TaxTMI 
TaxTMI 
2013 (9) TMI 414
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....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 Bazar, Delhi; duplicate note books, Kacha challans, Hisaba book, phot....
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....lled 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 quantity of the goods by the appellants. Since atleast two labourers were....
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.... 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. In Durga Trading Company vs. CCE, Lucknow reported in 2002 (148) ELT 9....
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.... 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 cheque amounts disclosed from bank passbook entries. Apart from these....
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....e 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 resumed the records mentioned in Annexure A to this Panchnama for furth....
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....ilding 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 the records mentioned in Annexure A . Nothing about seizure of the d....
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....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 for search of their person is not sufficient. In relation to the seiz....
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....sary 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 the charge against the assessee, certainly such material cannot be di....
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....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 therefore needs to be considered is what is the relevancy of the documents ....
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.... 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 the keys of the premises and how and when the keys came in possession o....
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....re 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 to 113 and 1 to 65 respectively. We presume the said entries mean th....
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....ceedings 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 doing alleged against such person. Therefore, if the statement as inc....
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....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 the statement of Sh. Vikas Maloo. However, perusal of whole the statem....
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....ere 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 matters stated therein. It is only a piece of evidence, the weight to be....
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....arned 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 working in three shifts. It was for the department to ascertain the sam....
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....oper 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 addresses of raw material suppliers were not given, however, the names thereo....
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....lants. 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 made merely on assumption. It was to the knowledge of the Commissione....
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....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. 64. In Ganga Rubber Industries vs. CCE reported in 1989 (39)....
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....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 clandestine removal was not established. 72. In CCE, Bangal....
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....rivate 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 manufactured and packed etc. 79. In T.M. Industries vs. Collect....
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....n 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. Commissioner of Central Excise, Ghaziabad reported in 2005 (182) EL....
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.... 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 its registered office at 3909, Gali Barna, Sadar Bazar, Delhi is als....
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....remises 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 Shri Subh Karan Bothra of M/s. KTPPL was present at the time of search....
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.... 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, Shri Mukesh Kapoor was the incharge, who received the purchase order....
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....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, that these books had also mostly been written by Shri Kishan Sharma, and....
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....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 . 91.13 On study of kachcha challans, it was found that each kachcha chall....
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....ioned 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 on the goods valued at Rs.29,95,79,744/- cleared clandestinely withou....
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....th 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 Mktg. Co. and M/s. New Delhi Mktg. Co., Shri P. Vishwanath of M/s. Mo....
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.....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 Jarnail Singh Rs.2 Lakh Shri Harmit Singh, Shri Harpal each Singh of M/....
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....ntion 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 Malu had retracted their statements and hence their statements are of ....
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....ls, 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 record to show that any part of the seized documents were tampered w....
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....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 his arguments, Shri B.K. Singh, ld. Departmental Representative pleaded....
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....se 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. Sr. Counsel in rejoinder pleaded that to prove clandestine removal, ....
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.... 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 by road, transport company s name etc. On the basis of kachcha chall....
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....ee 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. Moreover, we also find that Shri Shubh Karan Bothra in his statement dated....
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....y, 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 premises was under their control. As mentioned above, Shri Mool Chand Ma....
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....t 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, threat or promise proceeding from a person in authenticity, the confe....
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....nst 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 Malu had stated that these documents had been mostly written by Shri ....
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....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 information regarding production and clearances given to him by Shri C.S.....
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....her 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 9.10.98 of the premises at 4130, Gali Barna, Sadar Bazar, Delhi) sho....
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....ries 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 decisions of the Supreme Court is that the standard of proof in crimin....
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....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 and no clearance of finished goods, the details of which are mentioned ....
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....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 Vallabh Sarda of M/s. Dilip Traders, Shri Bhim Karan Jain of M/s. Snow Vi....
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....gards, 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 Shri Subh Karan Bothra as per his initial statement dated 9.10.98 and....
