TaxTMI 
TaxTMI 
2019 (1) TMI 909
X X X X Extracts X X X X
X X X X Extracts X X X X
....use without manufacture no duty can be levied; there must be cogent, solid direct evidence of clandestine removal without payment of duty; Cases of Clandestine Removal are quasi criminal and hence the burden is more heavily on the revenue; in a case of Clandestine Removal there can be no presumption or assumption on any aspect here it is the price of the chairs. 2.1. Ld. Counsel submitted that if the search and seizure is tainted or illegal then the entire case of relied upon documents in the Mahazar falls flat on its face; the only witness who has testified about the recovery of the pen drive is one Pradeep Kumar. His evidence on cross examination is patently contradictory for the following. (i). He says that he was present in the factory but cannot state whether he went to the office room. (ii). He states that the pen drive was recovered from a dustbin but did not see the pen drive being seized. He further adds on hearsay that somebody told him that the pen drive was taken from the dustbin. The revenue alleges that it was seized from a drawer at the office. But the witness does not know whether it was taken from the drawer. (iv). He cannot remember whether he was carrying a p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erry, Thrissur which he he admits in cross examination to be the address of Mr. Shanthakumar. 2.4. The alleged seizure of the pen drive is stated to have been effected from a drawer in the office of the appellant. Shri S.A. Hariprakash SIO, DGCEI, confirms that the pen drive was seized from the drawer as stated in the Mahazar. The Mahazar witness Shri Pradeep Kumar in his cross examinations stated that he was there and from some dustbin the pen drive was ceased" (in answer to Question 21). In answer to the next question he stated that he did not see the pen drive being seized but somebody told that the pen drive was taken from the dustbin. Towards a specific question as to whether the pen drive was taken from the drawer he stated that he did not know. He also stated that he did not know whether the print out were taken from the factory or from the pen drive; he did not know whether the print outs were made into the file. This is in contrast to the answer of Shri N.P. Gramaprohihit who stated that print outs were taken by the search officers in the presence of the two Mahazar witnesses and two employees of the company. The witness further could not recall the brand name of the pen ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ness of the Mahazar is suspect in view of the above. Clandestine removal being a serious charge the department needed to establish the same with cogent evidence on procurement of raw material, manufacture, clearance, transportation, receipt of sale proceeds etc. The department has not discharged the burden and therefore, the Show Cause Notice falls flat and the OIO is liable to be set aside. 3. The Ld. Commissioner, AR for the respondents gave an elaborate submission on the applicability of evidence quoting ratio of various judgements, in favour of the respondents, on the point of applicability of evidence, non-vitiation of proceedings where witnesses were pre-arranged or where witnesses could not totally recount the Mahazar proceedings or where witness's version during cross -examination was slightly in variance with Mahazar proceedings et. He submitted that (i). the appellants are only pleading that they are innocent without adducing any evidence; the appellant has only questioned the validity of Search and Seizure on flimsy ground; The case is built up not only on the „Pen Drive". Three CPU- Hard Disks seized, Production Slips, Other Records in KKP etc, statements were r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....1. Ld. Commissioner AR has submitted that even though, in the QUASI-JUDICIAL Proceedings, the contravention of Central Excise Act and Rules not required to be proved with mathematical precision, in the instant issue, the clandestine transactions of the appellant have been proved with legally convincing evidences. By taking into account of the entire facts and circumstances, the Adjudicating Authority has confirmed the SCNs which are legal and proper. As the appellant is making attempt to hide the "entire Pumpkin" in a handful of rice in a plate, the vague Appeal preferred by the appellant is liable for dismissal. The Hon'ble Bench may dismiss the Appeal restoring the order of the Original Adjudicating Authority. 3.2. Ld. Commissioner AR has submitted his replies to the claims of the appellants as below. 