TaxTMI 
TaxTMI 
1998 (9) TMI 601
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.... appellant, Shri Dinesh Kumar Goyel is the authorised representative of the said business. 2.2. The first appellants firm has been registered as a wholesale dealer in terms of Rule 174 of the Central Excise Rules, 1944 read with Section 6 of the Central Excise Act, 1944. Shri Mahesh Kumar Goyel was maintaining RG-23D Register in the ordinary course of his business and as a registered dealer was receiving excisable goods on purchase along with the duty paying documents (invoice) and bringing them into his registered godown and was selling the same to his customers under the company's own invoices in terms of the provisions of Rule 57GG of the Central Excise Rules, 1944. Based upon the invoices issued by the first appellant firm, the purchasers of the materials having been sold by it, were availing the benefits of the Modvat credit. 2.3 The appellant's office premises was searched by the Officers of Directorate General of Anti-Evasion (C.E.) along with the Officers of the Commissionerate who recovered and seized various statutory records maintained by the first appellant-firm as well as some other incriminating documents. Unaccounted Indian currency of Rs. 17,80,000.0....
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....e, Calcutta-II. Before the Order could be passed, the appellants moved a Writ Petition in the High Court of Calcutta, challenging, inter alia, the legality and validity of the said search and seizure of the documents and the Indian currency of Rs. 17,80,000.00. The Hon'ble High Court vide their Order dated 15-4-1997 directed the adjudicating authority to pass the Final Order in the proceedings initiated on the basis of the said show cause notice and to indicate the same to the appellants within a period of 3 weeks from the date of communication of the Order. Accordingly, the Commissioner of Central Excise, Calcutta-II vide his Order dated 7-5-1997 released the Indian currency of Rs. 17.80 lakhs and imposed a personal penalty of Rs. 15.00 lakhs on Shri Mahesh Kumar Goyel under the provisions of Rule 173Q(bbb) of the Central Excise Rules, 1944 for the contravention of Rule 57GG ibid. Penalty of Rs. 2.00 lakhs was also imposed upon the second appellant, Shri Dinesh Kumar Goyel under Rule 209A of the said Rules. The said amount of Rs. 17.00 lakhs was also appropriated and recovered from the released amount of Rs. 17.8 lakhs. 2.6  As regards 40.140 M.T. of H.R. Coils, the same w....
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....the arguments, learned S.D.R., Shri T. Premkumar submitted that the earlier Order dated 7-5-1997 was passed by the Commissioner in terms of the Hon'ble Calcutta High Court's Order and the Commissioner was bound by the same. There was nothing wrong or illegal in honouring the High Court's direction and then passing a detailed Order subsequently. 4.  After giving our careful consideration to this limited point raised by the appellants herein, we find that though such a practice of passing two different Orders by the adjudicating authority is not appreciable, nevertheless, we take note of the circumstances under which the two separate Orders were passed by the Commissioner. There was a High Court's Order directing the Commissioner to pass the adjudication order within a period of three weeks from the date of receipt of the High Court's Order. Honouring such direction, the Commissioner had passed the operative part of the Order and had very clearly observed that a detailed reasoned Order would be passed subsequently. Such a practice may cause inconvenience to the appellants, but cannot be a ground for setting aside the Orders as illegal Orders. The Hon'ble Delhi High Court's Ju....
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....isclosed, which show that no activity of receipt and despatch of the iron and steel articles was being carried out in the registered godown premises of M/s. C.T.C. at 4, P.T.R. Siding, Shalimar, Howrah. The said godown was inspected by the officers of the D.G.A.E.(C.E.) in presence of Shri Dinesh Kumar Goyel on 25-3-1995 and a verification report was prepared, which was jointly signed by the officers. It has been alleged that the said godown has a space measuring about 60"x35" having tin-sheet fencing and the main gate used for loading and unloading purposes was found rusted on the ground of prolonged non-use. It was, further, alleged that on the date of visit only 15 to 20 M.T. of Steel Rounds (Defective) was found lying at one side of the space. The remaining surface of the soil shows no sign of keeping any steel material on it. The soil surface was clean and greenish in colour. It was further alleged that the man living in the room at the side of the godown is just a guard/darwan and there was no sign of using the room for the purposes of issuing challans or for keeping any other paper/register of stock, etc. The godown was not having any infrastructure of loading/unloading of h....