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.... Lakh each, penalty on Shri Harmit Singh, Jarnail Singh and Shri Harpal Singh is reduced to Rs.1 Lakh each in the impugned order no.159/05 dated 30.12.2005 and to Rs.50,000/- (Fifty Thousand only) each in order-in-original no.3/06 dated 30.01.2006. 97.5 As regards the confiscation of land, building, plant & machinery of KTPPL and KI under Rule 173 Q (2) of the Central Excise Rules, 1944, the same has been rightly ordered as in both the cases, the duty involved on the clearances of finished goods in contravention of the provisions of the Central Excise Rules, 1944 exceeds Rs.One Lakh and thus, the conditions for confiscation under Rule 173 Q(2) are satisfied. 98. The impugned orders are, therefore, upheld except for modification of 43the quantum of penalty as mentioned above and interest on duty under Section 11 AB which shall be chargeable only in respect of clearances w.e.f. 28.09.96. The penalty on KTPPL and KI under Section 11AC of Central Excise Act, 1944 shall be requantified by the Commissioner as per the directions in para 6 above for which the matter is remanded to the Commissioner. The appeals stand disposed of as above. ORDER In vie....
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....e matter. 3. Learned Jt. CDR, Shri B.K. Singh, submits that a copy of this order be issued first and then only they will put forth their arguments. In my view, this submission made by the learned Jt. CDR seems to be not within the realms of Judicial discipline, as appearance is one thing and issuance of an order is another. In any case, copy of order be issued to the Department. 4. Learned Senior Counsel Shri A. Hidyatullah submits that Revenue could not seek adjournment orally, and they should have had courtesy of seeking adjournment at least two days in advance and inform the Bench in advance so that time of Bench, as well as time of Senior Counsel who came from outstation could have been saved. 5. The learned Jt. CDR request for copy of this order is granted and be issued to them by dasti and his submission that they will be making appearance only after receipt of order is not appreciated and needs to be deprecated. Be that as it may, copy of this order be issued dasti. 6. Copy of this order may also be forwarded to Hon'ble President, CESTAT for his information." 103. The facts of the case are already detailed out by both Hon'ble President and Hon'ble Member (Tech....
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....nd submit that the adjudicating authority has not been able to produce any evidence regarding the clandestine purchases of raw material. It is his submission that the Kachcha chits/Hisaba book, relied upon by the adjudicating authority to come to a conclusion that there was clandestine manufacture, also does not indicate anything about the purchases of main raw materials and that who is author of such kachcha chits/Hisaba book. It is his submission that in the absence of any indication as to who the author or who has written the chits/Hisaba book and made available for cross-examination, reliance cannot be placed on them to press home serious charge of clandestine removal and reliance on such chits as is done by the learned Member (Technical). It is his submission that in the absence of any evidence either regarding the author of the chits or any evidence of excess procurement of raw material or sale of final product, the view taken by Hon'ble President is correct. 104.4 It is his submission that on the date of visit of the officers to the appellant's factory, it is to be noted that there was no difference of stock of raw material and finished the goods, though 57 bags of finish....
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....Hyderabad [2005 (191) E.L.T. 1164] (para 5). 104.8 It is his submission that in Sharadha Forge case, the Bench specifically relied upon the decision of Durga Trading Co. as upheld by the Apex Court, and held that since there is no clarity as to who is the author of the chits the same cannot be relied against the assessee. He would place reliance on the decision of the Tribunal in the case of Vigirom Chem Pvt. Ltd.v. CCE, Bangalore [2010 (251) E.L.T. 544] and Atlas Conductors v. CCE, Mumbai reported in 2008 (221) E.L.T. 231 (Tri.-Mum.) for the proposition that their cannot be clandestine removal unless there is clandestine manufacturing. 104.9 It is his submission that the adjudicating authority has relied upon the evidence of manufacturing activity in the form of other manufacture is totally erroneous as the same is done behind the back of the assessee. It is his submission that the show cause notice to appellant was issued on 31-7-2000, while the checking or observing of manufacturing activities of other manufacturers by the adjudicating authority was conducted on 20-10-2000 and 12-2-2004. He would point out paragraph Nos. 54.6 and 54.7 for this and submit that to come to a ....
