TaxTMI 
TaxTMI 
2011 (5) TMI 896
X X X X Extracts X X X X
X X X X Extracts X X X X
....ommonly known as gutkha, jafrani zarda and 'Hira' brand supari falling under tariff item no. 24039990, 24039930 and 210690.30 of the first schedule to the Central Excise Tariff Act, 1985 respectively. HE is registered with the Central Excise department and has registration No. AABPH1170M-XM001 in Nipani range of Belgaum Commissionerate. HE is a partnership firm with S/Sri. Alsam H. Tamboli, Ibrahim alias Baba H. Tamboli, Hasanbhai Tamboli and Smt. Roshanbanu as partners. The head office of the firm is situated in Satara of Maharashtra state. Based on intelligence gathered by the officers of the Directorate General of Central Excise Intelligence about clandestine clearance of 'Hira' branded gutkha, manufactured by the said manufacturer with the active involvement of certain dealers, searches were carried out at factory premises along with business related premises of the said manufacturer and of the distributors. Certain incriminating records/documents were seized under mahazars in addition to 65 kg. of packing material of Hira gutkha, in rolls contained in two carton boxes, valued at ₹ 10,075/- from the factory premises of HE on 8.3.2004, a computer system con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....senting sales of Gutkha by the sales persons of M/s Dwarakamai Associates recorded daily by DA. Files retrieved from a computer seized from the premises of DA contained statements of expenses which reflected payments to HE. Proceedings before the Commercial Tax Authorities of the Karnataka State involving seizure of 40 gunny bags of Gutkha from one Shri Palani were also relied on. The Commissioner found that 65 kgs of unaccounted packing material seized on 12.09.2003 from HE was intended for clearing gutkha manufactured without payment of duty and accountal. He relied on the statements of various persons manning the retail shops from where quantities of gutkha were seized to hold that they had dealt in non duty paid gutkha knowing that they were liable to confiscation. After due process of law, the Commissioner passed the following order:- ORDER (a) I confirm the demand of Central Excise duty of ₹ 4,60,65,669/- (Rupees Four Crores Sixty Lakhs Sixty-five Thousands Six Hundred and Sixty nine only) along with interest under the proviso to sub section (1) of section 11A and the section 11AB of the Central Excise Act, 1944 respectively, in respect of Hira gutkha removed during t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... applicable to the Central Excise matters. However, I allow them to redeem on payment of fine of ₹ 125/- and ₹ 2500/- respectively in terms of section 34 of Central Excise Act, 1944. In this regard, the persons from whom the said goods have been seized are required to exercise their option to redeem the goods with the Additional Director General, Director General Central Excise Intelligence, Bangalore within one month from the date of receipt of this order and to pay the fine within two months from the date of receipt of this order, failing which the properties would vest with the government. (f) I impose a consolidated penalty, equal to the duty determined as above, of ₹ 4,60,65,669/- (Rupees Four Crores Sixty Lakhs Sixty-five Thousand Six Hundred and Sixty none only) in terms of Section 11AC of the Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002, on M/s, Hira Enterprises, Nippani. (g) I impose penalty of ₹ 25,00,000/- (Rupees twenty five lakhs only) on Sri Ibrahim H. Tamboli, Managing Partner of M/s. Hira Enterprises, under Rule 26 of Central Excise Rules, 2002. (h) I impose penalty of ₹ 5,00,000/- (Rupees five lakhs only)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ealer of gutkha viz. DA not raising invoice for sales of gutkha could not lead to an inference that the manufacturer had cleared gutkha without payment of duty. It was not established that HE had cleared the gutkha without payment of duty. The Commissioner had relied on statements of Shri A. Madhusudan of DA and Shri T.S. Nanjundeswara of M/s. Lakshmi Traders, Bellary to hold that HE had cleared gutkha without payment of duty. It is submitted that these persons had immediately retracted their statements. Moreover, no reliance could be placed on the records seized from a third party to draw adverse inference against the assessee manufacturer in the absence of evidence to show movements of goods from premises of the assessee to that party. The daily sales reports were not in the nature of independent, cogent and tangible evidence and they were therefore not reliable. 5.3. Computer Print-outs: The reliance placed on the material retrieved from the computer seized from DA is challenged on the basis that the print outs did not satisfy the conditions prescribed in Section 36(B) (2) of the Central Excise Act, 1944 (the Act). The assessee has reproduced the subject prescriptions to rely o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... neither DA nor HE; (ii) Goods were mentioned only as masala saunf/sweet masala saunf in the Railway Receipts and not as Hira branded gutkha; (iii) The Department had not interrogated any of the persons, who had either booked the consignments with the Railways or who had taken delivery of such goods from the Railways. (iv) The Department had also not interrogated any of the authorities of Railways to bring out the factual position. (v) None of the names mentioned in the Railway Receipts was that of the employees of HE. (vi) None of such Railway Receipts was recovered from the premises of HE. (vii) No goods were either detained or seized from the possession of Railways to prove that the goods had originated from HE. (viii) The department could not also adduce any evidences like unaccounted raw material purchase, higher consumption of electricity and labour engagement, suppression of production, payments made to the Railways for unaccounted clearances and receipt of unaccounted sale proceeds by HE to prove the allegation. The railway receipt copies had not been furnished to the appellant; only an abstract of the same was provided despite request by the appellant. The Commissi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee in finding clandestine production attributing to balance 20%. Such estimation, based on a formula, ascertained for a particular period could not be accepted as held by the Tribunal in Parle Beverages Pvt. Ltd. vs. CCE [1999 (114) ELT 872]. A total duty of ₹ 15,120/- was demanded in respect of the goods covered by show-cause notice dated 03.09.2004. 6. During hearing, the learned counsel for the appellants reiterated the grounds stated in the appeal. 