat. They installed one Himson Rieter Scragg Draw Texturising Machine in their factory on February, 1994 Model SDS-3 with 144 spindles purchased from M/s.Himson Engg. vide invoice dated 21.04.1994. 8. The factory premises of the appellant was visited by the officers of the Department on Page 3 of 35 C/TAXAP/405/2018 JUDGMENT 05.04.1995 and a search was carried out of the factory premises. The statements of the Directors were recorded in the course of the search. In the course of the search of the factory premises, the officers of the Department took into possession documentary evidence in the form of Registers, etc. At the end of the inquiry, the Department came to the conclusion that the appellant was guilty of clandestine removal of the goods manufactured in the factory premises. In other words, the Department noticed that the goods were cleared without accounting in the central excise records and without payment of duty thereon. 9. In such circumstances referred to above, a show cause notice came to be issued dated 27th September, 1995, calling upon the appellant to show cause why a particular amount should not be recovered with penalty towards the unaccounted texturized yarn. 10. The appellants appeared before the concerned authority with necessary documentary evidence to make good their case that the allegation of clandestine removal of the goods from the the factory premises without payment of duty was baseless. The principal argument of the appellant before the authority was with regard to the production capacity of the machine which was installed in the factory premises. The appellant pointed out that the figure of production arrived at by the Department was three to seven times more than the actual capacity of the machine. At the Page 4 of 35 C/TAXAP/405/2018 JUDGMENT relevant point of time, the appellants adduced evidence with regard to the manufacturing/production capacity of the machine. It was pointed out that the capacity of the machine was not more than 448 kgs per day in a span of 24 hours. 11. Ultimately, upon final adjudication, the Commissioner came to the conclusion that the appellants were guilty of clandestine removal of the goods manufactured by them in their factory premises without the payment of the requisite excise duty. An order came to be passed by the Commissioner for recovery of a particular amount with penalty. 12. The appellants, being dissatisfied by the order passed by the Commissioner, went in appeal before the CESTAT Tribunal. The Tribunal partly allowed the appeal preferred by the appellants by remitting the entire matter to the Commissioner for de novo proceedings. While remitting the matter to the Commissioner, the Tribunal observed as under: “(a) The appellants had produced Certificate from Technical/qualified authorities to contest the alleged production figures of Texturised Yarn was not possible or technically feasible on the machine installed & employed. They submit that production arrived at by Revenue is 3 to 7 times more than the actual capacity of the machine. The Certificate of M/s. Amson Techno Services, the annual maintenance contractor, had certified based on world known formulla, the production to be not more than 11,490 kgs for 28 working days or approximately 442.000 kgs. per day. The capacity as per the manufacturers is not more than 448 kgs. per day of 24 hours. The assessee had also produced Certificate from MANTRA (i.e Man Made Textile Page 5 of 35 C/TAXAP/405/2018 JUDGMENT Research Association) certifying the formula adopted to be correct to arrive at production capacity. The appellants had made the following chart & submission it before the Commissioner:- Date Production as per RG1 (Kgs) Illicit/excess production alleged (kgs) Total product (Kgs) 15.09.94 24.09.94 05.10.94 06.10.94 07.10.94 18.10.94 12.11.94 13.11.94 17.11.94 354.820 398.150 390.020 382.910 355.870 359.460 474.400 422.930 407.630 855.080 1338.020 2611.880 1325.880 1417.900 1202.730 1602.430 1636.700 985.210 1209.900 1736.170 3001.900 1908.790 1773.770 1562.190 2076.830 2059.630 1362.640 The impossibility or probability, of such a high percentage of yield, on the said machine was a factor which goes to the root of the charge of unaccounted production and clearance. The Commissioner has only found unsustainable reasons to reject the Certificates and has not arrived at any findings independently, of his own as to how the production in such large excess could be emerging from the said machines installed. Such orders are required to be set aside & returned back to the Commissioner to redetermine the production capacity and thereafter determine unrecorded production, if any, and duty & other liabilities. (b) The appellants plea that the duty demands have been made on production arrived on days the factory was closed, needs a reconsideration, since there is no material available to indicate that the factory was in production when it had declared a closed holiday or closure. (c) Reliance on the private records and entries therein need to be reconsidered along with material, if any, available on consumption of other raw material used e.g. Oils used in Draw Texturising and electricity consumption. Trial Page 6 of 35 C/TAXAP/405/2018 JUDGMENT runs could be ordered & conducted on the machines to determine optimum production capacities, as provided for under Rule 173E of the Central Excise Rule 1944, which were applicable and available for the period under dispute. Mere entries on the private records cannot be conclusive evidence of unaccounted production. (d) The reliance of the Ld.Advocate for the appellants, on the decision in case of George Varghese {1992 (60) ELT 361 (Ker} is well founded to arrive at an order of Remand since there is a failure on part of the Revenue to advert to proper material/relevant evidence to arrive at actual production & unaccounted clearance thereafter with liability to penalty, if any. (e) Since we are ordering a Remand for re- determination of the production, we do not arrive at any findings on other issues, keeping them for both sides in the Denovo proceedings.” 13. Thus, what weighed with the Tribunal in the first round of the litigation was the argument of the appellants with regard to the production capacity of the machine which had been installed in the factory. The Tribunal observed that the Commissioner was not justified in rejecting the certificates which were produced by the appellants with regard to the production capacity of the machine. The Tribunal indirectly conveyed that the burden is upon the Revenue to look into the production capacity of the machine and determine the liability accordingly. At the same time, the reasonings arrived at by the Commissioner did not find favour with the Tribunal. In such circumstances, the matter came to be remitted. 