TaxTMI 
TaxTMI 
2012 (4) TMI 558
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....p; Rs. 2,00,000/- on Shri Devjibhai Gopalji Khaniya of Manish Roadways. (d) Rs. 2,00,000/- on M/s. Balaji Trading Company. (e) Rs. 2,00,000/- on M/s. K.T. Enterprises. 2. As per facts on records M/s. Chandan Tobacco Company is engaged in the manufacture of Pan Masala containing tobacco commonly known as Gutkha. The preventive officer of Central Excise intercepted one truck on 19-1-2005 and the driver of the said truck produced Lorry Receipts of M/s. Manish Roadways as also two bills of M/s. Balaji Trading Company showing transportation of 150 bags of Kuber brand of Gutkha and 100 bags of Mulchand brand Gutkha. Both the bills were issued in the name of M/s. K.T. Enterprises, 20, Ahmedabad Complex, Ahmedabad. To check authenticity of the Gutkha packed in 250 bags totally valued at Rs. 16,25,000/-, the same were detained by the officers under Panchanama dated 19-1-2005. Statement of driver was recorded wherein he stated that the said Gutkha was loaded from the godown of M/s. Manish Roadways Transporters. Statement of one Shri Tanuj Ramkumar Pugalia, proprietor of M/s. K.T. Enterprises who was shown as consignee of the....
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....umption of the main ingredients. As per the statement, the input output norms is stated as under :- For taking a batch of Gutkha of 50 Kgs. (i) Supari 30 Kgs (ii) Flavour 01.080 Kgs (iii) Tobacco Leaves 04.430 Kgs (iv) Catechu (Katha Compound 04.430 Kgs with lime) 4. The SIIR, New Delhi test report was received on 1-6-2005. According to the said test report, the constituents of sample of Kuber brand Gutkha of 1.6 gm per pouch and Mulchand brand Gutkha, 1.6 gm per pouch, as under :- (A) Sample of Kuber Brand Gutkha of 1.6 gm per pouch S/No. Test Observed value In % by mass (in g per 1.6g sachet) 1. Average weight of laminated packing with samples -- 2.0 2. Average weight of content per sample -- 1.7 3. Average weight of laminated packing without sample 69.1 1.17 4. Supari 69.1 1.17 5. Lime (as CaCO3) 1.8 0.03 6. Tobacco Leaves 7.2 0.12 7. Katha 9.5 0.16 8. Menthol 0.3 5.1 x 10-3 9. Presence of other ingredients Absent Absent 10. Paraffin Present Present (B)  ....
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.... issued by M/s. Manish Roadways showing transportation of 25 bags of Gutkha under Invoice No. 158 of M/s. Balaji Trading Company and he admitted that there is no corresponding Central Excise invoice available in the records and as such he agree to pay duty on the said 25 bags of Gutkha. As regards to other LR dated 10-1-2005 issued by Manish Roadways, showing transportation of 100 bags of Gutkha along with invoice No. 149 of M/s. Balaji Trading Company, he clarified that the matter being old he did not remember anything and the bill was issued by M/s. Balaji Trading Company. As regards another LR showing removal of 100 bags of Gutkha under the cover of Central Excise No. 1, dated 6-4-2004, he submitted that it might have happened that his employees sent two consignments for transportation but due to oversight might have not prepared the Central Excise invoice. As regards, certain other invoices issued by M/s. Balaji Trading Company, he deposed that he is unable to say anything in respect of the invoices issued by M/s. Balaji Trading Company, a dealer. As regards difference in the bags of Gutkhas sold by M/s. Balaji Trading Company during the period June 2004 to Jan, 2005 and the nu....
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.....09% by mass whereas, as per the analysis report of SIIR, Delhi, the actual consumption of tobacco leave is 7.20% by mass for Kuber brand Gutkha and 7.00% by mass for Mulchand brand Gutkha. Thus, Revenue entertained a view that there was overstated consumption of tobacco leave to the tune of 35%. The excess stock of tobacco leave which was not entered in the record, was also found during the course of visit of the officers. 9. The SIIR, New Delhi report also varied with the appellant's claim of use of other raw materials like Lime and Katha. 10. Based on the above facts, the Revenue entertained a view that the appellant has been including in clandestine manufacture and removal of Gutkha. Accordingly, proceedings were initiated by issuance of show cause notice proposing to confirm the demand of duty of Rs. 46,49,615/- (Rupees forty six lakhs forty nine thousand six hundred fifteen only) along with confirmation of interest and imposition of penalty in respect of Gutkha illicity removed during the period Nov., 2002 to Dec., 2005. The notice also proposed imposition of penalty on the proprietor of M/s. Chandan Tobacco Company, M/s. Manish Roadways, the authorized person....
