CCE Vs. MS. ARIHANT TEXTILE

JUDGEMENT

(1.) MS . Arihant Textiles, Ahmedabad were engaged in the business of trading of cotton yarn. On 30.05.03 the officers of Directorate General of Central Excise Intelligence, searched the premises of Ms. Yogeshwar warehouse and found 1134 bags of yarn containing 58010 Kg of yarn stored in the said warehouse without any central excise documents or purchase bills. Out of above 1134 bags, 334 bags of cotton yarn belonged to the appellant. The goods were seized in the belief that they have been cleared illicitly without payment of duty by the manufacturers. Shri Uttamrao Dattarai, transporter in his statement dated 30.05.03 stated that he had kept 691 bags of 100% cotton yarn in Ms. Yogeshwar warehouse out of which 334 bags belonged to Shri Jaishkuhbhai D. Shah, proprietor of Ms. Arihant Textiles, which were lifted from a godown situated at Vijay Estate, two months earlier and kept in godown. Statement of Shri Jaishukhbhai D. Shah proprietor of the appellant was recorded on 04.09.03 wherein he stated that out of the above bags they owned and purchased 334 bags of cotton yarn from Ms. Vidhi Marketing P. Ltd. and produced 5 invoices to cover the seized goods. Also statement of Shri Harish Soni, owner of Ms. Vidhi Marketing P. Ltd. was recorded wherein he stated that he had given the invoice to the appellants without selling or delivering any goods, that he purchased the bills from Ms. Divya Petro Chemicals Ltd., a registered dealer and the said bills were also obtained by him without any material and that he charged 1% commission for providing the bills only. Statement of Shri Arvindbhai Patel of Ms. Divya Petro Chemicals Ltd. was recorded on 26.09.03 wherein he stated that he was a registered dealer and job worker and he had been told by Shri Harish Soni of Ms. Vidhi Marketing P. Ltd. that the appellants wanted adjustment entries for which he had issued bills of yarn in favour of Ms. Vidhi Marketing P. Ltd. without supply of goods so that Ms. Vidhi Marketing P. Ltd. in turn could issue invoices in favour of the appellant and that he had received 2% commission from Shri Jaishukhbhai D. Shah, the appellants for these transactions. He confirmed that the transactions took place on paper without any goods. A statement of Shri Sudershan Nag, Manager (Excise) of Ms. Mafatlal Industries, Nadiad, was recorded wherein he stated that Ms. Mafatlal had not manufactured cotton yarn of 34 -32 counts, that 334 bags of cotton yarn of above count found at the godown of Ms. Yogeshwar warehouse was not manufactured by them. A 2nd statement of Shri Jaishukhbhai D. Shah, Proprietor of Ms. Arihant Textile was recorded on 20.11.03 where he was shown panchnama, statement of U. Dattarai (transporter) and statement of Shri Harishbhai Soni of Ms. Vidhi Marketing P. Ltd. he accepted and agreed that the statements were true and correct. He did not give the name of manufacturer of the seized yarn. The seized goods were released provisionally on 04.09.03.

(2.) IN the original adjudication proceedings, duty demand on the cotton yarn seized was confirmed, cotton yarn was confiscated and penalty was imposed on various parties involved. On an appeal filed by the parties, the Commissioner (Appeals) in the impugned order allowed the appeal filed by Ms. Arihant Textiles and set aside the confiscation, imposition of redemption fine and penalty. Revenue is in appeal against this decision.

