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2014 (12) TMI 1213
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....on of interest. In addition, penalty of Rs. 6 crores stands imposed on the said appellant in terms of Rule 173Q of the Central Excise Rules for the clearances effected prior to 28-9-1996 and mandatory penalty of Rs. 84,75,070/- stands imposed under Section 11AC of Central Excise Act for the clearances effected after 28-9-1996. Further, penalty of Rs. 1.50 crores stands imposed on Shri Anoop Kumar Sahoo under Rule 209A of the Central Excise Rules. In addition penalty of varying amounts stands imposed upon other appellants in terms of Rule 209A of the Excise Act. 2. After hearing both the sides duly represented by Sh. K.K. Anand, Rupendra Singh, S.C. Kamra, Ms. Surabhi Sinha, Balbir Singh, Pawan Sri Agarawal, Dinesh Prakash, Anil Malhotra (Advocates) from the Appellant's side and Pramod Kumar Jain, JCDR from the respondent's side for a considerable period of time, we find that M/s. Ashwini & Co. is a partnership unit of 4 brothers : Shri Anoop Kumar Sahu, Shri Ashok Kumar Sahu, Shri Avdhesh Kumar Sahu & Shri Akhilesh Kumar Sahu. The said partnership firm has two units i.e. Unit No. 1 manufacturing Gutkha under the brand names of "Madhu", "Shalimar", "Yogi" & "Madhu Kheni" as ....
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.... the end of the supplier of the lamination i.e. M/s. Classic Products Private Ltd. and the other suppliers in support of the Revenue's stand that they were procuring the packaging materials in a clandestine manner. Investigations were also made with the various transporters and the statements of their representatives were recorded. Revenue also seized Indian Currency of Rs. 1,71,28,195/- from the premises of one Verma Roadways on the belief that they were collecting the sale proceeds of clandestinely removed goods of the appellant. 5. Prior to the issuance of the present show cause notice, the appellant was served with a show cause notice dated 13-5-1997 proposing confiscation of the goods seized from various places as also proposing seizure of Indian Currency of Rs. 2,63,000/- from the premises of the appellant. The said proceedings resulted in passing of an order by the Commissioner being Order No. 58-63/2004, dated 25-10-2004, confiscating the goods seized from various places, confirming the duty and imposing penalties, apart from confiscating the Indian Currency. The said order of the Commissioner was challenged before the Tribunal, and vide their Final Order Nos. A/111....
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....Section 9D. The sub-section of the said section relates to the admissibility of the statement when the person who made the statement is dead or cannot be found or is incapable of giving evidence. Otherwise, the admissibility of the statement is subject to examination of the witness before the Court. By drawing our attention to the provisions of Section 9D(1)(b) it stands contended that the statement recorded under Section 14 of the Central Excise Act will be admissible as evidence only when the adjudicating authority calls the said witness and examines him and gives a finding that the statement is worthy of acceptance in evidence. Reference stands made to the Hon'ble Delhi High Court decision in the case of J&K Cigarettes Ltd v. CCE - 2009 (242) E.L.T. 189 (Del.) = 2011 (22) S.T.R. 225. 9. The reliance is also placed upon the another decision of the Hon'ble Delhi High Court in the case of Basudev Garg v. CC - 2013 (294) E.L.T. 353 (Del.). In their further written submissions, our attention stands drawn to the Hon'ble Supreme Court decision in the case of Kishan Chellaram v. CIT, Bombay - 1980 SUPP SCC 660 wherein it has been held that no reliance can be placed on any advers....
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.... Unit No. 1. Statement of Shri Anoop Kumar Sahu, another partner, recorded on 20-11-1996 deposed that they were manufacturing Madhu Brand Gutkha as also Shalimar and Yogi Brands etc. The dispatch of Gutkha was undertaken through Rail as also by Road transporters, namely, M/s. Pawan Carrying Corporation and M/s. Verma Roadways of Kanpur. Another statement of Shri Anoop Kumar Sahu was recorded on 21-11-1996 wherein he deposed that they were not paying any excise duty on loose Pan Masala removed from their factory to other unit for further manufacture of the final product. He also disclosed the name of the laminate manufacturer i.e. M/s. Classic Pouch Pvt. Ltd. from whom they were procuring the laminates. He stated that they were mainly procuring the laminates on bills and payments were being made through checks but some quantity was also being purchased on cash and used in the packing of Gutkha for clandestine removal. Statement of Shri Krishankant Tripathy, Manager of Pawan Carrying Corporation, was to the effect that they were using two different serial number books one for cotton katran and the other for other goods and whenever "Cotton Katran" consignments were entered in the dis....
