TaxTMI 
TaxTMI 
2024 (3) TMI 558
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.... in the manufacture of chewing tobacco and Khaini. 3. Pursuant to the information received that the respondents were indulging in clandestine removal of goods and evasion of duty, the Investigating Agency of the Revenue Department conducted a search at six different places on 09.10.1998 namely, 30-31-K, Siraspur, Delhi, office premises of respondents at 4130, Gali Barna, Sadar Bazar, Delhi, 6041-42, 2nd Floor, Basti Harphool Singh, Delhi, 5987, Plot No. 83, South Nawab Road, Basti Harphool Singh, Delhi and 463, Pocket-A (GF) Sarita Vihar, Delhi. As a result of search, various materials were seized and the same included 57 bags of Moolchand brand Gutka, weighing 877.800 kgs. valued at Rs. 3,76,000/-, being excess in stock of the balance recorded in statutory record at 31-K, Siraspur, Delhi; cash of Rs. 1.90 lakhs at 3909, Gali Barna, Sadar Bazar, Delhi; duplicate note books, Kacha challans, Hisaba book, photocopies of passbooks at 4103, Gali Barna, Sadar Bazar, some Kachcha documents and cash of Rs. 7.36 lakhs from Gangu Foods (P) Ltd., a sister concern of KTPL at 6041-42, 2nd Floor, Basti Harphool Singh, Delhi; blank invoices/bill books of four firms namely, M/s. Rishi Trading Co.....
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.... Mkgt. Co., Shri Jarnail Singh of M/s. RKRT Goods Carrier Shri Harmit Singh of M/s. RKRT Goods Carrier, Shri Harpal Sinhgh of M/s. RKRT Goods Carrier, Shkri Devji Bhai of M/s. Diamond Transport Corporation, Sh. Vijay Singh Daga of M/s. Bikaner Assam Roadlines, Shri Pawan Kumar Karnani of M/s. Mahamaya Trade Agencies, Shri Dilip Ram Vallabh Sarda of M/s. Dilip Traders, Shri Bhim Karan Jain of M/s., Snow View Exports Pvt. Ltd., Shri Akhay Chand Kothari of M/s. Kothari Agencies and Shri Ashok Chaudhary of M/s. Chaudhary Sales Corporation, Guwahati. 6. Show Cause Notice dated 23.11.2000 was issued to KI and other for:- (a) recovery of central excise duty allegedly short paid central excise duty amounting to Rs. 3,47,22,118/- from KI in respect of the clearance of branded Khaini valued at Rs. 6,94,44,235/- during the period 11.12.1995 to 05.10.1998 along with interest; (b) recovery of differential duty amounting to Rs. 1,06,61,306/- in respect of the consignments of branded Khaini cleared during 01.12.1996 to 31.03.1999 period, which was allegedly short paid along with interest; (c) Confiscation of land and building and plant and machinery of KI used in the manufacture of goods; ....
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....Nos. E/560- 574/2006 and E/902/2006 were filed. 9. Show Cause Notice dated 23.11.2000 was adjudicated by the Commissioner of Central Excise, Delhi vide Order-in-Original No. 30/06 dated 03.01.2006 by which:- (a) total central excise duty demand of Rs. 4,18,29,655/- (Rs. 3,47,22,118 + Rs. 71,07,737/-) on account of clandestine removal and undervaluation of goods was confirmed against KI under proviso to Section 11 A (1) of the Central Excise Act, 1944 along with interest on this duty at the applicable rate as per the provisions of Rule 11 AB ibid; (b) land, building and plant and machinery, etc., of the KI was ordered to be confiscated under Rule 173Q (2) of the Rules, 1944 with option to be redeemed on payment of redemption fine in lieu of confiscation of Rs. 3 Lakhs; (c) Penalty of Rs. 4,18,29,655/- was imposed on KI under Rule 173 Q read with Section 11 AC; and (d) Penalty under Rule 209 A of Central Excise Act, 1944 was imposed on various noticees as under:- (i) Shri Mool Chand Malu Rs. 4 Crores (ii) Shri C.S. Baid Rs. 50 Lakhs (iii) Shri S.K. Bothra Rs. 40 Lakhs (iv) Shri Mukesh Kapoor Rs. 50 Lakhs (v) Shri G.S. Khattar Rs. 50 Lakhs (vi) Shri Akhay Cha....
