TaxTMI 
TaxTMI 
2018 (2) TMI 360
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....Vani falling under Tariff Item No. 24039910 of Schedule to Central Excise Tariff Act, 1985. The respondents were issued with two Show Cause Notices. Through Show Cause Notice dated 25/08/2015 respondents were called upon to show cause as to why excess finished goods valued at Rs. 7,14,533/- (MRP Value at Rs. 15,87,851/-) involving Central Excise duty of Rs. 6,32,933/- & raw-material valued at Rs. 1,36,83,980/- seized at the factory premises of respondent should not be confiscated under Rule 25 of the Central Excise Rules, 2002. There were, further, proposals to confiscate unaccounted raw-material valued at Rs. 11,13,375/- & packing material valued at Rs. 1,07,307/-. Further there was a proposal to confiscate 295 Cartons of Bharat & Vani Brand Chewing Tobacco and 44 Cartons of Unbranded Chewing Tobacco valued at Rs. 20,79,122/- involving Central Excise duty of Rs. 18,40,688/- seized on 26/02/2015 at the premises of various transporters or during transit. Further there was a proposal to demand duty of Central Excise duty Rs. 18,40,688/- involved in said goods valued at Rs. 20,79,122/- On the basis of investigations and statements recorded of various persons including transporters and....
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.... Devendra Singh was cross-examined on 27/02/2017. On 06/03/2017, Shri Anil Mishra & Shri Tapan Das were cross-examined. They further submitted that there was no evidence to prove that the goods booked on invoices of various firms belonged to the respondents and were manufactured and cleared clandestinely. They further submitted that Shri Atul Kumar in his statement dated 07/12/2016, stated that his earlier statements were not correct. They also submitted that though they had applied for provisional release of seized goods and executed bonds, they concluded the seized goods were not genuine after obtaining provisional release of same quantity and therefore refrained from obtaining provisional release of remaining goods. The Original Authority has found that the evidence for allegations in respect of Show Cause Notice dated 03/01/2017 was virtually non-existent. The Original Authority has also held that the demands supporting the allegations in the said Show Cause Notice dated 03/01/2017 were denied during cross-examination. He further held that there was no evidence in respect of the said Show Cause Notice and there were no Bills, Slips, any documentary evidence, evidencing such pro....
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.... an example, it has been recorded in Para-23 of the OIO that Shri Atul Kumar Chaurasia, Partner and Authorized representative of M/s MPE, though admitted various offences in his statements dated 26.02.2015, 27.02.2015 and 21.08.2015, denied everything in his statement dated 07.02.2016. Even a casual reading of the statement dated 07.02.2016 shows that he agreed with his previous statements which were shown to him on 07.02.2016. 2.4 Several case law have been cited in support of the findings, particularly those relating to evidentiary value of statements, but no attempt has been made to explain as to how the case law is applicable in the present case or which part of the case law(s) so cited is applicable to the present case, as will be shown in the succeeding paras. Merely some bald conclusions have been drawn from the case laws and were used as the grounds for trashing the entire evidence without application of mind. 2.5 In a rather unusual, unheard of and unprecedented move, the Adjudicating Authority summoned one Shri Manoj Ji (No further details except a Mobile phone No. is available in the records of Adjudication proceedings) for Cross-examination by the main Noticee, alth....
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....oods, submitted Bonds/Bank guarantees and got all the goods released provisionally except one consignment. However, based on this unusual deposition of someone who did not have the status of a witness, the A/A erred in holding all the finished goods seized at various places other than the factory premises as fake/counterfeit, thereby not only exonerating the main Noticee from the charge of clandestine removal, but also vacated the seizures without even confirming the demand of duty on these finished goods which were not accompanied by any duty-paying document. The department never got a chance to conduct cross examine the said Shri Manoj Ji whose name was never mentioned by any employee of any transport company. It appears that the name and address of the said Shri Manoj Ji was provided by the main Noticee to the A/A with a request to summon him and make him available for cross-examination. There is no precedent or provisions for allowing cross-examination of a witness on the request of the Noticees as a Defence witness. In fact, the Apex Court has repeatedly held that it is not obligatory on the part of the A/A to allow even all those witnesses for cross-examination whose ....
