TaxTMI 
TaxTMI 
2010 (8) TMI 53
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....crores and Rs. 21 crores on Shri Devi Dass Garg, Shri Rakesh Kumar Garg and Shri Santosh Kumar Garg respectively under Rules 25 & 26 of the Central Excise Rules, 2001/2002 on the ground that it is Shri D.D. Garg, Shri R.K. Garg and Shri S.K. Garg, (hereinafter collectively referred to as Gargs) who were the persons behind AJP. 2. The facts leading to these appeals are, in brief, as under: 2.1 AJP, a proprietary firm of one Shri Mahesh Kumar Gautam is a manufacturer of Pan Masala and Gutka of "Rajdarbar" brand which are charge able to Central Excise Duty under sub-heading 2106 20 00 of the Central Excise Tariff, as it stood during the period of dispute. M/s. Narsi Food (F) Ltd., 53/42, Shiv Mandir Road, Alipur, Delhi-36 (hereinafter referred to as NFPL) is a private limited company with Shri R.K. Garg and Shri D.D. Garg as Directors and it was manufacturing "Narsi Gold" brand pan masala and "Jackpot" brand Gutka. M/s. Surya Traders, Bees Kila Road, Jindpur, Delhi (hereinafter referred to as ST) is a proprietary firm of one Shri Sunil Kumar Aggarwal. M/s. Sonal Food Prod ucts, Delhi (hereinafter referred to as SFP) is a partnership firm of Shri D.D. Garg and Shri S.K. Garg and ....
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....howed that the raw material received by AJP from ST under this challan were not accounted for by AJP. Shri Dev Kumar Sharma, Accountant of ST, present at the time of search, in his statement dated 20-10-2000 stated that the headquarters of the ST is at D-1/2, Model Town-Ill, Delhi and that owners of this factory are Gargs, one of whom is Shri R.K. Garg and that cut, ground and mixed Supari, Tobacco, Chuna, Kattha, Menthol etc. packed in gunny bags is sold mainly to AJP and NFPL in cash. Shn Dev Kumar Sharma, in his further statement dated 19-3-04, confirming his earlier statement dated 20-10-2000, stated that whenever any goods were dispatched by ST to AJP, the same were being sent under challan which always used to bear S. No. 001, that no bills or invoices were being issued in respect of such goods, that original copy of challan used to be sent with the goods and duplicate used to remain in the factory, that on receiving confirmation regarding receipt of goods in AJP, both the copies of challan used to be destroyed, that on 20-10-2000 at the time of officers' visit, the challan No. 001 dated 20-10-2000 was yet to be destroyed, but all earlier challan have been destroyed, that the....
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....know in whose name the electricity connection of the factory or two landline telephones installed have been taken; that Shri Vinod Bansal, authorized signatory of AJP, has no connection with ST; that he is not aware as to why Shri Bansal has signed as authorized signatory of ST in a sales tax document presented to Sales Tax Department and that he cannot explain as to why the computer servicing report No. 2005 dated 23-4-01 in respect of computers of ST was signed by Shri Vinod Bansal with M/s. Internet Computers. Shri Sunil Kumar Aggarwal in his further statements dated 9-8-02, 14-7-03, 21-7- 03, 31-10-03 and 19-2-04 stated that while he has no connection with "D-1/2, Model Town-III, Delhi", he is not aware as to how the goods dispatched by M/s. Sai Fragrance & Flavours under their invoice No. 124 dated 10-5-2000, 183 dated 30-5-2000, 315 dated 17-7-2000 and 434 dated 8-9-2000 in the name of "M/s. Surya Traders, D-1 /2, Model Town-III, Delhi", reached the factory premises of ST at "31/22, Bees Killa Road, Jindpur, Alipur, Delhi", that he had taken loan, as and when required from M/s. Candy Properties, M/s. Narsi Hotels etc.; that he is the proprietor of M/s. Surya Ornaments also op....
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....g, Shri M.K. Gautam and others for - (a) demand of Central Excise Duty amounting to Rs. 33,20,03,239/- from AJP in respect of clandestine clearances of Rajdarbar brand Gutka alleged to have been made during the period from 1-4-2000 to 31-8-2002, (b) alongwith interest on this duty under Section 11AB and appropriation of Rs. 25 lakhs already deposited towards this- demand; (c) imposition of penalty on APJ under Section 11AC of Excise Act; and imposition of penalty under Rule 209 & 209A of Central Excise Rules, 1944/Rule 25/26 of Central Excise Rules, 2001/2002 on ST, Shri D.D. Garg, Shri R.K. Garg, Shri S.K. Garg and Shri Vinod Bansal. 2.8 The above show cause notice was adjudicated vide order-in- original No. 147/05, dated 28-10-05 by which - (a) duty demand of Rs. 33,20,03,239/- was confirmed against AJP alongwith interest under Section 11AB and an amount of Rs. 25 lakhs already paid was appropriated towards this demand; (b) penalty of Rs. 33,20,03,239/- was imposed on AJP; and (c) while penalty of Rs. 10 lakhs was imposed on Shri Vinod Bansal, authorized signatory/Manager of AJP under Rule 209A of Central Excise Rules, 1944/Rule 26 of Central Excise Rules, 20....
