TaxTMI 
TaxTMI 
2011 (4) TMI 466
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....tka/Pan Masala bearing brand name KUBER, MOOLCHAND etc. classifiable under Tariff Heading 2106.00, and are hereinafter called as KTPPL . M/s. Kuber International (India), now known as M/s. Kuber Khaini Pvt. Ltd., were engaged in manufacture of Chewing Tobacco and Jet brand Khaini classifiable under Tariff Heading No. 2404.00, and hereinafter called as KI . Pursuant to information received that the appellants were indulging in clandestine removal of goods and evasion of duty, the investigating agency of the revenue department conducted search on 9.10.1998 at six different places, namely, 30 & 31-K, Siraspur, Delhi, Office premises of the appellants, 4130, Gali Barna, Sadar Bazar, Delhi, 6041-42, 2nd Floor, Basti Harphool Singh, Delhi, 5987, Plot No. 83, South Nawab Road, Basti Harphool Singh, Delhi, and 463, Pocket A (GF), Sarita Vihar, Delhi. The impugned orders also disclose that as a result of the said search, various materials were seized and the same included 57 Bags of Moolchand brand Gutka weighing 877.800 kgs. valued at Rs. 3,76,000/- being excess in stock of the balance recorded in statutory record at 31-K, Siraspur, Delhi; cash of Rs. 1.80 lakhs at 3909, Gali Barna, Sadar ....
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....be preciously summarized as below. The total number of machines installed were 137 and as per the letter of Chairman of the Board each machine could manufacture 200 pouches per minute and therefore 137 machines could manufacture 27,74,25,000 pouches per month, and all the machines having utilized in three shifts for 25 days in a month, the total production would be 832275000 pouches per month. Therefore, as regards KTPPL is concerned, for the period of 14 months from 07.05.1997 to 30.06.98, the total production ought to have been 1165 crores of pouches i.e. 882575 bags, whereas in fact, the accusation of clandestine removal has been restricted to 21413 bags for the said period. For the period of three months from 1st July 1998 to 5th August 1998 considering the capacity of production, it would be 525523 crores pouches i.e. 193356 bags while the accusation has been restricted to 69,551 bags. As regards the electricity consumed, the loose sheets disclose that for the period of twenty days from 11th June 1998m to 30th June 1998, the appellants had purchased 29600 ltrs. diesel. The D.G. set consumed 55 litres per hour. Therefore, there was sufficient diesel to manufacture the huge quan....
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..... Failure to record the time of commencement and conclusion of search has been held to be a technical lapse. Non seizure of the key of the premises has been held to be not relevant for the decision in the matter. It has also been held that Shri Shubh Karan Bothra was present at the premises at the time of search. It has been held that the keys of the premises were brought by Shri Bothra and the documents were recovered in the presence of Shri Bothra and independent witnesses. It has also been observed that Shri Bothra had stated in the course of panchnama that the premises were used as the guest house by the appellants. The contention of the appellants that documents were fraudulently prepared by their dismissed employee Shri Umed Chandelia has been rejected on the ground that none of the persons have stated that the said documents were written by Shri Umed Chandelia. 7. It cannot be disputed that the charge of clandestine removal of goods is a serious charge and needs to be established with cogent evidence in support thereto. In that regard, certainly heavy burden lies upon the department to prove the same by placing on record proper evidence in support of such charge. I....
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....the impugned orders essentially relates to absence of cogent evidence in support of the charge against the appellants relating to clandestine removal of the goods, failure on the part of the Department to adduce satisfactory evidence in support of such charge and the findings having been arrived at by the authority in the absence of evidence in support thereto. The main grievance is that the findings are not borne out from the records but are merely presumptions and assumptions sought to be drawn even in the absence of materials on record remotely suggesting such findings. 11. It can hardly be disputed that the case against the appellants is essentially based on the materials in the form of kachha challans, loose sheets and Hisaba Book stated to have been recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi, read with the of seizure proceedings relating to those materials and the statements of Shri Mool Chand Maloo and Vikas Maloo. The conclusion regarding clandestine removal of the goods has been drawn on the basis of various entries in Hisaba Book and kachcha challans which are stated to be tallying with the entries in some of the invoices as well as the ....
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....nbsp; R/o E-13, Mansarovar Garden New Delhi. We the above named Panchas on being called by the officers of Anti Evasion Branch, Central Excise Commissionerate Delhi-I, New Delhi presented ourselves at 4130, Gali Barua, Sadar Bazar Delhi to witness the Central Excise proceedings on 9.10.98. The visiting officers called Sh. Shubh Karan Bothra, authorised signatory of M/s Kuber Tobacco Products Pvt. Ltd. Siraspur Delhi. Sh. Shubh Karan Bothra reached at the above said premises and informed the officers that they are using three rooms of the above said premises as their and opened the locks of the rooms in our presence. Suraj Prakash Inspector, Central Excise (A.E.) Delhi-I showed the search warrant dated 9.10.98 issued by the Assistant Commissioner, Central Excise (A.E.), Delhi-I to us and Sh. Shubh Karan Bothra and we all put our dated signature on it in token of having seen the same. The Officers offered themselves for the search which was declined by Shri Shubh Karan Bothra and conducted the search proceeding. As a result thereof the officers found certain records in the said rooms details of which is given in the Annexure A to this Panchnama. The officers re....
