AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (9) TMI 562
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....nd Mixure. In the registered premises two machines were found in sealed conditions (sealed by Central Excise Officers on 08.03.2010). In the unregistered premises, which is about 50 Mtrs. away from registered premises, four packing machines were found in a corner room. The officers found one machine was running to pack 'Surya Mark' (Khaini) of MRP Rs.2.00 and another packing machine was found packing Khaini of the same brand with MRP of Rs.1.50. Two other packing machines, although found installed in the premises, they were not running. The officers also found chewing tobacco raw material in the upper chamber of the room. Few packing material pouches were found attached to those two packing machines. The officers scanned images of both the pouches of chewing tobacco and the machines. The machines, raw-materials and finished goods were seized under a Panchnama. 2. Statement of Shri Ajay Kumar, a worker operating the machine, was taken who in his statement stated that two packing machines were working and other two machines were not running. Statement of another worker Shri Ratikanta Ghadei, who is the son of the Proprietor, was taken who also stated that two machines were working....
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....amaged and not in operative condition. The machines were not installed. The machines were having stand and wheel for movement and they were not attached with the Earth. (ii) There was no evidence of usage of the packing machines, but the officers arranged them in such a manner as if those were being used in the manufacture and packing of Chewing Tobacco. The rejected pouches have been used for exhibiting that the machines have been used. Merely because there have been four inoperative defective machines lying in the godown of the factory, it cannot be said that they were used in the manufacture and packing of Chewing Tobacco. The photographs cannot be relied upon as a proof that the machines were in operating condition. Mere presences of the machines have been made as the basis of raising the demand for five months from April 2010 to August 2010. The search was conducted on 02.08.2010, but the demand has been made for the entire month of August 2010, which is legally not tenable. (iii) The Panchnama has been drawn wrongly, since the Panchas were not the independent witnesses. They cannot come from 56 Km. away from their residence to the place of seizure at 5:30 A.....
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....ed in the manufacture of Chewing Tobacco. Rule 18(2) cannot be made applicable when there is enough evidence available to establish that the machines were not at all used. In the present case, the machines were scrapped and not capable of usage in the manufacturing process. As they have established that no manufacturing was possible with that four machines, the deemed manufacture provision cannot be invoked to demand duty. (viii). The Appellant cited the decision of GoyaL Tobacco Co. Pvt Ltd. Vs Commissioner of Central Excise and Service Tax, Jaipur-I, reported in 2017(348) ELT 720(Tri-Del) and contended that in this case on similar facts and circumstances, the Tribunal, Delhi has held that the provisions of CTPM Rules are not applicable and duty cannot be demanded on deemed basis as provided in Rule 18(2) of the said Rules. 5. The Ld. A.R. submitted that the investigation has established that 4 packing machines were installed in the unregistered premises owned by the Appellant. As per Rule 18(2) of the CTPM Rules, there is no need to establish any actual manufacture of goods. Mere installation of the machinery is sufficient to demand duty on deemed basis. Since the inv....
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....le to Customs and Central Excise Law. The noticee also requested to cross examine the panchas. Though the provisions of law requires to call local inhabitants as witness to draw panchanama, there appears to be no illegality if it is deviated depending on the circumstance without any malafide intention. In case of early bour searches and seizures, it may be difficult to call local panchas and in the present case, if the panchs are called from a distant place, the panchanam drawn cannot be challenged. Moreover, panchanama is not the only piece of evidence relied upon by the Department. The circumstances, inculpatory statement of the noticee and others, the way the packing machines have been procured by the noticee even for their registered premises etc goes against the noticee. Simply because panchas have been called from a distance place, the credentials of the panch witnesses cannot be doubted. Even the same panch may be called for a number of times without effecting the legal procedure. Further, the noticee had not taken the plea that the panchas are having inimical relations with them or they are having grudge against the noticee as held by the Apex Court in the case of Gyan Sing....
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....Rules, the number of operating packing machines operational during the months from April-10 to July-10 has to be considered as four in each of the months and duty can be demanded even without any evidence of actual manufacturing. 9.3. Thus, the issues to be decided in this appeal are: (i) Whether the procedure as mandated under Section 9D of the Central Excise Act, 1944, has been followed in this case? If not followed, whether the statements recorded in this case can be relied upon to confirm the demands? (ii) Whether the evidences available on record indicate that four packing machines installed in the unregistered premises were in working condition and used for manufacturing of Chewing Tobacco? (iii) Whether evidences available indicate that Rule 18(2) of the CTPM Rules applicable in this case to demand duty in respect of 4 packing machines, from April 2010 onwards, as provided in the said Rules? (iv)Whether penalty under Rule 18(1) of the CTPM Rules read with Section 11 AC of the Central Excise Act, 1944, imposable in this case? 10. We observe that the premises where the 4 machineries were found has been registered in the name of M/s.Jaga Kalia S....