(3.) WE have considered the submissions made by the learned JDR and have gone through the records. In this case the respondent is engaged in the business of trading of cotton yarn and the case against them is that they were not able to show that 334 bags of cotton yarn found in a godown on 30.04.03 which admittedly belonging to them was non duty paid. On 04.09.03 Shri Jaishukhbhai D. Shah, Proprietor of the respondent admitted the ownership of the goods and stated that he has purchased the goods from Ms. Vidhi Marketing P. Ltd. and produced five invoices. The case of the department is on the basis of the statement of Shri Harish Soni, owner of Ms. Vidhi Marketing P. Ltd. wherein he has stated that he had given the invoices at the request of the respondents without delivering the goods. The transporter had stated that he had picked up the goods and kept it in Ms. Yogeshwari warehouse. Further after recording a statement of Shri Arvindbhai Patel of Ms. Divya Petro Chemicals Ltd., the Revenue as part of the investigations recorded his statement of Shri Sudershan, Manager (Excise) of Ms. Ms. Mafatlal Industries wherein he stated that Ms. Mafatlal Industries had not manufactured cotton yarn of the counts under seizure. During the adjudication proceedings, respondents wanted cross examinations of four witnesses and during the course of examination, Shri Sudershan Manager of Ms. Mafatlal Industries stated that he could not confirm whether goods were manufactured by them or not without verifying the records. Shri Harish Soni, owner of Ms. Vidhi Marketing P. Ltd. retracted from his version that only documents were given and stated that goods were manufactured by Ms. Mafatlal Industries and were duty paid. The whole case of the department as observed by the Commissioner was built on the statements of the proprietor of the respondent, two traders of cotton yarn and also the transporter and finally the manager of Ms. Mafatlal Industries the manufacturer. Besides the cross examination, in a letter written on 15.05.03, Ms. Vidhi Marketing P. Ltd. had informed Ms. Arihant Textiles that the goods supplied under five invoices was excise duty paid. It has to be noted that this was before the seizure of 334 bags of cotton yarn. In fact on this basis only, the officers could contact the original manufacturer and record the statement. While initially the manager of Ms. Mafatlal Industries stated that he was not aware of the counts supplied, subsequently he stated that he was not in a position to confirm whether the yarn manufactured by them for Ms. Divya Petro Chemicals Ltd. was of what count. The sum and substance of the proceedings is that at the time of cross examination, all the parties retracted from their statements even though it was during cross examination. The documentary evidence available in the form of invoice issued by Ms. Vidhi Marketing P. Ltd. shows central excise duty and sales tax details. No evidence has been produced to show as to why this invoice is not acceptable. The manufacturer cannot confirm whether the goods were supplied or not but in this case it is strange that the goods are available, invoices are available yet the department claims that the physical delivery of the goods did not take place. As observed by the Commissioner, initially the Revenue took a stand that 334 bags of cotton yarn pertaining to respondent was lying without duty paying documents. But subsequently when documents were produced, the department recorded a statement from the manager and on the basis of the statement of transporter, made out a case that the documents produced did not cover the goods. As already observed by us above, the invoices were available and there was a letter on 15.05.03 covering the supply of goods. On the one hand we have documentary evidence in the form of invoice which has not been proved to be false or wrong. The department has also not established that Ms. Divya Petro Chemicals Ltd. has not received goods from Ms. Mafatlal Industries. Other than contradictory statements of the manager of Ms. Mafatlal Industries, there is no contrary evidence to show that the seized goods were not actually manufactured by Ms. Mafatlal Industries. The only case of the department is that the retraction and the change of the version by the respondents and other notices during the year should be ignored. Even if this is accepted, primary burden to show that the goods were non duty paid falls on the department, once the invoice showing central excise duty and sales tax is produced. There is no evidence in the form of extract of the records of Ms. Mafatlal Industries to show that yarn of counts 32 -34 was not manufactured by Ms. Mafatlal Industries. It is strange that the Revenue has chosen to rely upon the statement of the manager whereas it could have been easily verified from the daily stock register of Ms. Mafatlal Industries as to whether yarn of count 32 -34 was manufactured by them or not and whether they had sold such yarn to Ms. Divya Petro Chemicals Ltd. who in turn sold to Ms. Vidhi Marketing P. Ltd. who in turn sold to Ms. Arihant Textiles. Cotton yarn is not a commodity for which the provisions of Section 123 of Customs Act, 1962 are applicable so that the burden to show that the goods were duty paid is on the respondents. The primary burden has not been discharged by way of proper investigation in this case. When the case is solely based on statements and the documentary evidences are against the statements, the documentary evidence is required to be preferred. Further we also find that the Commissioner has considered the issue in great detail before coming to the conclusion that department has not been able to make out a case. In view of the above discussion and also in view of the fact that Commissioner has considered the issue in depth and properly before setting aside the order, we find that there is no merit in the appeal filed by the Revenue and accordingly reject the same.