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.... it specifies the location of the three rooms viz-a-viz the entire building as well as that of the documents alleged to have been found in the premises. The panchanama does not disclose the number of accesses available to the premises and whether the premises were accessible or not from any of those accesses before unlocking the rooms. There is no description of the entire building in which the three rooms, which were allegedly used as the guest house, were situated. The description merely states three rooms of the said premises . In other words, the premises bearing No. 4130 are not only having three rooms but there are more rooms to the said premises. The panchnama has to be specific and clear about the location and the description of the premises irrespective of the fact whether it is in the course of criminal investigation or tax evasion investigation. 16. The panchnama also does not disclose as to who had found the documents in question and where exactly those documents were located in the said premises. It does not state that those documents were seized by concerned officers. It only speaks of an act of resumption of the documents. The exact word used is resumed for....
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....All this information was absolutely necessary to give credibility to the panchanam, particularly when the entire proceedings in that regard are sought to be challenged and disputed. 20. Undoubtedly, there is a Annexure A stated to be giving details of the record found. However, bare perusal of the said annexure would disclose that the same does not give any sort of details of the documents stated to have been found in the premises. One Saraswat duplicate book or attendance register cannot be said to disclose the details of the identity of the document. It does not disclose what sorts of the book it is. It does not disclose whose attendance register it was. The photocopies of bank passbook are stated to be 51 in numbers. However, whose account books were they, what was the account number, by which bank they were issued, for what period they related to? Nothing has been stated. 21. A panchanama is a record of the things visually perceived or actually experience by the panchas in the course of investigation. If it is a search panchanama, obviously, it should record everything that takes place in the course of search. Mere recording that the search officers offered ....
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....e material seized and recovered can also be doubted. It is also necessary to record not only the description of the premises but also the movement of the officers and the panchas searching the premises and every relevant action of every such person has to be precisely recorded in the panchnama to avoid any doubt about the seizure proceedings. None of such precautions were taken in the cases in hand. 23. In the above circumstances, it is the contention on behalf of the appellants that since the seizure itself was illegal, the recovery stands vitiated and, therefore, nothing recovered can be considered as relevant material to substantiate the charge against them. However, this contention to be canvassed cannot be accepted. It is well settled that the rules of evidence as they are in force in this country do not exclude relevant material on the ground that it was obtained by illegal search and seizure. The evidentiary value of such material is to be ascertained and assessed irrespective of illegality in the search and seizure. Inspite of search and seizure being illegal, if the recovery is of relevant material and the department is able to establish the link between such material and ....
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....ndestine removal of goods connotes accusation of serious nature and, therefore, requires to be established with cogent evidence. If proved, it can have drastic consequences. Besides, a fair proceedings, with no opportunity to the prosecuting agency to gain advantage of its own wrong or lapse, is the corner stone of our justice system. At the same time, the other side of the coin is that the white colour offenders particularly those defrauding the public exchequer cannot be allowed to enjoy the booty collected by them by taking undue advantage of their own failure or perhaps mischief. It is, therefore, necessary to strike proper balance and that is why the Apex Court in State of Himachal Pradesh vs. Priti Chand and Another reported in 1996 (2) SCC 37, Radha Kishan vs. State of U.P. reported in AIR 1963 (SC 823 and State of Maharashtra vs. Natwar Lal Damodar Das Soni reported in 1980 (4) SCC 669, has ruled that the evidence obtained even by illegal search and seizure should not be discarded totally but should be scrutinized and examined carefully and what weight should be attached to such material should be decided depending upon the facts of each case. 27. The point theref....
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....f any help to the department to establish link between the appellants and the said premises. It is also contended that the premises 4130 belong to the appellants has been admitted by Shri Moolchand Maloo in his statement. About the alleged admission and the statement of Shri Moolchand Maloo is concerned, it would be dealt with separately herein below. 29. Reverting to the point relating to the documents stated to have been seized in the course of panchnama, admittedly, the author or authors thereof has/have not been identified, nor examined. Once it is not in dispute that the documents were recovered and seized from the premises other than the appellant s factory premises, it was absolutely necessary for the department to establish that the premises in question were in possession of the appellants at the relevant time. As pointed out above, undoubtedly, the panchanama discloses that the locks of the premises were opened by Shri Bothra, the employee of the appellants. However, it has not been established that the keys of the premises were in possession of Shri Bothra before unlocking the premises. In fact, it has not been established as to from where and who had brought th....
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....es no reference to any hisaba book or kachha challan. The said annexure does not enlist any hisaba book or kachha challan therein. The description of the materials stated to have been seized from the said premises under the said panchnama and described in the Annexure A to the said panchnama do not include any hisaba book or kachha challan. Being so, one wonders whether these were the very documents which were seized from the said premises? If not, how and from where these documents were recovered? We have no clue either from the records before us or from the impugned order in that regard. In the absence of this vital information, we fail to understand as to how these documents can be of any help to establish the charge of clandestine removal of the goods by the appellants, and that to by applying the curious methodology of two digit reduction theory applied by the department without disclosing any basis for such theory. 33. As regards the loose sheets, undoubtedly, the Annexure A to the said panchnama makes reference to one folder containing loose bahi papers and one loose paper file . In the corresponding third column of the Annexure A , the entries thereunder read as 1....
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....ount of various legal and procedural infirmities in the panchnama proceedings noted above, it is apparent that the entire proceedings have lost their credibility and serious doubt arises even about the credibility of the materials stated to have been collected in the course of such proceedings. 36. It is, however, stated that documentary evidence stand corroborated by admission on the part of Moolchand and Vikas in their statements which were recorded on 17.11.1998. The impugned order further discloses that the said statements were sought to be retracted on 04.12.1998, however, the Commissioner has rejected the retraction on the ground of delay. 37 In Shiv Shakti Steel Tubes vs. CCE reported in 2008 (221) ELT 166 it was held by the Hon ble Punjab & Haryana High Court that the statement to a custom officer can be relied upon and can be used against the makers of the statement as long as it is not hit by any of the defects envisaged by Section 24 of Evidence Act, 1872. A statement containing self exculpatory matter cannot amount to a confession of any wrong doing because of an exculpatory material is of the same fact which if true then it would negative the wrong ....
