TaxTMI 
TaxTMI 
2012 (4) TMI 558
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....palji 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 Gutkha was also recorded on 24-1-2005, wherein he depos....
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.... 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) Sample of Mulchand 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 s....
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....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 number of bags cleared by manufacturing unit to M/s. Balalji Trading Company, he clarified that as the matter being old, he does not remember anything. As regards the analysis report of SIIR, New Delhi, showing difference in consumption of supari, he clarified that there was always....
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.... 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 of M/s. Manish Roadways, M/s. Balaji Trading Company and M/s. K.T. Enterprises. The said show cause notice stands culminated into an impugned order passed by the Commissioner confirming demands and imposing penalties, as detailed in Para 1 of the order. 11. We have heard Shri Uday....
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....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 7.20% by mass for Kuber brand and 7.0% by mass for Mulchand brand Gutkha. Thus, there is overstated consumption of tobacco leaves by the assessee to the tune of 35%." As is seen from the above, Commissioner has observed that the appellants declared/overstated the consumption of tobacco leaves to t....
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....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 the Commissioner, wherein, at one place he stated that the appellant's understated the consumption of supari and at the other place, he has observed that the main ingredients being supari, the appellants have overstated the quantity of supari used by them in the manufacture of Gutkha, it stands submitted be....
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....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 fact cannot be held to be a corroborative evidence. 16. The Commissioner has further gone by the calculations that the capacity of the sealing machine installed in the factory should be around 60-80 pouches per minute and after taking a conservative figure of 50 pouches per minute, he has arrived at the asse....
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....red 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 located. In such a scenario, we really fail to understand that if the appellants intention was to use the excess supari in the manufacture of unaccounted Gutkha, they would not have first entered the excess supari in their records and then shown excess consumption of the same. Demand stand confirmed separately by tak....
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....f 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 Tobacco Company under the guise of clearances of M/s. Balaji Trading Company. Apart from the above fact, the proprietor of M/s. Balaji Trading Company, Ganesh Sharma confirmed before the adjudicating officer and has deposed that he used to prepare the invoices of the trading firm as per the directions of M/s. Chandan Tobacc....
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....nt 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 materials, etc., the party showed the entry of purchase in register No. 17 & 21 and all the packing materials have been accounted for, this will not reduce the quantum of evasion of duty, as the show cause notice is based on Gutkha manufactured from overstated quantity of supari in view of the production shown in their RG-1." ....
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....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." "However, the analysis report of SIIR, Delhi effects the contents of Menthol @ 0.4% by mass in the Gutkha but do not reflect any other ingredients claimed to have been contained in such Gutkha compound purchased and used by them. Therefore, inference in this regard can be drawn that the Gutkha compound might be containing certain percentage of m....
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....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 presumptions, surmises and conjectures and need hard evidence for the same. Doubt, however strong, cannot take the place of legal evidence. 21. As is clear from the above discussion, the Revenue's case is based upon the theoretical and hypothetical calculations of number of pouches, which the appellant could have manufactured, during the relevant period by usi....
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....ess 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 sale market and as such, there is a strong possibility of appellants having cleared the goods are in the realm of surmises and conjectures. The vast difference between 'might have' and 'must have', is required to be travelled by Revenue by production of clear evidence on record. The onus to travel the above distance is on the Revenue and not on the assessee inasm....
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....ue'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 Central Excise, Chandigarh - 2001 (134) E.L.T. 262 (Tri.-Del.), it was observed that in respect of samples taken on the date of visit of officers, the result of the same cannot be legitimately be applied to all cases of clearances during previous 4½ years. To the similar effect is the Tribunal's decision in the case of BEE-AM Chemicals Limited v. CCE, Raigad -....
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....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 under the cover of second Lorry Receipt is not justified. We really fail to understand as to how the Commissioner has arrived at a finding that exact quantity of 100 bags stands cleared by the assessee under the cover of the second LR. Even if the appellant has used the second LR for removal of goods, the same can be for less than or more than the 100 bags, it is not necessary ....
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....ell 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 fasten duty liability on upon M/s. Chandan Tobacco Company against the invoice issued by M/s. Balaji Trading Company. 25. In view of the above foregoing discussion, we set aside the duty confirmed against the appellants along with setting aside of interest and penalty. In view of the fact that the findings of clandestine removal against M/s. Chandan Tobacco Company stand set ....
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....resentative 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 invoices for the Gutkha, but only challans. The transporter also admitted maintaining of parallel LR book besides admitting that he used to destroy the papers relating to the goods transported without cover of Central Excise invoices. 29. During the search of the factory of M/s. CTC, no carry bag stock was found against closing balance of 12090. As against the stock of canvass bag of 110, no sto....