14. In the aforesaid context, we may observe that Page 7 of 35 C/TAXAP/405/2018 JUDGMENT the remand was on a specific issue and the Commissioner was obliged to keep this issue in mind while re-determining the liability of the appellants. When the matter was once again looked into by the Commissioner, it gave a total go bye to the issue of determination of the production capacity of the machine because, as observed by the Commissioner, in the second round of the litigation, when the officers visited the factory premises of the appellants to examine the machine, they found the same to be not in a working condition. 15. The Commissioner took the view that as the machine which had been installed in the factory premises was not in the working condition, it was not possible for the Department to examine the production capacity and, therefore, the burden upon the Department stood automatically discharged. With an absolutely incorrect approach towards the matter, the Commissioner once again adjudicated and held the appellants liable for the alleged clandestine removal of the goods. We may note the relevant observations made by the Commissioner in its order dated 31st January, 2018 as under: “23. The noticee vide their defence submission dated 13.12.2007 has requested for deputing any office at any factory having same machine to verify the production capacity. During personal hearing they showed their inability to run the same machine i.e. HIMSOn Scragg Draw Texturising Machine, Model SDS-3, with 144 Spindles, as the said machine is in junked condition and could not run. He requested for conducting a trial run at Page 8 of 35 C/TAXAP/405/2018 JUDGMENT any factory having machine as M/s. Trinetra Texturising Machine, Model SDS- 3, with 144 Spindles, as the said machine is in junked condition and could not run. He requested for conducting a trial run at any factory having machine as M/s.Trinetra Texturisers is closed since long and the machine is not in working condition. I find that in absence of the machine in question, the re-determination of production capacity is not possible. Moreover, after 14 years the exercise of gathering records of raw materials, oil and electricity consumption, etc. is also not possible as the unit is closed since long. I find that, the assessee’s request for running trial production on any machine will be beyond the scope of CESTAT’s directions, because production capacity of the particular machine has to be re-determined which the assessee possessed at the material time. Further, there cannot be a fixed norm for earning production of texturised yarn, the production may differ from machine to machine. It is pertinent to mention that as per Rule 173E of the Central Excise Rules, 1944, the determination of normal production of the factory was not done at the material time and now when the said machine is not in working condition, the same cannot be carried out. I find that the noticee advocating, production capacity of their machine to counter the packing slips and other private records seized during panchnama dated 05.04.95 is an attempt, contrived to mislead the adjudication proceedings in arriving at wrong production data when that particular machine is not in a working condition. Hence, I do not accpet noticee’s request to run test production elsewhere on any machine and proceed to decide the case based on evidence available on records. 25. It is seen from the Show Cause Notice that the entire amount of duty to be demanded and recovered from the factory had been worked out in Appendix-I to IV prepared on the basis of documents/records seized vide Annxure ‘C” to the panchnama dtd 05.04.95. A summary sheet as per the Appendix I to IV has been prepared. All these Appendix I to IV were alleged to be related to the illicit Page 9 of 35 C/TAXAP/405/2018 JUDGMENT production of texturised yarn illicitly cleared by the factory and form the major portion of the total duty demanded in this case which is as under:- :Amount of duty: Appendix-I Rs.45,08,314/- Appendix-II Rs.16,21,729/- Appendix-III Rs.2,29,959/- Appendix-IV Rs.3,27,283/- Total Rs.66,87,383/-” 16. We take notice of the fact that as the machine installed in the factory premises was not functional, the appellants requested the Officers of the Department to conduct a trial run at any other factory having such machine installed and in working condition. It appears, on the plain reading of the observations made in Paragraph No.23, that such a request made by the appellants was outright rejected. 17. Thereafter, the Commissioner proceeded to once again look into the other issues like the documentary evidence in the form of Registers, the statements of the Directors, etc. At the end of the de novo adjudication, the Commissioner passed the following order: “01. I, order confiscation of (i) 487.120 Kgs of texturised yarn valued at Rs.47,737.76, found excess than the recorded balance; (ii) resultant texturised yarn 7109.350 Kgs. valued at Rs.6,96,716.30 and (iii) texturised yarn waste 1966.810 kgs valued at Rs.1,968.10 obtained out of 7306.160 Kgs of POY under Rule 173 Q(1) of Central Excise Rules, 1944. Page 10 of 35 C/TAXAP/405/2018 JUDGMENT However, since the goods in question have already been released provisionally on execution of B-11 Bond for full value of the seized goods backed by Bank Guarantee of Rs.1,49,000/- and the factory has not produced the said goods before me during the proceedings, I order that M/s. Trinetra Texturusers (P) Ltd., Karanj, Dist. Surat, shall pay a redemption fine of Rs.1,49,000/- (Rupees one lakh forty nine thousand only) under section 34 of the Central Excise Act, 1944 on the provisionally released goods in lieu of confiscation. This redemption fine stands appropriated from the Bank Guarantee of Rs.1,49,000/- (Rupees one lakh forty nine thousand only) already furnished by them at the time of provisional released of the goods. 02. I confirm Central Excise duty amounting to Rs.3,44,711.86 (BED Rs.2,99,749.62 + Addl/ Duty Rs.44,962.24) leviable on seized goods which were provisionally released and subsequently cleared by the factory on payment of duty due thereon, under the provisions of Rule 9(2) of the Central Excise Rules, 1944. 03. I determine Central Excise duty amounting to Rs.66,87,285/- (Rs.58,15,030/- BED + Rs.8,72,255/- Addl. Duty) leviable on the illicit production and clearance of texturised yarn weighing 92,302.078 Kgs. valued at Rs.96,91,717/- (as detailed in Appendix-I to IV of Show Cause Notice) under Rule 9(2) of Central Excise Rules, 1944 read with Section 11A(2) of Central Excise Act, 1944. M/s. Trinetra Texturusers (P) Ltd., Karanj, Dist. Surat, forthwith will pay the duty so determined under provisio to Section 11A(1) of Central Excise Act, 1944. The interest is also payable for the delayed payment of the duty demanded above as stipulated under Section 11 AB of Central Excise Act, 1944. 