AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 369
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....l Head, both employees of LTCPL are in appeal against penalty of Rs. 20,00,000/- on each of them for alleged abatement. Shri Murlidhar Ojha, Supervisor and Rizwan Khan Factory In charge, both employees of LTCPL are in appeal against penalty of Rs. 5,00,000/- for alleged abatement. All the appeals are taken together for disposal as impugned order is arising from a common investigation and notice. 2. Facts of the case are that on an intelligence that LTCPL were clandestinely manufacturing and clearing Midland, Super match, Jet Brands of cigarettes without payment of Central Excise duty by suppressing the production, its factory at Bhopal was searched. 3. LTCPL Bhopal Factory was searched on 14/05/2010. It is alleged that an altercation took place between the visiting officers and the employees of LTCPL. An FIR was filed by the Officers against LTCPL employees and the Central Excise Officer posted in factory for physical supervision. It was alleged that the mob including employees of LTCPL and others were instigated to attack and rob visiting officers. Charges were of the unlawful assembly, assaulting and obstructing public servant, rioting obstruction of public servants, voluntaril....
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....t the Chart for 'Midland Non Filter' indicates panchanama stock as ( Annexure-B) on 8/6/2010 as 3,70,400 sticks and RG-1 Stock as 120000 ( 120 TU). Whereas the RG-1 copy available on records indicates the stock to be 120 TU (Thousand units) packed and 144 TU Loose (Total 264 TU or 264000 Cigarettes). In his statements Shri R. B. Shukla, Director LTCPL contended, proceedings on 8/6/2010 were conducted in absence of any authorized representative of LTCPL and stock taken includes loose cigarettes which did not reach RG-1 Stage. He also disclosed the names and details about raw material suppliers M/s Orion Tobacco Pvt Ltd., Bhopal for supply of Tobacco, PCT and TOR etc. and packaging material printers as M/s Ayodhya Graphics, Bhopal. He also stated to have appointed M/s Crown Trading and M/s Globus Trading as Sole Selling Agents to whom cigarettes were sold from factory on payment of duty. M/s Ayodhya Graphics has been alleged to have supplied printed packaging material under Kuchha Slips. He also gave details of the purchase of rights to manufacture Midland, Jet and Super match brands, from Brand owners. 5. INVESTIGATIONS OF RAILWAY RECEIPTS OF PVC BUNDLES, PP, PACKING MATERIALS: As ....
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.... contact with anyone of LTCPL. He retracted his statement dated 22/7/2010. In his later statements he stated to have received Cigarettes from LTCPL and paid cash to persons authorized by Shri R. B. Shukla. Other investigations involve statements of distributors of Pan Masala, Bidi etc. who stated to have purchased cigarettes in cash from recipients of railway consignments. 9. A market Stock of around 18,500 Cigarettes was also seized in Jaipur during investigations for which separate proceedings have been initiated and same is not subject of present appeal. However it is observed that seized quantity is small as compared to the quantity declared as manufactured and cleared for payment of duties, and seized quantities are disputed as part of the quantities cleared on payment of duty. The proceedings initiated against such seizures are undertaken separately and therefore same are not part of present matters and not dealt herein. 10. RR-INVESTIGATIONS AT COIMBATORE: Similar railway receipts for despatches from Bhopal to Coimbatore by rail were investigated at Coimbatore. After seeing the shown RRs, Shri CSM Altaf , Railway Parcel Agent, in his statement recorded under Section 14 of ....
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....a and Rijwan Khan, he stated that after their arrest they are not in contact. He stated he was not attending factory regularly due to his ill health and had appointed three managers. He later came to know about few instances of clearances without duty payment by such managers. In his statement dated 30/04/2014 he contested the reconciliation chart, that the same involves loose quantities and the panchnama proceedings on 8/6/2010 as drawn in absence of LTCPL authorized persons. 13. Shri Bharat Patel another Director of LTCPL and a co-appellant, in his statements recorded under Section 14 of the Central Excise Act 1944 stated to be a technical person, who attended setting up of the factory and supervision of production and he was not promoter of LTCPL. 14. In addition, statements of few persons in Bhopal were recorded, summary details of which follow. In his statement the proprietor of the Printer of Packaging Material for LTCPL M/s Ayodhya Graphics, Shri Niraj Bhargava stated to have been printing on the coated paper and board supplied by LTCPL in autos and returned after printing against the charges received in cash from Mr. Hashmi of LTCPL. In his statement Shri Juber Taj of M/s....