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.... Third parties and the invoices were being accordingly issued. To the same effect were the statements of the representatives of M/s. R.K. Products. 12. We note that most of the statements recorded by the department from the various ends are to the effect that most of the times, it was M/s. Ashwini & Company who were getting their goods booked under the name of fictitious consigners along with a fictitious name of the consignee. Similarly, the investigations made from the Railways led the Revenue to arrive at a finding of clandestine booking of the consignments under the fictitious names. 13. First of all, dealing with the appellants stand that such statements cannot be made the sole basis of the clandestine findings, without first offering the said deponent for cross examination, we find that admittedly the Adjudicating Authority has not produced the said deponent for cross examination, by taking recourse to the provisions of Section 9D of Central Excise Act, 1944. Section 9D of the Central Excise Act, 1944 reads as under :- "Section 9D. Relevancy of statements under certain circumstances. - (1) A statement made and signed by a person before any Central ....
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.... admitted. As such we are of the view that the denial of cross-examination by the commissioner by referring to the provisions of Section 9D is not appropriate. Reference can be made to the Hon'ble Delhi High Court's decision in the case of J&K Cigarettes Ltd. v CCE, 2011 (22) S.T.R. 225 (Del.). While upholding the constitutional validity of the said section, the Court observed as under : "(i) That, provisions under section 9D provides for relevancy of statements recorded under section 14 of the Act, under certain circumstances, in criminal as well as quasi judicial proceedings, to meet the ends of justice. (ii) That, the quasi judicial authority can rely on the statement of such a person only when the stated grounds is proved. (iii) That, the opinion or order of the quasi judicial authority is subject to judicial review by the Appellate Authority." 14. As such denial of the cross examination by the Commissioner except in a case falling under the provisions of Section 9(1)(a) is not on sound principles and makes the reliance on the said statements a shaky and weak evidence. 15. It ....
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....evenue for the period 15-4-1994 - 19-11-1996. The Revenue's cases that all the consignments booked through the railways by one Shri Rajiv @ Raju under the code of "Shiva" and "D. Kumar", showing the address of the consigner as 170 TP Nagar, Kanpur, were actually the clearances of the Madhu Brand Gutkha and Sweet Supari manufactured by the appellant. The Revenue has procured a chart from the Railways showing the details of the RRs issued by them wherein the goods shown to have been booked were described as manufactured tobacco/zarda. The reliance stands placed upon the statement of Raju, who had deposed that he was the booking agent and was consigned the code Shiva for booking the consignments. However, ongoing through the statement of the said Shri Raju, it is noticed that he has nowhere clarified that all the consignments booked by him under the name of 'Shiva' and showing the consigner's address as 170 TP Nagar, Kanpur, were in respect of the goods manufactured by M/s. Ashwini & Company. Shri Anoop Kumar Sahu in his statements has categorically denied any connection with the address 170 TP Nagar, Kanpur. Apart from admitting that Raju was their booking agent, he has nowhere accep....
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.... were removing the goods clandestinely from Kanpur Railway Station by using fictitious name and address of the consigners and consignee and by misdeclaring the description of the goods, they are under a legal obligation to prove so by production of independent corroborative evidence and no assumptions and presumptions can be made that all the railway bookings by Shri Raju where the consigner's address was shown is 170 TP Nagar, Kanpur, were that of the appellants products. 19. It is seen that the Revenue has procured from the Railways a list of 2287 consignments for the period 15-4-1994 to 19-11-1996, showing the consignments booked under the consigner's address 170 TP Nagar, Kanpur. However, the demand stands raised and confirmed only for the period 4-9-1995 onwards in respect of 1311 consignments either booked under the consigners name as D. Kumar and addressed as 170 TP Nagar, Kanpur. Out of 1311 consignments only 293 consignments are under the name of Shiva. Further, in some of the consignments the consigner name of Shiva was replaced by the name D. Kumar by crossing the original name by hand. In some of the consignments the name of the consigner was completely erased/d....
