TaxTMI 
TaxTMI 
TaxTMI 
2012 (10) TMI 340
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....re further packed in a bigger plastic bag called PP outer. During the period of dispute, the suppliers of plastic lamination and other packing material were M/s. MG laminations, Kanpur; M/s. Bakul Polypacks Pvt. Ltd., Kanpur and M/s. Anukampa Poly Packaging Industries, Lucknow. While till November, 2002, cutting and roasting of supari was being done in the factory of M/s. ST, since December, 2002, a firm M/s. Dhirendra Grinding at F-12, Talkatora Industrial Area, Lucknow (hereinafter referred to as "M/s. DG") with Shri Dhirendra Shukla as its proprietor, was started and M/s. DG started roasting and cutting the supari for M/s. ST on job work basis in their factory at "F-12, Talkatora, Industrial Area, Lucknow". 1.2 It is in the case of the department that on 20-10-2003, on receipt of intelligence that M/s. ST are engaged in large scale of evasion of duty by adopting various modus operandi, the officers of Directorate General of Central Excise Intelligence (DGCEI) conducted simultaneous search of - (a) the factory-cum-residential premises of Shri Sanjiv Mishra, Proprietor of M/s. ST, (b) factory premises of M/s. DG; (c) &n....
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....investigation were seized. 1.2.1 In the premises of Dealers - M/s. Shashi Traders, Lucknow; M/s. Shiv Kumar Jaiswal, sitapur; M/s. Shanker Traders, Lakhimpur and M/s. Awasthi Zarda Store, Hardoi, certain quantity of Shyam Bahar Gutka pouches were recovered which did not appear to be covered by any invoice and, hence, the same were placed under seizure. 1.2.2.2 Total duty involved in respect of 974.55 kgs. of gutka cleared without any valid invoice and seized from the premises of Transport Companies and dealers was Rs. 1,46,185/-. 1.2.3 In the premises of M/s. Bakul Polypacks, 2737.75 kgs. of printed laminated film rolls meant for M/s. ST was found over and above the balance in the RG-I register and the same was placed under seizure. 1.3 Inquiry in respect of M/s. DG revealed the following :- (a) This firm with Shri Dhirendra Shukla as proprietor had been started since December, 2002. Initially some machines for processing of supari had been put by Shri Sanjiv Mishra in the premises of M/s. DG, but subsequently all the machines for processing and cutting of supari were shifted from the factory of M/s. ST at Kundri, Rakabganj to F-12, Talka....
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....tobacco consumption shown and taking actual tobacco content as 2.2%, the gutka manufactured during 2000-2001, 2001-2002, 2002-2003 and 1-4-2003 to 16-10-2003 would be 861931.818 kg., 1011838 kgs., 1325890.12 kgs. and 762878.25 kgs. respectively as against the production of 127944 kgs. 139383.72 kgs., 181334.75 kgs. and 1,22,211.9 kgs. respectively shown by M/s. ST during these periods. This indicated that production of Gutka had been grossly under-reported by M/s. ST during 1-4-2000 to 16-10-2003 by showing inflated consumption of tobacco. 1.5 Sixty to sixty two grams gutka pouches are further packed in a plastic bag called PP outer. The pack of 60 to 66 pouches is also called a bundle. The sales invoice to dealers are issued in terms of bundles. Till July, 2002, PP outer were being supplied by M/s. Anukampa Poly Packaging Industries, Lucknow (M/s.APPL). The quantity of PP Outer supplied by M/s. APPL to M/s. ST during October, 2001 to July, 2002 as per the records of M/s. APPL is 14789.3 kgs. (41,08,135 in number). The 41,08,135 PP outer received by M/s. ST from M/s. APPL were used by M/s. ST upto November 2002, as thereafter they started procuring this item from M/s. Bakul P....