7. It is submitted that the admission by DA that the 13 railway receipts recovered from their premises had covered gutkha and not saunf was retracted within six days on 14.03.2004 before the Magistrate. 340 RRs emanating from Ghataprabha and Ugarkhurd railway stations were held to have covered 11,000 bags and 50,000 kgs of gutkha. Though the RRs had covered transport of saunf and sweet saunf, the discrepancy in the description had not been investigated by the railway authorities. A major portion of the goods involved were consigned to Hubli and no investigation was conducted at Hubli. The learned counsel submitted that the case of the Revenue was that DA exclusively dealt in Gutkha. However, the statement of expenses retrieve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evidence. He further submits that HE had 10 times as much capacity as its accounted production. This was evident from the relevant bank statement pertaining to the account of HE. The learned Special Counsel relies on preponderance of probability and related case-laws to support the Commissioner's findings. 9. In his rejoinder, the learned counsel submits that a nominal penalty of ₹ 10,000/- was imposed on Shri Nanjundeswara who operated close to Hubli where most of the consignments covered by the RRs recovered by the Department was disposed. 10. We have carefully examined the case records and studied the rival submissions. The main appellant M/s. Hira Enterprises, Nipani, is engaged in the manufacture and clearance of 'Hira' and 'Baoba' brand panmasala (gutkha) subject to duty of excise under Chapter Sub-heading 2403. During searches conducted at the premises of Hira Enterprises and at the premises of its main distributor M/s. Dwarakamai Associates, Bangalore on 08.03.2004 and the premises of M/s. Lakshmi Traders, Bellary, M/s. Parag House, Kolar and M/s. Balaji Provision Stores, Chintamani on the ensuing days, the departmental authorities seized 65 kgs ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id not match with the invoices issued for sale of gutkha by HE. 65 kgs. of packing materials seized from the factory of HE and the seizure of gutkha from premises of various dealers were other evidences relied on by the Commissioner in finding clandestine clearance by HE. 10.2 As regards the quantities of gutkha seized from M/s.Lakshmi Traders, M/s. Balaji Provision Stores and M/s. Parag House, the Commissioner observed that they had "utterly failed to establish the licit possession of the same". These facts led to the 'strong reasonable belief in respect of the clandestine clearance of Hira gutkha'. As regards the excess 65 kgs of packing material compared to the accounted stock, the Commissioner rejected the explanation of the assessee that the excess arose owing to the authorities taking into account also the weight of cones on which the packing material was wound. The Managing Partner, HE, had not denied the excess stock at the time of its seizure. "Therefore, the intention of the said manufacturer of indulging in clandestine manufacture has been substantiated". 10.3. We observe that the Commissioner's finding that the small quantities of gutkh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ub Bangalore 18.12.2003 901787 25 Swamy Irfan Bangalore These were consignments of saunf/sweet masala saunf as per the abstract. In the impugned order, the Commissioner does not give a finding to the effect that the RRs themselves showed the goods transported to be gutkha. The Commissioner has concluded that the 340 instances of transport of saunf/sweet masala saunf covered by the RRs obtained from Ghataprabha and Ugarkhurd railway stations represented clandestine clearances of gutkha. We are not able to sustain this finding. No investigation has been conducted with the railway authorities or with the various persons who had dealt with these consignments to conclude that the consignments were actually of gutkha cleared by HE clandestinely during the period 17.12.2002 to 13.03.2004. 10.5. We do not find that the abstract of RRs obtained from the railway authorities is adequate evidence to substantiate the finding that HE had cleared 50,000 KGs of gutkha without payment of duty. 10.6. As regards the small quantities of gutkha seized from various premises of retailers of gutkha, the non-duty paid nature of these goods is found on the basis that the shop keepers had initially....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ocuments and computer print outs as documents and as evidence. (1)....................... (2) The conditions referred to in sub-section (1) in respect of a computer print out shall be the following, namely:- (a) the computer print out containing the statement was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer; (b) during the said period, there was regularly supplied to the computer in the ordinary course of the said activities, information of the kind contained in the statement or of the kind from which the information so contained is derived; (c)throughout the material part of the said period, the computer was operating properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of that period was not such as to affect the production of the document or the accuracy of the contents; and (d) the information contained in the statement reproduced or is derived from information supplied to the computer in the ordinary....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ra gutkha to arrive at the finding. 10.12. The person who operated the computer for data entry could not be located. This person by name Shri Narasimhalu was not produced for cross-examination by the appellants. Before the Commissioner, the personnel of DA was cross-examined when it was averred that the said computer was in the use of one Shri Manoj Pola, an MBA student and son of one of the employees of DA, However, the Commissioner concluded that the said computer had been installed in the premises of DA and was in regular use of the business activities of DA. This finding is also without proper basis. 10.13. As regards 125 empty cotton bags valued ₹ 500/- seized from Parag House confiscated under Section 118 of the Customs Act, the finding is that the same had been used to transport non-duty paid gutkha from HE to Parag House. We find no evidence to support this finding except the retracted statement of the proprietor of Parag House. Confiscation of these bags is also, therefore, not sustainable. 10.14. As regards the penalties imposed on Shri Ibrahim Tamboli, Managing Partner, HE, penalties imposed on personnel of DA and Proprietors of Parag House, M/s. Lakshmi Traders....