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....is incorrect and order of the Hon'ble President holding that there is no evidence, is correct proposition of law. 104.12 It is his submission that reliance is placed by Hon'ble Member (Technical) upon the statement of one Shri Vikas Maloo, Director wherein it was stated that there was clandestine clearance to clear 50% of production. It is his submission that such statement was retracted by an affidavit filed in 2002, as soon as show cause notice was issued and he offered himself for cross-examination before the adjudicating authority which the adjudicating authority has not considered and not conducted the cross-examination. It is his submission that once the person has offered himself for cross-examination on a point which was against him and having not done so such statement cannot be relied upon. It is his submission that Vikas Maloo has in his affidavit stated that he was not the Director during the relevant period when investigating officers visited the premises. 104.13 It is his further submission that as regards the evidence relied upon by the Revenue on the kachcha chits recovered on 22-8-2002, the advocate of the appellants have filed an interim reply seeking for th....
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....s implicating as Revenue authorities did not produce these persons to authenticate the entries made in the said records in Kachcha challans and Hisaba book. For this proposition he would rely upon the judgment of the Supreme Court in the case of Ramji Dayawala v. Invest Import reported at AIR (1981) S.C. 2085 and more specifically para 16 and Bareilly Electricity Supply v. The Workmen reported at AIR 1972 (SC) 330 and more specifically para No. 14. It is also his submission that Hon'ble High Court of Punjab and Haryana in Laxmi Engg. Works reported at 2010 (254) E.L.T. 205 (P & H) upheld the law that it is necessary to have some positive evidence of clandestine removal of goods which has been retracted and Hon'ble High Court of M.P. in the case of UOI v. MSS Foods Products reported at 2011 (264) E.L.T. 165 (MP), it is his submission that once the affidavit has been filed on description of the individual and has offered for cross-examination, which has not been availed by the authorities, then the affidavit has to be considered as the correct and true picture of the proceedings. 104.16 He would rely upon the judgment of the Hon'ble Supreme Court in the case of Godrej Indus. Ltd. ....
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.... which they (transporters) do not book consignment. It was his further submission that GRs/TRs which are referred to by Revenue are third party documents. It was his submission that any alteration therein or addition and deletion to the description of the product could be properly explained by the transporter which is not on record. 104.19 It is his further submission that as regards the case of Kuber International, the said show cause notice issued was on identical set of facts and evidence and the proceedings before the Division Bench proceeded on the ground that it is a common order being dealt in for both show cause notices issued. In view of this the submissions made earlier would suffice for this case also, however, in any case he would bring on record the similarities of show cause notice and relied upon documents as appended to both the show cause notices. It is his further submission that Hon'ble Member (Technical) while recording the submission has categorically stated that all these issues are common and hence they are disposed of by common orders. Hence the submissions made by them in respect of Kuber Tobacco are applicable to Kuber International also. 104.20 Lear....
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....resident." 105.3 It can be seen from the above reproduced order that the point of difference between the Hon'ble President and Hon'ble Member (Technical) is whether there is sufficient evidence to prove the charges against the assessee or not sufficient in their respective orders. In my considered opinion, this satisfies the requirement of Section 129C(5) of the Customs Act, 1962, for hearing the difference of opinion. As regards, the submissions of the learned CDR that they are not in a position to argue this matter as they have not prepared, I have already recorded an order today morning which has been circulated and issued declining their request for adjournment. In any case, in order to meet the ends of justice, this matter will be taken up tomorrow for hearing the arguments of Revenue. 106. The matter was called out today (17-7-2011) for arguments of Jt. CDR. 106.1 Learned Jt. CDR starting the arguments on behalf of the Revenue reads the order written by the Hon'ble President and submits that Hon'ble President has recorded his arguments after the Member (Technical) recorded his comments. It is his submission that Hon'ble President has not addressed to the findings rec....