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.... in their records, was to be subsequently adjusted by them by showing more consumption of same, there was no need for them to enter a higher quantity of supari in their records at the first instance. Similarly, the Commissioner's reasoning that supari has been purchased from other sources and entered in records whereas the bills have been raised from Assam parties, even if true, cannot be taken as ground for arriving at findings of clandestine removal. Similarly, the shortage of supari at the time of visit of officers which has led to confirmation of demand of duty of Rs. 5,70,158/- by adopting the SIIR, Delhi analysis report, cannot be upheld in the absence of any other corroborative evidences on record. 13. Similarly, as regards consumption of tobacco leaves, Commissioner in Para 38 of his order, has observed as under :- "38. Similar situation has been noticed in respect of the consumption of tobacco leaves. The proprietor in his statement dated 20-1-2005 has claimed the consumption of tobacco at the rate of 4.430 Kgs for manufacture of 40 Kgs of Gutkha i.e. 11.09% by mass whereas as per analysis report of SIIR, Delhi, the actual consumption of tobacco leaves is 7....
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..... The analysis report of SIIR, Delhi clearly shows the contents of menthol as 0.4% by mass and also the presence of Paraffin in Gutkha. However, the proprietor of the assessee in his statement dated 20-1-2005 has claimed that he used to consume flavour @ 2.7% by mass July consisted of 38% Kiwam, 60% Paraffin and 2% Gutkha compound. He also states that menthol is contained in Gutkha compound, so he does not use it separately. Although this Gutkha compound is again mixed @ 2% by him to prepare flavour. Therefore, it is impossible to check the contents of menthol in such flavour. Thus, the assessee has deliberately suppressed the actual contents of menthol in Gutkha manufactured and removed by them." As is clear from the above, the basis for arriving at the findings of clandestine removal is again the percentage consumption of the said two products and the difference found between the appellant's claim and the SIIR analysis report. The appellants have very strongly contested the above findings of the Commissioner, arrived at on the basis of analysis and the appellant's claim, as regards consumption of various raw materials. By drawing our attention to the observations made by ....
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....ther the quantity of Gutkha filled in a pouch is 1.6 gms as declared by the appellant or found to be as 1.7 gms, as found by the SIIR, Delhi, the same will not make a difference, in view of the fact that Gutkha attracted the duty on the basis of MRP. Though the above plea stands categorically raised before the Commissioner, he has chosen not to deal with the same. The Gutkha pouch admittedly attracted duty under Section 4A of the Central Excise Act, 1944 and as such, it was not open to the Commissioner to calculate excess quantity of Gutkha cleared by the appellant during the period 2003-04 to 2004-05, at the rate of 0.1 gm per pouch and to demand the duty on the same. Even if the report of SIIR indicating that one pouch of Gutkha was weighing 1.7 gms, whereas notice is showing the same as 1.6 gm, is accepted to be correct, the same would reflect upon the understated consumption of supari as against the Revenue's case of overstated consumption of supari. Putting 0.1 gm of supari in excess per pouch will not serve any purpose to the assessee, when admittedly the duty is not be weight at specific rate but by value on the basis of MRP charged on the said product. As such, the said fac....
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....ged by production of sufficient and positive evidence. The fact of clearances of goods without payment of duty by the appellant on 19-1-2005 by itself cannot lead to the findings of clandestine removal for the past period i.e. 2002 onwards. For upholding the allegations, independent evidence is required to be gathered and looked into. Further, it is a well settled law that allegations of clandestine removal cannot be upheld on the basis of input-output ratio and theoretical figure of manufacture of final product. As regards consumption of various raw materials, Commissioner has himself observed that supari and Tobacco Leave are the farm products and the appellants have shown all the purchases in their accounts. Merely because some of the salers have not been traced by the Revenue, by itself is not a ground for concluding against the appellant. It is not the Revenue's case that the supari purchased by the said appellant has not been accounted for in their raw material accounts and as such stands consumed by them in the manufacture of excess Gutkha cleared clandestinely. On the contrary Revenue admits that they have reflected the purchases in their account but salers have not been lo....
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.... already observed, the demand stands confirmed on a general formula by calculating the same on the basis of report of SIIR, without in fact taking into account the other factors like wastage, rejections, etc. arisen in the course of manufacture of Gutkha. The Removal is a positive act and cannot have any reflection of deemed production. The statement of the transporter nowhere discloses any particular instance of removal and is general statement indicating that the goods stand removed without the cover of documents. There is no disclosure in the statement that as how many times, on what occasion and what quantity of the goods stand removed without the cover of documents. A general statement of the transporter without any details and documents cannot be relied upon, being the statement of a co-noticee. 19. Similarly, we find that the said statement of the transporter has admitted that the goods were being transported by him from the premises of M/s. Balaji Trading Company. The Commissioner in his impugned order has doubted the independent identity of the said M/s. Balaji Trading Company and has arrived at the finding that the goods were in fact being cleared by Chandan Tobac....
