By TIOL News Service

AHMEDABAD, JUNE 16, 2014: THE dispute relates to demand of duty on alleged clandestine processing and clearance of man-made fabrics.

The appellant M/s Mahesh Silk Mills is engaged in the processing of man-made fabrics belonging to various cloth merchants/ traders on job work basis attracting Additional Duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. The factory premises of the appellant M/s Mahesh Silk Mills and seven shop premises of cloth merchants/ traders were searched by the officers of the Directorate General of Central Excise Intelligence, Zonal Unit, Mumbai. During the course of search the officers seized one diary from the factory premise of Mahesh Silk Mills containing fabric details like Name, Date, No., Meterage , Name of Fabric etc. allegedly showing quantities of grey fabrics received from 47 cloth merchants / traders and corresponding processed fabrics sent back by M/s Mahesh Silk Mills after processing to the said merchants/ traders. Consequently, a demand of Rs 30 ,18,378 /- was confirmed with penalties. The appellant is before the Tribunal against the demand.

After hearing both sides, the Tribunal held:

It is observed from the records that the total demand of duty of Rs. 30 ,18,378 /- in the case has been raised mainly on the basis of figures taken from the diary recovered from the factory premises of Mahesh Silk Mills on 19/20.10.1955. While recovery of the impugned diary from the factory premises of Mahesh Silk Mills is not disputed by the appellant but no one from appellant's side has admitted that the diary belonged to the appellant. Nor the contents of the diary were admitted by any one from the appellant's side. The scribe of the said diary has not been identified by the Revenue for ascertaining the ground realities. Only one trader - Chandan Prints, who is one of the 47 traders mentioned in the said diary, initially admitted to have received 24,555 L. Meters of processed man-made fabrics, involving excise duty of Rs. 33,957/- from Mahesh Silk Mills against 24,555 L. Meters of grey Man-Made Fabrics sent to Mahesh Silk Mills on 29.03.1994 and 05.08.1993. However, M/s Chandan Prints had retracted its statement during the course of adjudication. The statements of the remaining 46 traders have not been placed on record by the Revenue to prove that the remaining entries recorded in the diary also related to clandestine manufacture and removal of processed man-made fabric. There is no corroborative evidence of excess consumption of electricity, colours , dyes, chemicals etc, by the appellant. There is also no evidence of transportation of processed man-made fabrics from the appellant's factory or any instance where clandestinely removed goods were seized by the revenue. Cross examination of the third party witness was also not provided to the appellants.

We are constrained to reiterate that evidence of only one diary cannot be made the basis of establishing clandestine manufacture and removal of the fabrics. It has been repeatedly held by the courts that clandestine manufacture and clearance cannot be readily inferred from few documents and statements unless the allegations are also corroborated and established on evidences, relatable to or linked with actual manufacturing operations. As far as the present demand is concerned, there is no such evidence forthcoming in the records before us to suggest clandestine manufacture and clearance by the appellants. Mere reliance on note books/ diaries or statements cannot be considered as enough evidence for clandestine manufacture and clearances. Accordingly, duty demand Rs 30 ,18,378 /- is not sustainable against the appellant Mahesh Silk Mills, and the same is set aside.

(See 2014-TIOL-1032-CESTAT-AHM)