04. I, order confiscation of land, building, plant, machineray etc belonging to M/s. Trinetra Texturusers (P) Ltd., Karanj, Dist.Surat, and used in the manufacture, strong and removal/clearance of exercisable goods involved in this Page 11 of 35 C/TAXAP/405/2018 JUDGMENT case under Rule 173 Q(2)(a) of Central Excise Rules, 1944. However, I give an opinion to the party to get same redeemed on payment of redemption fine of Rs.5,00,000/- (Rupees five lakhs only) in lieu of confiscation. This option should be exercised by them within 3 months from the date of receipt of this order. 05. I impose a penalty of Rs.25,00,000/- (Rupees Twenty Lakhs only) on M/s. Trinetra Texturures (P) Ltd., Karanj, Dist.Surat under Rule 173Q(1) of Central Excise Rules, 1944. 06. I, impose a personal penalty of Rs.5,00,000/- (Rupees Five Lakhs only) on Shri Atmaram Tripathi, Director of M/s.Trinetra Texturusers (P) Ltd., Karanj, Dist.Surat under Rule 173Q(1) read with Rule 209A of Central Excise Rules, 1944.” 18. The appellants, being dissatisfied with the aforesaid order passed by the Commissioner, had to once again go before the Tribunal with two appeals. 19. The Tribunal passed the impugned order without any application of mind ignoring the position of law. It was not expected of the Tribunal to pass such an order. In fact, the impugned order passed by the Tribunal in the second round of the litigation is something defying the order passed by the Tribunal in the first round of the litigation. The relevant observations made by the Tribunal in its impugned order reads thus: “7. We find that in the first round of litigation before this Tribunal, a plea was made by the appellant submitting that the machines installed in their factory are not capable of producing the quantity of goods alleged to have been Page 12 of 35 C/TAXAP/405/2018 JUDGMENT manufactured and cleared during the relevant period clandestinely. Accepting their arguments, this Tribunal has remanded the matter to the Adjudicating Authority to ascertain the production capacity of the appellant in terms of Rule 173E of Central Excise Rules, 1944, and thereafter to proceed to determine the allged removal of goods on the basis of evidence available on records. Since the appellant could not make available the machines for trial run, the Ld.Commissioner proceeded with the evidences available on record and confirmed the demand accordingly as directed by this Tribunal. The Ld.Commissioner recoreded its findings as follows: “The notice vide their defence submission dated 13.12.2007 has requested deputing any officer at any factory having same machine to verify the production capacity. During personal hearing they showed their inability to run the same machine i.e., HIMSON Scragg Draw Texturising Machine, Model SDS-3, with 144 Spindles, as the said machine is in junked condition and could not run. He requested for conducting a trial run at any factory having machine as M/s Trinetra Texturisers is closed since long and the machine is not in working condition. I find that in absence of the machine in question, the redetermination of production capacity is not possible. Moreover, after 14 years in the exercise of gathering records of raw materials, oil and electricity consumption etc., is also not possible as the unit is closed since long. I find that, the assessee’s request for running trial production on any machine will be beyond the scope of CESTAT’s directions, because production capacity of the particular machine has to be redetermined which the assessee possessed at the material time. Further, there cannot be a fixed norm for earning production of Page 13 of 35 C/TAXAP/405/2018 JUDGMENT texturised yarn, the production may differ from machine to machine. It is pertinent to mention that as per Rule 173E of Central Excise Act, 1994, the determination of normal production of the factory was not done at the material time and now when tehsaid machine is not in working condition, the same cannot be carried out. I find that the noticee advocating, production capacity of their machine to counter the packing slips and other private records seized during panchnama dated 05.04.95 is an attempt, contrived to mislead the adjudication proceedings in arriving at wrong production data when that particular machine is not in working condition. Hence, I do not accpet noticee’s request to run test production elesewhere on any machine and proceed to decide the case based on evidence available on records.” 8. We find that Tribunal has specifically directed after hearing both sides to carry out trial run to ascertain the capacity of production of the machines installed in the factory premises of the appellant. The appellant, before this Tribunal has accepted the said order and also later did not approach the Tribunal in making a plea of unavailability of machines for trial run. In these, circumstances, we do not see any reason to disagree with the findings of the Ld.Commissioner, who has rightly held that determination of production capacity of machine installed in other premises would be a futile exercise, as it could bot give a correct picture of production capacity of the appellate, accordingly, decided the case on merit on the basis of evidences available on record. In the result, the impugned order is upheld and the appeals are dismissed.” 20. We are not in a position to understand on what basis the Tribunal recorded in its impugned order Page 14 of 35 C/TAXAP/405/2018 JUDGMENT that the Commissioner rightly held that the determination of the production capacity of the machine installed on the other premises would be a futile exercise as the same may not give a correct picture of the production capacity of the appellants. The Tribunal completely overlooked the fact that in the first round of the litigation, the remand was on the very same issue and, therefore, there was no question of taking the view that it would be a futile exercise. 21. In such circumstances referred to above, the appellants, being dissatisfied with the impugned order passed by the Tribunal, are here before this Court with the present Appeals. Submissions on behalf of the appellants: 22. Mr.Deven Parikh, the learned senior counsel appearing for the appellants, vehemently submitted that the impugned order passed by the Tribunal is erroneous, and on the face of it, not tenable in law. 23. Mr.Parikh, further submitted that the impugned order, in fact, runs contrary to the order passed by the Tribunal in the first round of the litigation. The impugned order completely dilutes the idea with which the matter was remanded by the Tribunal to the Commissioner, in the first round of the litigation. 