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.... 40. In the case in hand, not only that the statements were sought to be retracted by the parties, as already observed above, the contents of such alleged admission do not relate to any of the documents stated to have been recovered under the panchnama. In the absence of link between the documents which are sought to be relied upon in support of the accusation of clandestine removal of goods and those documents which are stated to have been recovered in the course of panchnama, the accusation does not stand proved, equally so in relation to alleged admission in the said statements. 41. There is yet another peculiar aspect of the said statements. Perusal of the statements of Sh. Moolchand disclose that the same was stated to have been written by his son Sh. Vikas Maloo at the request of his father. In other words, it is in the handwriting of said Sh. Vikas Maloo. Prior to the signature of the party at the end of the statement, it has been recorded therein that the statement is given by deponent voluntary without any duress, force or enducement and that the statement is that of the deponent and it is correct statement given by him. Similar is the recording at the end of t....
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....peaks of opening of a lock of the premises by him. The statement nowhere states that the key of the premises was with the deponent. On the contrary, the statements specifically states that the custom officers were already present at the premises. It is pertinent to note that the statement was recorded on the very day on which the panchnama was conducted. The statement also does not disclose the description of the such documents stated to have been recovered and /or seized by the department from the said premises. The statement speaks of use of premises for residence of certain persons on the line of guest house but does not disclose the premises having been used by the appellants or their company as its guest house. Obviously, therefore, the statement of Shri Bothra also can not lend any support to the case of the department. 45. Any statement before being accepted as admission of a fact has to be examined to ascertain what is its imports and then to determine what weight it should be attached to the same. The Apex Court in Nagubai Ammal and Others vs. B. Shama Rao & Other reported in AIR 1956 SC 593 had ruled that an admission is not conclusive as to the truth of the mat....
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.... or utilizes the raw materials without disclosing its utilization. Learned Commissioner has clearly observed in the impugned order that there is no evidence of purchase of major raw materials like supari, tobacco etc even in the loose sheets. In other words, the department could not bring any evidence about procurement of raw materials sufficient to manufacture the final product of the quantity which is alleged to have been clandestinely removed. 50. Similar is the case in relation to the sale of the clandestinely removed goods. Admittedly, there is no material on record which could establish sale of the clandestinely removed goods. Neither the transporters have supported any such claim nor the suppliers have established the said allegation. 51. Undisputedly, the working of the machines in the appellants factory was not tested or certified to ascertain the production capacity of the said machines. There is no panchnama drawn to ascertain how many machines in the factory of the appellants were in working condition or where actually working and what was the production capacity of each of those machines. No records were available to hold that the appellants were wo....
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....en that telephone numbers. It was, therefore, necessary to collect proper evidence to establish the said fact by collecting cogent evidence regarding the actual production in the appellants factory. 53. The appellants are also justified in making grievance about the failure on the part of the respondent to collect any evidence in relation to either procurement of raw materials by the appellants or sale of final goods so as to justify the allegation against the appellants about clandestine removal of huge quantity of the final product within a short span of time. Admittedly, there was no verification of the capacity of the machines to produce the total quantity per day. Calculation in that regard has been arrived at merely on the basis of some assumption and not on actual verification of the machines. Inspite of repeated contention sought to be raised by the Advocate for the appellants in that regard, the respondent could not point out anything from the records which could convince us to reject the said contention on behalf of the appellants. 54. As regards the entries made regarding raw materials in the loose sheets, it has been stated that the complete addresse....
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....f the appellants or any of the employees or the officers of the appellants. Neither there was hand writing examination done nor the necessary evidence to establish the link between the said hand writing and that of any of the employees of the appellants has been placed on record. 57. As rightly pointed out by the Advocate for the appellants, any kachcha records to be made a part of the evidence, the same need to be corroborated by cogent evidence and in the absence thereof, the private records by themselves do not transform into reliable evidence. There is absolutely no corroboration in any manner of the entries in Hisaba Book or loose sheets or kachcha challans. 58. The efforts on the part of the Commissioner to link the said entries to the production of clearance of the goods from the appellants factory as rightly submitted are based on purely presumptions and assumptions without any tangible evidence to support the conclusions sought to be arrived at in that regard. 59. There is no evidence collected as regards the number of shifts the machine might have been used in the factory of the appellants. The conclusion in that regard has been sought to be ....
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....hat 200 KVA was installed in the premises, the Department has failed to establish that for one shift, the generator could have consumed such a large quantity of diesel within 20 days. In relation to 380 KVA for normal shift of 8 hours a day, the consumption of diesel would be 280L. Considering the same for 20 days, it cannot exceed 5,600 L. As regards 200 KVA for normal shift of 8 hours, it would consume 180 L and accordingly for 20 days it cannot exceed the consumption of 3,200 L. Being so, by no stretch of imagination, the appellants could have consumed 29,600 L of diesel within 20 days. The contention of the appellants in this regard is certainly well founded in the facts and circumstances of the case. 63. If however, defiance of law and procedure leaves scope for tempering with the material seized, then certainly such material cannot be of any relevancy. In the case in hand, on account of various legal and procedural infirmities in the panchnama proceedings noted above, it is apparent that the entire proceedings have lost their credibility and serious doubt arises about the credibility of the materials stated to have been collected in the coruse of such proceedings. &....