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....gal, Hardoi and Shri Pawan Kumar Grover, Proprietor of M/s. Grover Trading Company, Shahjahanpur, who confirmed having purchased Shyam Bahar brand Gutka from M/s. ST, Lucknow, the payment for which was being made in cash. Shri Ajay Sehgal in his statement also stated that though his name or alias is not "Bunti", Shri Sanjiv Mishra and Shri Awadesh Agnihotri of M/s. ST had told him for taking delivery of the goods in the name of "Bunti" and that he used to destroy the papers received from M/s. ST after receipt of the goods. Other dealers also mentioned receiving consignments of Gutka from M/s. ST under various names. 1.8 From the above, it appears that the GR issued by M/s. SKTC, M/s. NTFC and M/s. HTGC regarding despatch of "Zarda", "Masala" or "Gutka" etc. pertained to Shyam bahar gutka booked by M/s. ST and a number of said GRs were either hot accompanied by any invoice or were accompanied by very old invoices not pertaining to the goods covered under the GRs, which indicated that the bulk of the quantity of gutka transported under these GRs had been cleared by M/s. ST without payment of duty. The gross under recording of production of gutka by M/s. ST as estimated on the b....
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.... 20-10-2003. While at the time of recovery, Shri Mishra could not give any explanation whatsoever and the cash book of M/s. ST seized on 20-10-2003 did not reflect the cash seized, subsequently he claimed that he had promoted a company M/s. Shyam Vanaspati Oil Ltd. (SVOL) for manufacture of vanaspati of which he himself and Shri Pratyoosh Mishra were the Directors and on the basis of certificate issued by one Shir V.K. Tulsian, Chartered Accountant, claimed that the cash of Rs. 4,38,80,530/- seized was the share application money received from investors, an amount of Rs. 4.05 crore of which had been received from three companies M/s. Betsy Growth Finance Ltd., M/s. Sunshine Capital Ltd. and M/s. Stellar Investment Ltd. all of Delhi. Inquiry revealed that Sh. Surinder Jain and his brother, Shri Virender Jain were behind these three companies - M/s. Betsy Growth, M/s. Sunshine Capital and M/s. Stellar Investment and Sh. Surinder Jain in his statement dated 11-5-2004 and Shri Virender Jain in his statement dated 13-5-2004 stated that bogus/ fictitious entries had been made in the books of accounts of M/s. Stellar Investment, M/s. Betsy Growth and M/s. Sunshine Capital to show investme....
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....onfiscation of supari and supari waste seized from the premises of M/s. DG at F-12, Talkatora, Lucknow under Rule 25 of Central Excise Rules, 2002; (f) Imposition of penalty under Rule 26 of the Central Excise Rules, 2002 on- (i) The transporters M/s. SKTC, M/s. NTFC and M/s. HTGC; (ii) The dealers - buyers of M/s. ST M/s. Jaiswal Stores, Sitapur; M/s. Shashi Traders, Lucknow; M/s. Shankar Traders, Lakhimpur Kheri; M/s. Suresh Chand Mahesh Chand, Lakhimpur Kheri and M/s. Chokh Ram Mahender Kumar, Sitapur; (iii) Shri Sanjiv Mishra, Prop, of M/s. ST; and (iv) M/s. SVOL, Shri Sanjiv Mishra and Sh. Pratyoosh Mishra, Director of M/s. SVOL, Sh. Surender Jain, Director M/s. Sunshine Capital Ltd. and M/s. Betsy Growth and Sh. Virender Jain, Director, M/s. Stellar Investment; and (g) Imposition of penalty under Rule 27 of the Central Excise Rules on - (i) M/s. Bakul Polypack, Kanpur; and (ii) D....
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....n, Director M/s. Sunshine Capital and M/s. Betsy Growth Finance Rs. 50 lakhs (viii) Sh. Virender Jain, Director M/s. Stellar Investment Rs. 50 lakhs Penal proceedings against M/s. Chokh Ram Mahinder Kumar, Sitapur were dropped. 1.13 Against the above order of the Commissioner, these six appeals have been filed by M/s. ST, M/s. SKTC, Shri Dhirendra Shukla, M/s. SVOL and Shri Sanjiv Mishra & Pratyoosh Mishra, Directors of M/s. SVOL. 2. Heard both the sides. 2.1 Shri Bipin Garg, Advocate, the learned Counsel representing M/s. ST, M/s. SVOL, Shri Sanjiv Mishra, Proprietor of M/s. S.T. and Director of M/s. SVOL, Shri Pratyoosh Mishra, Director M/s. SVOL, and Shri Dhirendra Shukla, Proprietor, M/s. Dhirendra Grinders, pleaded that the entire case against M/s. ST and others is based on some details regarding booking of consignments in the records of three transport companies, M/s. SKTC, M/s. HTGC and M/s. NTFC, that all the sales of M/s. ST were at factory gate and the consignments in respect of which the duty is being demanded had been booked by the customers of M/s. ST to whom the goods had been sold by M/s. S....