24. Mr.Parikh, submitted that when the appellants Page 15 of 35 C/TAXAP/405/2018 JUDGMENT put forward a positive case that the allegations of clandestine removal of goods are not sustainable in view of the production capacity of the machine installed, then the burden shifted upon the Department to establish that the production capacity of the machine tallies with the records and the goods seized and thereby, the allegation of clandestine removal gets fortified. According to Mr.Parikh, the entire burden has been shifted upon the appellants to establish with regard to the production capacity of the machine. 25. Mr.Parikh further submitted that the law with regard to examining the production capacity of the machine is well settled. Mr Parikh invited our attention to Rule 173(E) of the Central Excise Rules, 1944 (for short ‘the Rules, 1944’). Rule 173(E) reads thus: “173E. Determination of normal production:- (1) Any officer duly empowered by the Commissioner in this behalf may fix the quantum and period of time when the production in the assessee\"s factory was considered normal by such officer having regard to the installed capacity of the factory, raw material utilisation, labour employed, power consumed and such other relevant factors as he may deem appropriate. The normal quantum of production during a given time so determined by such officer shall form the norm. The assessee shall, if so required by the said officer, be called upon to explain any shortfall in production during any time, as compared to the norm. If the shortfall is not accounted for to the satisfaction of the Page 16 of 35 C/TAXAP/405/2018 JUDGMENT said officer, he may assess the duty due thereon to the best of his judgment, after giving the assessee a reasonable opportunity of being heard. (2) The officer empowered as aforesaid may revise the norm as determined by him at any time, if after such further inquiry as he may consider necessary, he has reason to believe that any factor affecting the production of factory, has undergone a material change: Provided that the norm as determined by the officer empowered as aforesaid shall not be revised to the disadvantage of the assessee unless such assessee has been given a reasonable opportunity of being heard.” 26. Mr.Parikh would submit that if the machine installed in the factory premises of the assessees is not found to be functional and, on account of which the Department is unable to examine the production capacity, then it is the duty of the Department to look into such other machine in working condition installed at some other factory premises. Mr.Parikh pointed out that despite such a request being made by his clients, the Department did not accede to the same and the Commissioner also failed to consider this aspect of the matter in its true perspective, more particularly, the Rule 173(E) of the Rules referred to above. 27. In the last, Mr.Parikh submitted that taking the entire case put up by the Department against his client at its worst, the order of penalty could not have been passed merely relying upon the entries made in the Registers (Non-Statutory Registers) or on the Page 17 of 35 C/TAXAP/405/2018 JUDGMENT basis of few statements of the Directors recorded by the Department. In other words, Mr.Parikh concluded his submissions saying that once the issue of production capacity goes in favour of the appellants, the other issues would pale into insignificance. 28. In such circumstances referred to above, Mr.Parikh prays that there being merit in the Appeals, those be allowed and the impugned order be quashed and set aside. Submission on behalf of the revenue: 29. Mr.Nirzar Desai, the learned standing counsel appearing for the Department, has vehemently opposed both these Appeals. Mr.Desai would submit that no error, not to speak of any error of law, could be said to have been committed by the Tribunal in passing the impugned order. 30. According to Mr.Desai, although in the first round of the litigation the Tribunal thought fit to remand the matter so as to give an opportunity to the Department to look into the production capacity of the machine, yet as the machine installed in the factory premises of the appellants was not found in a working condition, the Department was not able to verify the production capacity. 31. According to Mr.Desai, in such circumstances, no fault could be found with the Department. According Page 18 of 35 C/TAXAP/405/2018 JUDGMENT to Mr.Desai, the Tribunal has rightly taken the view that as the machine was not found to be in working condition, the Department was not able to verify the production capacity. 32. Mr.Desai would submit that if it is the case of the appellants that the allegations of clandestine removal of goods are baseless having regard to the production capacity of the machine, then the burden is upon the appellants to establish the same, and the failure on the part of the appellants to establish this, puts the entire controversy to an end. 33. Mr.Desai would submit that the issue with regard to the production capacity of the machine is not the only issue involved in this litigation. In the course of the search, the officers of the Department were able to recover and seize documentary evidence in the form of Registers, etc. He pointed out that in the course of inquiry, the statements of the Directors of the Company were also recorded. According to him, the cumulative effect of all such materials was sufficient for the Commissioner to arrive at the conclusion that the case is one of clandestine removal of goods without payment of duty. ANALYSIS :- 34. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our Page 19 of 35 C/TAXAP/405/2018 JUDGMENT consideration is, whether the Tribunal committed any error in passing the impugned order? 35. Mr.Parikh, the learned senior counsel appearing for the appellants, with his usual fairness, submitted before the Court that all that he wants is to once again remit the matter to the Commissioner so that the exercise of ascertaining the production capacity of the machine can once again be undertaken. 36. Mr.Parikh submitted that this time it is expected of the Department to undertake such exercise, by examining a similar type of machine, installed in some other factory premises or by examining the machines at the factory premises where such machines are manufactured. To this extent, Mr.Desai, the learned standing counsel appearing for the Revenue, also agrees. However, in the peculiar facts and circumstances of the case, we, as a Court of law, are not inclined because we are quite disturbed with the approach of the Department in this particular litigation. 