TaxTMI 
TaxTMI 
2020 (12) TMI 191
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....ation and therefore the matter was argued on behalf of the company by the learned counsel for the official liquidator before us. 2. The appellant/assessee was a manufacturer of Alkyd, Phenolic and Malleic Resins (herein after referred to as "resins") falling under Chapter heading 3907.50/3909.51 of the First Schedule to the Central Excise Tariff Act, 1985. Shri Sama Rajasekhar was the Managing Director of the appellant/assessee and is the appellant in the appeal E/387/2012. Officers of DRI conducted searches and seizures, investigated and came to the conclusion that the appellant was clearing resins in excess quantity which were being booked for transportation under fictitious bills issued in the name of M/s Kalyan Chemicals, M/s Prasad Chemicals and M/s Priya Chemicals. It was further found that the goods in such invoices were declared as Orthoxylene, MTO, Xylene, etc. During searches they found 10 barrels of chemicals at the premises of the transporter M/s SRMT Ltd issued under the cover of two bills of M/s Kalyan Chemicals, Vijayawada and the goods therein were declared as orthoxylene. Further investigation by the officers showed that the goods were indeed the resins ma....
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.... Nagarajan, Proprietor, M/s Balaji Enterprises, Anna Nagar East, Chennai 11. 22.10.2003 M. Mohan of M/s Sujatha Paints, Washermanpet, Chennai 12. 21.10.2003 30.12.2003 V. Veera Raghavan, Proprietor, M/s Vee Kay Jay Paints & Chemicals, Chennai 13. 21.10.2003 R. Radhakrishnan, Proprietor, M/s Star Paints, Tondiarpet, Chennai 14. 03.08.2004 R. Karthick (alias) R. Daniel Karthick, Proprietor, M/s Raja Colour Tech and formerly Proprietor of M/s Raja Paints, Old Washermanpet, Chennai 15. 14.07.2005 25.08.2005 Smt S. Shanti, W/o Late Sri P. Sekhar, Proprietrix of M/s Vivek Paints, Muthugounderpalayam, Erode 16. 18.07.2005 T. Kalyanasundaram, Managing Director, M/s Veena Paints Pvt Ltd, Solaialagupuram Street, Madurai 17. 29.08.2005 K. Nagaraj, Partner, M/s Nirma Paints & Chemicals, Bellary 18. 10.07.2005 Sri Rajesh Mehta, Partner of M/s Oilchem India, Indore 5. Of the above, cross examination of S.No.1, 3, 8, 11, 15 & 18 could not be completed. S.No.11 above had died and therefore, could not be cross exam....
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....his Act. A summons to produce documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under the control of the person summoned. (2) All persons so summoned shall be bound to attend, either in person or by an authorised agent, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and to produce such documents and other things as may be required : Provided that the exemptions under Sections 132 and 133 of the Code of Civil Procedure, 1908 (5 of 1908) shall be applicable to requisitions for attendance under this section. (3) Every such inquiry as aforesaid shall be deemed to be a "judicial proceeding" within the meaning of Section 193 and Section 228 of the Indian Penal Code, 1860 (45 of 1860). Section 9D. Relevancy of statements under certain circumstances. - (1) A statement made and signed by a person before any Central Excise Officer of a Gazette rank during the course of ....
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....ing the principles of natural justice, in the following manner: (i) In the event that the Revenue intends to rely on any of the statements, recorded under Section 14 of the Act and referred to in the Show Cause Notices issued to Ambika and Jay Ambey, it would be incumbent on the Revenue to apply to Respondent No 2 to summon the makers of the said statements, so that the Revenue would examine them in chief before the adjudicating authority, i.e. before Respondent No 2. (ii) A copy of the said record of examination-in-chief, by the Revenue, of the makers of any of the statements on which the Revenue chooses to rely, would have to be made available to the assessee, i.e. to Ambika and Jay Ambey in this case. (iii) Statements recorded during investigation, under Section 14 of the Act, whose makers are not examined in chief before the adjudicating authority, i.e. before Respondent No 2, would have to be eschewed from evidence, and it would not be permissible for Respondent No 2 to rely on the said evidence while adjudicating the matter. Neither, needless to say, would be open to the Revenue to rely on the said statements to support the case so....
