TaxTMI 
TaxTMI 
2024 (10) TMI 622
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....onal Central Excise authorities. Those units manufacture 'Unmanufactured Branded Tobacco' and after packing the same in printed pouches bearing a brand name of 'Om Special Pandharpuri Tambakoo No. 1', were sold in the market. All the above four units discharged their Central Excise Duty liability on removal of the said products and also maintained statutory records and filed their statutory returns separately. Those units were also separately audited under the provisions of the Central Excise statute. Shri Mahendrabhai C. Patel was a Power of Attorney Holder of two firms viz. (a) M/s Shree M.C. Patel & Sons, a proprietorship firm of his wife Smt. Kailashben M. Patel and (b) M/s Shree Krishna Traders, a partnership firm of his sons Shri Neeraj M. Patel and Shri Rahul M. Patel. Both these firms were engaged in manufacture and sale of 'Unbranded Unmanufactured Loose/Bulk Tobacco'. Both these firms were having their respective head offices at Khandali, Gujarat and were having shop at Kurla (W), Mumbai. As Unbranded Unmanufactured Tobacco did not attract any Central Excise Duty, both these firms were not registered with the Central Excise Department. The respective head office of Patel ....
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....he aforesaid municipal limits was made in their own vehicles and delivery to outstation buyers were made through various transporters situated at Sakinaka, Mumbai. 2. During the course of searches conducted at the premises of the appellants as well in other places, the Central Excise officers have recorded statements of various persons. In his statement dated 10.06.2013, Shri Mahendrabhai C. Patel, proprietor M/s Patel Product had stated that raw tobacco used for production of 'Om Special Pandharpuri Tambakoo No. 1' is Grade-I quality and raw tobacco which is used for retail/bulk sale from M/s Shree Krishna Traders and M/s Shree M.C. Patel & Sons is Grade-II and III quality tobacco. All these bulk tobaccos are purchased at Khandhali, Gujarat in respective firm's name and thereafter, those were stock transferred to Kurla (West), Mumbai through All India Road Transport Company, wherein each consignment consisted of 250 bags, each of 40 kgs. During the course of investigation, the department had alleged that at the time of stock transfer, from Khandhali to Kurla of Grade-II / III raw tobacco of M/s M.C. Patel & Sons, Kurla and M/s Shree Krishna Traders, instead of 250 bags of Grade....
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.... be Rs. 31,11,78,562/-. The SCN alleged that M/s Jalaram Traders and M/s Shree Gajanan Agency were controlled by Shri Mahendrabhai C. Patel and therefore, the price at which these two firms used to sell the said branded tobacco of M/s Patel Product in the open market, should be considered as assessable value, for the purpose of demanding Central Excise Duty from M/s Patel Product. On that basis, a demand of differential Central Excise Duty on account of under valuation during the period from June, 2008 to July, 2012 of Rs. 3,67,06,613/- was made. The total demand of Central Excise Duty of Rs. 34,78,85,175/- was proposed for recovery from M/s Patel Product, Unit-I-II-III-IV, jointly and severally. It had also proposed for imposition of personal penalty on (a) Shri Mahendrabhai C. Patel, proprietor of M/s Patel Product [Unit-I-II-III-IV], (b) M/s Jalaram Traders, M/s Gajanan Agency, (c) Shri Arvindbhai N. Patel, proprietor/partner of M/s Jalaram Traders/ M/s Shree Gajanan Agency, (d) Shri Ashokbhai S. Patel, partner, M/s Shree Gajanan Agency, (e) Shree M.C. Patel & Sons, proprietor of Smt. Kailashben M. Patel, (f) M/s Shree Krishn....
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....Rs. 10,78,00,874/- was worked out. This demand was a part of total demand of Rs. 31,11,78,562/-, being worked out on the basis of diversion of raw material i.e. superior grade of tobacco in guise of inferior grade of tobacco at the rate of 75 bags per trip from M/s Shree Krishna Traders, Khandali and M/s Shree M.C. Patel & Sons, Khandali to M/s Patel Product, Kurla. The SCN had also recorded that Shri Mahendrabhai C. Patel, Proprietor of Patel Product was arrested on 13.06.2013 and was granted bail by the Chief Metropolitan Magistrate Court. He appeared before the investigation on 17.06.2013, when his statement was recorded under Section 14 of Central Excise Act. It is also mentioned in the SCN that Mahendrabhai C. Patel had retracted his statement dated 17.06.2013 vide affidavit dated 18.06.2013 and had also submitted a copy of said affidavit before the investigation and in response thereto, rejoinder letter of even number dated 26.06.2013 was sent by the investigation to Mahendrabhai C. Patel. Likewise, the SCN had also recorded further statement of Shri Mahendrabhai C. Patel under Section 14 of Central Excise Act, 1944 on 20.06.2013. It is mentioned in the SCN that Shri Mahendra....
