TaxTMI 
TaxTMI 
2024 (3) TMI 558
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....al (India) Ltd. [hereinafter referred as "KTIL"] were engaged 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 i....
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....encies and M/s. Ganpati Mktg., Shri Gauri Shankar Khattar of M/s. Delhi Marketing Co. & M/s. New Delhi 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 w....
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.... Rs. 20 Lakhs (xiii) Shri A.C. Kothari of M/s. Kothari Agencies, Delhi Rs. 05 Lakhs (xiv) Shri Ashok Chaudhary Proprietor of M/s. Chaudhary Sales Corporation, Guwahati Rs. 03 Lakhs 8. Against this order of the Commissioner, Appeals 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 o....
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.... Member (Judicial) Mr. M.V. Ravindran. Mr. Ravindran agreed with the opinion of the President (Judicial) Justice R.M.S. Khandeparkar and disagreed with Mr. Rakesh Kumar, Member (Technical). 14. The resultant position was that by majority of 2:1, the appeals were allowed. 15. Present appeal has been filed against the majority view of the Tribunal. The following substantial 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 o....
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....ore the assertion by respondents disowning the premises and the recovered documents are to be discarded as an afterthought, given the lack of objection at the initial stage. It is also the argument of the learned Senior Standing Counsel that the recovery of 57 bags from the premises of the respondents KTPPL is a substantive piece of evidence and even though the physical verification did not reveal excess stock, the loose 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 due....
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....obability is applicable in the adjudication proceedings. In this regard, the learned counsel relied upon the decision in the case of Commissioner of Police, New Delhi Vs. Narender Singh reported in (2006) 4 SCC 265, wherein, it has been held as under:- "12. It is not in dispute that the standard of proof required in recording a finding of conviction in a criminal case and in a departmental proceeding are distinct and different. 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. H....
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....ed at only on the basis of such confession although retracted at a later stage." "37 ............. The inference that burden of proof that he had made those statements under threat and coercion was solely on the proceedee does not rest on any legal principle. The question of the appellant's failure to discharge the burden would arise only when the burden was on him. If the burden was on the revenue, it was for it to prove the said fact. The Tribunal on its independent 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, an....
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....that they were not aware who has written the same. I find that these material aspects have escaped the attention of the Hon'ble Member (Technical). In the above background the sound legal proposition that what is admitted need not be proved, is not applicable in the instant case. For the same reasons, I find that it would not be justified to rely on these oral testimonies in the peculiar facts of the case. 25. I find that the Hon'ble President has correctly relied on the judgment 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....
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.... of the appellant company. Although the names of the consignors on GR/RR were found fictitious, the Hon'ble Member (Technical) was persuaded to assume that the same related to the Appellant company. As rightly observed by the Hon'ble President, even the panchnama' did not describe or identifies in its annexure which enlists the documents stated to have been recovered from the premises, recovery of any 'hisaba book' or 'Kachha Challans' or 'loose sheets with written pages'. I agree with the findings 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 clearanc....
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....o be positive evidence to establish the evasion. It was observed as under:- "In absence of any material reflecting the purchase of excessive raw material, shortage of finished goods, excess consumption of power like electricity, seizure of cash, etc., the Tribunal noted and held that there was nothing to bank upon except the bare confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time of their recording. The Tribunal also noted the fact 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 01.12.20....
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....t for any such movement. I do not find cogent evidence of disproportionate and unaccounted receipt and consumption of the basic raw materials and packing material, required for manufacturing alleged quantity of unaccounted finished goods. I do not find tangible proof of unauthorized payment for procuring such unaccounted raw material and packing material. I do not find cogent evidence of disproportionate power consumption, capacity utilization and labour employed, or any cogent evidence of clandestine manufacture of unaccounted quantity alleged as clandestinely removed. I find that unaccounted production in the factory of the appellant 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 esta....
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....er of the Chairman of the Board, each machine could manufacture 200 pouches per minute and therefore 137 machines could manufacture 277425000 pouches per month and if all the machines are utilized in three shifts for 25 days in a month, the total production would be 832275000 pouches per month. On the basis of the same, Commissioner made an estimate that for the period of 14 months from 07.05.1997 to 30.06.1998, the total production of KTPPL ought to have been 1165 crores of pouches i.e. 882575 bags and for the period of three months from 01.07.1998 to 05.08.1998 considering the capacity production, it would be 525523 crore pouches i.e. 193356 bags, while the accusation 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 ....
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....out the normal rule of production cannot be a proof of the actual production capacity of the machines in the respondent's factory. 35. CESTAT ruled that Hisaba Book makes reference to various firms and persons as the buyers of the quantity mentioned therein. However, no attempt was made to record the statement of any such person at all. Member (Judicial) recorded in Para 33 of his order that for confirming charges and for accepting the evidence adduced, a series of assumptions and presumptions are to be made, viz: (i) The total number of machines installed was intimated on 11.8.97, which was not found incorrect by visiting Central Excise Officers or in Audit inspection 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 a....
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....d his unawareness about the same, it is to be assumed that unaccounted Tobacco as mentioned in the loose sheets was supplied by them to the appellant company. (vii) Although Shri Chetan Kanodia of M/s Kanodia Technoplast Pvt Ltd, in his statement denied the contents of loose sheets and denied having sold laminations without invoices or having received payments in cash against any such sale, it is to be assumed that the alleged unaccounted laminations were sold by him to the appellant company. (viii) There is no evidence of any fruitful inquiry from any Courier services, despite allegation of dispatch of Kachha Challans by the appellant company through any Courier Service, however it is to be presumed that the 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 t....
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....andestine removal and under valuation of the goods. The charges are heavily reliant on a series of assumptions, such as factories operating in three shifts and unrecorded production and sales without complete evidence to back such claims. There is also no verified assessment of the production capacity of the installed machines in a single shift operation nor any evidence to suggest that the factory was operating beyond the stated capacity. Assertions by the Revenue about the production capacities are speculative without testing or certification by the competent authority. 38. The physical verification of the stocks and the absence of discrepancies in the recorded quantity of the raw material as well as the lack of evidence regarding the purchase of significant quantities of raw materials 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-examina....