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....statements recorded during the course of investigation submitting that sale book was left inadvertently by the proprietor of M/s. Balaji Trading Company in their factory and the same will not have any reflection of clearance of goods clandestinely. We find that the evidences referred to by the Commissioner are not sufficient in view of the fact that even the transporters has admitted transportation of the goods from the factory of M/s. Balaji Trading Company, Shri Ganesh Sharma, proprietor of M/s. Balaji Trading Company had appeared before the authorities and admittedly the goods were being cleared under the cover of Central Excise invoices to the said M/s. Balaji Trading Company. As such, findings of the Commissioner that M/s. Balaji Trading Company was not an independent trading firm, cannot be upheld. 20. At this stage, it may be relevant to refer the some of the findings of Commissioner, as recorded in the various paragraphs :- "I find almost all suppliers of raw material of Gutkha have supplied the details of sales and their goods to the assessee which on being compared with the records of the assessee found to be tallied. "Regarding purchase of stocks of packing....
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....hich is arrived at by giving requisite abatement on MRP. There is, thus a temptation to remove the Gutkha clandestinely without payment of duty." "The party's contention that there is a variance in consumption of supari in each lot seems to be correct, however, this negligible variation cannot account for overstated consumption of quantity of supari. The demand is based on scientifically based calculation.............." "...................However, looking to the surreptitious production and clearance on the basis of above discussed incriminating documents, there is preponderance of probability for evasion of Central Excise duty of Rs. 46,49,615/- involved in this case. The duty evasion is based on hard facts and documentary evidence as investigated and unearthed. Though as per machinery utilization the demand of duty evaded could have been much more for which no concrete evidence in the form of records have been maintained by the assessee." "Therefore, the genuineness of supply of supari to the assessee by these traders could not be brought on records, although the assessee have shown the receipt of supari in their books of accounts and even consumption thereof." "Howe....
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....n worked out in a scientific and systematic method. I find that the Department has taken a very conservative figure of 50 pouches per minutes as against the declared speed of 65 pouches. On the basis of which production of pouches per month has been worked out as under : No. of Machines x Pouches per Minutes 60 Minutes of Hour x 8 Hours Shift x 25 days i.e. 82 x 50 x 60 x 25 = 4,92,00,000 pouches per month. Keeping in view the above production of pouches per month, the assessee would have produced 59,04,00,000 pouches during the year 2003-04 (up to December, 2004) whereas they have shown the production of 7,35,06,100 pouches during the year 2003-04 and 7,72,18,200 pouches during the year 2004-05 (up to December, 2005) on such suppression of production and clearance, duty involvement came to Rs. 40,97,457/-." The use of expressions 'inferences', 'might have', etc., by the Commissioner definitely reflects upon one fact that the demand stands confirmed by him on the basis of doubt. It is again well settled law and does not need the reference to any precedent decision for holding that the allegation of clandestine removal cannot be made on basis of assumptions and presum....
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....ror under the Standards of Weights and Measures (Packaged Commodities) Rules, 1977. They have specifically contended that the Revenue has nowhere alleged that they have exceeded the limit prescribed in the said rules. The said plea of the appellants does not stand commented upon by the Commissioner, who has simply gone by the fact of consumption of supari in excess shown in the SIIR analysis report. Similarly, as regards utilization of machinery, he has calculated the production of pouches. Appellants have contended that at the material time the factory was being run only in one shift per day and the such calculation of production of pouches by the Commissioner is wholly illegal and the demand cannot be made on the basis of general formula, so adopted. We fully agree with the appellants on the above issue. The findings of the Commissioner, as already observed, being in nature of assumption and presumption, without the support of any evidence, cannot be upheld. There is no evidence as regards consumption of excess electricity during the relevant period or the identification of buyers or any financial flow-back in cash. The observation of the Commissioner that Gutkha has a ready to s....
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....rther investigations and evidences. In the present case, we note that neither the proprietor of M/s. Chandan Tobacco Company and nor the authorized representative of the dealers have admitted to such a huge clandestine removal, during the period 2002 onwards till January, 2005. Even the statement of transporter Shri Manish Goyal also does not corroborate the Revenue's allegation of clandestine removal of Gutkha to such a huge extent by manufacturing unit. As such, we are of the view that the allegation cannot be upheld on the above basis. 23. We also take note of the fact that Commissioner has made the analysis report his basis for concluding against the appellant that during the period 2002-04, the consumption of various raw materials was as per the report. The appellants have strongly contested that the result of the test conducted by SIIR, New Delhi in respect of the sample drawn in June, 2005 cannot be made applicable to all the clearances during the last four years. This would be in the nature of assumption that the appellants had been using the same ratio of various raw materials during the past period. In the case of Essma Woollen Mills Pvt. Limited v. Collector of C....