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....me of M/s Kalyan Chemicals. This confirms the modus of misdeclaration of the nature of the goods and also of booking the consignment in the name of front companies. (c) In the case of Inter City Cargo Movers, Shri S.S. Abrar, Proprietor, in his statement dt.28.07.2005 said that they were clearing the material from the consignor's godown only. However, Shri Abrar has negated his own statement during the cross examination although there was no specific retraction by him before the cross examination. (d) Private books of accounts maintained by the employees of the appellant contained references to the consignment notes, quantities and actual quality/grade of the goods and the realisation actually done. In some cases, the books contained entries other than those transported by the above two transporters viz., M/s SRMT and M/s Inter City Cargo Movers. These entries were explained by the authors of the books in their statements under section 14 of the Central Excise Act. The two authors who made the entries were Shri V. Srinivas Mahesh, Marketing Representative of the appellant and Shri V.B.S. Durga Prasad, Sales Executive of the appellant. Shri Srinivas Mah....
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....ceeds collected by him under different names including the name of the assessee/appellant and the DDs were sent by courier along with the covering letter; that he sent an amount of Rs. 70,00,000/- in this manner. 12. The assertion of the learned counsel for the appellant before us is that the entire case is based on assumptions and presumptions and does not hold water. The only physical evidence which the officers have collected were some barrels of Chemicals which the transporter M/s SRMT booked in the name of M/s Kalyan Chemicals and which were described as orthoxylene which on testing proved to be resin. These barrels are not related to them. All documents showed that they pertain to M/s Kalyan Chemicals. Therefore, clearance of these barrels cannot be attributed to them. 13. He would argue that although the seizure was with respect to these barrels, the case was made out to be much larger and this case was built on the basis of statements of 18 persons and several relied upon documents. Of the 18 persons, 6 were not examined/cross examined by the adjudicating authority even during the denovo proceedings and hence their statements cannot be relied upon. As far ....
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....pellant was the fourth piece of evidence relied upon by the revenue. These were maintained by Shri V. Srinivas Mahesh, Marketing Representative, who gave his statement on 21.10.2003, 03.12.2003 & 24.12.2003. Shri V. Srinivas Mahesh was not cross examined and therefore, in terms of section 9D his statement is not relevant and cannot be considered in these proceedings. Shri V.B.S. Durga Prasad, Sales executive has stood by his earlier statement that he is an employee of the assessee/appellant and that he opened a unit in the name of M/s Prasad Chemicals on instructions of Shri S. Rajasekhar within the factory of the assessee only. The firm was run in his name from the same premises as the assessee and it does not have any independent business. Only documents are signed in the name of Prasad Chemicals. Similarly, Shri Kalyana Chakravarthy, another employee of the assessee has confirmed that Kalyan Chemicals was a unit opened in his name and he was actually only an employee of the assessee and only papers are drawn in the name of M/s Kalyan Chemicals. Both Shri Kalyana Chakravarthy and Shri V.B.S. Durga Prasad have affirmed their statements during the cross examination. Learned counsel....
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.... were opened in the premises of the assessee by their own employees. The so called owners of M/s Kalyan Chemicals and M/s Prasad Chemicals were actually the employees of the assessee. When examined, they have confirmed that they are only employees and they have affirmed this position during the cross examination made by the assessee's own advocate. Thus, there cannot be any doubt that these are dummy firms. The third company M/s Priya Chemicals was opened in the name of the wife of the owner of the assessee firm which was also a dummy firm. 16. Statements were also records from other transporters such as Shri S.S. Abrar of M/s Inter City Cargo Movers. Statements of the buyers of the chemicals who were mainly the paint manufacturers were also recorded. None of these people have retracted their statements. The buyers as well as Shri S.S. Abrar have negated their statements during the cross examination which was conducted after several years. The learned adjudicating authority has correctly held that such negation during cross examination without having retracted their statements made several years ago cannot be accepted and their original statements must be relied upon....