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....tial question of law was framed:- "Whether the majority opinion is right in accepting the appeal and deleting the entire addition and whether the majority opinion is perverse?" SUBMISSIONS: 16. Arguments have been heard at length from Sh. Harpreet Singh, Senior Standing Counsel, appearing for the appellant/department as also Sh. Karan Bharihoke & Mr. Wattan Sharma, Advocates, appearing for the respondents. 17. The main pieces of evidence relied upon by the Excise Department to support the demand of excise duty in respect of alleged clandestine removal of the goods may be summarized as under:- "i) Statements dated 17.11.1998 of Mool Chand Malu and Vikas Malu, wherein, they had stated that about 50% of the production of branded Gutkha and branded Khaini was being cleared without payment of duty and that this was being done on account of stiff competition and that Kachcha Challan Books and Hisaba Books recovered from premises No. 4130, Gali Barna, Sadar Bazar, Delhi pertained to KI and KTPPL and contained the details of all the clearances during the clearances made without payment of duty; ii) Statements of Shubh Karan Bothra, C.S. Baid and other persons; iii) Contents of t....
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....ose papers detailing clearance and the raw material purchases during the specific period constitute complete evidence of clandestine clearances. It is further argued that the absence of tangible evidence does not diminish the weight of the substantial information contained in the recovered documents. It is thus submitted that the cumulative evidence including the statements, document correlations and physical findings form a robust case against the respondents. It is stated that the authenticity of the recovered documents holds firm and attempts to discredit them, lack merit. 20. Per contra, the learned counsel of the respondents has supported the majority view of the CESTAT, arguing that Revenue has failed to prove the allegations and consequently the demand of dues and penalties. It has been argued that the statements recorded under Section 14 of the Central Excise Act are not voluntary. The statements were later retracted by the respondents and therefore prudence demands that such retracted statements should not be accepted without independent corroboration. His challenge to the minority view is essentially because of the absence of cogent evidence in support of charge against ....
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....ent. Whereas, in a criminal case, it is essential to prove a charge beyond all reasonable doubt, in a departmental proceeding preponderance of probability would serve the purpose. 13. It is now settled by reason of a catena of decision of this Court that if an employee has been acquitted of a criminal charge, the same by itself would not be a ground not to initiate a departmental proceeding against him or to drop the same in the event an order of acquittal is passed." 23. There is no dispute that in adjudication proceedings to establish the charge of clandestine removal and undervaluation, Revenue is not required to prove the case with mathematical precision. Such charges are to be established on the basis of preponderance of probabilities. However, the conclusions to be arrived at are necessarily to be logical and not on the basis of presumptions and assumptions. Suspicion, howsoever grave, cannot replace the test of proof. 24. Admittedly, the statements recorded under Section 14 of the Central Excise Act are admissible in evidence and can be used against the maker. Mool Chand Malu and his son Vikas Malu in their statements have stated that about 50% production of the branded ....
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....ent examination of the factual matrix placed before it did not arrive at any finding that the confession being free from any threat, inducement or force could not attract the provisions of Section 24 of the Indian Evidence Act." Therefore, burden was not on the deponents to prove that statements were obtained by threat and coercion. Moreover, had the statements been voluntary and the retraction of statement dated 17.11.1998 been a bald retraction, there was no need to write 'Under Protest' on the TR-6 Challans, while depositing the total amount of Rupees Two Crores. These statements were not only retracted by them, but Shri Vikash Malu also submitted duly affirmed affidavit dated 3.9.2002, and offered himself for examination before the adjudicating authority in presence of officer of the department. Despite this, opportunity of his cross examination was not availed by Revenue, which lends credence to the retraction affidavits. As per ratio laid down in Parle Beverages Pvt Ltd vs CCE, Bombay, 1998 (98)ELT 585 (SC), affidavit cannot be brushed aside solely on account of delay without going into the genuineness of the evidence adduced, and in case of doubt deponent can be cr....