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.... 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% of the contents in Gutkha. The whole case of the department is on the ground that the contents of supari which could have been of about 75% is less than that and duty demand is also on that basis. Once excess quantum of supari shown as required, if the quantum of consumption is less, naturally M/s. CTC would be able to produce excess quantity of Gutkha out of such excess principal raw material declared as part....
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....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 clandestinely. It was argued vehemently that the findings of clandestine removal are required to be proved beyond doubt and onus of the same is on the Revenue which is required to be discharged by production of sufficient and positive evidence. The fact that clearance of the goods without payment of duty by the appellant on 19-1-2005 itself cannot lead to the finding of clandestine removal for the past period viz. 2002 o....
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.... 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 sale of 15 and 60 bags respectively. However when the duplicate invoices available with M/s. Balaji were seen, it was noticed that in respect of invoice No. 148, only 3 bags of Gutkha were sold and were shown as sold in cash and duplicate copy of invoice No. 151 could not be seen. This leads us to two conclusions. First one is that even though the claim of M/s. K.T. Enterprises that all payments were made by cheque....
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.... 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 show and support the case of the department that bags were used for packing and illicit removal of Gutkha. 39. Another aspect elaborately discussed in the show cause notice as well as in the impugned order is in the fact that M/s. CTC was filing 1.7 gms. of Gutkha instead of 1.6 gms. In fact, this would not make any difference and has no bearing on the case of the department. 40. Another submission made was....
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....ument 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 taken very conservative view. In the show cause notice, it was observed that each machine is capable of producing 50 pouches per minute and worked out the total production as 4,92,00,000 pouches per month, by assuming that the factory was working only in one shift and 25 days a month. This has been contested by the appellant by submitting that only 20-30 machines worked at a time and the production depends upon the demand. It is stra....
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....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). (ii) Whether based on the evidences gathered and the records, it can be said that the department has discharged the burden cast upon it to prove the case so that the demand for duty can be upheld. 48. In the context of clandestine activity such as smuggling, clandestine removal of excisable goods without payment of duty, and time & again, the Tribunal and Court have adopted preponderance of probability on a standa....
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....ot 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 register and append their signatures. 52. In case of Carpenter Classic Exim Pvt. Ltd. v. CC - 2006 (200) E.L.T. 593 (Tri.-Bang.), the Tribunal has observed as follows :- "Shri Kabbur has also confirmed that part of the amount is collected by cash and the balance by cheque. Ms. Jagruty Sevak in her statement has confirmed the practice of collecting part of the amount from the Customers by cash. The documents seized indicate that the value declared for....
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....udicial 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 Court also observed that no person will maintain authentic records of illegal activities. The decision of Hon'ble High Court is squarely applicable to this case also since the quantum of production has been estimated. In this case, the Department showed that the samples contained more supari than the ratio indicated by the Proprietor. On that basis, production was estimated and differential duty demand is supported by several evidences of clandestine removal, s....
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....t 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 taken to mean that there is no difference between departmental proceedings under Section 71(1) and prosecution for illegal possession under Section 85(1). A combined reading of Sections 8(1), 71(1) and 85 of the 1968 Act made it clear that the legislature intended to provide for two separate proceedings before two different forums and there is no conflict of jurisdictions between the Authorised Officer acting under Section 71(1) to direct confiscation on being satisfied that an o....
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....ute 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 final if it remains undisturbed later. Presumption in law of evidence is a rule indicating the stage of shifting the burden of proof. From a certain fact or facts the Court can draw an inference and that would remain until such inference is either disproved or dispelled. 14. For the purpose, of reaching one conclusion the Court can rely on a factual presumption. Unless the presumption is disproved or dispelled or rebutted the Court can treat the presumption as tantamounting to pro....
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.... 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 production should have been 7 times of what has been reflected. Based on the present duty structure, with proposed rates of duty on the basis of per machine per month and MRP of Gutkha manufactured, even to even assuming that only 25 machines are sued, this appellant would be required to produce 5 times more than he has accounted for in the record. It has to be noted that duty demand assumes only 8.7% of production as duty evaded whereas even to pay duty on the basis of present duty structure, this appellan....
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....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 collected by DRI officers can be applied only to the two consignments imported by the appellant in respect of which such proof was available and not in respect of past consignments. Tribunal rejected this contention and observed as follows :- "It is true that Thomas Mathew's statement has not been recorded moreover, there is no evidence of any investigation conducted abroad. No doubt there are certain deficiencies in the investigations on account of the above facts. It should be borne in mind in the case of underval....