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....s concerned, the alleged buyers of the clandestinely removed goods have negated their own statements when cross examined before the adjudicating authority. Without such examination/cross examination before the adjudicating authority their statements are not relevant and cannot be relied upon. The learned adjudicating authority has observed that although they negated their statements, such negation is only an afterthought as they have not retracted their statements before. We find that the admissibility of the statements itself depends upon the examination/ cross examination of the person making the statement under section 9D. If the statement has been negated during such cross examination, the evidentiary value of such statement is in doubt. Similarly, the statement of Shri S.S. Abrar, Proprietor of M/s Inter City Cargo Movers also has been negated by him during the cross examination. Thus, the evidence, as far as the transportation of the goods alleged to be clandestinely manufactured and removed as well as their sale to the prospective buyers has not been established to a reasonable degree of certainty in this case. As far as the manufacture and clearance are concerned, the alleg....
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.... establish the case based on the preponderance of probabilities and statements which are admissible in terms of section 9D that the assessee/appellant has clandestinely removed goods without paying Central Excise duties. 23. In view of the above, we find that the impugned order needs to be set aside and we do so. 24. The appeals are allowed and the impugned order is set aside with consequential relief, if any. (Pronounced in the open court on ________________________) (separate order) (ANIL CHOUDHARY) MEMBER (JUDICIAL) (P. VENKATA SUBBA RAO) MEMBER (TECHNICAL) ANIL CHOUDHARY: I have the benefit of going through the order recorded by learned brother Shri P. V. Subba Rao, Member (Technical) but I am unable to agree with the same. I hereby record my separate order as follows:- Revenue had intelligence of evasion of duty by the appellant company and accordingly parallel search was organised in the premises of the appellant and also in the premises of some of the suppliers as well as buyers of finished goods, as well as transporters. Search was also conducted at the residential ....
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....p; He further stated that the purchasers made payment of the actual value, as per the slips annexed to the bills, either by cash or demand draft through the employees/ agent of M/s HRPL situated at Chennai or were deposited in the account held in Global Trust Bank in his name or in the name of other employees. On being questioned by Revenue as to the non accountal of the sale transaction, despatched through the transporter SRMT or ICCM in his books, he replied that sale bills and sale tax return of M/s Kalyan Chemicals were also prepared as per the instruction of Shri S. Rajsekhar and he did not know any details, etc. Further, purchase invoices in the name of M/s Kalyan Chemicals were also arranged by Shri S. Rajsekhar. He also stated that he has done all these activities on the instruction of his employer - Shri S. Rajsekhar to save his job, without any other consideration. 26. Shri Kalyan Chakraworty was cross examined on 08.12.2010, and he stood by his earlier statement given during investigation. He also filed written submission being reply to the show cause notice, wherein he also reiterated the facts as aforementioned and affirmed his statemen....
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....L used to give the bills in the name of M/s Kalyan Chemicals also, which were signed by M. Kalyan Chakraworty, a Clerk of HRPL. 31. Usually the number of barrels despatched by HRPL, which were loaded at the same time from its factory, were spilt by issue of separate invoices by HRPL and M/s Kalyan or M/s Prasad Chemicals. As per instructions, he took two or more sets of LRs for booking. Such LRs usually had continuous or consecutive sl. Numbers. He further pointed out that the LR numbers were available on the bills and the LRs were prepared by him, both for M/s HRPL and M/s Kalyan Chemicals. He also identified and explained the contents of the 'outward register' maintained by M/s SRMT and identified the pages /entries made by him and other staff. On being queried as to the name of M/s Prasad Chemicals, appearing in the outward register of M/s SRMT (till June, 2001), Shri Durga Prasad explained that prior to giving bills of M/s Kalyan Chemicals, M/s HRPL use to give the bills under the name of M/s Prasad Chemicals in the same/ similar manner as in the name of M/s Kalyan Chemicals. He also stated that the address of M/s Prasad Chemicals is....