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.... the statements recorded from Shri Ajay Kumar, Sri Bishnu Charan Ghadei and Shri Ratikanta Ghadei and Shri Jhasaketan Bhoi, on 02.08.2010 and subsequently. However, we observe that all the above persons have retracted their statement by sworn affidavits on 04.08.2010, which were submitted to the department on 01.08.2011. The adjudicating authority has rejected these sworn Affidavits on the ground they were filed as an afterthought. The Appellant stated that the workers did not know English and their request for recording of the statement in Odiya was not considered by the investigation officers. They were not knowing the contents and compelled to sign the statements. Immediately after giving the statements they retracted it by sworn affidavit before the Notary, but submitted later on 01.08.2011. Late submission does not mean that they agree with the contents of the statements. Even if the retractions were submitted to the department later, they remain as retracted statements only. The retracted statements have no evidentiary value in the absence of any corroborative evidence. Also, the procedure set out in Section 9D has not been followed by the adjudicating authority. Their reques....
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....of the Central Excise Act. Any statement recorded under Section 14 of the Central Excise Act could be admitted in evidence only after the process of examination and cross examination is completed under Section 9D. For undertaking this exercise, it is not necessary that a person should have retracted from his statement. If the argument of the Adjudicating Authority is accepted, then the provisions of Section 9D would become otiose. This cannot be the intention of the legislature. We find that this view has been held by various decisions cited by the Appellant. 12.2 The Tribunal in the case of Ambica Organics Vs. CCE & Customs, Surat-1, reported as 2016 (334) ELT 97 (Tri. - Ahmd), held that once it came on record that various statements recorded from the witnesses were not of voluntary in nature but were obtained under pressure, the same could not be admitted in evidence by the Adjudicating Authority. The same clearly lost its evidentiary value.The relevant portion of the order is reproduced below: 7. After hearing both the sides and on perusal of the records, I find that the Central Excise officers while visiting the factory of the appellant, recovered a USB drive in the....
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....tention that it is the responsibility of the noticees to produce the witnesses for cross-examination is a strange one considering that they are witnesses of the Department and that their statements are being relied upon by the Department in support of the SCNs. Since it is relying on such statements, it is the responsibility of the Department to ensure their presence for cross-examination. As already mentioned, whenever such witnesses (i.e. six of them) were produced for cross-examination they resiled from their earlier statements. 43. It is not a matter of mere coincidence that none of the witnesses who were cross-examined stood by their earlier statements. It is one thing to overlook this feature on the premise that all of them were under the pressure and control of the noticees. The other approach is to view this with some caution and ask what might be the case if the remaining witnesses were also produced for cross-examination? Importantly, what would be the prejudice caused to the noticees, in such circumstances, by their non-production for cross- examination? Thus a doubt is created in favour of the noticees when such witnesses do not turn up for cross-examination. I....
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....than a proceeding before a Court, as they apply in relation to a proceeding before a Court." 5. A plain reading of sub-section (1) of Section 9D of the Act makes it clear that clauses (a) and (b) of the said sub-section set out the circumstances in which a statement, made and signed by a person before the Central Excise Officer of a gazetted rank, during the course of inquiry or proceeding under the Act, shall be relevant, for the purpose of proving the truth of the facts contained therein. 6. Section 9D of the Act came in from detailed consideration and examination, by the Delhi High Court, in J.&K. Cigarettes Ltd. v. CCE, 2009 (242) E.L.T. 189 (Del.) = 2011 (22) S.T.R. 225 (Del.). Para 12 of the said decision clearly holds that by virtue of sub-section (2) of Section 9D, the provisions of sub-section (1) thereof would extend to adjudication proceedings as well. 7. There can, therefore, be no doubt about the legal position that the procedure prescribed in sub-section (1) of Section 9D is required to be scrupulously followed, as much in adjudication proceedings as in criminal proceedings relating to prosecution. 8. As already noticed herein above....