3.2.1. Contention: Witness was not residing in the given residential address and was arranged by one Shri Shanthakumar Rebuttal: No Enmity between Shanthakumar & M/s KKP and between the Witness and M/s KKP was alleged. Further there is no legal bar that Witness should reside in his permanent Native Address. 3.2.2. Contention: witness was unable to say whether the Office was vis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that "The evidence obtained under illegal search could still be admitted in evidence provided there is no express statutory violation or violation of the constitutional provisions. For example, if certain specific enactments are made and the search or seizure is to be effected in accordance with the provisions of such enactment, the authorities shall comply with such provisions. The general provisions given in the Criminal Procedure Code are to be treated as guidelines and if at all there is any minor violation, still the court can accept the evidence and the courts have got discretionary power to either accept it or reject it. In the instant case, we do not think that the court has violated any such provision merely because the witness was not from the same locality and his evidence cannot be rejected." 3.2.8. Contention: Shri Gram Purohit, who prepared the Mahazar, would state that at the time of Search, the officers went looking for two witnesses and they were found outside the factory premises. This is in direct contrast to the statement of Mr. Pradeep Kumar who would state that he was asked by Shri Shanthakumar to be a Witness to the raid. Rebuttal: No contradiction has be....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the witnesses who attested the seizure memo. If the evidence of the investigating officer who recovered the material objects is convincing, the evidence as to recovery need not be rejected on the ground that seizure witness do not support the prosecution version." 3.2.9. Contention: Non-Availability of Cross Examination of another Mahazar Witness Sri Rajib Dan is a fatal to the seizure Rebuttal: The Original Authority in para 94.31 of Order in Original clearly stated that non availability of Sri Rajib Dan do not make the mahazar invalid. In this regard, it is further submitted that Sri Rajib Dan is only a Panch Witness. He has not witnessed any crime committed by the appellant. He has only observed the scene of Search operation and to ensure that search is conducted peacefully in an orderly manner without causing any damage to the person or property etc and attest the Mahazar. Moreover, the Managing Partner Sri KK Ibrahim confessed that the used the Pen Drive in their factory. The retraction of statement letter sent by him also is not having any substance or poof. Under the background, the question of Cross examination of Panch Witness is not required at all. As per Section 10....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed in the Mahazar dated 24.1.2006. This fact was not retracted or denied by her or sought to be disproved by way of cross examination. 3.2.11. Contention: The Ownership of the "ZION" Brand -"Pen Drive" of 256 MB is not established and there are contradictions in the statements of Sri Afsal regarding Usage of Pen Drive: Rebuttal: The "Pen Drive" seized is branded as "ZION" having the capacity of 256MB. Sri.K.I.Afsal, the son of K.K. Ibrahim, Managing Partner of M/s K.K. Plastics also confirmed by his own hand writing as a reply to Q.5 & 6 in his statement dated 15.5.2006 that he got one "Pen Drive" through Sri Aijee George for study purpose in April or May 2005. The brand name of the Pen Drive is starting with the letter "Z". It was 256MB. Both versions of the Sri Afsal clearly established that the Ownership of the Pen Drive lies with Sri Afsal. This fact of ownership was corroborated by Sri Aiju George, Hardware Engineer, who has deposed in his Statement dated 28.4.2006 that he had been attending computer related works in M/s K. K, Plastics, Karothukuzhy Plastics and residence of Sri Ibrahim and he had supplied one 256 Mb-ZION -brand Pen Drive, by purchasing from Skynet Computers....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nidle and Sri Dony in the firm viz Aldous Glare Trade and Exports and that "FAST" SOFTWARE was supplied to many customers including M/s K. K. Plastics They had quit the firm, but continued to provide software support for accounting purpose to M/s K. K. Plastics on the programme "FAST" supplied by Aldous, that the "FAST" is an accounting system, for accounting and inventory; that the "FAST" Software could be used in external devices like CD, Pen Drive etc. He also knew that M/s K. K. Plastics were using the "FAST" software in their Pen Drive. He also confirmed that the impugned Print Outs (except few pages) having taken by FAST software. Sri S. K. Benilde, in his statement dated 26.6.2006 has confirmed his involvement in the development of "FAST" software for Financial Accounting and Inventory; that software was supplied to Sri K. K. Ibrahim of M/s K. K. Plastics and that he knew that Sri Jinson/Dony were providing support of "FAST" software to many customers including Sri K.K. Ibrahim. It is pertinent to note here that Sri Aiju George, Sri. Jinson Thomas and Sri. S. K. Benilde have not retracted their statements. Further, they have not made any contradictions to their statements du....