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....t by M/s HRPL staff only. 34. Revenue also searched Room No. 20 at Shivkasi Nadar Mansion at Chennai which was taken on rent by Shri V. B. Durga Prasad, Sales Executive of M/s HRPL who looked after the sales, collection of sales proceeds by visit to the outstation customer(s) at Chennai and other places. Certain documents were found and recovered which included 'Executive Diary -2003' containing handwritten entries. The entries contained details of payment receipt/ collection from different parties, party name, outstanding balance and noting etc. Diary appears to be maintained in regular course of business showing particulars of (a) party name/ short name (b) a multi digit Sl. No. followed by (c) an encircled number (d) coded description of goods, (e) quantity in number of barrels and weight per barrel, and (f) rates/ price per kg. On verification, the aforementioned particulars at (a) to (e) were found to match with the details of consignee name, LR No., the quantity in barrels and total weight respectively of the consignment booked for transport from Vijayawada in the name of M/s Kalyan Chemicals also corroborated with record of the transporter.&n....
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.... RMD-LAV plus one barrel consisting of Malleic Resin denoted as 'MM' beneath these entries and the total value was arrived at as Rs. 91,580/- against which the payment of Rs. 49,580/- was deducted and the balance indicated as Rs. 42,000/- (which was also indicated as subsequently paid on 04.06.03). The details of payment of Rs. 49,580/- were also written with details of the Demand Draft number and date, etc. 35. Thus, the aforementioned Executive Diary - 2003 was found to be a privately maintained record, showing the actual description and value of resin that were supplied to various parties under the fictitious bills of M/s Kalyan Chemicals during the period from January, 2003 to October, 2003. Further, in respect of various consignments/ parties, the datewise detail of payment receipt were also found available in this diary, and the noting 'PAID' was written against the specific consignmentwise entries. This diary contained despatches made both in the name of M/s Kalyan Chemicals as well as M/s HRPL. It was also found that certain despatches by M/s HRPL purportedly as trading despatches, example - vide invoice No. T-364 dated 18.01.200....
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....y 'BHARANI', such entry dated 09.06.2003 is RMD 5 barrels x 190 kg.- 475.00. But, in page for 09.06.2003 in the Executive Diary-2003, the supply of 5 barrels of 190 kg. each of RMD @ Rs. 50/- is equal to Rs. 47,500/- supplied vide LR No. 1144296 to BHARANI was mentioned. Similarly, in folio 50 of the pocket ledger against ten barrels @ Rs. 49/- per kg. was mentioned. Thus, the debit apparently pertains to the value of supplies and credit for the payments received against the supplies. 37. The record recovered vide Mahazar Sl. No. 4 was a small notebook containing various notings including datewise details of expenses apparently incurred by Shri V. B. Durga Prasad in the course of his duty and also certain notings showing the actual description, quantity and value/ rate of certain consignments, which was on verification, pertained to those cleared under the bills of M/s Kalyan Chemicals. 38. Further, various loose sheet slips including computer printed partywise account - statement of M/s HRPL, letters/ correspondence of M/s HRPL, M/s Priya Chemicals etc. were found and recovered and placed in a file at Sl. No. 5 in the Mah....
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....03 bearing handwritten particulars as "RMD10X190 kgs. @ 46/- to Star Paints, Chennai through SRMT (Door delivery)", which on verification, apparently showed the actual description (and price) of the consignment booked with SRMT under the name of Kalyan Chemicals vide LR No. 1171077 to M/s Star Paints, Chennai on 26.07.03, however with goods described as 'orthozylene'. (d) Page 371 of the above said file consists of a handwritten statement of party-wise outstanding amounts, showing certain remarks, additions and adjustments from different parties' amounts. The caption on the page 'Mahesh book and boss book' appeared to be self-indicative that the details pertained to a reconciliation between the amounts reflected in the privately maintained ledger of Sri V. Srinivas Mahesh, the employee of HRPL at Chennai and the amounts as per the 'boss-book' an obvious reference to Sri Sama Rajasekhar, M.D. of HRPL. (e) More importantly, page 299 of the above said file was a printed List of products i.e. Resins manufactured by HRPL (with the printed company name and address). In this sheet, prices were handwritten against many items and in addition notings....
