AI Drafter 
TaxTMI 
TaxTMI 
2011 (12) TMI 610
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....se notice dated 17/12/2005.) 1.4 Appeal No.E/69/2008 is by TAG against demand of duty of Rs. 4,29,95,446/- along with interest and imposition of penalty of equal amount under Section 11AC and further penalty of Rs. 42 lakhs under Rule 25 of the Central Excise Rules, 2002 by the Order-in-Original No.14/2007 dated 28/9/2007 passed by the Commissioner. 1.5 Appeal No.E/70/2008 is by Shri H.S. Nataraj, Managing Director of TAG challenging the penalty of Rs. 5 lakhs imposed under Rule 26 of the Central Excise Rules 2002 by the order No. 14/2007 dated 28/9/2007 passed by the Commissioner. 1.6 All the above five appeals arise out of common investigation, involve common evidences and also a common appellant and therefore, are being disposed of by this common order. 2. Heard Shri K. Parameshwaran assisted by Ms. Amudha for the appellants and Shri P.R.V. Ramanan, Special Counsel for the Department. The matter was heard extensively on 8/9/2011, 14/9/2011 and 15/9/2011. Both sides have filed written submissions / additional submissions in the course of hearings. 3.1. TAG is a manufacturer of gutkha (with brand name Super Gem / Siddu ) falling un....
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....hree parties viz. TAG, M/s Wahab Stores and M/s. Embee Agencies. 3.7 In pursuance of show-cause notice dated 31/1/2007, duty of Rs. 4,29,95,446/- along with interest stands demanded and penalty of equal amount under Section 11AC and further penalty of Rs. 42 lakhs under Rule 25 of the Central Excise Rules, 2002 stand imposed. A penalty of Rs. 5 lakhs stands imposed on Shri H.S. Nataraj, Managing Director of TAG under Rule 26 of the Central Excise Rules 2002. 4. The learned Advocate for the appellants assails the orders of the Commissioner on various grounds. The important grounds can be summarized as follows:- a. Allegations that huge quantities of raw material were purchased form M/s. Sanjay Enterprises and the same were not accounted in the books of account of TAG are not correct. The bills recovered from Sanjay Enterprises, Pune were in the name of Shri Lingaraju, Ex. Director of the Company who relinquished as Director before the date on which bills were raised and in the name of Shri Amitbhai an employee of TAG. No statements of representative of M/s Sanjay Enterprises, Shri Lingaraju and Shri Amitbhai have been recorded. Under these circumstances....
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....hs and purchase of small quantities of bags without bills and admission for clearing small quantities of samples without payment of duty cannot be treated as admission about the quantities arrived at by the Department as clandestinely removed based on assumptions and presumptions. h. The finding of unaccounted production based merely on one raw material or one packing material without letting in any evidence of procurement of other major raw materials required for production of gutkha cannot be sustained. i. The demand was proposed adopting 3 different methods as per the show-cause notice. However, the entire demand has been confirmed based on capacity of production and based on formula given by the Managing Director. Mere presence of pouching machines cannot lead to the conclusion that the same were actually put to use for manufacture of pouches of gutkha. j. TAG was selling their products only through M/s. Embee Agencies. Dealers were buying only from Embee Agencies and not directly from TAG. Seizure of goods from the dealers which were presumed to have been received without bills or not corresponding to particulars with bills produced cannot lead to a presumption....
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....d. reported in 2007 (214) ELT 3 (S.C.) (xii) Sapthagiri Cements Pvt. Ltd. Vs. Commissioner of C. Ex., Visakhapatnam [2005 (183) ELT 385 (Tri.-Bang.)] (xiii) T.G.L. Poshak Corporation Vs. Commissioner of C. Ex., Hyderabad [2002 (140) ELT 187 (Tri.-Chennai)] (xiv) Chawla Enterprises Ltd. & Ors. Vs. CCE, New Delhi and Vice Versa [2004 (61) RLT 982 (CESTAT-Del.)] (xv) Commissioner of Customs, Kandla Vs. Dimple Overseas reported in 2005 (190) ELT 58 (Tri.- Mumbai)] 5.1 The learned Special Counsel supporting the orders of the Commissioner made the following submissions : (a) TAG was regularly purchasing raw materials like arecanut, tobacco pathi, khatar, lime, packing materials such as multilayer laminated plastic films and canvas bag and diesel for generation of electricity and was not accounting substantial quantities in the statutory records; for such unaccountal purchases, payments were made in cash. Such purchases are evident from documents recovered from M/s Sanjay Enterprises, Pune (from whom kimam, tobacco pathi, blend, methnol and mix blend were purchased), M/s Montage Enterprises, Jammu (from whom multilayer laminated plastic....