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....d presence of such enormous quantity of unaccounted finished goods as contrary to law and ordered confiscation of these goods. ii) Huge quantities of unaccounted raw material & packing material, collectively valued at over Rs. 1.36 crores was seized from the factory of the main Noticee. Further, unaccounted raw material & packing material collectively valued at Rs. 23.34 Lakh were also seized from a godown belonging to the main notice. Qty of raw tobacco, a perishable material, is 7225kgs. As in case of finished goods, packing material mainly comprising small tin boxes for packing of 10 gms, 50 gms of finished goods are of very low value and, therefore, the quantity is huge in term of nos. e.g. 94,906 as against recorded balance of 60,224. iii) Even while not ordering confiscation of seized inputs on the ground that these were neither manufactured by M/s MPE nor Cenvat credit was taken by them, the A/A has not held the charge of the said inputs under seizure being unaccounted, as not proved. The A/A has, therefore, ered in not taking into account the evidentiary value of storing such huge quantities of unaccounted raw material/packing material by M/s MPE in their factory as we....
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....mes were also seized from several far off places such as Bareily, Dalkhola (Disstt. Uttar Diajpur, WB) etc. as well as from Delhi & Gurgaon which were at various stages of transit and were destined for buyers figuring in the recorded sales of M/s MPE. These consignments were mostly found booked under fake invoices of non-existent companies and were generally found mis-declared as Sweet Mix, Agarbattis etc. Some of these seizures were effected by Central Excise officers of various Commissionerates. viii) Investigations conducted under summon proceedings with another transporter, namely M/s M.S. Freight Carriers (P) Ltd., Ghaziabad revealed another modus operandi of the main Noticee. Scrutiny of records voluntarily submitted by the said transporter under summons revealed that, though most of the consignments booked by the main Noticee with the said transporter for delivery to a Mizoram based buyer were duly recorded by the main Noticee and were duty paid, there were several instances when more than one consignment was booked for transportation under invoices bearing the identical Nos. and Date of issue. Details are in Para 17.2 of the SCN dated 03.01.2017. ix) M/s M. P. Enterpri....
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....at the above statement dated 26.02.2015 of Shri Deveder Singh was corroborated by Shri Anil Mishra, another Booking Clerk of M/s NECC in his voluntary statement dated 02.03.2015. Both these statements got further corroboration from Shri Laxman Kumar Sharma, Manager of M/s NECC in his voluntary statements dated 27.02.2015 & 12.04.2016. 2.9 Details of other such seizures and statement made by employees/Managers/Owners of various transport companies are summarized in the table given above. Similarly, details of investigations with suppliers of raw/packing material and buyers of finished goods, including gist of statements recorded, are also given in the tables above. 2.10 That Shri Atul Kumar Chaurasia, Authorised Signatory of M/s MPE in his voluntary statements dated 26.02.2015 & 27.02.2015, inter alia, admitted that they had been manufacturing branded and unbranded chewing tobacco and clearing them clandestinely without payment of duty. Shri Atul Kumar was confronted with the Panchnamas dated 26.02.2015 drawn at the factory premises of M/s MPE and their godown at 56/10, Near Atlas Cycle, Site-IV, Sahibabad, Ghaziabad and he admitted that the unaccounted raw material and packing....