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....gutka pouches, but the same has not been allowed, that since the major portion of duty demand is based on the testimony of these persons, not permitting their cross-examination vitiates the entire proceedings and in this regard, he relies upon the judgment of Hon'ble Allahabad High Court in case of C.C.E., Meerut-I v. Parmarth Iron Pvt. Ltd. reported in 2010 (260) E.L.T. 514 (All.), that duty demand of Rs. 35,80,500/- is based on the allegation that during the period from 1-1-2001 to 20-10-2003, while the duty had been paid on the basis that each gunny bag (bora) contained 100 bundles of 60 to 66 two gram pouches each, actually each bag contained 150 such bundles, that during the above period, M/s. ST were packing 60 to 66 pouches in one bundle and only 100 such bundles were being packed in one bag (bora), that there is no basis for the department's allegation that each bora was containing 150 bundles of 60 to 66 pouches each, i.e. 9000 to 9900 pouches, that entire duty demand is based on the assumptions and presumptions, that no adverse conclusions can be drawn on the basis of recovery of cash of Rs. 4,38,80,530/- from the factory-cum-residential premises of Shri Sanjiv Mishra, th....
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....ransporter had knowledge that the goods being transported by him were liable for confiscation under the provisions of Central Excise Act, 1944 or of the Rules made thereunder, that no evidence in this regard has been produced by the department showing that M/s. SKTC had knowledge that the goods transported by them had been cleared without payment of duty or that any other provisions of Central Excise Rules had been contravened in respect of the same and that in view of this, there is no justification for imposition of penalty on M/s. SKTC under Rule 26 of the Central Excise Rules. 2.3 Shri B.K. Singh, ld. Jt. CDR assisted by Shri S.R. Meena, ld. SDR defended the impugned order by reiterating the findings of the Commissioner in the impugned order and pleaded that M/s. ST were indulging in large scale of evasion of duty by grossly under-reporting the production and clearances of Shyam Bahar Gukta manufactured by them, that receipt and consumption of various ingredients of gutka - supari, tobacco, kattha, lime, perfumes, menthol and lamination & packaging material was being recorded in their records by calculation on the basis of production of gutka pouches shown in RG-I registe....
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....y booked by M/s. ST through these transport companies, the buyers were being shown as consigners as well as consignees and the correct description of the goods was not being mentioned and the words "Zarda", "Masala", "Shyam Bahar" etc. were being used for Gutka, that the partners of employees of the transport companies in their statement have stated that the consignments mentioning the description of the goods as "Zarda", "Masala", etc. are actually of Shyam Bahar Gutka received from the factory of M/s. ST, that in this regard, the plea of M/s. ST that another person was using the brand "Shyam Bahar" and a Civil Suit has been filed by that person against M/s. ST, does not help them in any manner, as such a suit was filed only in November, 2003, that in view of judgments of Hon'ble Supreme Court in cases of Hazari Singh v. Union of India reported in 1999 (110) E.L.T. 406 (S.C.); K.I. Pavunny v. Assistant Collector of Central Excise, Cochin reported in 1997 (90) E.L.T. 241 (S.C.) and Vinod Solanki v. Union of India reported in 2009 (233) E.L.T. 157 (S.C.) = 2009 (13) S.T.R. 337 (S.C.) the statements of proprietors/partners and employees of transport companies and of the partners/prop....