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....ehicles even had not existed and some of them were not even trucks/lorry capable of carrying more than 10 to 15 M.Ts. of iron and steel materials. It was alleged that some of them were found to be Matadors or even Three-Wheelers or vehicles belonging to Calcutta Municipal Corporation. No evidence of payment to these transporters had been produced by the appellants. No transport challans by the transporters had been produced by the appellants. Further, in Para 3.9, it had been alleged that in some cases, the goods had been procured at a higher price and sold at the depreciated value whereas it is a common knowledge of fact that iron and steel being non-perishable commodities has a tendency to grow in value over the years and as such, there cannot be any compelling reasons for the appellants to sell the goods at the depreciated value. From all these, it had been concluded by the Commissioner that the appellants had been engaged in the purchase and sale of iron and steel materials on paper without actual receipt of the same and the goods covered under the bills/invoices were sold to different buyers against cash and the buyers reflected in the invoices had availed the Modvat credit wi....
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....tal clarification which is to the effect that sales to non-modvatable persons need not be entered in the RG-23D register. 16. He, further, submitted that the sale-bills were seized by the Officers. at the time of seizure of the documents from their office. This fact is also clear from the initial deposition of Shri M.K. Goyel made in his statement tendered on 21-1-96. 17. As regards the statements he submitted that all these statements were given by the appellants while they were in jail custody and the same had subsequently been retracted by the appellants. The statement of Shri R.N. Dubey of M/s. C.T.C. is not reliable inasmuch as the said deponent was not offered for cross-examination. 18. As regards the departmental allegation in respect of the Invoice No. 647, the Explanation Chart correlating the said invoice to M/s. Mechano Paper Machines Ltd. has been put on record by the Appellants, starting from the procurement of the materials from S.A.I.L. and sending of the same to the De-coiler, M/s. New India Metal Works Howrah, for the purpose of de-coiling and further transport to M/s. Mechano Paper Machines Ltd. to whom it had been sold. The papers showing ....
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....rious statements given by them. 22. As regards the balance stock of 1049.685 M.Ts, the appellants" stand that the same has been sold to non-modvatable optees and the bills raised are in the custody of the Department, is not correct inasmuch as no cash memos were seized from the office of the appellants as is clear from the list of seized records appearing in the seizure memo. The appellants have also not made any efforts to inspect the records and ............ the said bills from the records. The show cause notice has clearly mentioned that seized records were not containing any cash memo or sale bill. In spite of that, the appellants have not tried to inspect the records and prove the Department wrong by taking such cash memos, etc., from the seized records. He submits that in fact, the appellants changed their stand after the seizure of 40 M.Ts. stock from the De-coiler, M/s. New India Metal Works, Howrah. But, however, inspection of records was not asked for, in spite of the fact that para 5 of the show cause notice specifically asked for documents required by them. Referring to the various evidences disclosed in the show cause notice and relied upon by the adjudicating ....
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....appellants, still carry a lot of evidentiary value as the same were corroborated by the other evidences on record. Mere retraction of the statements without any evidence of duress or coercion, do not reflect upon the evidentiary character of the statements which were recorded under Section 108 of the Customs Act, 1962. We also find that the appellants have been changing their stand in various statements. The Hon'ble Supreme Court in the case of Surjeet Singh Chhabra reported in 1997 (89) E.L.T. 646 (S.C.) = 1996 (17) RLT 331 (S.C.) has laid down that if the statements are retracted, Court is required to examine whether it is obtained by pressure or duress and if found to be voluntary, the same is to be relied upon for conviction. In other words, it has been laid down by the Hon'ble Supreme Court that the mere fact of retraction of the confessional statement by itself, is not sufficient and if, on examination, nothing is found to hold that the statements have been given under coercion or duress, the same can be made the basis by holding the appellants guilty. Apart from this, we also find that Shri R.N. Dubey, Accountant of M/s. C.T.C. in his statement had deposed that though he was....