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....sessee could not therefore be expected to call them in evidence for the purpose of helping the Revenue to discharge the burden which lay upon it. We must therefore hold that there was no material evidence at all before the Tribunal on the basis of which the Tribunal could come to the finding that the amount of Rs. 1,07,350/- was remitted by the assessee from Madras and that it represented the concealed income of the assessee." 21. Tribunal in a number of cases has observed that the transport documents cannot be made the sole basis for upholding the allegation of clandestine removal. Reference can be made to the Tribunal's decision in the case of Charriot Cement Company v. Commissioner of Customs - 2003 (161) E.L.T. 598 Tribunal (Tri. - Kolkata) wherein while dealing with an identical situation it was observed as under : "That the entire case of the Revenue rests upon the railway receipts recovered from the Railway Authorities. The Railway has not, surprisingly, contacted the concerned person at Dimapur who had taken the delivery, to arrive at the correct factual position. No officers of the Railways have been examined so as to find out as to who was the person who ....
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....any person. 23. We also note that the Revenue has referred to the statement dated 21-11-1996 of Shri Suraj Prakash Tripathy, senior parcel clerk Northern Railway, Kanpur wherein he deposed that one person was recognized as 'Madhuwala' who was doing the business of booking the consignments of Madhu Brand Gutkha, though, the description of the goods was being shown as manufactured Tobacco and the symbol as Shiva. This statement also does not further the Revenue's case inasmuch as even as per the Revenue the consignments were being booked by Raju and not by any other person identifiable as Madhuwala. No efforts stands made by the Revenue to find out the identity of the said person called Madhuwala or to confront Raju with Shri Suraj Prakash Tripathy to find out as to whether it is Raju only who was recognized by the railways as Madhuwala. 24. Apart from the above, we also find that the Revenue has also procured forwarding notes which contained brand names such as Laxmi, Vimal, Sagar etc. which were also shown to have been consigned to Vijaya Agency Warangal. Though, the Revenue has tried to seek the opinion of the hand-writing experts in respect of some of the forwardi....
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....l such decisions in the succeeding paragraphs. 27. A part of the demand to the extent of Rs. 95,92,200/- stands confirmed in respect of 3571 bags of Gutkha allegedly cleared by the appellant and transported to M/s. Vijaya Agencies through Verma Roadways during the period 1995-96 and 1996-97. During the course of investigations, Revenue has recorded the statement of one Shri Babu Ram Verma, General Manager of Verma Roadways, Hyderabad. Two statements of Shri Babu Ram Verma were recorded, one on 5-2-1997 and another on 15-5-1997. In his first statement dated 5-2-1997, he had deposed that the description of the goods was given as 'Seeds' in the L.R.s but the goods actually transported were Madhu Brand Gutkha. In his subsequent statement recorded on 15-5-1997, he has deviated from his first statement which was a computer typed statement and has clarified that he was not aware of the fact of transportation of Gutkha under the garb of seeds. No further statement of said Shri Babu Ram Verma was recorded. Neither at the time of recording of the said second statement on 15-5-1997, he was confronted with his first statement dated 5-2-1997 and no question was put to him as to why ther....
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....the freight allegedly paid by M/s. Vijaya Agencies to Verma Roadways. M/s. Vijaya Agencies is located at Warangal and there is absolutely no evidence for movement of the goods from Hyderabad to Warangal. It is also seen that the premises of Verma Roadways, when searched, resulted in recovery of Indian Currency of Rs. 1.72 crores which the Revenue has alleged to be the sale proceeds of Madhu Brand Gutkha collected by M/s. Verma Roadways. The ld. Advocate has drawn our attention to the fact that after DGAE officers left the premises of Verma Roadways, the officers of Income Tax Department stepped in and seized Indian currency of Rs. 13,05,180/-. Though the Revenue in the present case is holding that the said Indian Currency is the sale proceeds of the clandestinely cleared Madhu Brand Gutkha, the Income Tax Authorities have treated the same as the undeclared income of Shri Jagadmaba Prasad of M/s. Verma Roadways. If that be so, the Indian Currency cannot be attributed to the sale proceeds of Madhu Brand Gutkha and the Revenue's efforts to draw support from the said fact cannot be appreciated. 30. There are number of decisions laying down that confirmation of demand and allega....