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.... clause (a) of sub-section (1) thereof, would be pregnable to challenge. While the judgment of the Delhi High Court in J&K Cigarettes Ltd. (supra) holds that the said challenge could be ventilated in appeal, the petitioner has also invited attention to an unreported short order of the Supreme Court in UOI and Another v. GTC India and Others in SLP (C) No. 21831/1994, dated 3-1-1995 [since reported in 1995 (75) E.L.T. A177 (S.C.)], wherein it was held that the order passed by the adjudicating authority under Section 9D of the Act could be challenged in writ proceedings as well. Therefore, it is clear that the adjudicating authority cannot invoke Section 9D(1)(a) of the Act without passing a reasoned and speaking order in that regard, which is amenable to challenge by the assessee, if aggrieved thereby. 13. If none of the circumstances contemplated by clause (a) of Section 9D(1) exists, clause (b) of Section 9D(1) comes into operation. The said clause prescribes a specific procedure to be followed before the statement can be admitted in evidence. Under this procedure, two steps are required to be followed by the adjudicating authority, under clause (b) of Section 9D(1), viz.....
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....il he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for proving the truth of the contents thereof, he has to first admit the statement in evidence in accordance with clause (b) of Section 9D(1). For this, he has to summon the person who had made the statement, examine him as witness before him in the adjudication proceeding, and arrive at an opinion that, having regard to the circumstances of the case, the statement should be admitted in the interests of justice. 17. In fact, Section 138 of the Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidence-in-chief has to precede cross- examination, and cross-examination has to precede re-examination. 18. It is only, therefore,- (i) after the person whose statement has already been recorded before a Gazetted Central Excise officer is examined as a witness before the adjudicating authority, and (ii) the adjudicating authority arrives at a conclusion, for reasons to be recorded in writing, that the statement deserves to be admitted in evidence, that the question of offering the witness to the ....
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....No. 2 for adjudication de novo by following the procedure contemplated by Section 9D of the Act and the law laid down by various judicial Authorities in this regard including 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 examination-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 r....
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.... 9.1 At the outset, it needs to be clarified that during the course of argument, Learned Counsel for the parties agreed that second substantial question of law is with regard to legality of procedure adopted by the adjudicating authority and not the Tribunal as such because the Tribunal has only exercised appellate jurisdiction. This is quite obvious from orders passed by the Tribunal, the appellate authority and pleadings/ground in the appeal. There is no dispute that the adjudicating authority did not record the statement of the Director Mr. Narayan Prasad Tekriwal and the basis of the finding recorded by the adjudicating authority as well as Customs, Excise and Service Tax Appellate Tribunal, has been the statement of the Director as recorded by the investigation officer during investigation. Section 9D of the Central Excise Act of 1944 reads as under: Section 9D - Relevancy of statements under certain circumstances. A statement made and - (1) signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under th....
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....in clause (a), only when the person who made the statement is examined as witness in the case before the court (in the present case, Adjudicating Authority) and the court (Adjudicating Authority) forms an opinion that having regard to the circumstances of the case, the statement should be admitted in the evidence, in the interest of justice. 9.4 The legislative scheme, therefore, is to ensure that the statement of any person which has been recorded during search and seizure operations would become relevant only when such person is examined by the adjudicating authority followed by the opinion of the adjudicating authority then the statement should be admitted. The said provision in the statute book seems to have been made to serve the statutory purpose of ensuring that the assessee are not subjected to demand, penalty interest on the basis of certain admissions recorded during investigation which may have been obtained under the police power of the Investigating authorities by coercion or undue influence. 9.5 Undoubtedly, the proceedings are quasi criminal in nature because it results in imposition of not only of duty but also of penalty and in many cases....
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....cise v. Kalvert Foods India Private Limited (Laws (SC) 2011 838) = 2011 (270) E.L.T. 643 (S.C.). That decision turned on its own facts. In para 19 of the judgment, it was concluded as below : We are of the considered opinion that it "19. is established from the record that the aforesaid statements were given by the concerned persons out of their own volition and there is no allegation of threat, force, coercion, duress or pressure being utilized by the officers to extract the statements which corroborated each other. Besides the Managing director of the Company of his own volition deposition the amount of Rs. 11 lakhs towards excise duty and therefore in the facts and circumstances of the present case, the aforesaid statement of the Counsel for the Respondents cannot be accepted. This fact clearly proves the conclusion that the statements of the concerned persons were of their volition and not outcome of any duress." Accordingly, on the first and second question of law, we hold that the statement of the Director could not be treated as relevant piece of evidence nor could be relied upon without compliance of Section 9D of the Act. The two questions of law accordin....