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.... and M/s Priya Chemical etc. has been tabulated in Annexure D-1 to the show cause notice. 40. The other records / documents recovered from the residence of Shri V. Srinivas Mahesh include - made up file No. 1 containing various documents as party's account - statements, correspondence, etc. pertaining to HRPL and M/s Priya Chemicals. Sheet 64 and 65 of the file consist of Bill No. 1/65 dated 20.06.2003 of M/s Kalyan Chemicals, Vijayawada showing supply of goods declared as orthoxylene ten barrels x 190 kg. @ Rs. 10/- per kg. total value Rs. 19,000/- (including CST) to M/s Ranga Paints, Chennai vide LR No. 1009160 of SRMT for door delivery. Sheet 66 is the small slip, stapled to sheet No. 64 and 65 containing handwritten details as follows:- 20.06.2003: Ranga Paints, Chennai, RML (LAV)- 10x 190 kg. @ 49/-; SRMT - Door delivery. Thus, from the matching of the particulars and date, consignee, quantity and transporter's name in the bill and LR with the small slip, it is apparent that the goods supplied were resins (EML-LAV denoting Resonated Medium Linseed Resin with Low Acid Value) at a price of Rs. 49/- per kg., while the corresponding bill was issued....
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....sh and further demand draft were obtained against cash or transfer from the account as narrated hereinabove. 43. Further, Shri V.S. Mahesh, the Marketing Representative of HRPL in his statement recorded with the department on various dates under Section 14 has identified the documents and admitted the same as being maintained in the normal course of business at the instance of Shri S. Rajsekhar. He further admitted that he has been employee of HRPL from 1997 till June, 2003 stationed at Chennai and his duty included contracting buyers of resin manufactured by HRPL, procuring orders, forwarding the same to HRPL, receiving the LR and collecting the sale proceeds from the buyers. Normally he communicated the orders for sale to Shri S. Rajsekhar over phone and raisin was despatched generally by door delivery through SRMT, Vijayawada. That after dispatch of resin Shri S. Rajsekhar used to send the third copy of the LR alongwith a chit and bill of Kalyan Chemicals or Prasad Chemicals or Priya Chemicals. That the chit contained details of the buyers name, description of goods, quantity and actual rate at which the resin was supplied. That the set of ....
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....ad, C.S. Durga Prasad and M. Kalyan Chakraworty. The said practice is evident from the following documents found and recovered. Page 21 of the made-up file No. 77/1, recovered from the factory of HRPL during the search on 21.10.03 was a type-written sheet/ letter, unsigned, but bearing the rubber-stamp impression of HRPL. The contents of this documents were as follows: "Dear Mahesh, Today, we opened Current Account Premium at Global Trust Bank Ltd., in the name and style of M. Kalyana Chakrawarthy A/c No. 29011 01142. Today onwards, you deposit all the 'without funds' in the above account. Also we are going to close V. Durga Prasad A/c. So please do the necessary action immdtly". 45. On requisition, Global Trust Bank, Vijayawada furnished the copies of the Account- Statements of the above said accounts alongwith copies of the Account-Opening forms and related documents. The relevant details as per these documents, are as follows: Name S/Shri Account Number Period operated Total amounts deposited Ch. Siva Durga Prasad 29000 - 18190 October, 2001 to March, 2002 Rs. 27.54 lakhs (ex....