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....awan Carrying Corporation for transportation of the clandestinely removed goods. Further, no investigation stand made from the other manufacturers whose names were shown in the transporters register. We fully agree with the appellant that confirmation of demand of duty on the allegation of clandestine removal based upon the third party documents i.e. the transporters, that too not clearly supporting the Revenue's case is neither in accordance with law nor warranted. The representatives of Pawan Carriers have stated that Gutkha of various brands which were being manufactured at Kanpur by the other manufacturers were being dispatched as Cotton Katran. No inquiry, except from the owners of Sagar Brand, stands made by the Revenue. In such a scenario it is neither possible nor legal to conclude that all the goods sent as Cotton Katran by the said transporters were that of Madhu Brand Gutkha manufactured by the appellant. 32. We further find that a part of the demand stands confirmed in respect of clearances made to M/s. Mandal Enterprises, Calcutta. The said demand is based upon the seizure of a diary containing details of bags of MG Brand and statement of Shri Arun Kumar deposi....
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....id documents and the appellant. 34. The manufacturer of Gutkha and Pan Masala requires number of raw materials, the major being Supari. Further Katha, Tobacco, cardamom, lime, menthol and perfume are also required to the varying degrees. Except for making allegation of receipt of unaccounted lamination packing material from M/s. Classic Pouches Pvt. Ltd., there is neither any allegation much less any evidence to procurement of other raw materials. Shri Anoop Kumar Sahu was never questioned about the procurement of the raw materials except the laminations. In his statement dated 21-11-1996, he deposed that the laminations was being procured from M/s. Classic Pouch Pvt. Ltd. as also from other manufacturers, M/s. Balaji Traders, Puja packaging etc., and the said procurement was always on the strength of bills, which were duly entered into the books of accounts. The appellant have strongly contested that the evidence in respect of alleged unaccounted purchase of lamination from Classic Pouches cannot be relied upon inasmuch as the same is solely based upon the documents recovered from their premises and the statement of Shri S.K. Saxena and the proprietor Shri Kapil Dhawan and....
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.... fact that another show cause notice dated 13-5-1997 issued to the appellant in respect of the goods seized at various places as also in respect of the final products and the raw materials seized from the appellant's premises was concluded against them by the Adjudicating Authority by relying upon the same set of investigations and the evidences as also the statements recorded during investigation. The order of the Commissioner, being Order No. 58-63/2004, dated 25-10-2004 confirming the demands of duties and ordering confiscation of the currency etc., based upon the same set of the relied upon documents, as has been relied upon in the present case was set aside by the Tribunal vide its Final Order No. A/1114-1116/2005 SM, dated 13-6-2005. By setting aside the demand, the Tribunal observed as under :- "The confiscation of the goods seized from the premises of M/s. Ashwani & Co. at Kanpur and Ahirwan as well as from other premises including Kanpur and Guwahati railway stations on the ground that these were removed in a clandestine manner by Ashwani & Co., Kanpur (Appellant) cannot be sustained for want of any duty demand in respect of those goods which was allegedly removed....
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....6-2005. 38. After having observed as above, we may now refer to various decisions, relevant on the issue. The Tribunal has already, in the earlier order passed in the case of M/s. Ashwani & Co., based upon the same set of investigations has granted them relief on the ground that the evidence adduced by the Revenue was not sufficient enough to conclude against the assessee as regards the clandestine activities. The said order has not been shown to have been appealed against by the Revenue. The same having attained finality, would be of a binding nature. Apart from that, we also note that there are plethora of judgments laying down that duty cannot be confirmed merely on the basis of railway receipts unless there is independent evidence to corroborate the allegations of clandestine removal, especially when such railway receipts do not get recovered from the assessees' factory in which case the onus may get shifted to him for explaining the presence of RRs in his premises. We have already referred to the Tribunal decision in the case of Charriot Cement Co., on the said issue. Further, reference can be made to the Hon'ble Supreme Court's decision in the case of Collector of Cus....