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....was opened by Shri S.K. Bothra; (iii) Non-mentioning of the name and surrounding of the premises in the panchnama cannot be said to discredit the panchnama; (iv) Non-mentioning of the description of the premises and the exact site of the premises cannot be taken as panchnama being faulty or discreditable. (v) That out of documents seized in Panchnama, the Revenues is more concerned and place reliance on the entry mentioned at Sr. No. 2 and Sr. No. 5 i.e. Folders containing loose paper and loose paper file. (vi) Panchnama recorded the submission that Shri Bothra before opening the premises had brought the keys from the head office and there is no need for any further corroboration as Shri Bothra was called from the head office and he has brought the keys along with him. (vii) Panchnama indicates the presence of Shri Bothra during the search is recorded in panchnama. 106.4 It is his submission that the finding of the Hon'ble President that documents which were recovered and author(s) thereof were not identified is incorrect, as there is a statement indicating that one Shri Kishan Sharma, employee of the ass....
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.... to the company. It is his submission that his statement was recorded subsequent to panchnama which was drawn at 4130, Gali Barna. 106.9 Learned Jt. CDR would submit that the findings recorded by Hon'ble President regarding the connection of the documents which were recovered during the panchnama as inconclusive is wrong and he would submit that veracity of the documents and doubting the same is incorrect. For this purpose, he would take me extensively through the statement of Shri Moolchand Maloo and Shri Vikas Maloo at pages 65-72 and 73-76 respectively and submit that both the Directors have clearly recorded that the documents as recovered by panchnama, are written by one Shri Kishan Sharma. He would submit that the recorded statement was retracted afterwards and which was very much belated and there are many evidences which would render the retraction as not a proper retraction and the original statement by these directors stands as it was, and was correctly relied upon by the Commissioner and wrongly discarded by Hon'ble President. It is his further submission that the retraction which was done and letter of retraction was addressed to the Commissioner of Central Excise, De....
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....ther documents cannot be relied, is not in accordance with the law. It is his submission that there cannot be a coercion, only by uttering the words of possibility of arrest of an individual. 106.11 After extensively reading of para 49 onwards of the order of the Hon'ble President, is it his submission that there is evidence to show that there is clandestine removal, the clandestine manufacturing activity has to be presumed to have taken place. It is his submission that the Revenue officers has made the statement of the clearances recorded in Hisaba book, kachcha challans and correlated the same with GR's available, after deleting, the entries that were found entered in the statutory books and found to be correct and the demand of the duty has been worked out. It is his submission that once there is evidence to indicate that there was clandestine removal of the goods in the form of party-wise information on the Hisaba book/kachcha challans, and it being co-related with the GR available with the transporter (as annexed from page 232-252) in respect of one transporter, the proof of preponderance of the clearance of the goods clandestinely from the factory of the appellants is prov....
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....ing material was purchased and supplied by supplier. It is his submission that in most of the cases where goods are clandestinely removed and booked through transporter consignor/consignee, name mentioned on the GRs are fictitious. He would draw my attention to pages 471 and 477 and 480 to support the proposition, and statements of various persons to submit that consignor/consignee name as indicated in the address were not present or fictitious. It is his submission that sale of clandestinely removed goods is proved by seizure of the goods manufactured by the appellants from Mahamaya Trading Co., Raipur and from Gauhati. It is his submission that when the consignments were verified, it is noted and recorded that pouches of gutkas were manufactured by the appellant-company in September 1998. He would submit that appeal should be considered on the basis of evidence/panchnama/submissions at pages 514, 518 and 521 of the papers given by them. 108.2 It is his submission that once there has been evidence to indicate that there was clandestine removal of the goods, further evidence of clandestine manufacture need not be given. It is his submission that expert opinion need not be taken ....