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it is clearly established with clinching evidences that the "ZION -BRAN D-256mb Pen Drive" seized under Mahazar on 24.1.2006 has been purchased and used in the factory premises of M/s K. K. Plastics to maintain their accounts. 3.3. On the issue of legal position on the "admissibility of evidence" on the "Materials obtained" by Search & Seizure, the Ld. Commissioner AR relied upon the following. (i). The Hon'ble High Court of Bombay in the case Kekoo J. Maneckji vs Union of India (UOI) on 12 April, 1979 reported in (1980) 82 BOMLR 109 while appreciating the evidence, held as follows. 13. In Kuruma v. The Queen [1955] A.C. 197 the Privy Council laid down that if the evidence is admissible, the Court is not concerned how it was obtained. The Privy Council has observed as follows (p. 203): In their Lordships' opinion the last to be applied in considering whether evidence is admissible is whether it is relevant to the matters in issue. If it is, it is admissible and the Court is not concerned with how the evidence was obtained. While this proposition may not have been stated in so many words in any English case there are decisions which support it, and in their Lordships....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1.2006 was retracted vide letter dated 25.1.2006 which was delivered through Special Messenger to DGCEI, Kochi in the evening of 27.1.2006. The reason adduced for the Retraction was that he had studied only up to 10th standard and he was not fluent in English; Realizing my limitation with regard to English, the raid party compelled his son Mr Afsal K.I to write his statement in English; he submitted that various averments in the said Statement were made by him and written down by son under the compulsion of the Officer; he was compelled to affix signature on the statement; the great stress and tension created by your Officers is reflected in the signature in the statement which greatly differs from his usual signature". 3.4.1. Ld. Commissioner AR submitted that the ratio of the following three rulings pronounced by Hon'ble Supreme Court need to be taken into account. (i). The Hon'ble Supreme Court in the case of Percy Rustomji Basta V State of Maharashtra 1983(13) ELT 1443(SC) held in para 24 as follows: The mere fact that the customs officer who recorded the statement explained the provisions of Section 193 of the Indian Penal Code and informed the appellant that he was b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....him is not fluent in English, his son Sri Afsal K I has done B. Tech Degree Course in Electrical Electronics Engineer, who is one of the partners of M/s K. K. Plastics also accompanied with him at the time of recording statement. In fact, whatever narrated on the Offence by Sri K. K. Ibrahim was recorded in English by his son in English on his own hand writing. His son knows English, and he is one of the Partners, he also knows about their business. Under the circumstances, the Central Excise Officers cannot play any mischief against him in getting Statement in English from Sri K. K. Ibrahim through his son. Sri K. K. Ibrahim on 20.2.2006 stated that the retraction letter has been withdrawn after consulting an advocate. Again on 03.5.2006, Sri K. K. Ibrahim stated that he got legal advice to retract the statement. Thus, these statements clearly revealed that Sri Ibrahim is compelled only by his Advocate to send Retraction letter. Further, in his statement dated 20.2.2006, for Question No:15 regarding file containing the Sheets of Estimates, Sri KK Ibrahim stated that he does not understand what those "ESTIMATES" are. But Estimate No: 000445 dated 22.01.2006 [Annex-C2] was seized fr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd the signature appearing on the face of it are those of the maker. In view of this, the Customs authorities were entitled to rely upon every word in the statements, signed by the witnesses, notwithstanding their attempt to retract therefrom, especially when there was no evidence of threat." In the instant case, by applying the ratio of the