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.... that Commissioner himself has observed that all the four copies of the said LR were cancelled. If that be so, we really fail to understand that as to how the said LR number was to be used again by M/s. Manish Roadways for transportation of goods. Further, no statement of M/s. Antani Marketing to whom the Gutkha in question was cleared, stands recorded by the Revenue, so as to confirm the receipt of clandestinely removed Gutkha. (b) It is further observed that two LR Nos. 33997 dated 6-4-2004 and 34497 dated 6-4-2004 issued by M/s. Manish Roadways have been recovered from the factory premises of Chandan Tobacco Company, whereas only one invoice dated 6-4-2004 stands issued by M/s. Chandan Tobacco Company for 100 bags of Gutkha. Accordingly, Commissioner has held that M/s. Chandan Tobacco Company has illicitly removed another consignment of 100 bags of Gutkha under the cover of second LR involving duty of Rs. 1,98,900/-. Though the appellant has not explained in detail, the presence of two Lorry Receipts but we find that for the Commissioner to hold that another quantity of 100 bags stand removed un....
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....pertain to a particular period i.e. from 8-7-2004 to 10-1-2005. There can be a stock of Gutkha received by M/s. Balaji Trading Company prior to the said date or there is definitely a possibility of having received it from other sources and from other manufacturing unit of the owner of the same brand of Gutkha. In the absence of any independent evidence as regards manufacture as well as sale of 404 bags of Gutkha, the said factor cannot be held as a corroborative evidence. (d) We further note that reference stands made to the fact that whereas the original copy of commercial invoice Nos. 148, dated 30-10-2004 and 151, dated 10-1-2004 issued by M/s. Balaji Trading Company reflected the sale of 15 bags and 60 bags to M/s. K.T. Enterprises, the duplicate of the said invoices issued by M/s. Balaji Trading Company, sale of only 3 bags were shown as against invoice No. 148 and there is no duplicate copy of invoice No. 151 present with them. As such he has held that M/s. Chandan Tobacco Company had illicitly removed 210 bags under the guise of M/s. Balaji Trading Company involving duty of Rs. 4,17,690/-. We really fail to understand that as to how the above fact would ....
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...., Delhi and ratio given by the Proprietor cannot be the basis since there can be variations as regards contents of various raw materials since uniformity cannot be achieved at the time of manufacture. However, this contention has been made only at the time of reply to show cause notice and earlier to that no request was made for testing of more samples on the ground that the samples were not representative and the raw material contents could vary from one sample to the other. 28. The investigations in this case started with the interception of a truck on 19-1-2005 carrying Pan Masala manufactured by M/s. CTC by the Central Excise officers of Vapi Commissionerate. On the very next day, the statement of Proprietor of M/s. CTC was recorded in which he gave the input-output ratio besides admitting that Gutkha intercepted had been cleared without payment of duty and also admitting shortages and excesses found in the stock of raw materials. He also stated that on an average 20-30 filing and sealing machines were working depending upon the orders received by them. It was admitted by Shri Dilip Shethia, who was in charge of M/s. Manish Roadways that there was no Central Excise invo....
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....milarly, in the case of 2004-2005 also the lowest electricity consumption was in June 2004 which was Rs. 4.18/kg and highest recorded was in April, 2004 amounting to Rs. 14.14/kg. It was also felt from the statement that there was substantial variation from month to month as regards electricity consumption. 34. M/s. CTC contended that the department has been taking contradictory stand about the supari consumption. If the intention was to evade duty by not accounting for the production of Gutkha, there was no need for overstating the consumption of supari. The fact that there was a shortage, also supports the case of the appellant. Further, the fact that the dealers in Assam were non-existent, would in no way support the case of the department in view of the fact that it is not the case of the department that supari was not received, but it is the case of the department that the appellant had shown excess consumption of supari to facilitate excess production of Gutkha and removal thereof. It was also contended that no benefit would be derived by the assessee by falsifying the addresses of the suppliers. It has to be noted that supari, according to M/s. CTC accounts for 75% o....
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.... confiscation of the goods seized after interception are the subject matters of separate proceedings and the Commissioner has erred in relying upon this aspect of the matter. I am not able to agree with this view. Even if it is not a part of the proceedings, it has to be remembered that this was the beginning of the investigation. But for the interception, there would have been no investigation even. There are several points in favour of the department to show that the appellant was in the habit of clearing the goods without payment of duty and without Central Excise invoices. There was a parallel LR book and the transporter was collecting the money in cash for transportation of the goods without payment of duty, the dealer was also assisting such transportation. Quite often, I have noticed that the defence pleas have been made that the whole demand is based on the assumptions and presumptions and just because some shortage was found, clandestine removal cannot be alleged in the absence of at least one incident of clandestine removal. This is a case where no such plea can be raised since the whole investigation started with interception of a truck carrying Gutkha removed clandestin....