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....88/- on the clandestinely cleared and seized goods raised in show cause notice dated 25.08.2015; dropped the demand of duty of Rs. 7,38,84,583/- raised in the impugned show cause notice dated 03.01.2017 and also dropped the penal proceedings proposed against the Co-Noticees even though duty paid nature of the finished goods was not established. 2.13 The Adjudicating Authority has ignored the presence of Brand names of M/s MPE on the products and name of the manufacturer as M/s MPE on the products recovered from the live consignments removed illegally from their factory and booked for onward transportation to the dealers duly figuring in their recorded sales placed under seizure and discarded all the statements relied upon in the impugned show cause notices on the ground that Shri Atul Kumar Chaurasia had denied everything in his final statement dated 07.12.2016 and that all the other persons connected with the transportation/purchase of the party s goods during cross-examination, had stated their statements were obtained under coercion. 2.14 That the Adjudicating Authority has erred by ignoring the fact that Shri Atul Kumar Chaurasia had tendered his statements dated 26.02.20....
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....is reproduced below:- Demand clandestine removal Shortage of inputs and finished goods Evidence of Statement of Director admitting that clearances shown in chart, prepared by Department on basis of entries in loose sheets and note-books found on premises of assessee and sister concern, were made without payment of duty or issuing of invoices Said confessional statement inculpatory and specific and was never retracted Said statement admissible evidence Clandestine clearance requires to be proved by sufficient evidence However, each individual case needs to be scrutinized and examined independently in factual matrix Statement of Director not taken under duress and no cross-examination asked for, therefore no reason to disallow this evidence Commissioner (Appeals) erred in holding not enough evidence proving clandestine clearance Demand upheld Section 11A of Central Excise Act, 1944. [Paras 14, 15 & 19] 2.17 That the Adjudicating Authority has erred in not considering the fact that all the persons connected with the Transporters-Co-Noticees, whose cross-examination had been allowed by the Adjudicating Authority, were in league with the main Noticee M/s MPE in transporting the of....
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..... after lapse of a long period from the dates of recording of the relied upon statements. Similarly, the Hon'ble Supreme Court in the case of Telestar Travels Pvt. Ltd. Vs. Special Directory of Enforcement reported as 2013 (289) ELT 3 (SC) had held that if the statements are based on consideration of relevant facts and circumstances and found to be voluntary, they can be relied on irrespective retraction and that subsequent retraction was mere afterthought to escape consequences of violations committed. The ratio of the case supra is squarely applicable in the present case as the relations made by the witnesses in their written statement are corroboration of facts already on record. 2.18 That the Adjudicating Authority has erred in not considering the fact that none of the persons connected with the Co-Noticees had ever complained of threat or coercion before they were summoned for cross-examination and in these circumstances the retractions made by the said persons of the Co-Noticees during cross-examination, was nothing but an afterthought and such retractions have no credence. In this regard, reliance is placed on the judgment of the Hon'ble CESTAT, Bangalore in the case o....
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.... erred in not considering the fact that the statements dated 26.2.2015, 27.2.2015 and 21.8.2015 tendered by Shri Anil Kumar Chaurasia under Section 14 of the Central Excise Act, 1944, were tendered by him voluntarily and, during his last statement dated his last statement dated 7.12.2016 he was again shown his previous 3 statements, he signed the same in token of having seen the same also in his agreement and recorded that he agrees with his previous statements. It was only with regard to statements of other witnesses shown to him that he gave a evasive reply. The findings of the Adjudicating Authority that Shri Atul Kumar Chaurasia retracted his earlier statements during his statement dated 7.12.2016 is, therefore, contrary to facts o record. The statement dated 7.12.2016 cannot be treated as retraction of his earlier statements dated 26.2.2015, 27.2.2015 and 21.8.2015, which were never retracted by him at any point of time. 2.21 That the Adjudicating Authority has relied upon the judgement of the Hon'ble Supreme Court of India in the case of Vinod Solanki vs Union of Idia reported as 2009 (233) ELT 157 (SC) and the judgement of the Hon'ble Punjab & Haryana High Court in the c....