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....ala (vii) Ruby Cholrates (supra) viii) Ganesh Enterprises (supra) 108.5 Learned Jt. CDR continuing the arguments, supplements the order written by Hon'ble Member (Technical). Reading paras 3, 4 and 5 of the Hon'ble Member's order he submits that there is a submission of Shri R.P. Sharma which is indicating that production in the factory is recorded as per the direction of Mr. C.S. Baid. It is his submission that entire records of the factory which has been relied upon by the other side is written only based upon the instructions of Shri Baid and reconciliation done of the records recovered at 4130, Gali Barna is correct reconciliation for the demand of duty. It is his further submission that entire dispute on records arose due to the reason that the statements recorded by Shri Bothra, were denied in cross-examination, which resulted in the doubtfulness of the documents recovered at 4130, Gali Barna on 9-10-1998. It is his submission that Hon'ble Member (Technical) has correctly come to a conclusion that even at the stage of cross-examination, it was admitted that the recovery of documents from the place was done so in his presence. It is his submission that Shri Bothra cla....
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....109.3 Continuing the arguments for the Revenue in the afternoon, learned SDR submits that reading of para 19.5 of the order-in-original would clearly indicate that the clearance of goods by kachcha challans in Hisaba books have been clearly taken place. It is his further submission that reading of allegation and as adjudicated by the adjudicating authority in paras 24.5, 25.1, 25.2, 25.3 and 25.4 of the order-in-original clearly indicate how the transportation of the goods have taken place clandestinely from the manufacturing premises. It is his submission that all these records indicate and gave a cross connection to the entries recorded in the hisaba books and delivery challans which were unearthed from the premises of 4130, Gali Barna. 109.4 He further takes me through paragraph No. 54 of the order-in-original to submit that extent of clearance of goods were unearthed by investigation and show that the appellant companies have floated various fictitious firms. It is his submission that invoice books by these fictitious firms were recovered. It is also his submission that Sales Tax number which were printed on the said blank invoices were inquired upon from the Sales Tax autho....
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....onclusion without reference to the evidences adduced by Revenue. They place reliance on following case laws : (i) Shah Guman Mal v. State of Andhra Pradesh - 1983 (13) E.L.T. 1631 (S.C.) (ii) CC v. D. Bhoormull - 1983 (13) E.L.T. 1546 (S.C.) (iii) CIT v. Best & Company - 1966 (2) SCR 480. (iv) Kundan Lal Rallaram v. Custodian Evacuee Property - AIR 1961 SC 1316. (v) CC v. D. Bhoormull - AIR 1974 SC 859. (vi) Narayan Bhagwantrao Gosavi Balajiwale v. Gopal Vinayak Gosavi - AIR 1960 SC 100 (vii) Sahib Singh v. State of Haryana - AIR 1997 SC 3247 (viii) Lokeman Shah v. State of West Bengal - AIR 2001 SCW 1646 SC (3-Member Bench) (ix) Assistant Collector of Central Excise, Rajamundry v. Duncan Agro Industries Ltd. - (2000) 7 SSC 53 = 2000 (120) E.L.T. 280 (S.C.) (x) C. Sampath Kumar v. The Enforcement Officer - 1997 (96) E.L.T. 511 (S.C.) (xi) K.I. Pavunny v. ACC - 1997 (90) E.L.T. 241 (S.C.) (xii) The Director of Enforcement v. Shri Rohit B. Jhaveri - 1996 (1) All. M.R. 89 (xiii) K.T.M.S. Mohammed & oth....
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....hanti Bhushan would draw my attention to the provisions of Rule 26 and submits that the said Rule talks about every order of the Tribunal, shall be in writing and shall be signed and dated by the Members constituting the Bench concerned. It is his submission that when there was difference of opinion, order referred to the third Member was dated and signed and consequent a order of third Member, the point/points of difference were referred to the Bench. It is the submission that once an order has been signed on the first day, subsequent orders are only pursuant to the direction of the Bench. He would draw my attention to the decision of constitution of the Bench of the Apex Court in the case of State of Uttar Pradesh v. Babu Ram Upadhya - (1961) 2 SCR 679 and more specifically to Paras 28 & 29, for the proposition that the Rules which include the word "shall" in is ordinary import is obligatory but a situation arises when the said word would mean to say "may". It is the submission that though the Rule talks about the word "shall", Court may ascertain the real intention of the legislature by carefully attending to the whole scope of the statute. He would further submit that the judgm....