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....hat the M/s. Balaji cleared excess quantity as against the quantity received by them, would show that the firm was created to ensure that the Gutkha when being transported would go with the bills so that Gutkha could not be seized. Even with such an arrangement, M/s. CTC could not resist the temptation of clearing goods without bills as evidenced by interception and transporter's statement. This is what comes out from the activities and the statement of M/s. Balaji. This would show that there were clandestine removals directly from M/s. CTC also. It was also noticed from the records of M/s. Balaji that two invoices bearing Sr. Nos. 151 and 158 were not found during search operation and quantity has been taken based on LR and other records. Similarly, invoices Sr. Nos. 165 to 170 were seized from the premises of the transporter and in respect of two consignments, parallel LR numbers were also found. This is clearly showing the involvement of M/s. Balaji in evasion of Excise duty. Further, on scrutiny of the records seized from the premises of M/s. K.T. Enterprises, wholesale dealer, original copies of the invoice Nos. 148 & 151 issued by M/s. Balaji were recovered which reflected sa....
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....ommissioner cannot be found fault with his conclusion as regards clearance of 25 bags of Gutkha. 37. M/s. CTC also did not explain how 2 Lorry Receipts bearing No. 3397, dated 6-4-2004 and No. 34497, dated 6-4-2004 issued by M/s. Manish Roadways and seized from the factory of M/s. CTC reflected invoice No. 1, dated 6-4-2004. Thus, there were two lorry receipts for a single invoice showing illicit removal of 100 kgs of Gutkha involving duty of Rs. 1,98,900/-. For all these specific issues, the reply of the proprietor was standard one. It was neither exculpatory nor inculpatory. He stated that he used to be out of station quite often and such clearances might have taken place or might not have taken place because the factory was managed by the workers and staff. However, there is a clear admission by the concerned persons of M/s. Manish Roadways that they used to maintain parallel lorry receipts and also they used to destroy lorry receipts after transportation was over where both M/s. CTC and M/s. Balaji did not want any records to be maintained. This clear admission has not been retracted till date. 38. During the search of the factory, shortage of HDPE bags would sh....
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....correct. Further, he has also observed that variation is negligible. At the cost of repetition, in the absence of challenge to test report and input-output ratio, the observation of Commissioner using word "seem" would not help the appellant. 43. Again, the Commissioner has also observed that as per the machinery utilization, the demand of duty could have been much more for which no concrete evidence in the form of document has been mentioned by the assessee. What the Commissioner established is that in the absence of documentary evidence and corroborative evidence to support the claim, the department has made conservative estimate on the basis of available documents and evidence. His observations of machinery utilization and demand of duty that could have been raised, would be discussed in the subsequent paragraph and analysed. 44. In view of the above observations, I do not agree that the Commissioner's conclusions are based on assumptions and presumptions. In my view, department has been able to gather evidences documentary as well as corroborative as discussed above. 45. The next issue is as regards observation of Commissioner that the department has tak....
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....ble to make profit which would mean that manufacturers are able to produce more than 20 lakh pouches (One rupee pouch) per machine per month. This would only reflect how conservative the department has been in working out the duty liability. 47. The discussions would show that the Department has proceeded to make estimate of production in view of the fact that none of the instances of removals without document and utilization of raw materials, etc. could have resulted in exact quantification of the actual quantity removed clandestinely. It has been shown that the estimate made by the Department is that amount of 8% only was liable to duty on the basis of estimated unaccounted production and removals whereas the production could be more than 5 times what has been accounted for. Nevertheless the fact remains that the clandestine removal and consequential demand is based on estimate. At this stage, it would be worthwhile considering the legal aspects which are briefly listed as under :- (i) Whether the department is required to prove clandestine removal 'beyond doubt' as urged by the learned advocate and as held by learned Member (Judicial). ....
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....obability that a prudent man may, on its basis, belief in the existence of the fact in issue. Thus, legal proof is not necessarily perfect proof often it is nothing more than a prudent man's estimate as to the probabilities of the case. 31. The other cardinal principle having an important bearing on the incidence of burden of proof is that sufficiency and weight of the evidence is to be considered...... Since it is exceedingly difficult, if not absolutely impossible for the prosecution to prove facts which are especially within the knowledge of the opponent or the accused, it is not obliged to prove them as part of its primary burden." 51. In the case of Gulabchand Silk Mills v. CCE, Hyderabad-II - 2005 (184) E.L.T. 263 (Tri.-Bang.), the Tribunal observed "clandestine activity at best can be established only by circumstantial evidence and it will be humanly impossible to establish every link in the claim of clandestine activity without any break." It was also observed that in any type of clandestine activity, the persons try their best not to leave any evidence. Therefore, such persons cannot be expected to faithfully put details of all such clearances in some regis....