37. It is expected of the Department to know the position of law. When the position of law is abundantly clear that such examination of the machine can be undertaken at some other place, the Department should have agreed to do so. Having not done so, the Department now cannot take shelter of the order passed by the Tribunal, which is not tenable in law. Page 20 of 35 C/TAXAP/405/2018 JUDGMENT 38. By now, this litigation is almost two decades old. It will be too much for this Court to once again remand the matter for the very same exercise, which could have been undertaken a decade back. 39. In such circumstances, we decline to accept the vociferous submission of the learned standing counsel appearing for the Revenue that the appellants should not be permitted to have an undue advantage as the same would lead to a huge loss to the Revenue. 40. We shall now look into the Case-law, which has been pointed out by Mr.Parikh, the learned senior counsel appearing for the appellants. In the case of R.K.Mill Board (P) LTD. Versus Commissioner of Central Excise, Meerut, reported in 2001 (135) E.L.T.1296 (Tri-Del.), the Tribunal has observed as under: “15. Heard the rival submissions. We have considered the evidence on records and the statements of the various persons. We have perused the chart prepared by the counsel for assistance showing comparative yield and calculating the production on the basis of yield. We find that the contention of the appellants is that the natural justice was denied to them. We note that the documents were provided to the appellants. The appellants required certain documents which were not considered and relied upon, therefore were not supplied. The fact, however, remains, the appellants were free for inspecting the records, if they wanted and take copies of the documents except those which were considered as information report and secret documents. We note that the Commissioner has dealt with this issue at length. The appellants Page 21 of 35 C/TAXAP/405/2018 JUDGMENT submitted reply and attended the personal hearing before passing the order. Thus, there was no denial of natural justice. 16. Insofar as the retraction is concerned, we note that S/Shri Hari Mohan Maheshwari, Jai Kumar and Sanjay Gupta only explained the entries and other narration in the documents shown to them. It is not the case of the Department that they have relied upon only the statements. Thus the retraction will not vitiate the proceedings. 17. Insofar as the determination of the norms of production is concerned, we note that under Rule 173E, the Commissioner is competent to determine the norms of production. In the instant case the norms of production has been determined by the Collector. He has taken the figures from the records of the appellants. We note that there is no illegality in taking production of another unit for comparing purposes. We, therefore, hold that there was no infirmity in determining the norms of production. Insofar as the imposition of penalties is concerned, we note that the appellants' firms suppressed the production and removed the goods and thereby attracted penal action under Rule 173Q and 209 A indicated in the SCN. We note further that S/Shri Ashok Kumar, Nikhil Kumar and Mukesh Kumar are Directors, they were concerned with the clearance, transport, etc. of the goods clandestinely and thus attracted penalty under Rule 209A. Similarly, S/Shri Hari Mohan Maheshwari, Jai Kumar and Sanjay Gupta and Pankaj Kumar were concerned with the transport, storing, removing and clearance of the goods, therefore, the attracted the penalties. Since they were only employees, therefore lower penalties have been confirmed on them. Similarly S/Shri Chaman Lal and Promod Kumar Jain, partners of M/s. SPH were concerned with the receipt of the goods which they had reason to believe that they were liable to confiscation and, therefore attracted the provisions of Rule 209A. ” Page 22 of 35 C/TAXAP/405/2018 JUDGMENT 41. The aforesaid decision of the Tribunal came to be affirmed by the Hon’ble Supreme Court. The Hon’ble Supreme Court’s decision, affirming the Tribunal’s order is reported in 2002 (139) E.L.T.A85 (S.C.). 42. Our attention has also been drawn to the decision of a Co-ordinate Bench of this Court in the case of Shivam Casting Versus Commissioner of Central Excise reported in 2018 (359) E.L.T. 16 (Guj.), wherein, this Court has observed as under: “1. The assessee is in appeal against the CESTAT dated 16.05.2017 raising following questions for our consideration: 1) Whether the CESTAT is correct in remanding the case to the Original adjudicating authority, for reappreciation of Chartered Engineer’s Certificate on the basis of the direction given in para 6 of the order? 2) Whether the CESTAT is correct in remanding the matter to the Original adjudicating authority, ignoring the fact that the department has not produced any evidence to prove that the order of the Honourable Commissioner is perverse? 3) Whether the CESTAT is correct in remanding the matter with the direction of examine the certificate in the manner as prescribed in para 6 of the order, after lapse of 11 years? 4) Whether the CESTAT is correct in remanding the matter only on the issue of certificate of Chartered Engineer and ignoring the fact that the adjudicating authority has decided the show cause notice also on the merits of the case? 5) Whether the CESTAT is correct in directing the department to verify Chartered Engineer’s certificate, by Page 23 of 35 C/TAXAP/405/2018 JUDGMENT independently assessing through experts, verification of purchase documents, brochures/pamphlets issued by the manufacturers after lapse of 11 years and that too without considering the fact that the department has not produced any evidence to prove that the findings of the adjudicating authority are perverse? 