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....gment of Hon'ble Supreme Court in the matter Nagubai Ammal and Others- vs B. Shama Rao, AIR 1956 .se 593 wherein it was held that- "an admission is not conclusive as to the truth of the matters stated therein. It is only a piece of evidence, the weight to be attached to which matters depends on the circumstances under which it is made. I am unable to find these retracted oral testimonies as credible piece of evidence to sustain the charge against the Appellant Company. 26. It would be necessary to analyze whether the evidences, other than the retracted oral evidences, are credible for being used as corroborative evidence. The Hon'ble Supreme Court in case of Sitaram Sao v. State of lharkhand - (2007) 12 see 630, pithily encapsulated the idea of "corroborative" evidence, in the following words: "34. The Word 'corroboration' means not mere evidence tending to confirm other evidence. In DPP v. Hester - (1972) 3 All ER 10.16, Lord Morris said: "The purpose of corroboration is not to give validity or credence to evidence which is deficient or suspect or incredible but only to confirm and support that which as evidence is sufficient and satisfactory and credible; an....
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....ndings of the Hon'ble President that entire proceedings have lost credibility and serious doubt arises about the credibility of the materials stated to have been collected by Revenue in the course of proceedings. 28. Physical verification conducted at the factory premises of the appellant company did not reveal any excess stock of raw material as such. There is evidence of seizure of 57 bags weighing 87.8 Kgs valued at Rs. 3,76,200/- from the factory premises of KTPPL during the visit of the officers, however I agree with the finding of the Hon'ble President that same could have been recorded in the course of the day and before their clearance, and even otherwise the seizure of 57 bags by itself cannot be a substitute for the proof of clandestine removal of goods." 26. It is a settled law that there cannot be clandestine removal of the goods unless the assessee manufactures the same clandestinely and for that purpose, procures raw material clandestinely and uses it without disclosing its utilization. Admittedly, there is no evidence of purchase of major raw material like supari, tobacco etc even in the loose sheets/Hisaba Books recovered in the search. Revenue has not pr....
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....act that the requisite opportunity of cross examination was also not made available so as to bring to the fore the true picture and therefore, it concluded against the Revenue observing that not permitting the cross examination of a person in-charge of records of M/s. Sunrise Enterprises and absence of other cogent and positive evidences, would not permit it to sustain the demand of Rs. 1.85 Crores raised in the Demand notice and confirmed by both the authorities below." 29. The Special Leave Petition filed by the Department against the said order being SLP (Civil) (CC No. 19304-07 of 2014) was dismissed by the Supreme Court on 01.12.2024. 30. In the case of Arya Fibres Pvt. Ltd. v. CCE, Ahmedabad- II 2014 (311) ELT 529 (Tri.-Ahmd.), the learned CESTAT discussed the entire law concerning clandestine removal and enumerated the legal position as under: "(i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of: (a) raw materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not in....
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....nt company has not been established. In Ruby Chlorates (P) Ltd., Versus Commissioner of C. Ex., Trichy, 2006 (204) E.L.T. 607 (Tri.-Chennai), it was held that: "21....... The settled legal position is that when several raw materials are involved, when a case of clandestine production and clearance is built on clandestine use of raw materials, the same should be proven with reference to unaccounted use of all such major raw materials". "22. In a case of clandestine removal the department should produce positive evidence to establish the same. In the absence of corroborative evidence, a finding cannot be based on the contents of loose chits of uncertain authorship. Department has not produced evidence of use of inputs to prove that there was manufacture of unaccounted finished product....." Moreover, in the case of Atlas Conductors (supra), this Tribunal has taken a clear view that the demand cannot be on presumption of manufacture but on the basis of actual manufacture which is the basis to come to conclusion as recorded by Hon'ble President in para 47 onwards that the findings of the adjudicating authority are without any evidence and is not correct view as is liable to be se....