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.... by independent evidence; that when duty demand is against AJP, no penalty can be imposed on Gargs who had no connection with AJP; that as per Commissioner's finding in para 178 & 179 of the order-in-original, it is Shri Vinod Bansal who was the main person involved in the duty evasion; that no enquiry has been conducted with the buyers of gutka/pan masala; that the loans provided to AJP by some companies, some of which are owned by Gargs, have been paid by AJP; that there is no finding in the impugned order that Gargs physically dealt with the goods clandestinely cleared by AJP and therefore, no penalty can be imposed on them under Rule 209A of Central Excise Rules, 1944/Rule 26 of Central Excise Rules, 2001/2002; that in this regard, reliance is placed on Tribunal's decisions in cases of Kamdeep Marketing Pvt. Ltd. v. CCE, Indore reported in 2004 (165) E.L.T. 206 and A.M. Kulkarni v. CCE, Aurangabad reported in 2003 (56) RLT. 573, that the quantum of duty demand against AJP is based only on the basis that each of the 20 machines installed in AJP's premises could produce 200 pouches of 2 gms. each per minute and the factory worked in one shift of 8 hours daily for 25 days in a mon....
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.... deed in respect of the premises of ST with Shri D.D. Garg has expired or has been extended and in whose name the power con nection and telephone connections are installed, that para 35 of the impugned order-in-original describes in detail the mod us operandi adopted by ST for sending bags of gutka and pan masala powder to AJP without accounting in their ac counts, that para 36 and 38 of the order-in--original describe in detail as to how the black money generated by unaccounted sale of 'Rajdarbar' gutka and 'pan masala' by AJP was being converted into white income of Gargs by showing the sale of gold jewelry by them to M/s. Surya ornaments and M/s. Shreeji Jewelers owned by the persons controlled by Gargs; that as held by the Tribunal in case of Dr. Writers' Food Products v. CCE, Pune-II reported in 2009 (242) E.L.T. 381, for imposition of penalty under Rule 26 of Central Excise Rules, 2001/2002, corresponding to Rule 209A of Central Excise Rules, 1944, on a person, his dealing with the clandestinely cleared goods physically is not necessary; that the evidence on record as summed up by the Commissioner in para 158 of the impugned order, clearly shows that it is the Gargs who were ....
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....out the fact that Gutka/Pan Masala powder i.e. Supari, Tobacco, Chuna, Kattha, Illaichi, Perfumes etc., cut, ground and mixed, was being received from ST on credit and in the premises of AJP, only the packing into the pouches was being done. Similarly, there is no dispute about the fact that AJP were using Raj Darbar brand on Gutka/Pan Masala pouches, which was owned by the SIP, a parthership firm of Shri D.D. Garg and Shri S.K. Garg under an agreement and the purchase of plant and machinery by AJP from M/s Krishna Packers had also been financed by the companies in which Shri D.D. Garg and Shri R.K. Garg and Shri S.K. Garg were Directors. However, the main evidence relied upon by the Department in support of this allegation is as under :- (1) Statement dated 20-10-2000 of Shn Dev Kumar Sharma, Accountant of ST, wherein he stated that it is the Garg family which are the actual owners of this firm and that the headquarters of ST is "D-l /2, Model Town III, Delhi". (2) While on paper, ST and AJP had no connection, from the premises of ST. some documents were recovered on which Shri Vinod Bansal, Authorized Signatory and Manager of AJP had signed as Authorized Signatory of ST; ....
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....ning the various papers of AJP only on the instructions of Shri R.K. Garg, Shri D.D. Garg and Shri S.K. Garg. 5.1 The appellant, however, plead that other than the statement of Shri M.K. Gautam, there is no other independent evidence showing that it is the appellant who were behind AJP and its operations and that even the statements of Shri M.K. Gautam are not reliable as the statement dated 26-4-2000 of Shri M.K. Gautam has been retracted by him on the very next day and an FIR was filed with the police against the Investigating Officers complaining of having been beaten up by them and in this regard he has also submitted a medical examination report from Lok Nayak Hospital. 5.2 The factory of AJP had been searched on 20-10-2000 and at that time, on learning that Shri M.K. Gautam is the proprietor of AJP, a summon had been served but he failed to turn up. Thereafter a series of summons were served to him on 23-10-2000, 6-11-2000, 23-11-2000, 7-12-2000 and 5-4-2002 but he did not turn up. Ultimately, he appeared on 26-4-02 in response to the summons dated 23-4-02. The manner in which he avoided the investigating officers indicates that he had something to hide. Moreover when t....