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.... Vs. K.S. Gandhi & Ors. [1991 2 SCC 716] (ii) Rishi Kesh Singh Vs. The State (AIR 1979 All 51 at 90] 5.3 In respect of his other submissions, he relied up on the following decisions : (i) Gulabchand Silk Mills Pvt. Ltd. [2005 (184) ELT 263] (ii) CCE, Surat Vs. Neminath Fabrics Pvt. Ltd. [2010 (256)ELT 369 (Guj.)] (iii) CCE, Chandigarh Vs. Sahara Steel Rolling Mill [2008 (224) ELT (307)] (iv) Commissioner of C. Ex., Mumbai-V Vs. Champion Confectionery [2010 (262) ELT 865 (Tri.-Mumbai)] 6.1 We have carefully considered the submissions from both sides and perused the records. In this case, TAG has accounted during the period from 1.4.2002 to 19.6.2005 totally 32,25,500 pouches of gutkha. However, the department has treated the production as 13,41,48,000 pouches during this period and demanded duty over Rs. 4 crore on differential quantity of 13,09,22,500 pouches. 6.2 The production determined by the department is more than 40 times of the production accounted. Is it a case of evasion of unprecedented scale or is it a case of production arrived at by the department based on fanciful assumptions and presumptions? &....
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....e starting from 10 machines in one unit have increased the number of machines to 27 machines in two units as duly recorded in Para 53 of the order of the Commissioner. Persistent queries from the Bench did not produce any satisfactory explanation for the number of machines which was in their possession and for the substantial and periodical increase in the number of such machines. We are not able to believe that these additions made for ornamental purpose! 7.6 Therefore, we have no hesitation to conclude that their capacity of production is manifold when compared to their accounted production. Procurement of raw materials/packing materials/consumables 8.1 Documents recovered form M/s Sanjay enterprises indicated supply of kimam, tobacco pathi, methnol and mix blend. It is claimed that the bills were in the names of Shri Lingaraju, Dirctor of TAG and Shri Amitbhai, a sales representative of TAG at Delhi. It is not disputed that TAG was purchasing these materials from M/s Sanjay Enterprises, Pune. In fact, it has been claimed on behalf of TAG that out of four consignments covered by four bills issued by M/s Sanjay Enterprises, three of them were found accounted and....
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....e disregarded in view of evidence where consignments of 3500 pouches were found in different premises. However, this issue may not be significantly relevant in view of the decision proposed to be taken. 8.4 Documents recovered from the premises of M/s Arun Agencies indicated supply of 1,08,692 Ltrs and 60972 Ltrs of diesel during the years 2004-2005 and 2005-2006 respectively. The bills though were raised in the name of GMS, it was stated by cashier of M/s Arum Agencies that the said quantities of diesel were supplied to the factory of TAG. It has also been claimed that GMS stands for an abbreviation of G.M. Siddeshwar, Director of TAG. The TAG has not disputed they did not have power connection and that they had DG Set and that one of the Directors is by name Shri G.M. Siddeshwar. Further, M/s Arun Agencies is undisputedly, a firm run in the name of Aunt of one of the Directors of TAG by name Shri G. Arun Kumar. Further, no evidence has been produced to show that they have procured diesel from other resources and that the same was reflected in their accounts. 8.5 From the above, it is seen that TAG has involved in procuring different materials without bringing ....
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....a practice was due to their facing stiff competition in the market from the established brands and huge duty structure. • Procure diesel from M/s Arun Agencies owned by aunt of Shri G. Arun Kumar, one of the Directors and the payments were made by cash. Statement dated 5.9.2005 • Procurements from Montage Enterprises; Sai-lami Pack Pvt. Ltd., Silvasa; Jenith Laminators Pvt. Ltd., Delhi; Divya Enterprises, Delhi, etc. • Shri Amit, representative of New Delhi makes payment to suppliers in cash as per direction. • They may have made purchase of 1500 2000 bags from M/s Divya Enterprises without invoices. • Arcanut purchased mentioned in the book maintained by staff may not have been totally accounted. Statement dated 2.12.2005 • The small bag, means one cotton canvas bag containing 3000 pouches. • They have not maintained account of free samples cleared by them. The department may take the number of bags cleared as free samples as 200 numbers comprising both the brands. • That the statement dated 5.9.2005 regarding purchase of 1500 to 2000 bags without invoices may be mo....
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.... and paying in cash. Degree of proof in Adjudication Proceedings : 12. In a case of clandestine activity involving suppression of production and clandestine removal, it is not expected that such evasion has to be established by the Department in a mathematical precision. After all, a person indulging in clandestine activity takes sufficient precaution to hide/destroy the evidence. The evidence available shall be those left in spite of the best care taken by the persons involved in such clandestine activity. In such a situation, it is settled law that the entire facts and circumstances of the case have to be looked into and a decision has to be arrived at on the yardstick of preponderance of probability and not on the yardstick of beyond reasonable doubt . Analysis of Case Laws Relied upon : 13. Several decisions have been relied upon on behalf of the appellants to contend that no allegation of clandestine removal can be sustained as held by the Commissioner. It would be appropriate to analyze the decisions as follows : (a) The Tribunal in the case of Radheshyam Kanoria Vs. Commissioner of Central Excise, Thane-II reported in 2006 (197) E.L.T. 130 (Tri.-Mumbai) has he....