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....with the interest. As regards, the imposition of penalty on Shri Sanjeev Kabbur, we find that he was an employee of the appellant-firm and he had acted under the directions of his bosses. There is no evidence to show that he personally benefited from the under-invoicing. In these circumstances, we set aside the penalties on Shri Sanjeev Kabbur. With this modification, we confirm both the Order-in-Original." In this case, it was also held that in a quasi-judicial forum like this, we are concerned more with a preponderance of probability rather than proof beyond reasonable doubt, as held by various judicial fora. It may be seen that the Tribunal in this case, took a view that leave alone "beyond doubt", the department need not prove the case "beyond reasonable doubt" also. 53. In the case of CCE v. International Cylinders Pvt. Ltd. - 2010 (255) E.L.T. 68 (H.P.), Hon'ble High Court of Himachal Pradesh observed that once the department proves something illegal being undertaken, the burden shifts to manufacturer. It was also observed that the department need not prove quantity of goods carried in each truck for which there was no entry made in company records. Hon'ble High Co....
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....atachaliah, J. (as His Lordship then was) in State of U.P. v. Krishna Gopal [1988 (4) SCC 302]. 38. The above position was highlighted in Krishnan and Anr. v. State represented by Inspector of Police [2003 (7) SCC 56]." The above observations show that even in criminal cases, prosecution has to establish a case "beyond reasonable doubt". The Hon'ble Apex Court also stated as to what is reasonable doubt. It was also observed that the concept of probability cannot be expressed in terms of mathematical units. Naturally, the above observations show that there is a difference between the degree of proof required in different types of cases. Even in criminal trials, prosecution is required to be prove a case only "beyond reasonable doubt" and not "beyond doubt". It is well settled law that the nature of proof as in the case of trial before a Court for criminal liability and before quasi-judicial body, are entirely different. 55. The observations of Hon'ble Supreme Court in the case of Gopaldas Udhaydas Ahuja v. UOI as reported in 2004 (176) E.L.T. 3 (S.C.) are relevant and are reproduced below :- "21. We may clarify that our above observation should not be take....
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....follows :- "Proof does not mean proof to rigid mathematical demonstration, because that is impossible; it must mean such evidence as would induce a reasonable man to come to a particular conclusion". 12. The said observation has stood the test of time and can now be followed as the standard of proof. In reaching the conclusion the Court can use the process of inference to be drawn from facts produced or proved. Such inferences are akin to presumptions in law. Law gives absolute discretion to the Court to presume the existence of any fact which it thinks likely to have happened. In that process the Court may have regard to common course of natural events, human conduct, public or private business vis-a-vis the facts of the particular case. The discretion is clearly envisaged in Section 114 of the Evidence Act. 13. Presumption is an inference of a certain fact drawn from other proved facts. While inferring the existence of a fact from another, the Court is only applying a process of intelligent reasoning which the mind of a prudent man would do under similar circumstances. Presumption is not the final conclusion to be drawn from other facts. But it could be well be....
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....derance of probability can be said to have been met, the observations of Lord Denning in the case of Miller v. Minister of Pensions would be relevant. He described it simply as "more probable than not". Therefore, it can be said that standard is satisfied if there is greater than 50% chance that the proposition is true. 58. The various decisions described above and discussion clearly show what is required to be proved is by preponderance of probabilities and not beyond doubt or even beyond reasonable doubt. 59. Now, we have to see whether the Department has been able to make out a case of preponderance of probability. In this case, based on the consumption of supari, the evasion is estimated at about 8% based on the records of dealers, M/s. Balaji, the evasion is about 28%. The actual evasion detected based on fake lorry receipts and bogus invoices, trading firms comes to Rs. 14,69,871/-. The exact quantum of supply of supari could not be verified by the Department since the 3 suppliers of supari were found to be non-existent. Based on the capacity of production, as worked out in the show cause notice, assuming one shift per day and 82 machines working, the producti....
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....ed sales tax on the estimated sales, where the sales tax officer had made a best judgment assessment. Hon'ble Supreme Court observed as follows :- "In such a situation, it was not possible for the Sales Tax Officer to find out precisely the turnover suppressed. He could only make an estimate of suppressed turnover on the basis of the material before him. So long as the estimate made by him is not arbitrary and has nexus with facts discovered, the same cannot be questioned........ But that is no ground for interfering with the 'best judgment'." The Apex Court observed that assessee cannot be permitted to take advantage of his own illegal acts. If he failed to do his duty, he cannot be allowed to call upon the assessing authority to conclusively prove what turnover, he has suppressed. That fact thus must be within his personal knowledge. Hence, for proving the burden is on him. The observation of Hon'ble Supreme Court in this case clearly supports the procedure adopted for estimation of duty in this case. 62. In case of Carpenter Classic Exim Pvt. Ltd. v. CC - 2006 (200) E.L.T. 593 (Tri.-Bang.), the Tribunal rejected the claim of the appellant that the evidence collecte....