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....ion has been restricted to 69551 bags. As regards the electricity consumed, the view of the Commissioner was that the loose sheets disclose that during the period of 20 days i.e. from 11.06.1998 to 30.06.1998, the appellants had purchased 29600 litres of diesel. The DG set consumes 55 liters per hour and therefore there was sufficient diesel to manufacture the high quantity of the goods by the respondents. Since at least two labourers were required to operate each machine, besides other labourers would also be required for packing, crushing of Supari, Kattha, mixing of compound and other ingredients, the respondents ought to have employed sufficient number of employees. The balance sheets of the respondents during the relevant years disclose employment of 50 to 60 labourers but the Commissioner disbelieved the same to be true on the ground that the number of employees must have been shown less to avoid provident fund liability and other complications and therefore the record in that regard must have been manipulated. Though, the suppliers disputed the supply of raw material to the respondents, the Commissioner was of the view that the same stands established by the contents of the ....
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....ion by CERA and internal audit and there is no evidence of working for more than one shift a day. As per the appellant, the production capacity with such machines, in one shift, is not sufficient to manufacture the alleged huge quantity alleged to be removed in clandestine manner, and moreover, the duty fixed by the Board per machine, if taken into account would also indicate much less production than alleged in the Notice. As rightly observed by the Hon'ble President, the working of the machines in the appellant's factory was not tested or certified to ascertain the production capacity of the machines installed. Even number of machines installed in working condition was not recorded in panchnama drawn at factory. There is no record to show that the appellants were working for three shifts. Panchnama regarding the production capacity of the machines at totally different factory of a stranger could not have been applied to decide production capacity of the machines in the appellant's factory, as has been sought to be done in the impugned Orders. There is no evidence of additional employees having been employed to enhance the production, nor is there any evidence of exces....
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....e same were sent through Courier by the appellant company. (ix) It is to be assumed that huge quantity of 91445 bags was removed from factory in a clandestine manner. (x) Although the amount of Rs. Two Crores deposited during the investigations was clearly deposited by recording on the Challans 'Duty under protest', it is to be assumed that the said payment was voluntary with acceptance of the clandestine removal. (xi) It is to be assumed that Original Kachha Challans must have been destroyed by all of the alleged distributors/dealers. (xii) It is to be assumed that 'packet' mentioned on Kachha Challans, is actually 'bag', (xiii) It is also to be assumed that the appellant manufacturer was the actual consignor although the name of the consignor in the GRs /RRs relied by Revenue are other than that of the appellant manufacturer; (xiv) It is also to be assumed that although the description of goods on GR /RR were 'Chewing Tobacco', 'Tobacco', 'Supari', 'Garments, Shoes, Handloom Cloth etc', 'Gum Powder', 'Rakhi', the same actually were 'Branded Guthka' manufactured and clandestinely cleared by....
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....ials and cash undermine the presumption of unaccounted manufacture. Furthermore, the recovery of documents from the premises unrelated to the respondents and reliance of such documents to establish clandestine operations are found to be procedurally flawed and legally untenable by the learned CESTAT. The reliance by the Revenue on the statements that have been retracted or challenged in cross-examination, without corroborating evidence weakens the credibility of such testimonies as the basis for establishing the guilt. Based upon above, learned Tribunal (Majority view) has rightly concluded that the evidence sought to be relied upon in support of allegations against the respondents are unreliable, uncorroborated and unsustainable to establish the charge of clandestine removal of goods. 39. The charges of clandestine removal and under valuation against the respondents in this case cannot be sustained merely on the basis of assumptions and presumptions. The absence of direct, credible evidence linking the respondents to the alleged offences necessitate the dismissal of the charges. The decision is grounded on the principles of justice and the requirement for the burden of proof to b....