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....essary to ascertain whether in the peculiar facts of the case, there was sufficient cogent, unimpeachable, relevant and credible material evidence so as to establish the case against the appellant-company applying the test of preponderance of probability. Although every link of the process is not required to be proved for the said purpose, however the Revenue is not relieved altogether of the burden of producing some credible evidence in respect of the fact in issue. 120. Plethora of case-laws has been cited by both the sides, and ratio of these case-laws has been duly considered by me. I have heard at length ld. Senior Advocates, initially Shri Hidayatullah and thereafter Shri Shanti Bhushan, both appearing on behalf of the appellants, and Ld. CDR, Jt. CDR, SDR and DR appearing on behalf of the Revenue. To arrive at a finding as to whether there has been clandestine removal and under-valuation, essentially peculiar facts of the case and the evidence relied upon in the background facts, have been seen. Even the reference before me is limited to the said question whether the evidence on record is sufficient to prove the charges against the assessee. 121. As rightly observed by....
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.... evidence, sufficient to establish the case against the appellant-company even applying the test of preponderance of probability and requires too many assumptions and presumptions to uphold the allegation of clandestine removal and under-valuation. 124. The ld. Representatives for the Revenue have drawn my attention to the fact that ld. Member (Technical) considered the depositions of Shri Moolchand Maloo in his statements dated 17-11-1998, and found that the same corroborated the statement recorded on the same date of Shri Vikas Malu. Statements of Shri Shubh Karan Bothra were also considered by him. Even retractions filed by them were considered by the Hon'ble Member (Technical). 125. However while the ld. Member (Technical) has recorded that each of them retracted their statements, the retractions are brushed aside by holding that the same were not only belated but were bald retractions without any evidence from which it can be inferred that there was any threat, coercion or inducement used in recording the same. I am unable to agree with this proposition. It is contrary to the law laid down by the Hon'ble Supreme Court in Vinod Solanki v. Union of India, 2009 (233) E.L.T.....
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....d, but has also submitted the documentary evidence to that effect. Moreover, as evident from the impugned Order Shri Mool Chand Malu also sent a letter dated 4-12-1998 to the Commissioner alleging harassment of officials of the company, and that their Manager was detained continuously for more than 30 hours. Thereafter, he again sent a letter dated 5-8-1999 to the Chief Commissioner, wherein he reiterated that the officials of the appellant-company were being subjected to unlawful harassment by the officers. The fact that they were not directors since September, 1998 was also corroborated from the depositions of Shri C.S. Baid in his cross-examination held on 28-1-2005. Further, Shri Bothra not only backed out from his statement in his cross-examination, even in his immediate retraction dated 10-10-1998, his deposition that he was employed with M/s. Kusum Trading Company since five to six years and there will not be his signature in any documents pertaining to KTPPL has not been rebutted by the Revenue by producing reliable evidence to the contrary. Statement of Shri C.S. Baid was also retracted by him. Shri Baid not only alleged that he was detained for 30 hours and that third deg....
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....worthy of credence." 128. That, apart from these retracted oral evidence, the main evidence on which reliance is placed by the Revenue are the loose sheets, Hisaba books and Kachcha Challans. It is undisputed facts that any author of these records was not traced and made available for cross-examination. Moreover, these documentary evidence were not recovered from the office or factory premises of the appellant manufacturer company, and there is no tangible evidence on record to conclusively relate the same with the appellant manufacturer company, except the retracted oral evidence. There isn't any untainted, undisputed admission by the concerned Director of the company that these records relied by the Department were of company's unaccounted production and removal thereof. The entire accounted production of the appellant manufacturer for the relevant period is not recorded in these Kachcha records besides the alleged unaccounted production. The Hon'ble Member (Technical) was persuaded to assume that Shri Bothra would have keys to premises at '4130, Gali Barna, Sadar Bazar, Delhi', and although Panchnama drawn at this premises nowhere records the name of the appellant-company, he....