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....documents recovered from the third party premises, without corroboration of the said documents. The statements itself are not sufficient for holding so. No presumptions are available in respect of such documents unless they come from the proper custody and such documents raise serious doubts about their genuineness. For the above proposition reference can be made to Bombay High Court decision in the case of Commissioner of Customs, Mumbai v. Foto Centre Trading Co. - 2008 (225) E.L.T. 193 (Bom.); Radhey Shyam Kanoria - 2006 (197) E.L.T. 130 (Tri. - Mum.); Pioneer Industries - 2006 (193) E.L.T. 506 (Tri. - Mum.) & Rutvi Steel & Alloys - 2009 (243) E.L.T. 154 (Tri. - Ahmd.). In fact the list is never ending and reference to all the decisions cannot be made. 39.2 As regards the onus and production of sufficient evidence, reference can be made to the Tribunal's decision in the case of Harsinghar Gutkha Pvt. Ltd. v. Commissioner - 2005 (186) E.L.T. 369. It stands held in the said decision that the non-accounted procurement of all the raw materials is required to be proved by various evidences. The Hon'ble Delhi High Court in the case of Commissioner of Central Excise, Raipur v. ....
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....unsustainable. Such inculpatory statements lose their evidentiary value when the same are not corroborated by Revenue. To the same effect is another decision of the Tribunal in the case of Rawalwasia Ispat Udyog Ltd. - 2005 (186) E.L.T. 465 (Tri. - Del.), laying down that allegations of clandestine removal based upon the statement as also the invoices issued by the informer, cannot be upheld in the absence of cross examination of the deponents of the statements. 41. In fact there are plethora of decisions laying down that the allegations of clandestine removal cannot be based upon the uncorroborated statements and evidences and when there are several raw materials involved, the Revenue is required to prove beyond doubt with reference to unaccounted use of all such major raw materials. Such charges of clandestine activities cannot be upheld on the basis of assumptions and presumptions. The list of such decisions is never ending and though the appellant have relied on most of them, we do not find it practical to deal with or to refer to all such decisions. Suffice it to say that though the allegations and findings of clandestine activities are to be decided based upon the evi....
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....landestine allegations is not 'preponderance of probabilities' as in a civil suit but proof beyond reasonable doubt, as required in criminal trial is desired. 44. In view of the foregoing discussions, we held that the Revenue has failed to discharge its burden, so as to come to a finding of clandestine removal. We, accordingly, are of the view that the impugned orders are required to be set aside and appeals allowed. 45. Having independently come to the above finding, we also, at this stage take note of the notesheet orders on the file, which stands produced before us. For better appreciation of the same, we like to reproduce the relevant notesheet observations made by the ADG on 18-10-1999. "Your reply dated 16-9-1999 on my observations dated 1-1-1999 has been noted. The replies to my observations dated. 1-1-1999, however, are not satisfactory. I could not attend to this matter earlier as I was pre-occupied with election duty. In the meanwhile, another representation dated 29th September, 1999 from Shri Anoop Sahu of Ashwani & Co. addressed to the D.G. with a copy endorsed to me has been received in my office. While going through the draft show cause notic....
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....est of Shri Kapil Dhawan. Investigations need to be made from the banks as to who had issued the drafts in their favour. It was also to be important to find out whether all the drafts issued were in the name of Shri Surinder Kumar and then were endorsed in favour of this Co. there is a statement allegedly taken by the then AD, Anti Evasion, Kanpur of Shri Rajiv Jain dated 14-7-1997 which, apparently not on record though a copy of it has been enclosed by Shri Anoop Sahu in his representation dated 29-9-1999 (refer para 31 page 12 of his representation). I would like JD(DZU)'s comments on this aspect. e. Despatch by Rail : Certain attested photocopies have been discharged on the basis of an opinion taken by a local hand-writing expert. There would be some difficulty in sustaining such a piece of investigation, as firstly, the examination of documents should be confined to original documents and that too by the Examiner of Questioned documents a Govt. body the office of which I understand is located in Simla. Giving handwriting opinion on the basis of a photocopy would hardly be sustainable. Furthermore, it is not clear whether the person who had originally written the d....