judgement, the Quasi-judicial authority can draw the statutory presumption under Section 36A and 36B of Central Excise Act,1944. (ii). Bhana Khalpa Bhai Patel 1997 (96) ELT 211(SC) An attempt was made to contest the admissibility of the said statements in evidence. It is well settled that statements recorded under Section 108 of the Customs Act are admissible in evidence vide Ramesh Chandra v. State of West Bengal, AIR 1970 S.C. 940 and K.I. Pavunny v. Assistant Collector (H.Q.), Central Excise Collectorate, Cochin, 1997 (90) E.L.T. 241 (S.C.)". Hence, in the instant case also, Statements recorded under Section 14 of Central Excise Act, 1944, when found to be voluntary and not vitiated in any manner, admissible in evidence" (iii). Jethmal V UOI 1999(110) ELT 379 (SC) "Before us a faint argument was made that the statements of the tw....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s it essential that the corroboration must come from facts and circumstances discovered after the confession was made, (see Hem Raj v. State of Ajmer). If the rule required that each and every circumstance mentioned in the confessional statement must be separately and independently corroborated, then the rule would be meaningless inasmuch as the independent evidence itself would afford sufficient basis for conviction and it would be unnecessary to call the confession in aid. 3.5. Ld Commissioner, AR submitted with regard to the appreciation of Other Evidences that the officers have seized not only the impugned Zion Branded Pen Drive, but also seized 3 CPU-Hard Disks(factory and Residence), Other Private records found in the factory of KK Plastics & Sister Concerns, Residential premises of Partners of the Units, Beverly Agencies & Green Fair Marketing in addition to un accounted Plastic Moulded Chairs and stools found in M/s K. K. Plastics and Beverly Agencies and Green Fair Marketing. The Appellant has not disputed the recovery and seizure of Three Hard Disks and other Private records sized as referred above. Instead, they only pointed out few discrepancies in the entries found o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... slips available in File No. 1 and 9 seized om KK Plastics(Annexures C-33 of SCN.2) was compared with the production accounted in Register No.2 and huge variation noticed in the furnished Table. This fact has been confirmed by the Commissioner in para 94.61(page 186) of the 0I0. He further submitted that the appellants suppressed the value of goods cleared. Sri KK Ibrahim in his confessional statement dated 24.1.2006, explained the modus operandi adopted by him that they were showing Sale Price of the Chair as Rs. 70/- per Chair, whereas Sales were actually sold by them around Rs. 150/-per Chair, allowing separately a discount of Rs. 10/- per chair. The amount over and above invoice value were collected in cash only and not accounted in their books of accounts. All the 12 Dealers/Distributers/Buyers (Para 94.81 of 0I0) have admitted that the Sale Value of Rs. 70/- per chair shown in the Sales Invoice was not actual rate and they had actually paid Rs. 135/- Rs. 140 per Chair as per the Estimate Slips and had actually paid the extra value was given in cash to the Driver of the company vehicle in which goods are delivered. None have retracted on their own at the earliest opportunity. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... almost all the Dealers also confirmed this fact. Sri KK Ibrahim also admitted and corroborated this fact. The Commissioner in the 0I0 (Paras 94.47, 94.48 94.49 & 94.50) dealt with the placing of orders and supply thereof by verifying the matching of entries in the Pen Drive Estimates and documents seized from the dealers (Note Book: 8 seized from Beverly Agencies & Order Book No.12 seized from the factory), and other Billing particulars, Sales Register Data of the Pen Drive. 3.8.3. Ld. Commissioner, AR submitted that the appellants were Destroying /Not Keeping of the Documentary Evidences of Estimates. Shri KK Ibrahim admitted and explained the "modus operandi of this offense, he, inter al/a, stated in his statement dated 24.1.2006 as "the goods are dispatched from the factory directly to the dealers/distributers; at the time of dispatch of goods from the factory we are generating a Slip containing the details of goods dispatched and the actual sale value of the goods; such Slips are generated by using the Computer and the Slips are having the heading "Estimate"; the files seized by contain many such Estimates prepared by them in respect of sale of goods by M/s K. K. Plastics; at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....additionally corroborated this fact. Shri K.K. Ibrahim vide his statement 10.7.2006 admitted that the sale Proceeds are collecting through his Drivers. 