2. The respondent department had issued a show cause notice alleging clandestine removal of goods without payment of duty and seeking recovery of Central Excise duty of Rs.82.79 lakhs (rounded off) with interest and penalties. The adjudicating authority I.e. Commissioner of Central Excise dropped the proceedings which order was challenged by the department before the Tribunal. The Tribunal by impugned judgement remanded the case before the Commissioner making following observations: “5. We have carefully considered the submissions advanced by both sides. The Revenue has assailed the impugned order on the ground that even though the investigation was over and the show cause notice was issued, the plea of production capacity is less than the quantity alleged to have been removed has been taken for the first time through the Chartered Engineers Certificate produced during the adjudication proceeding. The ld. Commissioner at Para 3.6.1 to 3.6.2 and 3.9 observed as under: 3.6.1 Ld. Advocate also argued that while considering the fact that so called production indicated in relevant document is not the production of final product or production and were marketable or is cleared without support of document. While making such observation and while determining the clearance of final product in Annexure X1, the department has also overlooked the production capacity of the company. A certificate issued by Chartered Engineer dated 8.4.2006, wherein certified that Noticee has installed Cupola Furace and after considering the various parameters, the Furnace could work for 15 days a month and the total production capacity per day could be assessed at 2000 to 2750 Kg. per day. Considering the observation of the Chartered Engineer, and average estimated production of 2500 kg., the total production Page 24 of 35 C/TAXAP/405/2018 JUDGMENT of the Noticee, per year could come to only 4,50,000/- and for the period under consideration could come to only 10,50,000/- kg. whereas the department has worked out 29,42,722 kg which is almost three times of the capacity worked out by the chartered engineer. 3.6.2 In this regard, I find that no manufacturing unit can manufacture the goods beyond their capacity. Since, installed capacity of machinery viz. copola furnace used for casting of goods have capacity of 2000 Kgs to maximum 2750 Kgs per day no more casting can be takes place as in no case work of furnace for melting of metal can be carried out by any other means. Hence as per the Chartered Engineer factory work for full efficiency then turnover of the company could come to about of Rs. 75,00,000/- and the said turnover being less then exemption limit of Rs. 1,00,00,000/-. However the said production includes rejection which is again melted in furnace for re-casting. Thus, Noticee No. 1 could not have produced the goods beyond exemption limit by the installed and certified machinery. 3.9 In view of the facts and circumstances enumerated hereinabove, I find that the entries of private records impounded from the premises of Noticee No.1 and its godown are not corroborated to the effect that the said entries are in respect of production and clearances of the finished goods as well as I find that the quantity alleged to have clandestine removal in the Show Cause Notice is also not supported by the installed capacity of the factory as certified by the Chartered Engineer. Hence charge ofclandestine removal of the quantity alleged in the Show Cause Notice is failed. 6. On going through the above finding, we do not harbour any doubt that the ld. Commissioner has been influenced by his finding that since the unit of the Respondent is not capable of manufacturing the quantity alleged to have been removed clandestinely, in view of the Chartered Engineers Certificate, therefore, the allegation of clandestine manufacture and clearance made on the basis of entries made in various private records remain uncorroborated and hence, cannot be relied upon. In these circumstances there cannot be any doubt of the fact that the Chartered Page 25 of 35 C/TAXAP/405/2018 JUDGMENT Engineers Certificate referred to and relied upon by the ld. Commissioner, played a significant role in arriving at the conclusion. In our view in all fairness, Revenue should get an opportunity to examine the certificate before the case is accepted or otherwise. Recently, the Honble Supreme Court in the case of Suresh Synthetics (supra) has also expressed similar view and remanded the matter by allowing Revenue to furnish necessary expert opinion in rebutting the claim of the assessee therein. Therefore, we remand the matter to the adjudicating authority with the direction to get the Chartered Engineers Certificate verified and if necessary could independently assess through experts, verification of purchase documents, brochures/pamphlets issued by the manufactures of the machines, etc., the production capacity of the installed machinery. Since the matter is very old it is expected that de novo proceeding would be completed within a period of three months from the date of communication of this order. The Respondent is directed to co- operate in the matter. The Revenues appeal is allowed by way of remand. Cross-Objection filed by the Respondent is also disposed of accordingly. “ This judgement the assessee has challenged in the present appeal. 3. Learned counsel Mr. Sheth for the assessee submitted that the Tribunal committed an error in remanding the proceedings enabling the department to controvert the contents of the Chartered Engineer’s certificate produced by the assessee. After a long gap of time it will not be possible for the assessee to produce further material in support of its stand that the annual production capacity of the unit could not have exceeded Rs.10.50 lakh kilograms whereas the department had worked out clearance of Rs.29.42 lakh kilograms. Counsel further submitted that the Tribunal erred in appreciating the order of the Commissioner as being passed solely on such Chartered Engineer’s certificate. The Commissioner had referred to and taken into account other evidence also. 4. We do not find that the Tribunal understood the Commissioner’s order as being Page 26 of 35 C/TAXAP/405/2018 JUDGMENT passed solely on the Chartered Engineer’s certificate. According to the Tribunal, this was one of the important grounds which weighed with the Commissioner in dropping the proceedings. The perusal of the order of the Commissioner would establish that the Tribunal’s observations are correct. The Commissioner did refer to other evidence on record, nevertheless, his findings were based heavily on the Chartered Engineer’s certificate indicating the production capacity of the unit and the fact that the department had alleged total clearance worth nearly three times the maximum capacity. 5. Counsel for the appellant further submitted that after number of years, burden cannot be cast upon the appellant to substantiate the contents of the Chartered Engineer’s certificate by producing additional evidence. This is not what the Tribunal has directed nor can the order of the Tribunal be understood in such a manner. In plain terms, the Tribunal granted opportunity to the department to verify and if found inaccurate, controvert the Chartered Engineer’s certificate. The onus is thus on the department to produce such material if so desired. 