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....hi High Court held that author of loose sheets was not identified is of no consequence in view of admission made by Director of firm. It was recorded that the Director had clearly admitted that loose sheets reflected removal of goods from the factory in a clandestine manner. As a matter of fact, there were three godowns of the assessee which were identified during search of the premises and it was found that several machines manufacturing gutkha and pouches were actually not in use. 70. In CCE, Hyderabad vs. Vanifab Engineers Pvt. Ltd. reported in 2006 (206) ELT 893, the Tribunal held that in the absence of any statement from any person from the factory to prove that there has been excess production and clearance of the goods without payment of duty and in the absence of any other evidence , the proceedings on charge of clandestine removal of the goods are liable to be quashed. 71. In Laxmi Engg. Works vs. CCE, Delhi & Anr. reported in 2001 (98) ECR 273, it was held that in the absence of cross-examination of witnesses and the recovery of slip pads, loose papers and register from the factory premises having not proved by the independent witnesses, the charge of ....
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....nt was sought to be established on the basis of entries made in the private note book by the labour contractor regarding the quantity bundled and loaded during the relevant period. It was held to have been established as the entries in the book were corroborated by the statement of the labour contractor and his partner as also considering the volume of power consumption. On facts, the case is clearly distinguishable. 78. In Sharma Chemicals vs. Commissioner of C. Ex. Calcutta-II reported in 2001 (130) ELT 271 (Tri. Kolkata) the note book entries of production and removal of products recovered from a person whose name was appearing in the list of the workers in statutory records cannot be of any relevancy to establish the charge of clandestine manufacture and removal. Such a charge cannot be sustained on presumption that the persons entrusted with such job are not usually shown as employees. The entries in private note book of record of production at the most may raise a doubt but can not be a proof of the charge in the absence of other corroborative evidence like installed capacity of factory, raw materials utilization, labour employed, power consumed, goods actually manu....
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....tion in such note book were less then the entries of the production in RG-I on the relevant dates. 84. In Ruby Chlorates (P) Ltd. vs. Collector of C. Ex. Trichy reported in 2006 (204) ELT 607 (Tri. Chennai) held that it is settled legal position that when several raw materials are involved, when a case of clandestine production and clearance is built on clandestine use of raw materials the same should be proven with reference to unaccounted use of such major raw materials. In a case of clandestine removal the department should produce positive evidence to establish the same. In the absence of corroborative evidence, a finding cannot be based on the contents of loose sheets of uncertain authorship. Failure on the part of the department to produce evidence of use of inputs to prove that there was manufacture of unaccounted finished product, absence of statements disclosing the source of procurement of the raw materials, absence of evidence regarding use of electricity or receipt of sale consideration by the assessee would establish failure on the part of department to bring home the charge of clandestine removal by the manufacturer. 85. In Opel Alloys (P) Ltd., vs....
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....inable to establish the charge of clandestine removal of goods, it is not necessary to deal with other grounds of challenge in the matter. Suffice to observe that in the absence of cogent evidence on record, the charge of clandestine removal against the appellants cannot be said to have been proved and hence the appeals are liable to be allowed. 90. In the result, the appeals are bound to succeed. The impugned orders are liable to be set aside with consequential relief. Accordingly, I allow the appeals and set aside the impugned orders. ORDER Per: Shri Rakesh Kumar: 91. Since common questions of law and facts arise in all these appeals, the same were heard together and are being disposed of by a common order. The facts leading to filing of these appeals are, in brief, as under:- 91.1 M/s. Kuber Tobacco Products Pvt. Ltd. (hereinafter referred to as KTPPL ) having its registered office at 3909, Gali Barna, Sazar Bazaar, Delhi, is a Private Limited Company, whose Directors are Shri Mool Chand Malu and his son, Shri Vikas Malu. M/s. Kuber International Ltd. (hereinafter referred to as KI and now called as Kuber International Pvt. Ltd.) having....
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....e listed in Annexure-A to the search Panchbnama. 91.4 The premises at 6041-42, 2nd Floor was found to be used by M/s. Gangaur Foods Pvt. Ltd., (GFPL), a sister concern of KI and KTPPL of which Shri Bajrang Lal Malu was one of the Directors and the company was found to be engaged in the manufacture of Dandia brand Gutka. The search of the premises resulted in the recovery of katcha documents pertaining to M/s. GFPL, cash of Rs.7.36 Lakhs which were placed under seizure. 91.5 As regards search of premises at 5987, Plot No.83, South Nawab Road, Basti Harphool Singh, Delhi, blank invoice/bill books of four companies were recovered:- (1) M/s. Rishi Trading Co., Gali Pahad Wali, Sadar Bazar, Delhi-6. (2) M/s.Swastik Trading Co., 1464, Qutab Road, Sadar Bazar, Delhi-6. (3) M/s.Shyam Tobacco Co., 6468-B, Basti Harphool Singh, Sadar Bazar, Delhi-6. (4) M/s. Shukla Enterprises, 2861, Bagichi Raghunath, Sadar Bazar, Delhi-6. At these premises, one Shri Ravi Kumar Duggar, Accountant of KTC was present. 91.6 From 463, G.F. Pocket-A, Sarita Vihar, New Delhi, no incriminating documents were recovered. 91.7 S....