3.11. With regarding to appellants request to verify their Sales Tax Returns to confirm the fact in respect of Bill No:8 and Bill No:11, Ld Commissioner, AR submitted that the Appellant has maintained improper documents with false figures in order to evade statutory levies. Accordingly, the appellant have paid the statutory levy of Sales Tax for lesser Values accounted, on the basis of concerned undervalued documents. Whereas for their reference, they are storing the actual data in the Electronic Devices viz Computer & Pen Drive. It is evident that the Appellant has accounted 4% KVAT to the Government Authorities whereas actually they collected illegally KVAT (c) 12.5% from many Dealers which is stored in their Computer. This is clearly proved with documentary evidences of their own CREDT BILL No:23 dated 652005(Marked as C29) and TAX Invoice No: 23 dated 652005(Marked as C30) in which for the for the 800 Quantity of Chairs valued as Rs. 56000/- and collected Rs. 7000/- in the name of KVAT @ 12.5% from their Dealer M/s Green fair M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....case, sufficient electronic and documentary evidences have been collected to prove the contravention of Clandestine Manufacture, Clandestine Clearance and Suppression of Value. Hon'ble CESTAT(LB) in the case of Gopal Industries Ltd 2007(7) STR (TR-LB) also held in para 18.1 that: "Nature of particulars contained in the Private Records clearly go to show their intrinsic authenticity about the clandestine production and removal of the excisable goods by the appellants who had obtained the excise Registration for the manufacture of such goods in the firm name. When the production and removal of excisable goods in a clandestine manner is established by such documentary evidence and the oral evidence of the Managing partner and the supervisor, it cannot be said that the Commissioner committed any error in holding that the appellant has manufactured and cleared tin containers in a clandestine manner. The quantum of liability which is worked out, has not been disputed before us. We find ourselves in complete agreement with the reasoning and findings of the learned Commissioner in holding that the charge of clandestine removal of tin containers by the appellants was established beyond do....
X X X X Extracts X X X X
X X X X Extracts X X X X
....illegal then the entire case relied upon documents in the Mahazar falls flat on his face. The appellants relied upon the following cases among others: (i) Continental Cement Company Vs. UOI, 2014 (309) ELT 411 (All.). (ii) Kuber Tobacco Products Pvt. Ltd. Vs. Commr., 2015 (317) ELT A4159 (SC). (iii) Pan Parag India Ltd. Vs. CCE, Kanpur, 2013 (291) E.L.T. 81 (Tri. - Del.) And submitted that clinching evidence is required of purchase of raw material, use f extra electricity, sale of final products, clandestine removal, transportation, payment, realization of sale proceeds, made and flow back of fund. 5. We find that Ld. Commissioner AR has rebutted the argument of the appellants point wise citing a catena of judgments to support his contentions. Whereas the appellant's arguments were on the issue of correctness of the Mahazar, dependability of Mahazar witnesses and maintainability of evidence, Commissioner has dealt elaborately on each of the issues raised in the SCN and OIO. He has established as seen above by citing relevant cases the following: (i) Evidence obtained under illegal search could still be admitted in evidence and merely because the witness was not from the sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gically be extended to the entire activity. The seizure of estimates from the residence of Shri K.K. Ibrahim and from the dealers like M/s. Greenfair go to prove that the arguments of the appellant on the pen drive are not substantiated. We find that Hon'ble Supreme Court has observed in the case of CC Vs. Bhoormall (supra) that: "But in appreciating its scope and the nature of the onus cast by it, we must pay due regard to other kindred principles, no less fundamental, or universal application. One of them is that the prosecution or the Department is not required to prove its case with mathematical precision to a demonstrable degree; for, in all human affairs absolute certainty is a myth, and as Prof. Brett felicitously puts it-"all exactness is a fake". El Dorado of absolute Proof being unattainable, the law, accepts for it, probability as a working substitute in this work-a-day world. The law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue. Thus legal proof is not necessarily perfect proof often it is nothing mor....