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.... that case, it was observed that the results of the samples taken on a particular date or time, cannot be applied to all cases of clearances during last 4½ years and some more evidences were needed which were not collected and placed on record. In this case, the test reports and percentage of raw material have been used only for the purpose of estimating the production and we have already discussed in detail and has shown that based on the evidences gathered by the department, the method of estimation was the only possible approach in this case and the estimate is highly conservative. Therefore, the decision of the Tribunal in case of Essma Woollen Mills Pvt. Ltd. - 2001 (134) E.L.T. 262 (Tri.-Del.) or in the case of BEE-AM Chemicals Ltd. v. CCE, Raigad - 2004 (167) E.L.T. 534 (Tri.-Mumbai), would not help the appellant. I have not discussed several other decisions since facts in this case are unique and not comparable. 65. There is no doubt that the appellant has misdeclared the quantum of supari used in Gutkha; misdeclared the names and addresses of supari dealers; did not account for full quantity of supari production; indulged in illicit removal of supari; instru....
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....consumption of supari, as held by Member (Technical)? (iv) Can it be said that M/s. Balaji Trading Co. was not a camouflage/dummy unit and evidences gathered by the Revenue with regard to invoices. LRs and accounts have been explained as held by learned Member (Judicial) or activities and records of M/s. Balaji Trading Co. as brought out can be used as corroborative evidence of clandestine removal? (v) Can it be concluded that the Commissioner has held that the difference between the production by quoting 50 pouches per machine per minute and actual production has been cleared without payment of duty as observed by learned Member (Judicial) or can it be said that this has been used only as a corroborative evidence and not for demanding duty as held by Member (Technical)? (vi) Can it be held that that demand has been separately made for consumption of the raw material, as held learned Member (Judicial) or can it be said that the demand for duty is based on the input-output ratio of supari and Gutkha as supplied by the proprietor and as confirmed by the test report, as held by Member (Technical)? (vii) Whether the statement of the transporter cannot be relied upon a....
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....t aside as held by learned Member (Judicial)? (xvii) Whether penalty of Rs. 2 lakhs imposed on M/s. K.T. Enterprises has to be upheld as held by Member (Technical) or to be set aside as held by learned Member (Judicial)? (Pronounced in Court on 31-12-2010) Sd/- (B.S.V. Murthy) Member (Technical) Sd/- (Archana Wadhwa) Member (Judicial) 69. [Per : M.V. Ravindran, Member (J)]. - This difference of Opinions is placed before me as per order of Hon'ble President of resolving the following points of difference arose between the Bench while deciding the appeal Nos. E/894 to 899/2008. (i) Can interception of truck and seizure of Gutkha be not relied upon being subject of separate proceedings as held by learned Member (Judicial) or has been rightly used as corroborative evidence as held by Member (Technical)? (ii) Can it be concluded that there was no motive for the appellant to show excess receipt to Tobacco and overstate the consumption as held by learned Member (Judicial) or can it be concluded that this was done with a view to ensure that the consumption of tobacco and supari would tally with the ....
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.... shortage of supari, input-output ratio given by the proprietor , test report and other evidences as discussed by Member (Technical)? (x) Can duty be demanded on the basis of supari consumption and SIIR, Delhi test report as held by Member (Technical) or can it be said that it cannot be done as held by learned Member (Judicial)? (xi) Is it correct to demand duty from 2002-2005 on the basis of input-output ratio given by the proprietor and test report and other evidences as held by Member (Technical) or is it to be held that result of test and input-output ratio cannot be applied to past period as held by learned Member (Judicial)? (xii) Whether suppression of facts and misdeclaration can be said to exist and therefore extended period has been rightly invoked and demand confirmed as held by Member (Technical) or no demand can be upheld as held by learned Member (Judicial)? (xiii) Whether penalty of Rs. 25 lakhs imposed on Shri S.H. Chhajed, Proprietor be upheld as held by Member (Technical) or imposition of penalty cannot be sustained as held by learned Member (Judicial)? (xiv) Whether penalty of Rs. 2 lakhs imposed on M/s. Manish R....