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....etracted confessional statement, but an important observation was also recorded by the Apex Court which appears to have missed the attention of the A/A (Though it is one of the Head notes) and is reproduced below:- Whereas mere retraction of a statement may not be sufficient to make the confessional statement irrelevant for a purpose of the proceedings in a criminal or quasi-criminal case but there can not be any doubt whatsoever that the court is obligated to take into consideration the pros and cons of both the confession and retraction made by the accused. 2.22 That the Hon'ble Supreme Court of India in its above referred judgement in the case of Vinod Solanki vs Union of India reported as 2009 (233) ELT 157 (SC), has also held that the evidence brought by confession if retracted must be corroborated by other independent and cogent evidences. In the instant case, as explained above, thought no retraction was made by any of the witnesses prior to cross-examination, but the seizure of the clandestinely removed finished goods by M/s MPE at the premises of the transporters, from their trucks enroute as well as the seizure of the excess quantity of finished goods and unaccounted....
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....e, this Court used the evidence of co-accused as corroborative evidence. There is no discussions in the OIO as to whether the A/A conducted any exercise to weigh the evidences vis-`-vis confessional statements or whether any grounds were found to consider the confessional statements as having been recorded under threat, coercion or inducements, even though there was no formal retraction by any of the witnesses prior to their appearance for cross-examination. 2.24 That the Adjudicating Authority has erred in not considering the fact that though the overwhelming and plausible evidences to prove the clandestine removal of goods by M/s MPE are available on record, but it is humanly impossible to establish every link in the chain of clandestine activity without a break and in this regard reliance is placed on the judgment of the Hon'ble CESTAT in the case of Gulabchand Silk Vs. CCE reported as 2005 (184) ELT 263 (CESTAT), wherein, the Hon'ble CESTAT has held as under:- 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 the details of all such clearances in some register and appen....
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.... erstwhile Central Excise Rules, 1994 Rule 26 of Central Excise Rules, 2002 [Paras 4, 5, 5.2 , 5.3, 5.6, 5.7.2, 6] Evidence Preponderance of probability Confiscation of goods, confirmation of duty evaded and imposition of penalty Standard of proof required in departmental proceedings is preponderance of probability Adjudicating Authority or Tribunal to evaluate evidence of both sides and decide what is most probable Section 11A of Central Excise Act, 1994. Similarly in the case of MP Agro Vs. CCE-2003 (158) ELT 763 (CESTAT), the charge of clandestine removal was sustained when there was huge difference between raw material used and final product cleared. In Patel Products Vs. CCE-2003 (151) ELT 650 (CEGAT), the material was found to be stored in unregistered premises; In Sita Cement Vs. CCE-2003 (153) ELT 204 (CEGAT), it was held that though assumptions and presumptions cannot discharge onus of Revenue to prove its charge but, at the same time, mathematical precision is not required; that absence of records, statutory or private would not affect a case, since no assessee would maintain a record of his clandestine removal and in this case the duty demand and penalty was confirm....
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.... payment or had claimed refund of the same. Thus, the Adjudicating Authority has erred in not considering the fact that it is a settled law that where an assessee comes forward to pay the Central Excise duty voluntarily, the clandestine removal is proved. In this regard, reliance is placed on the judgment of the Hon'ble Apex Court in the case of Commissioner of Central Excise, Mumbai Vs. Kalvert Foods India Pvt. Ltd., reported as 2011 (270) ELT 643 (SC) wherein the Hon'ble Apex Court has held as under:- Clandestine removal Proof Managing Director admitting clandestine clearance and voluntarily paid duty Statement of proprietor of buyer and of production supervisor also show clandestine removal Adjudicating Authority s finding that unaccounted finished goods recovered from eight dealers, firms created dealing in similar products from same premises by same persons, invoices issued by firms other than respondent and parallel set of invoices of same serial numbers used Tribunal set aside demand ignoring said materials Specific allegation of maintenance of two sets of invoices, one for excisable goods and other for non-excisable goods, not considered and discussed by Tribunal Excisabl....