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....which GM Sadar Office was written against his name, he stated that he did not understand as to what had been written. 91.8. Summons were served on Shri Mool Chand Malu and Shri Vikas Maloo, Directors of KTPPL and of KI and they appeared before the investigating officers on 17.11.98. Shri Mool Chand Malu in his statement dated 17.11.98 recorded under Section 14 of the Central Excise Act, 1944 stated that he was the Director of KTPPL, that he was also the proprietor of M/s. Kusum Trading Company (KTC), M/s. Kuber Aqua Minerals Ltd. M/s. Kuber Grains & Spices Pvt. Ltd., M/s. Green Valley Resorts Ltd., M/s. Blooming Dale Pvt. Ltd., and M/s. Kuber Globals Pvt. Ltd., that M/s. KTPPL were having their factories for manufacture of Gutka and chewing tobaco of Mool Chand brand and kuber brand, that Shri C.S. Baid was of his employee, who was in charge of purchase of raw materials and manufacture of finished goods and their despatch; that the payments for the purchase of the raw materials were being made by him or Shri Vikas Malu, that Shri C.S. Baid reported directly to the Directors i.e. himself or in his absence to his son, that for the purpose of marketing of the finished goods,....
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....aintain and keep the accounting of the goods cleared without payment of duty, entries were first made on loose sheets on daily basis, that subsequently on the basis of entries in loose daily sheets, kachcha challans were prepared in duplicate in the name of the respective distributors, the original copy of which was sent to distributors by courier, that on the basis of kachcha challan, kachcha accounts containing partywise details of sales and receipt of payments were prepared and that payments for non-duty paid were received in cash or through bearer demand drafts. Shri Mool Chand Malu was shown the documents recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi and stating that the same pertained to KTPPL and KI, he further stated that the books at sl.no.8, 9, 10, 12, 16, 17, 18, 19 and 20 were the carbon copies of the kachcha challans in respect of the goods sold to various distributors, that these kachcha challans have been mainly prepared / written by his employee Shri Kishan Sharma, that the books against sl.no.11, 13, 14 and 15 were the kachcha accounts and at sl. nos. 14 and 15 (Hisaba books) contain partywise accounts of sales and receipt of the payments, tha....
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....nce November, 1998, he was working with KTPPL, that he was doing the job of dispatching the letters, handling bank transactions and various other work of KTPPL and KI and other firms of Mool Chand Malu, Vikas Malu and their family members, that the entire work relating to production of Gutka and Khaini and the work of marketing of the finished goods and purchase of raw materials was being looked after Shri C.S. Baid, that for local sales within Delhi, Shri Mukesh Kapoor and Shri Gowri Shankar Khattar were responsible, that Shri Gowri Shankar Khattar and his wife were the owner of two firms, M/s.DMC and M/s. NDMC, that Shri Mukesh Kapoor and his wife Mrs. Saroj Kapoor were owning two firms M/s. Ganpati Agencies (GA) and M/s. Ganpati Marketing Co. (GMC), and that Shri Subh Karan Bothra was looking general administration of the office at 3909, Gali Barna, Sadar Bazar, Delhi and he was also looking after the receipt of payments from the buyers. 91.12 The statements of Shri Mukesh Kapoor, his wife, Smt. Saroj Kapoor, and Shri Gowri Shankar Khattar were also recorded wherein they accepted that they were marketing the Gutka and Khaini manufactured by KTPPL and KI . 91.....
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....entioned in the kachcha challans. The loose sheets in the folder mentioned at S.No.2 of the Annexure to Panchnama dated 9.10.98 of the search of premises at 4130, Gali Barna, Sadar Bazar, Delhi consisted of daily sheets containing details of clearances of Gutka and Khaini, and records of purchase of raw materials/ inputs like plastic lamination, tobacco, and diesel for running of generators. It, therefore, appeared that M/s.KTPPL and KI were clearing Gutka and Khaini without payment of duty in clandestine manner and even in the cases where the central excise invoices had been issued and the duty had been paid, the duty had been evaded by undeclaring the value. Looking to the number of machines and capacity of the machines, it appeared that KTPPL and KI had capacity to manufacture the quantity of the Gutka and Khaini which had been sold under the kachcha challans. It is on this basis that the following two show cause notices were issued to KTPPL and KI and other noticees. 91.15.1 A show cause notice dated 31.07.2000 was issued to KTPPL and others for (a) recovery of allegedly short paid central excise duty amounting to Rs.11,99,33,571/- from M/s.KTPPL chargeable ....
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....h proviso to Section 11 A(1) of the Central Excise Act, 1944 along with interest on this duty at the applicable rate under Section 11 A ibid; (b) recovery of differential duty amounting to Rs.1,06,61,306/- in respect of the consignments of branded Khaini cleared during 1.12.1996 to 31.3.1999 period, which was allegedly short paid under Rule 9(2) of such Central Excise Rules, 1944 read with proviso to Section 11 A(1) of the Central Excise Act, 1944 along with interest on it at the applicable rate under Section 11 AB ibid; (c) Confiscation of land and building and plant and machinery of M/s. KI used in the manufacture of goods under Rule 173 Q(2) of the Central Excise Rules; (d) Imposition of penalty on M/s. KI under Rule 9(2) read with Section 11 AC and Rule 173 Q of Rules, 1944 and also under Rule 226 of the Central Excise Act read with Section 11 AC of the Central Excise Act, 1944; and; (e) Imposition of penalty under Rule 209 A of the Central Excise Act, 1944 on Shri Vikas Malu, Mool Chand Malu, Shri C.S. Baid, Shri Subh Karan Bothr,.Shri Mukesh Kapoor of M/s. Ganparti Agencies and M/s. Ganpati Mktg. Co. Shri Gowri Shankar Khattar of Delhi ....