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.... the purchase of machinery installed in AJP had been made from M/s. Krishna Packers on credit and that M/s. Krishna Packers and M/s. Surya Traders were related to Garg family. In view of these circumstances, we hold that the statements dated 26-4-02, 4-11-03 and 12-3-04 of Shri M.K. Gautam have to be treated as true, correct and voluntary statements and hence admissible as evidence. 5.3 Though on paper M/s. Surya Traders (ST) were supplying the raw material - Supari, Tobacco, Illaichi, Chuna, Kattha, perfumes etc. to AJP for manufacture of Gutka/Pan Masala, as is clear from the statement of Shri Dev Kumar Sharma, Accountant of ST. these ingredients were not being supplied as such but were being supplied after grinding and mixing and, thus, converting into Pan Masala/Gutka powder and that this was being done on the instructions of Gargs. Shri Dev Kumar Sharma in his statement dated 20-10-2000, which has not been retracted, has clearly stated that it is the Gargs i.e. the appellants, who were the actual owners of ST and he also explained in detail the mod us operandi of sending raw material to AJP without any invoice Rs. The statement of Shri D.K. Sharma is also corroborated by th....
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....not be a ground not to initiate a departmental proceeding against him or to drop the same in the event an order of acquittal is passed." 5.5.1 Hon'ble Supreme Court, in the case of Collector of Customs, Madras v. D. Bhoormull reported in 1983 (13) E.L.T. 1546 (S.C.), in which goods of foreign origin, alleged to have been illicitly imported into India, had been recovered from the premises of M/s. Shah Rupaji Rikhaldas, Chennai and ownership of the goods had been claimed by one Shri D. Bhoormull claiming the goods to have been legally imported, but who never appeared before the Investigating Officers with the necessary documents, while considering the question of liability of the seized goods for confiscation and of Shri D. Bhoormull for penalty under Section 167(8) of the Sea Customs Act, 1878 [Correspondending to Section 111(d) and 113 (d) of Customs Act, 1962] laid down the following two important principles regarding the standard of proof in Departmental proceedings and the burden of proof - (1) While the burden of proving that the goods to which the provisions of Section 178A of Sea Customs Act, 1878 (corresponding to Section 123 of the Customs Act, 1962) does not apply, i....
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.... standard of proof before the adjudicating authority, where preponderance of probability would be a guiding factor and proof beyond reasonable doubt, relevant in criminal prosecution before a criminal court, cannot be bodily lifted and transported in adjudication proceedings, when consideration of probabilities would be the guiding factor". 5.5.3 Thus the standard of proof required in the Departmental proceedings under the provisions of the Customs Act, 1962 or Central Excise Act, 1944 or of the Rules made thereunder, for confiscation of goods, confirmation of demand for duty evaded, and imposition of penalty is the preponderance of probability. For establishing to be preponderance of probability, the adjudicating authority or the Tribunal has to evaluate the evidence of both the sides and decide what is most probable. 5.6 Keeping in view the above principles laid down by Hon'ble Supreme Court about the standard of proof required in departmental proceedings and the burden of proof, we are of the view that the evidence as discussed in para 5 above, makes the Department's can most probable, as even if the gold transactions of Garg family with M/s. Surya Ornaments and M/s. Shree....
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....he fact that the invoices for the goods meant for ST, dispatched by M/s. Sai Fragrances arid Flavours at address -Model Town-HI, Delhi", which is the address of Gargs, reached the ST's premises located at "31/22, Bees Killa Road, Jindpur, Delhi" also points to link between Gargs and ST and corroborates the statement of Shri Dev Kumar Sharma. (3) Though M/s. Surya Ornaments with Shri Sunil Kumar Aggrawal as Proprietor (who is also the proprietor of ST) claim to have purchased huge quantity of gold jewellery from members of Garg family during 1998-99, i.e. prior to the period with we are concerned in this case, the fact remains that it does not appeal to common sense that a person with no financial resources and no business experience would suddenly be come a Gutka/Pan Masala manufacturer and a gold dealer having trans actions in crores. The gold transactions of M/s. Surya ornaments with members of Garg family, prima facie, appear to be money laundry operations. But Shri D.D. Gargs, Shri S.K. Garg and Shri R.K. Garg, other than doubting the statements of Shri M.K. Gautam and Shri Dev Kumar Sharma, have not adduced any evidence showing that they had no connection with AJP and ST....
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....erefore, be used as substantive evidence connecting the petitioner with the contra vention by exporting foreign currency out of India." Section 108 of the Customs Act, 1962 and Section 14 of the Central Excise Act, 1944 being pan materia, the ratio of the above judgment is applicable to Central Excise case also and accordingly, the inculpatory statement of a co-accused can be used as a substantive evidence for proving charge against the person implicated is the statement. 5.7.1 The statements dated 26-4-02, 23-10-03 and 4-11-03 of Shri M.K. Gautam, recorded under Section 14 of the Central Excise Act, by a Gazetted office of Central excise, wherein he has stated that though he was the owner of AJP only on paper and Shri Vinod Kumar Bansal looked after the work under the supervision of Gargs, he signed cheque book, account books etc. of AJP on the instructions of the owners i.e. Gargs, make him a willing accomplice as it is in conceivable that anybody would be signing the cheques, account books, balance sheets etc. of a company for years under mistake belief that the same are for the issue of his ration card, and, therefore, his statements become the inculpatory statements of a....