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....g alleged quantity of unaccounted finished goods. I do not find tangible proof of unauthorized payment for procuring such unaccounted raw material and packing material. I do not find cogent evidence of disproportionate power consumption, capacity utilization and labour employed, or any cogent evidence of clandestine manufacture of unaccounted quantity alleged as clandestinely removed. I find that unaccounted production in the factory of the appellant-company has not been established. In Ruby Chlorates (P) Ltd. v. Commissioner of C. Ex., Trichy, 2006 (204) E.L.T. 607 (Tri.-Chennai), it was held that :- "21.....The settled legal position is 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 all such major raw materials". "22. 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 chits of uncertain authorship. Department has not produced evidence of use of inputs to prove that there wa....
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....f any tangible evidence which would indicate that there was clandestine manufacture and clearance of the goods from the factory premises of M/s. VTPL, in the peculiar facts and circumstances of this case, we hold that the impugned order which confirms the demand on the appellant M/s. VTPL and imposes penalty on them is not sustainable and is liable to be set aside and we do so." 133. I also do not find tangible evidence of removal from factory, of unaccounted goods so manufactured, by loading from factory and transportation therefrom, of alleged clandestinely removed goods. I do not find any reliable evidence of the actual customer/recipient of the clandestinely removed goods with their confirmation of unauthorized payment towards unaccounted purchase of goods allegedly manufactured and removed in a clandestine manner from the factory of the appellant. There was no recovery of any unaccounted sales proceeds in substantial cash in the factory or office premises or anywhere else in the control of the appellant-company, backed by any confirmation oral or written from the person giving such cash against goods removed in clandestine manner without payment of duty from the factory of ....
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....ts annexure which enlists the documents stated to have been recovered from the premises, recovery of any 'hisaba book' or 'Kachcha Challans' or 'loose sheets with written pages', it is to be assumed that the same were recovered under the panchnama drawn at Premises 4130, Gali Barna, Delhi. (iv) It is to be assumed that Shri Bothra would have keys to the said premises, although not recorded in the panchnama. (v) Although the alleged supplier of paraffin, Shri Rajiv Gulati stated that he issued invoices only if he sells the goods and denied the contents of loose sheets, it is to be assumed that he had supplied paraffin, (vi) Although Shri Bhikam Chand Chaudhary in his statement, when confronted with loose sheets for alleging supply of Tobacco to the assessee by M/s. Shambhu Dayal Kaushal & Sons and M/s. Shiv Devi Enterprises showed his unawareness about the same, it is to be assumed that unaccounted Tobacco as mentioned in the loose sheets was supplied by them to the appellant-company. (vii) Although Shri Chetan Kanodia of M/s. Kanodia Technoplast Pvt. Ltd., in his statement denied the contents of loose sheets and denied hav....
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....t with detailed findings, the link between the documents recovered in search and the activities of the appellants in their factory is required to be proved. However, I find that due to various reasons as recorded above, the Revenue has failed to prove the same. 136. The loose sheets, Kachcha Challans and hisaba books were not recovered from the factory of the appellant-company or from any of their office or residential premises. I find that for considering the same as relevant and credible material, on one hand a series of assumptions and presumptions are to be made, and on the other hand various fatal objections regarding veracity of the panchnama and the contents of these documents stated to have been seized in the course of panchnama, as correctly recorded in the detailed findings of the Hon'ble President are to be ignored. I agree with the reasons and findings recorded by the Hon'ble President that entire proceedings had lost their credibility and serious doubt arises about the credibility of the materials stated to have been collected in the course of such proceedings. Therefore, it would not be justified to rely on these records to fasten the duty and penal liability on th....