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....y the Commissioner of Central Excise, Delhi vide order-in-original no.30/06 dated 3.1.2006 by which (a) total central excise duty demand of Rs.4,18,29,655/- (Rs.3,47,22,118 + Rs.71,07,737/-) on account of clandestine removal and undervaluation of goods was confirmed against KI under proviso to Section 11 A (1) of the Central Excise Act, 1944 along with interest on this duty at the applicable rate as per the provisions of Rule 11 AB ibid; (b) land, building and plant and machinery, etc. of the KI was ordered to be confiscated under Rule 173Q (2) of the Rules, 1944 with option to be redeemed on payment of redemption fine in lieu of confiscation of Rs.3 Lakh; (c) Penalty of Rs.4,18,29,655/- was imposed on KI under Rule 173 Q read with Section 11 AC; and (d) Penalty under Rule 209 A of Central Excise Act, 1944 was imposed on various noticees as under :- (i) Sh. Mool Chand Malu Rs.4 Crores (ii) Shri C.S. Baid Rs.50 lakhs (iii) Shri S.K. Bothra Rs.40 Lakhs (iv) Shri Mukesh Kapoor Rs.50 lakhs (v) Shri G.S. Khattar Rs.50 Lakhs (vi) Shri Akhay Chand Kothari Rs.20 Lakhs (vii) Shri Ja....
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.... description of the premises is there in the Panchnama nor does it mention as to from which room these documents have been recovered, that there was enough scope for tampering of the documents and in fact, there are interpolations in the documents alleged to have been seized by the department, that there is no proof that hisaba books and kachcha challans pertain to the factories of the KTPPL and KI, that it was not permissible to the adjudicating authority to place reliance on such private records in absence of corroboration by cogent evidence on records, that even the entries of the hisaba books do not disclose that the same relate to the production of goods in the factories of the appellants, that no attempt has been made to locate the writer of the documents and kachcha challan books and hisaba books without which no reliance can be placed on the same, that neither the machines installed in the factory premises of KTPPL and KI were capable of manufacturing of Gutka and Khaini which are alleged to have been sold nor the generators installed in the factories were capable of running the machines for the period which the department alleges, that Shri Mool Chand Malu and Shri Vikas M....
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....f the three aspects of the manufacturing - procurement of raw materials, unaccounted production, or removal of goods on completion of manufacturing process, is established, it is sufficient to prove the case of clandestine removal and it is not necessary to prove all the three aspects, as many a times, it is impossible to get the evidence of all the three aspects, that the evidence on record stands corroborated by the statements of deponents, which includes the parties to the proceedings and no value can be attached to the retraction of statement by Shri Mool Chand Malu and Shri Vikas Malu, as the same was done as late as 17 days after recording the statement, that the findings have been arrived at by the adjudicating authority on analysis of the materials on record which includes the documents as well as the statements including the statements of transporters, that the contents of the documents - loose sheets, kachcha challan books and hisaba books had admittedly been written by the persons of the appellants Shri Kishan Sharma and Shri Umed Jain, that as regards cash flow is concerned, there is clear admission in this regard by the appellants, that there is no materials brought on....
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....ar, Delhi was being used as their guest house, the minor lapses like as to who brought the keys, non-mention of time of starting of the search and time of completion of the search, etc. do not vitiate the search itself, that as mentioned by the adjudicating authority in para 56.6 to 56.18 of the order-in-original no.159/2005 dated 30.12.2005 and para 51.7 to 51.14 of order-in-original no.3/06 dated 30.01.2006 retraction of the statement of Shri Mool Chand Malu and Vikas Malu is purely an afterthought and not genuine retraction, that authenticity of the loose sheets, kachcha challans books and hisaba books recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi stands established by the evidence unearthed on the inquiry with the transport companies and railways and also with the consignees and that FIR by Shri Vikas Malu on 19.08.2000 against Shri Umesh Chandalia regarding mis-appropriation of the money from the company does not help the appellant in any manner as this had been done only to discredit the evidence of Shri Umesh Chandalia and that at the time of search of the appellant s premises, the appellant had no grievances against Shri Umesh Chandalia. Summarising hi....
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.... admitted by Shri Mool Chand Malu and Shri Vikash Malu and just because these statements had been retracted, the same cannot be disregarded as the retractions of these statements by Shri Mool Chand Malu and Shri Vikas Malu are belated retractions made after 17 days and as held by the Tribunal in the case of Colmbia Electronics reported in 2002 (143) ELT 635 (para 6), belated retractions have no meaning; (g) Hon ble Madras High Court in the case of Dy. Director Enforcement Vs. A.M. Ceaser reported in 1999 (113) ELT 804 (para-9) and Hon ble Punjab & Haryana High Court in the case of Shiv Shakti Steel Tubes Vs. CCE reported in 2008 (221) ELT 166 (P&H) have held that statements recorded under Section 14 of the Act, 1944 are of the nature of admission and are admissible as evidence unless the same are hit by Section 24 of the Evidence Act and in this case, no evidence has been produced by the appellant that the department has used any threat, coercion or inducement in course of recording of the statements of Shri Mool Chand Malu and Shri Vikas Malu. Shri B.K. Singh, ld. DR, therefore, pleaded that there is no infirmity in the impugned order. 92.3 Shri H. Hidayattullah, the ld.....