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....ort through SRMT and ICCM were accounted for in this record. All the aforementioned records were found handwritten by Shri Kalyan Chakraworty. Significantly, the vouchers for rent payment by M/s Kalyan Chemicals were in the signature of the rent recipient, identified as Shri S. Rajsekhar, the Managing Director of Harika. As regards similar records of M/s Prasad Chemical, Shri S. Rajsekhar vide his letter dated 10.08.2004 specified that the records of M/s Prasad Chemicals as well as those of M/s Kalyan Chemicals for the earlier period were destroyed and hence not available. Shri S. Rajsekhar further confirmed that Plot No. R.S. 409/2 which was the address of M/s Prasad Chemicals belongs to him and the address of M/s Kalyan Chemicals D. No. 25-52/1, Kabela Road was a room in a corner of the plot which was used by the Watchman who stayed there and rared cattle. He also identified and admitted the rent receipts of M/s Kalyan Chemicals as issued by him. He also affirmed that all the letters in the name of M/s Kalyan Chemicals were delivered at HRPL factory (located nearby). 47. Thus, it is evident that M/s Prasad Chemicals and M/s Kalyan Chem....
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....antity and rate (prepared by him mostly), were sent to the party or M/s HRPL's representative. He further stated that the buyers made the payment as per the value indicated in the slip either by cash or demand draft, and further admitted that these amounts were deposited in the account held in Global Trust Bank in his name or in the name of other employees. That the demand drafts were also obtained favouring certain raw material suppliers from the said account. He also stated that all the records of M/s Kalyan Chemicals like sales bills, sales tax return etc. were also prepared as instructed by Shri S. Rajsekhar, and he did not know anything or any details. He also stated that the purchase invoices for M/s Kalyan Chemicals were also arranged by Shri S. Rajsekhar and he did not know the manner of disposal of the purchases. Further, he categorically stated that he has done all activities in the name of M/s Kalyan Chemicals on the instruction of Shri S. Rajsekhar, being the employee and have not received any additional consideration for the same. 49. Shri V. B. Durga Prasad, Sales Executive of M/s HRPL in his statement dated 09.08.2004 deposed, t....
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....deposited in the account of M/s HRPL and Shri M. Kalyan Chakraworty denoted in code as - HK and KC respectively and such entries were written by him. 50. Shri C. S. Durga Prasad, Accountant of M/s HRPL in his statement dated 09.08.2004 and 29.07.2005 inter alia stated that the firms M/s Kalyan Chemicals and M/s Prasad Chemicals were created at the instance of Shri S. Rajsekhar to cover up the clandestine clearance of M/s HRPL. He was working as Accountant of M/s HRPL and also handled the work of M/s Priya Chemicals and some other firms belonging to Shri S. Rajsekhar and his relatives. He further admitted that he created the proprietorship concern M/s Prasad Chemicals at the instance of Shri S. Rajsekhar, obtained the Sales Tax registration, opened the bank account, signed the blank cheques and everything at the instance of Shri S. Rajsekhar. He has no personal interest in M/s Prasad Chemicals or in the bank account No. 29000 -18190 opened in Global Trust Bank, Vijayawada. He further affirmed that the said account was used for depositing the unaccounted amounts (flow back) from the sale of resin removed clandestinely by M/s HRPL under the invoices of....
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....ji Enterprises, Chennai through its Prop. N. Natarajan have admitted to received resin from M/s HRPL under the invoices of M/s Prasad Chemicals/ M/s Priya Chemicals etc. He further stated that demand drafts were taken in the name of the firm as per the invoice and the difference amount was collected in cash by Shri S. Mahesh of M/s HRPL or deposited by his employee in the bank account in the name of Shri Kalyan Chakraworty. He also identified the entries in Diary No. 3 pertaining to the payment made by him on various dates to HRPL, including those through Shri S. Mahesh, particularly for procurement of 30 barrels during 2003 for which no bills were issued and he had scored out the entries, as HRPL clandestine confirmed the receipt of amount in cash. He also accepted the clandestine transactions recorded in the resumed private records vide Mahazar from V. S. Mahesh and V. B. Durga Prasad. 54. Similar confirmation was made by other buyers of clandestinely removed goods namely - M/s Sujatha Paints, Chennai through its Partner Shri M. Mohan, by M/s Vee Kay Jay Paints & Chemicals, Chennai through its prop. V. Veeraraghavan, M/s Star Paints, Chennai through its....