6. Subject to above observations, tax appeal is dismissed” 43. Our attention has also been drawn to one more decision rendered by a Co-ordinate Bench of this Court in the case of Commissioner of Central Excise Versus Saaken Alloys Pvt. Ltd. 2014 (308) E.L.T. 655 (Guj.). We quote the entire order as under: “Since all these Tax Appeals contain common questions of facts and law, they are being decided by this common order. 2. Challenging the order of the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench, Ahmedabad {“CESTAT” for short} dated 15th July 2013, Revenue has challenged the same in Page 27 of 35 C/TAXAP/405/2018 JUDGMENT both these Tax Appeals, raising the following substantial questions of law for our consideration: {a} “Whether the CESTAT, while passing Order No. A/1081710820/WZB/AHD/2013 dated 15.07.2013, was correct in holding that there is no evidence of illicit clearance available despite holding that there are suspicion of illicit clearance and the Department proved the entire modus of illicit clearance on sample basis ?” {b} Whether the Customs, Excise & Service Tax AppellateTribunal, while passing Order No. A/108171820/ WZB/AHD/2013 dated 15.07.2013, was correct in holding that evidences collected by Departments are admissible evidences only for one offence while the same set of evidences only for one offence while the same set of evidence are insufficient to establish another offence ?” {c} Whether the Customs, Excise & Service Tax Appellate Tribunal, while passing Order No. A/108171820/ WZB/ AHD/2013 dated 15.07.2013, was correct in admitting the evidences for the past clearance and ignore the evidences for the remaining clearances ?” {d} Whether the Customs, Excise & Service Tax Appellate Tribunal, while passing Order No. A/108171820/ WZB/ AHD/2013 dated 15.07.2013, was correct in holding that the statement has been retracted even though the same person has admitted the depositions made in the retracted statements in his statement recored subsequent to the retraction ?” 3. We have heard learned counsel Ms. Amee Yagnik for the Revenue and with her assistance, examined the material on record. In the following factual background, these appeals arise. 4. Messrs. Saakeen Alloys Private Limited, which is engaged in the Page 28 of 35 C/TAXAP/405/2018 JUDGMENT manufacture of CTD/Round bars, is situated at VisnagarMahesana Road, District Mehsana. On the premises of Messrs. Saakeen Alloys Private Limited and Messrs. Sunrise Enterprises, Mahesana simultaneous searches were carried out wherein three notebooks and one pendrive were recovered containing details of illicit clearances made by the said M/s. Saakeen Alloys Private Limited. On 24th November 2007, at the business premises of M/s. Kodiyar Transport Services, Mahesana search was carried out and various documents containing the invoices issued by M/s. Saakeen Alloys Private Limited were recovered. Statement of one Mr. Mohammed Altaf Alambhai Kapadia connected with Messrs. Saakeen Alloys Private Limited was recorded on 23rd November 2007 which was, within a short time, retracted. Statement also was recorded of the proprietor of M/s. Sunrise Enterprises where he agreed to be the main supplier of Messrs. Saakeen Alloys Private Limited. This statement too was retracted very soon. Likewise, statements of proprietor of M/s. Khodiyar Transport Service, Mahesana and Excise Manager of Messrs. Saakeen Alloys Private Limited were recorded and on the basis of pendrive seized, panchnama and other documents were drawn. On the basis of entire material, show cause notice was issued by the Commissioner of Central Excise dated 7th October 2010 demanding the duty amounting to Rs. 1,93,26,138/. Out of this total amount, Rs. 1.85 Crores [rounded off] was based on the data contained in the notebooks and pen drive recovered from Messrs. Sunrise Enterprises and remaining Rs. 8.50 lakhs [rounded off] from the parallel invoices recovered from the office of the transporter – M/s. Khodiyar Transport Services. 5. The order-in-original was passed on 7th October 2010 confirming the entire demand mentioned in the show cause notice. This was when challenged before the Commissioner of Central Excise, it confirmed the demand and imposed matching penalty. 6. Aggrieved by such action of both – order in original and that of the Page 29 of 35 C/TAXAP/405/2018 JUDGMENT Commissioner, the Tribunal was approached by the respondent-assessee and the Tribunal, vide its impugned order, set- aside the demand of Rs. 1.85 Crores confirming the duty demand of Rs. 8.25 lakhs as also the penalties under Section 11 (c) of the Central Excise Act. Therefore, the present appeals raising aforementioned questions of law. 7. As can be noted from the decision of the Tribunal, it has extensively dealt with the entire factual matrix presented before it. The Tribunal rightly concluded that in the case of clandestine removal of excisable goods, there needs to be positive evidences for establishing the evasion, though contended by the Revenue. In absence of any material reflecting the purchase of excessive raw material, shortage of finished goods, excess consumption of power like electricity, seizure of cash, etc., the Tribunal noted and held that there was nothing to bank upon except the bare confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time of their recording. The Tribunal also noted the fact that the requisite opportunity of cross examination was also not made available so as to bring to the fore the true picture and therefore, it concluded against the Revenue observing that not permitting the cross examination of a person incharge of records of M/s. Sunrise Enterprises and absence of other cogent and positive evidences, would not permit it to sustain the demand of Rs. 1.85 Crores raised in the Demand notice and confirmed by both the authorities below. 8. As could be noticed from the material on record that for the remaining amount of Rs. 8.25 lakhs from the transporter’s premises, the parallel invoices were recovered which not only were confirmed by the proprietor of the said transporter but independent evidences also affirmed the same. The Tribunal has chosen to sustain such amount levied in order-in-original and in the appellate order of the Commissioner. Page 30 of 35 C/TAXAP/405/2018 JUDGMENT 9. Penalties imposed on some of the persons being the Managing Director, the proprietors and others on the basis of such material also hardly requires any indulgence. 