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....been signed by Shri S.K. Bothra, who as per the panchnama was present throughout the duration of search. The documents mentioned at Sl.No.1 are photocopies of the bank pass books, which are pass books of various companies of Shri Mool Chand Malu and Shri Vikas Malu and their other family members. The main documents on which the department s case is based are -- (a) documents at Sl.No.2 a folder containing 113 loose papers; (b) documents listed against sl.No.8, 9, 10, 12, 16, 17, 18, 19 & 20 in the Annexures to Panchnama, which are kachcha challan books, also called Chalani by the appellant and (c) the documents listed at Sl.Nos.11,13, 14 & 15 which are kachcha accounts and the documents at S.No.14 & 15, called Hisaba books contain partywise accounts of the sale of gutka and khaini by KTPPL and KI during the period from 1.8.95 to 5.10.98. The kachcha challan books contain the carbon copies of the challans regarding sale of branded Gutka and Khaini and contain the details of the clearances and sales of the gutka and pan masala - consignee s name and address, the quantity and value of the goods, mode of transport, RR nos. in case of dispatch by railways and GR nos. in case of dispatch....
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....he premises informed the officers and panchas that they are using three rooms of this premises as their guest house and thereafter he opened the locks in their presence. When the fact that the locks of the premises were opened by Shri Bothra is not in dispute and at that time, there was no protest from Shri S.K. Bothra that the premies does not belong to them, it is clear that keys of the premises had been brought by Shri Bothra only. Shri Bothra, as per the statement of Shri Mool Chand Malu and Shri Vikas Malu was the person in charge of General Administration and Coordination work of their office at 4909, Gali Barana, Sadar Bazar, Delhi and therefore it is expected that it is Shri Bothra who would have keys to the premises at 4130, Gali Barna, Sadar Bazar, Delhi which was being used as the Appellant company s guest house. Therefore, just because panchanama does not mention as to who brought the keys of the premises at 4130 Gali Barana, it cannot be concluded that the keys were in the possession of someone other than Shri Bothra. For the same reason, just because panchnama does not mention the time of search and completion of the search, it would not make the search invalid. Moreo....
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....mentioned in the katchcha challans had been cleared on payment of duty, the particulars of those consignments, as mentioned in the kachcha challans, tally with those mentioned in the invoices, though in some cases, in the invoices much lower value has been mentioned. Para 53.1 and 53.2 of the order-in-original no.3/06 dated 30.01.06 and para 58.1, 58.2 and 58.3 of the order-in-original No.59/05 dated 30.12.2005 give the details of such kachcha challans. In some cases invoices had been issued only for a part of the quantity mentioned in kachcha challans and in such cases, the kachcha challans themselves mention the break-up of total quantity into the quantity cleared under invoices and the quantity cleared without invoices. This is a clinching evidence that daily sheets, kachcha challan books and Hisaba books recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi pertained to KTPPL and KI only. The photocopies of bank pass books recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi are of the accounts of various companies of Shri Mool Chand Malu and Shri Vikas Malu and their family members and their presence at this premises clearly indicates that this pre....
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....tary or unlawfully obtained. It is only for the maker of the statement who alleges inducement, threat, promise, etc. to establish that such improper means have been adopted. The Hon ble Apex Court further observed that if the maker of the statement fails to establish his allegations of inducement, threat, etc. against the officer who recorded the statement, the authority while acting on the inculpatory statement of the maker is not completely relieved of his obligations in at least subjectively applying its mind to the subsequent retraction to hold that the inculpatory statement was not extorted and it thus boils down that the authority or any court intending to act upon the inculpatory statement as a voluntary one, should apply its mind to the retraction and reject the same in writing. The Hon ble Supreme Court in the case of State (NCT) of Delhi Vs. Navjot Sandhu reported in 2005 (11) SCC 600 has held that for invoking Section 24 of the Evidence Act, the allegation that a confessional statement was made under any inducement, threat or coercion provision need not be proved to the hilt, that if it appears to the court that the making of the confession was caused by any inducement, ....
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....to be held as pertaining to KTPPL and KI and admissible evidence against them. The Hon ble Supreme Court in the case of Khet Singh Vs. Union of India (supra) has held that the documents recovered during the search, even if the search was illegal, are to be considered as admissible evidence unless there is allegation that the same have to be tampered with. Though in this case it has been pleaded by the appellant s counsel that some of the kachcha challans have corrections and interpolations on close examination, we find that as observed by the Commissioner in para 57.17 of the order-in-original No.59/05 dated 30.12.2005 and para 52.16 & 52.17 of the order-in-original no.3/06 dated 30.01.2006 the cutting and corrections are only in a few challans and that too in challan numbers and there are no correction or interpolations in quantity, value or description of the goods. Such corrections of challan nos. not make the documents unreliable. 94.2.1 It has been pleaded that the author of the seized kachcha challan books and hisaba books have not been identified and hence these documents cannot be relied upon. We do not agree with this plea, as both Shri Mool Chand Malu and Vikas ....
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.... Malu and Shri Vikas Malu, wherein they had stated that about 50% of the production of branded Gutka and branded Khaini was being cleared without payment of duty, that this was being done on account of stiff competition and that the kachcha challan books and hisaba books recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi pertain to KI and KTPPL and contain the details of all the clearances including the clearances made without payment of duty. (2) Seizure of 57 bags of Mool Chand brand Gutka totally weighing 877.8 Kgs valued at Rs.3,76,200/- (MRP) from the premises of KTPPL at the time of officers visit to the factory on 9.10.98 which was in excess to the recorded balance in RG-I Register, which as such represented unaccounted production. (3) Statement dated 17.02.2000 of Shri R.P. Sharma, Authorised Signatory of KTPPL wherein he stated that he was in charge of maintaining the central excise records of KTPPL and KI, while Shri C.S. Baid was in charge of the purchase of raw materials, manufacture of khaini and gutka and their dispatch and that he was entering the figures regarding production and clearance in the RG-I register on the basis of info....