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....position of penalties on Directors and Employees of LTCPL, Advocate Anil Mishra appearing for the appellants, contended that the reconciliation Charts exhibited to Shri R. B. Shukla (Director) on 4/4/2014 are erroneous to the extent that the Panchnama Dated 8/6/2010 mentions, that loose Cigarettes on Machine Line and Tray are not included in Annexure-B. Whereas in Annexure-B at Serial Number 4, 5, and 6, loose cigarettes kept in box & crates have been counted in stock and it is unclear as to why the stock panchnama dated 8/6/2010 was drawn before the security guards and why authorized officials of LTCPL were not asked to be present. He also contends that it was imperative for the visiting officers to act against any shortage or excess quantities on spot, and failing which, no liability can be impinged upon LTCPL through some reconciliatory calculations done after four years of the stock verification. He also pointed to the vague manner of reconciliation indicating that the reconciliation chart for Midland Non Filter indicates in panchnama Annexure B as 3,70,400 sticks and RG-1 Stock as 120000 (120 Thousand Units or 120 TUs) whereas the daily production records RG-1 indicates the st....
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.... M/s LTCPL, operating under departmental supervision. He contended that there are no evidences for even the probability of such transportation from LTCPL factory to Bhopal Railway station. As without the transportation of the goods, it could not be held that there was any clandestine removal of the finished goods, especially when all the other evidences were seized from the third party and not from the premises of M/s. LTCPL. He contended that none of the third party records or seized private documents contains any preliminary evidence of transportation or sale of Cigarettes by LTCPL. When even Railway Parcel Agents have categorically stated to be dealing in numerous goods such as Rubber, Pumps, Gutkha etc., sorting of the expenses entries in such private records without having any reference to Railway Receipts of package description as Poly Bundles, PP Material, Packaging Materials etc., allegations and assumptions that such packages were containing cigarettes is without basis and can not sustain. He relied upon: (i) COMMISSIONER-OF-CENTRAL-EXCISE-DELHI-II-Versus-BALAJEE-PERFUMES" COMMISSIONER OF CENTRAL EXCISE DELHI-II Versus BALAJEE PERFUMES - 2017 (4) TMI 1288 - DELHI HIGH CO....
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....ture of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. He also placed reliance upon: (i) Oudh Sugar Mills Ltd v Union of India, 1978 (2) ELT (J172) (SC) (ii) FLEVEL INTERNATIONAL VERSUS COMMISSIONER OF CENTRAL EXCISE- 2016 (332) E.L.T. 416 (Del.) (iii) Arya Fibres Pvt. Ltd. v. CCE, Ahmedabad-II 2014 (311) ELT 529 (Tri.-Ahmd.) (iv) KUBER TOBACCO PRODUCTS LTD. VERSUS COMMISSIONER OF C. EX., DELHI 2013 (290) E.L.T. 545 (Tri. - Del.) confirmed by Apex Court 2015 (317) E.L.T. A159 (SC) (v) T.G.L Poshak Corp. v CCE, 2002 (140) ELT 187 21. He further contended that the only basis of the demand is the alleged number of bundles contained in RRs, multiplied with assumed quantities. Even if the figures of bundles in the few seized documents tally, that by itself cannot prove clandestine manufacture and clearance, the tests for which have been adequately explai....
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....r the Revenue did not challenge the decisions cited, he vehemently contended that such cases have to be decided on the principle of preponderance of probability. It was not necessary for the revenue, or possible, to establish the cases of clandestine manufacture and clearance with mathematical precision as has been observed by the Hon'ble Supreme Court in CC v D. Bhoormull, 1983 (13) ELT 1546. He also referred to the statement of Shri R. B. Shukla (Director), regarding the incidents of removals by his factory staff. 26. After summarizing the facts as stated by the Adjudicating authority, by way of what has been stated in the Show Cause Notice, the ld. AR submitted that, except for saying that investigations did not touch on purchase of raw materials and payments therefor, LTCPL did not come forward with any satisfactory explanation in respect of the facts stated in the Show Cause Notice, and the statements referred to therein and the categorical statement of Shri R. B. Shukla. In this view of the matter, he submits that the present demand has been confirmed by the Adjudicating Authority for valid reasons and cannot be faulted. 27. Having considering rival contentions, we record o....