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....admitted that the said Shri Tiwari used to be their employee and since left the job somewhere around May, 2015 i.e. 3 months after the initiation of investigations. Thus, the aforesaid findings of the A/A are purely based on the mysterious deposition of a defence witness namely Shri Manoj Ji which has already been discussed in detail in Para-6 above. Even therein his deposition before the A/A, the mysterious witness namely Shri Manoj Ji made only a general reference about fake/counterfeit nature of goods being booked by his employee. The reference to goods being fake/counterfeit comes only in reply to one question and a free English translation of the reply is reproduced below:- Sir, I used to have an employee named Mukesh Tiwari who used to connive with some rogue traders by booking their fake/counterfeit goods (NAKLI MAAL). I removed him from my employment when I came to know about this fact. This is the only reference to goods being fake in his apparently unauthorized and illegal deposition. Manoj Ji did not claim that all the finished goods under seizure at various places were booked by Mukesh Tiwari and were fake; he did not claim that the goods booked by Mukesh Tiwari ....
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....s in the godown of M/s MPE on the ground that the said unaccounted raw materials were neither manufactured by M/s MPE nor they had availed Cenvat credit thereon. The Adjudicating Authority in support of his findings, has relied upon the judgments of the Hon'ble CESTAT in the cases of CCE, Surat Vs. M/s Narmada Fabrics Pvt. Ltd. 2009 (233) ELT 397 (Tri-Ahmd) and Commr of C. Ex, Cus & S.T., Hyderabad-I Vs. Cubex Tubings Ltd. 2015 (325) ELT 914 (Tri-Bang) by holding that non-cenvatable raw material cannot be confiscated on the ground of non-accountal. The Adjudicating Authority while vacating the seizures of the unaccounted raw materials, has ignored the fact that the procurement of unaccounted raw material was linked to clandestine manufacturing and clearance of the finished goods and the said fact had also been admitted by Shri Atul Kumar Chaurasia, Authorized Signatory of M/s MPE in his voluntary statements dated 26.02.2015 & 27.02.2015, wherein, he, interalia, admitted that that the unaccounted raw material and packing material were procured by them without bills for clandestine manufacturing and clearance of finished goods without payment of duty. He also admitted that the unacco....
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....he said Rule 25 is a penal provision and enumerated various situations and clause (b) of the Sub-rule (1) is directed against non-accountal of excisable goods produced or manufactured or stored refers, inter alia, also to a manufacturer, who does not account for any excisable goods produced or manufactured or stored by him. The word or in the said clause should be read disjunctively. The word excisable goods defined at Section 2(d) of Central Excise Act, 1944 as was in force during the relevant period reads as : Excisable goods means goods specified in [the First Schedule and the Second Schedule] to the Central Excise Tariff Act, 1985 (5 of 1986) ] as being subject to a duty of excise and includes salt; Besides, the use of the word any before the word excisable goods, in the said clause, makes it more clear and points out to a plausible interpretation that the said Rule is not only refers to the excisable goods manufactured and stored in the factory by a manufacturer but also excisable goods manufactured elsewhere and stored in the factory. Thus, the said Rule 25 of the Central Excise Rules, 2002 covers both the situations, that is, where excisable goods are manufactured and st....
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....n as rightly proposed in the impugned Show Cause Notice. 5. Heard the ld. A. R. for Revenue, who presented the above stated grounds of appeal. 6. Heard the Counsel for the respondent, who has summarized the grounds raised by Revenue as follows:- (i) That the Adjudicating Authority instead of relying on the statements recorded during investigation, has considered retractions of the witnesses recorded during cross-examination before him in the adjudication proceedings. (ii) That the respondent s authorized representative in his initial statements has admitted clearance of goods without payment of duty, and (iii) That respondent by voluntarily depositing Rs. 4 crore during the investigation of the case admitted guilt of clandestine removal of goods. They further submitted that Shri Atul Chaurasia in his statement 07/12/2016 denied that there was any clearance of goods without payment of duty. They submitted that the statements were retracted but did not stand the scrutiny during cross-examination before the Original Authority and therefore it cannot be said that the statements were retracted. The fact is that the statement did not stand the scrutiny of cross-examination. The....