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....tition has been dismissed vide order dated 20-11-2004, that even in the cases where the invoices were being issued, the quantity mentioned in the invoice on which duty was being paid was much less than the quantity actually being supplied, that this was being done by actually packing 150 bundles of 60 to 66 pouches each in a bora, while the invoices were being issued on the basis that one bora contained 100 bundles of 60 to 66 pouches each, that the transporters had knowledge about non-duty paid nature of the goods and hence, penalty was rightly imposed on them, that penalty has also been rightly imposed on M/s. SVOL, and its directors, Shri Sanjiv Mishra and Pratyoosh Mishra and also on Shri Surender Jain, Shri Virender Jain and Shri V.K. Tulsiyan, as these persons had fabricated false documents to show that the cash of Rs. 4,38,80,530/- seized from the residential premises of Shri Sanjiv Mishra had been received by a newly promoted company, SVOL from the investors, while it was a totally bogus and false claim, that for this offence, penalty on these persons under Rule 26 of the Central Excise Rules has been correctly imposed and that in view of the above, there is no infirmity in....
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....irectors of M/s. SVOL for fabrication of documents to show legal origin of the cash of Rs. 4,38,80,530/- seized from the residential premises of Shri Sanjiv Mishra can be decided independently, irrespective of the decision in respect of questions (a), (b), (c) & (d). We will, therefore, consider the questions (e) & (f) first. 4. Supari processed as well as unprocessed seized from the premises of M/s. DG is sought to be confiscated under Rule 25(1) of Central Excise Rules and for this while M/s. ST are sought to be penalized under Rule 25(1), Shri Dhirendra Shukla, Proprietor, M/s. ST is sought to be penalized under Rule 26 of the Central Excise Rules, 2002. 4.1 Rule 25 (1) of the Central Excise Rules, 2002 provides that subject to provisions of Section 11AC of the Central Excise Act, 1944 if any producer, manufacturer, registered person of warehouse or registered dealer - (a) removes any excisable goods in contravention of any provisions of the Rules or of the notifications issued under these Rules; or (b) does not account for any excisable goods manufactured or stored by him; or (c) engages in m....
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....emsp;In this case, the only allegation against Shri Dhirendra Shukla is not maintaining account of the supari received and processed by him. There is no allegation against Shri Dhirendra Shukla that he was in any manner concerned in acquiring possession of, or was in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner dealing with the gutka manufactured by M/s. ST, which he knew or had reason to believe was liable for confiscation. In our view, just for non-accountal of supari, provisions of Rule 26, as the same stood during the period of dispute, would not be attracted. In view of this, penalty on Shri Dhirendra Shukla is not sustainable and the same is liable to be set aside. 5. The allegations against M/s. SVOL, its directors, Shri Sanjiv Mishra and Shri Pratyoosh Mishra, Shri V.K.Tulsiyan, Chartered Accountant and Auditor of M/s. SVOL, Shri Surinder Jain, Director of M/s. Sunshine and M/s. Betsy Finance and Shri Virendra Jain, Director of M/s. Stellar Investment is that they fabricated documents to show the legal origin of cash of Rs. 4,38,80,530/-seized from the residential premises of Shri Sanjiv Mi....
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....ans showing description of the goods as "Zarda", "Masala", "Shyam Bahar" etc. issued by the transport companies M/s. SKTC, M/s. HTGC and M/s. NTFC in respect of consignments booked in the name of a number of persons, showing them as consignors as well as consignees, in respect of which it is alleged that those consignments are of "Shyam Bahar Gutka" manufactured and cleared by M/s. ST and booked by them to their outstation customers, without issue of invoices and without payment of duty. 6.1 The question as to whether the currency of Rs. 4,38,80,530/- seized from the residential-cum-factory premises of Shri Sanjiv Mishra is sale proceeds of the goods cleared clandestinely without payment of duty and on this basis liable for confiscation under Section 12 of the Customs Act, 1962 read with Section 12 of the Central Excise Act, 1944, whether the unaccounted gutka seized from the premises of M/s. ST is liable for confiscation and whether the transporters including M/s. SKTC are liable for penalty under Rule 26 of the Central Excise Rules, 2002 are linked with the main question - whether M/s. ST were indulging in large scale evasion of duty and whether on the basis of evidence rel....