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....g materials for clandestine printing of packing material, there are no evidences for manufacture of huge quantities of Cigarettes, referred to and calculated on per RR Basis, indicated to be 231,60,000 Nos. in Annexure A, 113,52,000 Nos. in Annexure C, 226,32,000 nos in Annexure D, 132,48,000 Nos in Annexure E. Thus a total of 703,92,000 Cigarettes alleged to have been manufactured and cleared by LTCPL under such RRs. We find that though there are no quantification of raw materials required to manufacture such quantities, a sizable quantity of Cut Tobacco Cigarette Papers, PCT, Filter Rod, Aluminum Foil, BOPP Film, TOR, Shell, Slide, Gray wrapper, CFC, Masking Tape, Fevicol, etc would be required to be purchased and consumed. 30. We find that the Revenue's allegations and findings are mainly based upon the statements recorded during the course of investigation, some of which are inculpatory, some neutral and some stand retracted. We note that most of the statements recorded by the department from the various persons are to the effect that, it was LTCPL who were getting their goods booked under the name of fictitious consignors along with a fictitious name of the consignee. Similar....
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....ntial material to show that such a huge quantity of Cigarettes has been transported. There is no evidence of transportation of Cigarettes from LTCPL Factory to Bhopal Station. Undoubtedly, huge quantities of raw material would be required for manufacturing such a huge quantity of cigarettes. No evidence has been brought either in the notice or in the Adjudication Order to show that raw materials have been purchased for manufacture of such a huge quantity of Cigarettes. There is no proof of any extra payment being made by LTCPL to raw material supplier, Orion Tobacco, Bhopal. In fact no investigations have been made with M/s Orion. In the absence of these evidences, it would be impossible to conclude that LTCPL had manufactured and/or cleared such huge quantities. Railway Parcel Agents statement, could not be given much credence for the reasons firstly that their notes books were for carting and handling expenses only, secondly such agents were not exclusively dealing in alleged consignments, but were also handling parcels of other commodities also. Further, the recipient dealers were also dealing in other goods also like Pan Masala, Gutkha, and Bidi etc. It would be difficult to co....
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....estine manufacture and clearance, the tests for which have been adequately explained in following paragraphs. The documents in question have not been resumed from LTCPLS premises. 35. In cases like the present, where the demand is based on alleged clandestine production, clearance and sale of excisable goods, mere entries in notebooks or diaries cannot establish the same. Proof of actual production, whether by direct evidence or corroborative evidence is a 'must', and the probative value of such evidence has to be established, especially when such a finding would lead to penal consequences. 36. In our view, therefore, the present demand, which has been confirmed by the impugned order, is not based on evidence, which, as this Tribunal has repeatedly emphasized in cases of clandestine manufacture and clearance, would justify a finding against the appellant (LTCPL). Inferential or conjectural conclusions cannot be arrived at in such cases, as has been done in the present demand, merely based on Railway Receipts and vague records. Unless there is conclusive evidence that LTCPL did actually manufacture such cigarettes and clandestinely cleared them without payment of duty, liability c....
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....er contended that the figures recorded in the diary maintained by the Foreman were not corroborated by any other evidence. Several decisions of this Tribunal were cited in support of the contentions of the appellant [CCE, Meerut v Moon Beverages Ltd., 2002 (150) ELT 976, Kabra Enterprises & others v CCE, 1999 (109) ELT 571, Kothari Products Ltd and others v CCE, Kanpur, 2003 (159) ELT 1187, CCE v Raman Ispat, 2000 (121) ELT 46]. This Tribunal cited and followed the earlier decision in the Moon Beverages Ltd case (supra) to the following effect: It is well settled that the charge of clandestine removal cannot be established on the basis of one single factor which in this case, is the figures of sales reflected in the computerized sheets recovered by the Department from M/s. PEL. Without obtaining evidence such as evidence of other inputs required for manufacture of finished product namely Sugar, Carbon-di-Oxide being purchased and utilized in the manufacture of the final product during the period in dispute is required. There is no such evidence in the present case. There is also no evidence regarding higher electricity consumption. There is also no evidence of receipt of extra sa....
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....ery of exercise Note Books and certain balance sheets maintained by the assessee and in the absence of any corroborative evidence. In fact, in a tabulated form this Tribunal dealt with the judgments that were referred to, to support the plea that demands cannot be confirmed which contained the reason for this Tribunal coming to the conclusion that, in the absence of any corroborative evidence, of a tangible nature, clandestine removal cannot be established. This Tribunal relied on the tabulated list of citations furnished by the Counsel that unless there is clinching evidence on the nature of purchase of raw material, use of electricity, sale and mode of flow back of funds, demands cannot be confirmed solely on the basis of Note Books maintained by some workers. (vi) In Hilton Tobacco v CCE, 2005 (178) ELT 378, certain private documents maintained in the factory were seized under which it appeared that the appellant had not accounted for raw material procured by him. This Tribunal held that a inference cannot be based on certain private documents only when there is no corroborative evidence recorded. Investigation had not found out at least a few buyers who had received the goods....