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....non-use of qodown; absence of any weighment-slips etc.; references disclosed in the invoices having been found false by the Department; impractical over-weights carried by some vehicles out of which some belonged to the Public Works Department like Calcutta Municipal Corporation etc.; absence of any evidence of payment of any freight to the transporters - are sufficient enough to hold against the appellants. We also find that this question came up for consideration before the Tribunal in the case reported in 1998 (97) E.L.T. 342 (Tri.) = 1997 (23) RLT 548 (CEGAT), in more or less similar state of facts and circumstances. It was held that the vehicles as mentioned in the invoices have been found to be other than trucks inevitable for carriage of the sizes of consignments in question and there was no freight shown to have been paid to the transporters the non-use of the vehicles was established. All these evidences would lead to the inevitable conclusion that the goods in question were never transported. Accordingly, we find that there is sufficient material on record against the appellants herein to prove that the appellants have been engaged in mal­practice of issuance of bogus....
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....ejected. Sd/- (Archana Wadhwa) Member (J) 28. [Contra per : P.C Jain, Member (T)]. - I have gone through the order proposed by my ld. Sister, Smt. Archana Wadhwa, Judicial Member, but I regret, with respect, that I do not agree with her conclusions on the evidence on record. 29. Facts have been largely set out in the order proposed by the ld. Judicial Member. It is not necessary to set out the same again. I will set out, wherever necessary in the course of my discussion, those facts which have not come on record. 30. Allegations against the appellants made in the show cause notice (SCN) and which have been upheld are that the appellant No. 1 a dealer of Iron and Steel products registered by Central Excise authorities for issuing modvatable invoices to further traders therein or to manufacturers of excisable goods in order to enable them to take Modvat credit, - (i) purchased Iron and Steel products from TISCO, SAIL and other dealers but did not bring the same to its godown in Calcutta; (ii) disposed of the said products clandestinely without accounting for it in records to such manufacturer....
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....in respect thereof are different. Reliance has been placed on a statement of one Shri Rabindra Kumar Goyal, Manager of Bengal Steel Processors. (h) No weighment slips of such materials have been found or have been produced. (i) No weighbridge was found in the godown. (j) A vehicle, apparently used in transportation of modvatable goods, was found to belong to Public Vehicles Department, Government of West Bengal. (k) some of the vehicles even had not existed and some of them were not even trucks/lorries capable of carrying more than 10 to 15 MTs. Some of the vehicles were found to be matadors or even three wheelers or vehicles belonging to Calcutta Municipal Corporation. (l) no transport challans by the transporters were produced. (m) in some cases goods had been procured at a higher price and sold at a depreciated value even though the products being non-perishable, have a tendency to grow in value over the years. (n) availability of huge cash on the day of seizure supports the allegations inasmuch as no cash....
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.... to be proved beyond reasonable doubt, whereas in departmental proceedings a charge can be proved on preponderance of probabilities. 36. It is a settled proposition that "witnesses essential to the unfolding of the narrative on which the prosecution is based must be called by the prosecution, whether in the result the effect of their testimony is for or against the case for prosecution" (See page 236 - "The Law of Evidence"- 17th Edition, Reprint 1988 - by Ratan Lal Dhiraj Lal). 37. Now the Revenue says that the transactions of sales incorporated in sale invoices of the appellants are without transactions of goods because no goods were brought or transported by him to his godown. It becomes essential for Revenue to bring on record the evidence of driver or owners of vehicles which, as mentioned in undisputed invoices of sale by SAIL, TISCO, etc., transported the goods. Failure to do so leads to the inevitable inference that the state of affairs mentioned in such invoices of SAIL, etc., regarding transportation of goods to the appellant's premises cannot be doubted at all. To doubt such transportation is to doubt the invoices themselves which is not even the case of ....