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....d every link therein has to be proved. (j) The Tribunal in the case of Sharon Veneers Vs. Commissioner of C. Ex., Chennai reported in 2002 (146) ELT 655 (Tri.-Chennai) has held that statements of several persons taken Reliance placed selectively. Revenue has to establish extra payment as well its receipt with credible evidence, though not with mathematical precision. (k) The Hon ble Supreme Court in the case of Commissioner of Customs, Calcutta Vs. South India Television (P) Ltd. reported in 2007 (214) ELT 3 (S.C.) has held that strict rules of evidence do not apply to adjudication proceedings though adjudicating officer has to examine probative value of documents. (l) The Tribunal in the case of Sapthagiri Cements Pvt. Ltd. Vs. Commissioner of C. Ex., Visakhapatnam [2005 (183) ELT 385 (Tri.-Bang.)] has held that suppression of production and clandestine removal could not be sustained on the basis of discrepancy between the quantities of raw material in Form-IV Register, and private documents when such discrepancy has been satisfactorily explained. (m) The Tribunal in the case of T.G.L. Poshak Corporation Vs. Commissioner of C. Ex., Hyderabad....
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....n half hearted admission. His claim that the company was working only for 5 hours with a lunch break of one hour is a clear understatement of working hours. Similarly, his claim that they were working only for 14 to 16 days in a month also appears to be an understatement of working days. If these submissions were to be true, there was no need for procurement of more and more packing machines. The M.D. of TAG has also admitted clearance without accounting and without preparing invoices. Some of the dealers have also accepted buying the goods without bills and on payment of cash. The statements are also not retracted. If the totality of all these facts and circumstances are taken into account, the ratio of none of the decisions relied upon on behalf of the assessee are applicable to this case. Quantum of duty involved 15.1 In view of the foregoing, we have no hesitation to conclude that TAG was involved in systematic manipulation of records relating to raw materials procured, suppressing the production of excisable goods in their statutory records and clearance of the same without payment of duty and, therefore, there is evasion of excise duty. Now, we proceed to consider wheth....
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....at the demand for the entire period from 1.4.2002 to 19.6.2005 stands demanded on the basis of production capacity of the machines. This is incorrect as the Commissioner s order also refers to duty having been correctly demanded as per the show-cause notice. Obviously, as submitted by the learned Sr. Counsel, the demand has been made based on four different methods i.e. (a) based on tobacco pathi for the period 2002-03, (b) based on capacity of machines for the period from April 2003 to July 2004, (c) based on cotton canvas bag for the period August 2004 to March 2005; and (d) based on note book Titled BNV for the period April & May 2005. As per the work sheet appended to the notice, the break of the duty demanded is as follows: S. No. Year No of pouches Ass. Value Total duty Rs. 1. 2002-03 32,20,745 16,10,373 9,66,224 2. 2003-04 3,48,56,000 1,74,28,000 1,04,56,800 3. 4/04 to 9/7/04 93,89,600 46,94,800 28,16,880 4. 9/7 - 31/7/04 8,33,150 4,16,575 2,54,944 5. 8/04-2/05 6,63,70,500 3,31,85,620 2,03,09,373 6. 3/2005 94,81,500 47,40,750 31,85,784 7. 4/05-5/05 1,....
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....for the immediately preceding 16 months from April 2003 to July 2004. 16.4 The demand of Rs. 50,05,439/- for the period April 2005 and May 2005 (up to 19.5.2005) has been based on consumption of lime as per the entries in the note book titled BNV . This production figures adopted are below the production figures estimated based on production capacity of packing machines as recorded in para 54 of the Order-in-Original. Therefore, the demand for this period appears reasonable and calls for no interference. 16.5 The demand of duty of Rs. 2,85,634/- on the goods seized on the date of search should be held to be part of the above demand as obviously they related to goods cleared on or before 19.6.2005 and there is no justification for separate confirmation of the same. 17. A submission has been made on behalf of TAG that show-cause notice dated 31.1.2007 relies upon substantially the same evidence as the show-cause notice dated 17.12.2005 and therefore, invoking extended period of limitation for demand of duty in the show-cause notice dated 31.1.2007 was not justified. In this regard decision of the Supreme Court in the case of Nizam Sugar Factory as well a....
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....the prescribed period of limitation. 18. The Proviso comes into play only when suppression etc. is established or stands admitted. It would differ from a case where fraud, etc. are merely alleged and are disputed by an assessee. Hence, by no stretch of imagination the concept of knowledge can be read into the provisions because that would tantamount to rendering the defined term relevant date nugatory and such an interpretation is not permissible. 19. The language employed in the proviso to sub-section (1) of Section 11A, is, clear and unambiguous and makes it abundantly clear that moment there is non-levy or short levy etc. of central excise duty with intention to evade payment of duty for any of the reasons specified thereunder, the proviso would come into operation and the period of limitation would stand extended from one year to five years. This is the only requirement of the provision. Once it is found that the ingredients of the proviso are satisfied, all that has to be seen as to what is the relevant date and as to whether the show cause notice has been served within a period of five years therefrom Penalties 18.1 TAG has indulged in manipulation of recor....