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....utka under old invoices, as discussed in details in para 24.5 and 24.6 of the show cause notice, have been used as supporting evidence. 7.1 The main plea of the Appellants, however, is that their sales are at factory fate, that the consignments of gutka have been booked by their customers after taking delivery from the factory, that the statements of transport company's Proprietors/partners or employee or of dealers stating that it is M/s. ST who were booking the consignments of Gutka by describing the same as "Zarda", "Masala" etc. are of no evidence value, as in spite of their request, the cross examination of those persons was not allowed and that in view of this, confirmation of duty demand of based on the records of Transport Companies is without any basis. 7.2 We find that there is merit in the plea of M/s. ST regarding cross examination, as Hon'ble Allahabad High Court, which is the jurisdictional High Court in this case, in para 14 of its judgment in case of C.C.E., Meerut-I v. Parmarth Iron Pvt. Ltd., reported in 2010 (260) E.L.T. 514 (All.), relying upon the judgments of Hon'ble Supreme Court in cases of Arya Abhushan Bhandar v. U.O.I, reported in 2002 (143) E....
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....s. The judgments cited by the learned DR are about the admissibility as evidence of the voluntary statements given by a person before a gazetted officer of Customs under Section 108 of the Customs Act or before a gazetted central excise officer under Section 14 of the Central Excise Act, 1944 and if such statement has been retracted, when such retractions can be accepted. But such a voluntary statement recorded by a gazetted officer of customs/central excise can be used for proving the charge of duty evasion against an assessee only if it is correct, it reflects the actual state of affairs and for ascertaining this, the cross examination of the person may be necessary to ascertain as to whether the statement was without any threat, duress or coercion, whether it was based on his personal knowledge, or documentary evidence or just hearsay - on what basis the statement had been made. In case of the report of a Chemical Examiner on which some allegation of duty evasion against the assessee is based, his cross examination may be necessary for ascertaining as to which method had been adopted by him for the chemical test. Therefore, if cross examination of some witnesses is requested giv....
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....s 4%, as the quantity of supari processed by M/s. DG for M/s. ST during December, 2002 to 19-10-2003 period has been estimated on the basis of the quantity of waste found in the premises of M/s. DG. Similarly, the cross examination of the Chemical Examiner of SIIR, who tested the samples of Shyam Bahar gutka for ascertaining its tobacco content is necessary for ascertaining as to by which method the test had been conducted. The report of the Chemical Examiner of SIIR is important as - (a) While SIIR has reported the tobacco content of Shyam Bahar Gutka as 2.1% to 2.2%, by weight, as per the formula intimated by M/s. ST to the Department, the tobacco content of the gutka is supposed to be about 13% to 16% by weight and if the SIIR report is correct, it would be a clinching evidence of a clever modus operandi for under-reporting the production of Gutka by showing inflated figure of consumption of tobacco; and (b) the exact figure of consumption of tobacco for the entire period of dispute i.e. 2000-2001, 2001-2002, 2002-2003 and 1-4-2003 to 16-10-2003 period of 2003-04 are available and if the SIIR report about tobacco content of Shyam....
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....n M/s. ST on this count and the question of imposition of penalty on the transporter, M/s. SKTC under Rule 26 of the Central Excise Rules, 2002 are linked with the question of sustainability of the duty demand from M/s. ST in respect of consignments of Shyam Bahar Gutka alleged to have been booked through M/s. SKTC, M/s. HTGC and M/s. NTFC. Therefore, the order of confiscation of currency, confiscation of 85008 pouches of gutka for non- accountal and penalty on M/s. ST on this count and imposition of penalty on M/s. SKTC under Rule 26 of Central Excise Rules has also to be set aside and these matters have also to be remanded for de novo adjudication. Since at the time of seizure of the currency of Rs. 4,38,80,530/- Shri Sanjiv Mishra could not give any explanation for the same and his subsequent explanation, based on the certificate of their Chartered Accountant, Shri V.K. Tulsian that this currency is the share application money received for his new venture, M/s. SVOL, from some investors - three main investors being M/s. Sunshine Capital Ltd., M/s. Betsy Growth Finance and M/s. Stellar Investment, has been found to be false, in case the duty demand of Rs. 7,17,16,580/- is upheld ....