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....e goods against modvatable invoices issued by it. Revenue has not made any mention to examined and record the evidence of transporters of goods sold by it to such further traders or manufacturers. Revenue's charge that only documents were sold without actually supplying the goods falls through on the failure of the Revenue to examine and record evidence of transporters - vehicle owners and drivers of vehicles mentioned in modvatable invoices/challans. Evidence of transporters acquires a lot of significance because they unlike the appellant or the buyer, are not beneficiaries at all in the scheme of Revenue's story and thereby they attain the status of independent witnesses. These charges have further weakness that Revenue has not examined and recorded the statements of persons who, as per modvatable invoices, purchased the goods from the appellant and received them. These person also fall in the category of essential witnesses. Failure to examine and record statements from them injects a serious weakness in Revenue's case. 40. These weaknesses are fatal to the Revenue's case. Consequently the impugned order is liable to be set aside on these weaknesses alone. I order accord....
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....to be correct. M.K. Goyal in his statement dated 23-1-1996 (available at P/77 of the appeal papers) has very clearly stated: 'sold out to non-optee customers. Papers in whatever/whatsoever in your custody'. D.K. Goyal in his statement dated 20-1-1996 stated. "The goods have been sold to non-modvat optee". The bills of sale should be in seized documents. It is to be noted here that statements of both the appellants tally with one another. These statements were made when they were in jail and they did not have complete records before them. Subsequent statement dated 18-3-1996 of D.K. Goyal stated that 40.150 MTs. were lying at New India Metal Works and the remaining sold to non-modvat optees. Bulk of the quantity was still told as sold to non-modvat optees. Difference of 40.150 tonnes is no doubt due to new facts coming to light subsequently. This quantity had been seized by the C. E. officers in the meantime as having not been entered in R.G. 23D register. I am of the view that reply to such a question requires detailed examination of records. One cannot remember these things, which in any case are a matter of record. Both the appellants had stated that sale bills must be in seized ....
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....cumstance that no transport challans were produced, appellant's explanation is that the customers brought their own vehicles; they did not book it through any transport agency necessitating issuing of transport challans. This fact that customers brought their own transportation is not disputed by the Revenue. Hence the circumstance reduced upon is erroneous. In any case, by itself such a circumstance does not prove the allegation of non-transportation of goods in the absence of recording statements of transporters. 48. Regarding the circumstance of some of the goods having been sold at prices lower than the purchase price, explanation of the appellant is that there is no allegation that these have been sold at less than market price on the date of sale. Further, it is submitted that it does not make any commercial sense to keep the capital idle in a business activity waiting for the time for the market to rise. There is substantial force in the appellant's plea and a purely theoretical approach of the Revenue without understanding the pragmatic consideration of trade and commerce......... Further, I am of the view that a few such examples, out of about 900 modvatable transa....
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.... herein. Adjudicating authority has not cared to apply its mind to those explanations. I do not find any substance in Revenue's case on the basis of evidence available on record. 51. Therefore, I allow the appeal with consequential relief to the appellant. Sd/- (P.C. Jain) Member (Technical) Calcutta Dated : 5th March, 1998 POINT OF DIFFERENCE In the facts and circumstances of these cases whether appeals be allowed as held by Member (Technical) or these be rejected as held by Member (Judicial). Sd/- (Archana Wadhwa) Member (J) Sd/- (P.C. Jain) Member (T) Calcutta Dated : 5th March, 1998 52. [Order per : C.N.B. Nair, Member (T)]. - The point of difference stated above occasions this opinion. These appeals mainly relate to imposition of penalty under Rule 173Q (bbb) of the Central Excise Rules on a registered dealer of excisable goods. Rule 173Q (bbb) is reproduced below for convenience of discussion of the issues involved :- "Rule 173Q (bbb) If any manufacturer, producer, registered person of a warehouse or registered dealer - enters wilfully any wrong or incorrect particulars in the invoice issued for the excisable ....