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....the ground that the assessee had not given any reason and justification for their cross examination. This Tribunal held that this approach of the Adjudicating Authority is inconsistent with the law of evidence. On a careful perusal of the entire records of the case, the Tribunal found that there was nothing on record as to unrecorded purchases or consumption of other various raw materials in the manufacture of finished products. There was no statement of suppliers of raw material, except in respect of one of the raw materials. His cross-examination has also been rejected. In the absence of any other tangible evidence to show that other major raw materials had been procured without recording the same in books of accounts, this Tribunal did not accept the contention of the revenue that finished goods had been clandestinely manufactured and cleared. After referring to several earlier decisions of the Tribunal on the subject, the Tribunal held that the charge of clandestine manufacture was not established. This decision was taken by the Commissioner of Central Excise in appeal before the Hon'ble High Court of Gujarat, which was dismissed by the Hon'ble High Court [2013 (287) ELT 243 (G....
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....and cleared without payment of duty. The charge of clandestine removal must be based on tangible evidence and not on inferences involving unwarranted assumptions. 33. After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following: a. There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; b. Evidence in support thereof should be of: i. Raw materials, in excess of that contained as per the statutory records; ii. Instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; iii. Discovery of such finished goods outside the factory; iv. Instances of sale of such goods to identified parties; v. Receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; vi. Use of electricity far i....
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...., to establish the cases of clandestine manufacture and clearance with mathematical precision as has been observed by the Hon'ble Supreme Court in CC v D. Bhoormull, 1983 (13) ELT 1546 and the probability in the matter is established. In our view, this submission may be of help only in cases where, in the matter of clandestine manufacture and clearance, there is some tangible and corroborative evidence of such manufacture and clearance by LTCPL. This Tribunal has laid down several criteria that could go to establish the cases of clandestine manufacture and clearance. Where such ingredients exist, a contention that a case need not be proved with mathematical precision may become relevant. The decision in D. Bhoormull would not, therefore, be of help to the revenue in cases where there is no evidence at all satisfying the tests laid down by this Tribunal in the long line of cases referred to earlier. 41. It is further seen that the learned Adjudicating Authority has dropped proposed penalties on the controlling officer-Inspector Ram Swaroop Harlal, citing absence of evidences. We are of the view that indicated absence of evidence, as it applies for departmental officer, also applies....
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....hri R. B. Shukla with regard to sale and purchase of the impugned goods. However there is no name, address or whereabouts of the person who was receiving such payments. Therefore, the statement of Shri Makhija cannot be relied upon for any purposes. Statement of Shri Tulsi Makhija and railway agents making bald claims cannot be relied upon in the absence of any corroborative evidence by independent evidences. This case has been made on the basis of diaries seized from the premises of co-noticees and their oral evidence but no corroborative evidence was brought on record to prove clandestine removal of goods. While going through the extracts of the diary recovered from the railway parcel agents, it can be seen that such diaries are not containing the name of LTCPL or any of its employee. There is no co-relation of the entries made in the diary with the RRs and allegedly manufactured quantities of Cigarettes. The RRs received from railways (LTCPL is not the consignor) was made the main basis to demand duty. The contents of consignments mentioned in RRs are PVC Bundles, Packaging Material, etc. It is alleged to be incorrect but the actual contents of the said parcel were not proved to....
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....ntral Excise Officers were assessing duty payable before removal of the goods. We also note that the investigation did not establish as to from where the raw material such as tobacco was obtained and to whom the goods were cleared and how the money was recovered out of alleged clandestine clearance of such goods. We note that the Central Excise Duty is on manufacture and the clandestine manufacture of cigarette was not possible in view of the presence of Central Excise Officers within the factory. We, therefore, hold that there are no grounds to establish that the quantity of cigarettes were manufactured by appellant on which demand of about Rs. 39 crores was raised. 46. Regarding the alleged confession of Co- Appellant Shri R. B. Shukla, dated 04/04/2014, we note that the statement is general in nature and is a vague admission of few unspecified clearances without duty payment. We need to examine the corroboration of the said statement with corroborative evidences and its relation with the subject. Though the legal position is now well settled that for placing reliance on statement of an individual, its admissibility as an evidence is to be established through compliance of the m....