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....esumption as well as on the basis of statement of the appellant's proprietor and report of SIIR. It is his submission that there is no investigation or evidence of source from which the supari was purchased by the appellant, inasmuch as the contradictory findings have been recorded by the adjudicating authority in this regard. It is his submission that identical findings have been recorded in respect of consumption of tobacco leaves. It is his submission that the adjudicating authority has recorded in the books, the excess quantity of tobacco in order to clandestinely manufacture the final product "Gutkha". It is his submission that the entire impugned order has also recorded the same findings as regards other ingredients as well as the packing material. It is his submission that the adjudicating authority had contradicted himself in the impugned Order-in-Original, inasmuch as it is recorded that the appellant had understated the consumption of supari and at other place had observed that the appellant had overstated the consumption of supari used for the manufacture of Gutkha. It is his submission that the entire production and clandestine removal allegation as confirmed by the adj....
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.... are purchases of unaccounted packing material and inputs, gathered during the investigation and preparation of fake invoices by the traders of the assessee. It is his submission that proprietor of trader, in his statement, admitted clearances of the goods on fake/unaccounted invoices/bills, which accompanied the consignment to Ahmedabad without the payment of duty and there was a parallel LR book recovered from the transporter. It is his submission that the transporter, in the statement, has admitted having transported the goods on parallel LR which are not accounted for. It is his submission that the consumption of the input has been overstated and the production has been understated and the appellant has not maintained the proper records of electricity generated by DG sets. It is his submission that the evidences are sufficient to prove the preponderance of probability of evasion of duty. It is his submission that in an activity of clandestine removal of the goods, the Courts in Tribunal, in umpteen numbers of cases, have adopted the theory of preponderance of probability as a standard of degree. He cited the few cases. (i) CC, Madras....
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....rges in the two show cause notices. 77. As per the Revenue, the above evidence is sufficient to sustain the charge. I find that at first blush, it may appear to be sufficient, however a deeper scrutiny reveals to the contrary. The above evidence is not relevant and credible material 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 undervaluation. 78. It would be necessary to analyze whether the evidences, other than the oral evidences, are credible for being used as corroborative evidence. The Hon'ble Supreme Court in case of Sitaram Sao v. State of Jharkhand - (2007) 12 SCC 630, pithily encapsulated the idea of "corroborative" evidence, in the following words : "34 The Word 'corroboration' means not mere evidence tending to confirm other evidence. In DPP v. Hester - (1972) 3 All ER 10.16, Lord Morris said : "The purpose of corroboration is not to give validity or credence to evidence which is deficient or suspect or incredible but only to confirm and support that which as evi....
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....ribunal has taken a clear view that the demand cannot be on presumption of manufacture but on the basis of actual manufacture which is the basis to come to conclusion, and I notice that the findings of the adjudicating authority are without any evidence and is not correct view and is liable to be set aside. 82. My above view are fortified by a recent case in the case of Viswa Traders Pvt. Ltd. & Others v. CCE, Vadodara being Final Ordar Nos. A/1846-1851/WZB/AHD/2011, dated 1-11-2011 [2012 (278) E.L.T. 362 (Tri.-Ahmd.)], a similar issue of clandestine removal was decided by co-ordinate Bench of Tribunal in Ahmedabad, wherein it is held that unless clandestine manufacturing is brought on record, there cannot be any allegation of clandestine clearances, uncorroborated with evidences. I was one of the Members in that Bench and while coming to the conclusion, the Bench had relied upon the judgment of Hon'ble High Court of Gujarat in the case of Nissan Thermoware Pvt. Ltd. - 2011 (266) E.L.T. 45 (Guj.). I am reproducing the relevant portion of the said order, which is fortifying my view in this case also. "15. We find that Hon'ble High Court of Gujarat, in the case of Nis....
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....ence adduced, a series of assumptions and presumptions are to be made, viz. - (i) The total number of machines installed was having the capacity to manufacture the final goods held being clandestinely removed and there is no evidence of working for more than one shift a day. As per the appellant, the production capacity with such machines, in one shift, is not sufficient to manufacture the alleged huge quantity alleged to be removed in clandestine manner, and moreover, the duty fixed by the Board per machine, if taken into account would also indicate much less production than alleged in the Notice. As rightly observed by the Hon'ble Member (J), the working of the machines in the appellant's factory was not tested or certified to ascertain the production capacity of the machines installed. Even number of machines installed in working condition was not recorded in panchnama drawn at factory. There is no record to show that the appellants were working for three shifts. There is no evidence of additional employees having been employed to enhance the production, nor is there any evidence of excess wages having been paid to the existing employees. However....
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.... 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, the Revenue has failed to prove the same. 87. I find that the entire case proceeded on the footing that the appellant has understarted the consumption of main raw materials and confirmed by SIIR, which is again not free from doubt. 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 infirmities as to equating appellant's products with branded products' contents of raw material, no evidence of purchase of supari and tobacco, as correctly recorded in the detailed findings of the Hon'ble Member (J) are to be accepted. I agree with the reasons and findings recorded by the Hon'ble Member (J) that entire proceedings are based on presumptions and assumptions and serious doubt arises about the corroborative evidence 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....