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....chines have been made as the basis of raising the demand for five months from April 2010 to August 2010. 14.1 We observe that the Revenue has never stated that all the four machines were operational. The statements recorded also reveal that only two packing machines were operational. Hence, demand of duty on the other two packing machines is not supported by any evidence. Regarding the remaining two machines, we find that the Revenue has relied upon the statements as the only evidence to support their case. In view of the findings above, it has been held that the retracted statements alone cannot be relied upon to demand duty. Hence, we would like to examine the other evidences available on record to substantiate the allegation of manufacture and clandestine clearance of chewing tobacco by using the remaining two packing machines. 14.2 We observe that the investigation has not brought in any other evidence such as purchase of raw material, purchase of packing material, excess consumption of power during the period, buyers of the clandestinely cleared material, statements from transporters etc. We observe that the unregistered premises, from where the four packing machines wer....
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....cer that the packing machines were not capable of being used in the manufacture of Chewing Tobacco. The statements recorded on 02.08.2010 indicate that only two machines were operational. Hence, duty cannot be demanded on these two packing machines. Regarding the remaining two packing machines, we observe that the investigation has not brought in any other evidence such as purchase of raw material, purchase of packing material, excess consumption of power during the period, buyers of the clandestinely cleared material, statements from transporters etc. 15.2 We observe that the unregistered premise from where the four packing machines were found has been registered in the name of M/s Jaga Kalia Snax and Mixure. They also deal with Chewing Tobacco as traders. The contention of the Appellant is that some damaged raw material and finished goods seized by the officers belonged to the trading activity of M/s Jaga Kalia Snax and Mixure. In such circumstances, the investigation must have probed further to establish the manufacture and clandestine clearance by means of other evidences. Instead, the investigation has relied solely on the statement to demand duty. There is no evidence avai....
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....nd was made based on presumption that these machines were working from 8-3-2010 without interruption. The Original Authority emphasized that in terms of Compounded Levy Scheme, the goods shall be determined to have been manufactured with the help of installed packing machines irrespective of whether it is in use or not, or is in working condition or not. He held that non-working of any machine is not relevant to determine the duty liability. However, we note that in the present case the submission of the appellant is that these machines were scrapped and were lying unutilised and cannot be considered as packing machines "installed" for operation in terms of the Explanation II to Rule 19. If the inference of the Original Authority is considered as a legal ratio, then wherever the packing machines were lying, in any premises, including the premises of the manufacturer or seller of such machines, then the duty can be demanded from them in terms of the Compounded Levy Scheme. Apparently no such situation is covered by the Scheme. Presumptive duty liability as envisaged in the Compounded Levy Scheme of 2010 Rules cannot be extended to a level that automatic duty liability will arise in ....
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....ises and the manufacturer and clearance is established, the duty demand is correctly made. While the presence of machines is an admitted fact, the manufacture and clearance has not been evidenced with any corroborative evidence established during investigation. For this the only reliance was on the statements given by the Accountant of the appellant's unit, labourer and the driver of the tempo. There is no verification of procurement of raw materials, packing material, bank statements, etc. to corroborate the illicit manufacture and clearance of dutiable items. We also note that the Commissioner did not permit the cross-examination of the witnesses with reference to prayer of the appellant regarding serious irregularities in panchnama and search proceedings. We find that the Commissioner recorded since the machines were found in an unauthorized premises, the cross-examination of the witnesses would not make any change. Similarly, cross-examination of the officers conducting search operation was also denied. We further note that the Hon'ble High Court of Rajasthan in Jupitor Industries and Another in Tax Reference Case No. 28 of 2004, decided on 7-4-2006 [2006 (206) E.L.T. 1195 (Raj....
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....el.) and Hon'ble Allahabad High Court in Parmarth Iron Pvt. Ltd. - 2010 (260) E.L.T. 514 (All.). Further, reference can be made to the decision of Hon'ble Delhi High Court in J.K. Cigarettes Ltd. - 2009 (242) E.L.T. 189 (Delhi) = 2011 (22) S.T.R. 225 (Del.)and Hon'ble Allahabad High Court in Govind Mills Ltd. - 2013 (294) E.L.T. 361 (All.). In the present case, we find that the statements were relied upon as corroborative evidences and the cross-examination of witnesses who made such statements was denied without valid ground. We find that there is no other corroboration evidencing operation of these machines even for a single day during the impugned period. The presence of machines and certain statements of labourers and accountants were the only evidences, which resulted in confirmation of demand. We find that these evidences, the admissibility of which itself is legally not sustainable, cannot be the basis for confirmation of duty on the goods allegedly manufactured and cleared by the appellant. The investigation in the present case has been very sketchy and will not support the findings in the impugned order. 11. After careful consideration of the impugned order and th....