10. All the appeals are based predominantly and essentially on factual matrix. The Tribunal elaborately and very correctly dealt with the details furnished by both the sides and rightly not sustained the demand of Rs. 1.85 Crores, which had no evidences to bank upon. Confessional statements solely in absence of any cogent evidences cannot make the foundation for levying the Excise duty on the ground of evasion of tax, much less the retracted statements. To the extent there existed substantiating material, Tribunal has sustained the levy. No perversity could be pointed out in the approach and treatment to the facts. 11. Appeals since do not raise any question of law, much less substantial question of law, deserves no consideration. Accordingly, both these Tax Appeals are disposed of.” 44. The aforesaid decision of this Court came to be affirmed by the Hon’ble Supreme Court vide order dated 01.12.2014 reported in 2015 (319) E.L.T. A117. The decision of this Court was against the order of the Tribunal dated 15th July, 2013. We also deem fit to quote the Tribunal’s order as under: “11. From the above settled law, it is clear that in a clandestine removal case, the facts of clandestine removal of excisable goods cannot be established only on the basis of certain statements which are retracted later but there has to be positive evidences like purchase of excess raw materials, shortage/excess of raw materials/finished goods found in the stock/factory premises of the appellant, excess consumption of power like electricity, any seizure of cash during the investigation when huge transactions Page 31 of 35 C/TAXAP/405/2018 JUDGMENT are made in cash. In the present case also, it is observed, from the annexures to the show cause notice dated 1-5-2009 issued to the appellants, that there were huge amounts are being undertaken in clandestine removal activities, it is very likely that some cash would have been seized. There is not a single instance where either seizure of cash is made or any clandestinely removed goods are seized or raw materials/finished goods were found either short or in excess in the factory premises of the appellant or at any other place. As per the Panchnama drawn at the factory premises it is shown that there was no excess/shortage of the raw materials or finished goods found. The documentary evidences collected from the business premises of M/s.Sunrise Enterprise and the statements recorded by investigation, can at the most raise a reasonable doubt that some clandestine removal activities are undertaken by the appellant. However, such a suspicion or doubt has to be strengthened by positive evidences which seem to be lacking in this case. Any suspicion whosoever cannot take the place of evidence regarding clandestine removal of excisable goods. Moreover, after having positive evidences, qualification of duty on clandestinely removed goods also becomes essential. As already mentioned above, the stock lying in the stock yard of M/s. Sunrise Enterprise, Mehsana was found containing the goods received from M/s.Sakeen Alloys Pvt. Limited under proper invoices. When the goods received under proper invoices are found in the stock yard of M/s. Sunrise Enterprise, then it is possible that out of such goods certain quantities were sold to various customers by accepting payment in cash. In such a situation, the quantification undertaken by the investigation becomes doubtful and incorrect. For this purpose cross- examination of the person Incharge lookingafter the records of M/s.Sunrise Enterprise was must, which was not allowed by the adjudicating authority. In view of the above observation, the demand of duty of Rs.1,85,10,861/- is not sustainable and is required to be set aside. Page 32 of 35 C/TAXAP/405/2018 JUDGMENT 12. However, so far as the duty demand of Rs.8,25,277/- with respect to parallel invoices recovered from the transporter is concerned, it is observed that positive evidence in the form of parallel invoices issued by the appellant are available and the same have been confirmed by the proprietor of transporter M/s.Khodiyar Transport and the same have been affirmed by independent witness other than the manufacture of the goods. Therefore, the duty demand of Rs.8,25,277/- pertaining to clandestine removal of goods on parallel invoices is required to be upheld and the appellants are liable to penal action under the provisions of the Central Excise Act and Central Excise Rules. Accordingly, penalty of Rs.8,25,277/- is imposed upon M/s. Sakeen Alloys Pvt. Limited under Section 11AC of the Central Excise Act, 1944 and penalties of Rs.2,00,000/- each are imposed on Shri Mohamad Altaf Alambhai Kapadia, Managing Director of M/s. Sakeen Alloys Pvt. Limited and Shri Mukeshbhai Virabhai Patel, proprietor of M/s.Sunrise Enterprise, Mehsana. A penalty of Rs.1,00,000/- is imposed upon Shri Shantuji Manaji Thakore, proprietor of M/s.Khodiyar Transport Service.” 45. The principle of law discernible from the aforesaid decisions is that the case of the Department, of clandestine manufacture and removal of the goods should be looked into having regard to the production capacity of the machine, installed in the factory premises. 46. For any good reason, if the Department was unable to arrive at any final conclusion with regard to the production capacity of the machine on account of the same not in a working condition, then the Department owed a duty to examine the machine of similar type, which might have been installed in any Page 33 of 35 C/TAXAP/405/2018 JUDGMENT other factory premises. This is what Rule 173(E) of the Rules, 1944, provides for. The principle of law, in this regard, is that the burden will be upon the Department to show that the entries in the Registers, etc. match with the production capacity of the machine. 47. We may remind the Revenue of the observations made by the Supreme Court in the case of Parashuram Pottery Works Co. Ltd. v. Income Tax Officer, Circle I, Ward A, Rajkot, reported in (1977) 106 ITR 1, which read thus : “It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue.” 48. In the overall view of the matter, we are convinced that the impugned order of the Tribunal is not sustainable in law. Once again, at the cost of repetition, we state that we could have remanded the matter once again but, for the obstinate attitude of the Department, we decline to grant any further opportunity to the Revenue. 49. In the result, both the Appeals succeed and are hereby allowed. The impugned orders passed by the Tribunal are hereby quashed and set aside. The substantial questions of law are answered in favour Page 34 of 35 C/TAXAP/405/2018 JUDGMENT of the appellants and against the Revenue. 50. It is needless to clarify that the demand towards the amount of penalty and duty, as imposed, would not survive. 51. In view of the order passed in the main matters, the Civil Applications do not survive and the same stands disposed of accordingly. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) PALAK Page 35 of 35 "