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....vidence of huge clearances of finished goods in respect of which neither any duty had been paid nor any central excise invoices had been issued. Since these statements have been recorded under Section 14 of the Central Excise Act, 1944, which is in pari materia with Section 108 of the Customs Act, 1962, in view of the judgements of Hon ble Supreme Court in cases of (i)Naresh J. Sukhwani Vs. Union of India reported in 1996 (83) ELT 258 (SC), (ii) K I Pavunny Vs. Assistant Collector of Customs reported in 1997 (90) ELT 241 and (iii) Surjeet Singh Chhabra Vs. U.O.I. reported in 1997 (89) ELT-465 (SC) with regard to evidence value of inculpatory statement recorded under Section 108 of the Customs Act, 1962, the same have to be treated as substantive evidence. The seizure of 57 bags of Mool Chand Brand Gutka weighing 877.8 Kgs from the premises of KTPPL on 9.10.98 which had not been recorded in the RG-I Register is also clear evidence of unaccounted production, as this quantity of Gutka represents several days production which had not been recorded in the RG-I Register. The records of purchase of raw materials in loose papers within (Sl. No. 2 of the Annexure to the said panchnama dated....
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.... The onus then shifts upon the manufacturer to establish that the entries in such private records do not relate to the production in the factory or that the entries do not relate to manufacture and removal of the goods. In the case in hand, the appellants have totally failed to discharge his onus. In such circumstances, the question of further evidence in the form of buyers records or transporters examination or electricity records or record pertaining to excessive raw material need not be referred to. The Tribunal in case of K. Janardhan Pillai Vs. Collector of Customs reported in 1988 (38) ELT 647 (Tribunal) relying upon the Hon ble Supreme Court s judgement in the case of Collector of Customs Vs. Bhoormal reported in 1983 (13) ELT 1546 (SC) and Kanungo and Co. Vs. Collector of Customs, Calcutta reported in 1983 (13) ELT 1486 has held thus:- So far as trial proceedings in the Criminal Court are concerned, it is the axiomatic proposition of law that circumstantial evidence should point only to the hyphothesis, viz., the guilt of the person and should be absolutely incompatible with the innocence of the persons accused of an offence. But the effect of the said d....
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....5.3 In the present case, the seizure of huge quantity of unaccounted production from the factory premises of KTPPL, the statements of Shri Mool Chand Malu and Vikas Malu clearly admitting that about 50% of the production was being cleared without payment of duty recovery of the kachcha challan books and hisaba books containing details of the clearances in respect of which neither any central excise duty nor invoices had been issued, from the premises at 4130, Gali Barna, Sadar Bazar, Delhi which was being used by Shri Moolchand Malu and Sh. Vikas Malu as their guest house, the documents recovered from the railways and transport companies showing that the consignments mentioned in the kachcha challans and hisaba books recovered from the premises of the appellants had, indeed, been transported to the consignees mentioned in the kachcha challans and inquiry with the consignees, clearly show that the KTPPL and KI were involved in large scale of evasion of duty by clandestine removals without payment of duty and just because there is no records of procurement of unaccounted raw materials for the entire period of dispute, it cannot be concluded that there was no unaccounted production an....
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....well as KI under Section 11 AC ibid. However, since Section 11AB and 11AC had been introduced w.e.f. 28.9.96, interest under Section 11AB would be chargeable only in respect of clearances w.e.f. 28.9.96 and penalty under Section 11AC would be confined only to the duty demand on the clearances w.e.f. 28.09.1996. Since Shri Mool Chand Maloo and Shri Vikas Maloo, Directors of the KTPPL and KI are involved in sale of excisable goods which had been clandestinely cleared and which they knew were liable for confiscation, penalty has been rightly imposed on them under the provisions of Rule 209 A of the Central Excise Rules, 1944 and the same is upheld. However, since penalty under Section 11 AC has been imposed on KTPPL and KI, penalty on Shri Mool Chand Malu in order-in-original no.159/05 dated 30.12.95 and 3/06 dated 30.01.06 is reduced to Rs.70 Lakhs and Rs.70 Lakhs respectively and penalty on Shri Vikas Malu imposed under order-in-original no.159/05 dated 30.12.2005 is reduced to Rs.70 lakhs. 97. As regards Shri Gowri Shanker Khattar of M/s. Delhi Marketing Co. and M/s. New Delhi Marketing, Shri Pawan Kumar Karnani of M/s. Mahamaya Trade Agencies, Raipur, Shri Dilip Ram Vall....
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....in-Original No.3/06 dated 30.01.2006 Rs.10 Lakhs 97.2 As regards, Shri C.S. Baid, since admittedly, he was the person in charge of purchase of raw materials including the unaccounted raw materials, manufacture of the Branded Gutka and Branded Khaini and dispatch of the finished goods to various consignees and since the evidence on records indicates that dispatches of finished goods without payment of duty and without issue of invoices had been made with his knowledge and since it is Shri C.S. Baid, who was telling that Shri R.P. Sharma, Excise Asstt. regarding the quantity of the goods manufactured to be entered in the RG-I Register, we are of the view that he is also the person involved in dealing with the goods, which he knew were liable for confiscation and hence, penalty under Rule 209 A of Central Excise Act, 1944 has rightly been imposed on him. However, since Shri Vaid, he is only an employee of KTPPL and KI, in our view, penalty of Rs.50 Lakhs vide order-in-original no.159/05 dated 30.12.2005 and Rs.50 Lakhs vide order-in-original no.3/06 dated 30.01.06 is excessive and hence the same is reduced to Rs.5 Lakh each (Rupees Five Lakh) each. 97.3 As regards ....