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....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; instructed the transporer to destroy the records in such cases; instructed dealer not to account for a portion of the goods; did not account for the raw material properly. Recorded electricity consumption shows drastic variation month to month. 66. In view of above circumstances, suppression of facts and misdeclaration is established and therefore, penalty under Section 11AC is imposable. Shri S.H. Chhajed, Proprietor of M/s. CTC being the sole proprietor, has to be held responsible for improper accounting and illicit ....
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....r 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 as held by learned Member (Judicial) or the same has to be relied upon as one of the corroborative evidences as held by the Member (Technical)? (viii) Can it be said that the finding of clandestine removal are required to be proved beyond doubt and the onus of the same is on the Revenue, which is required to be discharged by production of sufficient and positive evidence as held by learned Member (Judicial) or the finding of clandestine removal are required to be proved by preponderance of probability, as held by Member (Technical)? (ix) W....
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....ing 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 quantity of Gutkha produced by the appellant, as held by Member (Technical)? (iii) Based on the records, can it be held that the Commissioner was not clear in his mind about the consumption of supari as held by learned Member (Judicial) or the Commissioner has rightly understood the 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 activit....
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.... 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 Roadways has to be upheld as held by Member (Technical) or to be set aside as held by learned Member (Judicial)? (xv) Whether penalty of Rs. 2 lakhs imposed on Shri D.G. Khaniya has to be upheld as held by Member (Technical) or to be set aside as held by learned Member (Judicial)? (xvi) Whether penalty of Rs. 2 lakh imposed on M/s. Balaji Trading Co., has to be upheld as held by Member (Technical) or to be set 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....
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.... 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 adjudicating authority has been worked out only on the basis of imaginative excess of consumption of inputs. It is his submission that the final product Gutkha is liable to duty on the MRP and duty is not levied based on the weight of the product contained in the pouch. Hence, the final product is covered under the provisions of Section 4A of the Central Excise Act, 1944 as a product, the value which was based on the MRP, the Department should not have resorted to arrive at clandestine removal of the quantity per pouch in the present case. For example the lower authorities rely upon the report of SIIR to indicate that o....
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....he 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 v. D. Bhoormull - 1983 (13) E.L.T. 1546 (S.C.) (ii) Gulabchand Silk Mills v. CCE, Hyderabad - 2005 (184) E.L.T. 263 (Tri.-Bang.) (iii) Carpenter Classic Exim Pvt. Ltd. v. CC, Bangalore - 2006 (200) E.L.T. 593 (Tri.-Bang.) (iv) CCE v. International Cylinders Pvt. Ltd. - 2010 (255) E.L.T. 68 (H.P.) (v) State of Rajasthan v. Mohan Lal - 2009 (237) E.L.T. 435 (S.C.) (vi) Gopaldas Udhaydas Ahuja v. UOI - 2004 (176) E.L.T. 3 (S.C.) (vii) ....
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....eing 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 evidence is sufficient and satisfactory and credible; and corroborative evidence will only fill its role if it itself is completely credible......" There can be, therefore, no "corroboration" of evidence, which is itself unworthy of credence. 79. In the entire records of proceedings, there is no evidence to indicate that there was clandestine manufacturing. There is no independent tangible evidence on record of any clandestine purchases or receipt of the raw materials required for the manufacturing of the alleged quantity of finished goods for its clandestine removal from the factory. In the entire notice and the order there is no satisfactory and ....
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.... 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 Nissan Thermoware Pvt. Ltd. - 2011 (266) E.L.T. 45 (Guj.), has specifically held as under : "7. Thus, on the basis of findings of fact recorded by the Tribunal upon appreciation of the evidence on record, it is apparent that except for the shortage in raw material viz., HD which was disputed by the assessee and the statement of the Director, there was no other evidence on record to indicate clandestine manufacture and removal of final products. On behalf of the revenue, except for placing reliance upon the statement of the Director recorded during the course of the search proceedings, no evidence has been pointed out which corroborates the fact of clandestine manuf....
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....rking 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, it is to be assumed that the factory was continuously running for three shifts, more machines than declared were installed, and that the actual production was grossly suppressed. (ii) Allegedly, the case is on a presumption that the appellant has recorded excess consumption of raw materials like betel nuts, etc., and clandestinely manufactured the goods and cleared the same while there is no evidence of purchase of main raw materials 'Betel Nuts' (which constitutes 85% of the raw materials), Catechu, Perfume and Lime, it is to be assumed that all these raw materials were purchased in cash, brought to factory, and used in unaccounted manufacture of Pan Masala/Guth....