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....cts of the case. They also submitted that the stock was not available because most of it had been disposed of through non-modvat invoices and there is no Central Excise requirement to enter such supplies in the RG23D account. And the remaining quantity was available with the decoiler and had been seized. With regard to Government vehicles and non-transport vehicles figuring among the vehicles used for transport, they submitted that the transporting of the goods was the responsibility of the buyers and the invoices merely entered the vehicle numbers given by the buyers and they have no responsibility in this regard. They also submitted that they had consistently explained in their statements that shortage on the date of stock taking was on account of goods being sold to non-modvat buyers. There was no contradiction or inconsistency. Regarding the sales at less than purchase prices, they explained that sale price had to be seen in comparison to market price at the time of sale and not the purchase price. And there was no allegation of sale below market price. It was submitted that they had not been allowed cross-examination of their accountant Shri R.N. Dubey and Shri D.K. Goyal thou....
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....sufficient for the findings in the adjudication order in the light of the explanations offered by the appellant. He submitted that the adjudication order is entirely wrong and mis-directed in holding that it is not necessary to establish the factum of consignees taking impermissible credit. The adjudication order has gone on the basis that it is sufficient to show that the dealer had issued invoices without receiving stock or despatching the same. Dr. Pal submitted that the finding that the goods were not received or despatched is also without basis in view of the explanation of the appellant that goods were purchased from reputable big iron and steel manufacturing companies and they had been paid through banking channels. He emphasised that it is inconceivable that such companies would issue false invoices providing wrong particulars in the invoices (including transport). No evidence has also been produced by the investigation to show that the transporters had taken the goods to parties other than the appellants or that the appellant had disposed of the goods to persons other than the consignees mentioned in the invoices. In fact investigation is silent on all these vital aspects.....
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....rmissible credit is relevant only with regard to manufacturers and action for recovery of impermissible credit against the manufacturers is under entirely different Rules. These are entirely separate actions and should not be mixed-up and are not inter-dependent. With regard to the evidence adduced in the case being of a circumstantial nature, he submitted that proof in cases involving fraud cannot be of mathematical precision but what is required is the establishment of such degree of probability that a prudent man may on its basis believe in the existence of facts in issue as held by the Hon. Supreme Court in the case of Collector of Customs, Madras v. D. Bhoorrall [1983 (13) E.L.T. 1546 (S.C.)]. He also submitted that proceedings under the impugned order were not a criminal trial, and in a civil proceeding relating to violation of tax laws, the nature of evidence required is different from the evidence required in a criminal proceeding. He also submitted that mens rea is not required in a revenue matter like this. He relied upon the Hon'ble Supreme Court's decision in AIR 1984 SC 273 in support of the submission that principles of natural justice will depend on facts and circums....
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..... Adjudication order also has not given a finding that impermissible credit had been taken under any of these invoices. The order instead avoids this requirement by holding that such enquiry was not relevant. I am not able to agree with this approach to investigation which avoids vital facts and concentrates on certain subordinate circumstantial matters. Therefore, the investigation was misdirected and allegations have been made without ascertaining relevant facts. Even in a case where impermissible credit has been taken by the consignees, the Rule requires it to be shown that a dealer had, with intent to "facilitate" the buyer to avail impermissible credit, had "wilfully" entered wrong or incorrect particulars in these invoices. The penal provision in the Rule is, therefore, subject to satisfaction of mala fide intent and wilful entry of wrong or incorrect particulars. In the instant case it has not been shown as to what entries made in which of the invoices are found to be wrong or incorrect on verification. It has also not been shown that entry of such wrong or incorrect particulars was wilful and done deliberately to facilitate fraud on Revenue by the consignees. The investigat....