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....44, on Shri Mahendrabhai C. Patel, proprietor of M/s. Patel Product [Unit-I-II-III-IV]; (vi) I impose a penalty of Rs. 1,00,00,000/- (Rupees One crore only) on Shri Mahendrabhai Patel, under the provisions of Rule 26 of the Central Excise Rules, 2002; (vii) I impose a penalty of Rs. 25 lakhs on Shri Arvindbhai N. Patel, proprietor of M/s Jalaram Traders (Noticee No 6) under Rule 26 of the Central Excise Rules 2002; (viii) I impose a penalty of Rs. 10,00,000/- (Rupees Ten lakhs only)under Rule 26 of the Central Excise Rules 2002, on M/s Shree Gajanan Agency (Noticee No.7), which devolves on Shri Mahendrabhai Patel, the defacto owner of M/s Shree Gajanan Agency; (ix) I impose a penalty of Rs. 10,00,000/- (Rupees Ten lakhs only) on Shri Arvindbhai N Patel & Rs. 10,00,000/- (Rupees Ten lakhs only) on Shri Ashokbhai S Patel, (Noticee No 8 & 9) under Rule 26 of the Central Excise Rules 2002; (x) I impose a penalty of Rs. 20,00,000/- (Rupees Twenty lakhs only) on Smt Kailashben M Patel, Proprietor, M/s. Shree M.C. Patel & Sons (Noticee No. 10), under Rule 26 of the Central Excise Rules 2002; (xi) I impose a penalty of Rs. 20,00,000/- (....
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....rmed the number of inner pouches, outer pouches and bags of 'Om Special Pandharpuri Tambakoo No. 1' packed in a month by the respective unit, (iv) affidavits of three buyers of tobacco viz. (a) Jiya Pradeep Jagiasi, Proprietor of M/s. Ekta Traders, (b) Md Anjum Abdul Gafar, Partner of M/s. Haya Traders, Mumbai, and (c) Md Javed Haji Yakub, Partner of M/s. Heena Enterprise, who have affirmed that the officers of Central Excise Department had visited them and tried to threaten them and obtain statements, but failed in their such action. M/s. Patel Products had requested the Adjudicating Authority to afford cross examination / examination-in-chief of: 1) Gulammiya Jamalmiya Sekh, Sandhana 2) Mahendrabhai Vishnubhai Patel, Ramol 3) Dhaneshbhai Manibhai Patel, Sandhana 4) Babubhai Valabhai Patel, Godhaj 5) Amratbhai Devabhai Patel, Der 6) Hirjibhai Narayanbhai Patel, Godhaj 7) Mukanji Hirji Patel, Kunda 8) Gautambhai Chanciabhai Patel, Maherav 9) Kashibhai Lallubhai Solanki, Dedarada 10) Maheshbhai Kantibhai Patel, Maherav 11) Manojkumar Kantilal & Co., ....
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....m Abdul Gaffar 51) Mrs. Jiya Pradeep Jagiasi 52) Authorised signatory of M/s. Konark Infrastructure Ltd. who had issued letter dated 12.10.2012 and letter dated 27.11.2012 53) Respective staff of M/s. Konark Infrastructure Ltd. who is said to have physically collected octroi and issued octroi slips to tobacco importers within the limits of Kalyan and Dombivli Municipal Corporation during the period from 25.07.2009 to 24.06.2012 and period from 01.06.2008 to 06.07.2009. 54) The Assistant Commissioner of Octroi, The Municipal corporation of the City of Thane, Mahapalika Bhavan, who has issued letter dated 26.09.2012 and 24.12.2012 55) Respective staff of M/s. Thane Municipal Corporation of Thane who is said to have physically collected octroi and issued octroi slips to tobacco importers within the limits of Thane Municipal Corporation during the period from 04.07.2011 to 05.08.2012 and period from 26.09.2010 to 23.05.2011 56) The Assistant Commissioner of Octroi, Pune Municipal Corporation who has issued letter dated 23.11.2012. 57) The Respective Staff of the Pune Municipal Corporation who has collected Octroi in regard ....
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....ed that the printed packing pouches were supplied in kilograms and not on piece basis, the officers wanted him to state more number of pouches were contained in one kilogram, than what was in actual. He had very promptly stated the correct ratio. In case of paper foil pouches, the ratio varies, but it cannot be more than 900 pouches per kilogram. He was shown statement of Mahendrabhai C. Patel, wherein he has stated that in one kg. 840 pouches would be made. He explained that thicker ply of plastic / paper, one kilogram would consist of less number of pouches, whereas thinner ply, one kilogram would consist of more number of pouches. He confirms that what Mahendrabhai C. Patel has stated is correct. Under no specification / size, the yield has gone above 900 pouches per kilogram. Learned Advocate placed reliance on the affidavits of 25 different farmers / dalals of raw tobacco, who had supplied raw tobacco to (a) M/s. Patel Product, Khandhali, (b) M/s Shree Krishna Traders, Khandhali and (c) M/s Shree M.C. Patel & Sons, Khandhali. It is his submission that despite the fact that Shri Mahendrabhai Patel in his statement had categorically said that the quality of raw tobacco purchased....
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....ared from the four units of M/s. Patel Product. Respective affidavits of production Supervisor of Unit-I, II & IV of M/s Patel Product are annexed with the appeal memorandum of M/s Patel Product. He further submitted that during the course of investigation, although officers of Central Excise Department had visited other three buyers of tobacco and tried to threaten them and obtain their statements as per their requirement, the said three buyers had not agreed to give false statements. Therefore, the officers had not recorded the statements of said three buyers. These three buyers have filed respective affidavits, narrating the whole incident. Copies of the affidavits of (a) Jiya Pradip Jagiasi, Proprietor of Ekta Traders, (b) Mohd. Anjum Abdul Gafar, Partner of Haya Traders, Mumbai, (c) Mohd. Javed Haji Yakub, Partner of Heena Enterprise are annexed with the appeal memorandum filed by M/s Patel Product. He further submitted that if the SCN is referred to, then as per Annexure MCP 58800 bags of 40 KGs of 'A' grade are alleged to have been diverted. Likewise, as per Annexure SKT 15325 bags of 40 KGs of 'A' grade are alleged to have been diverted. Thus, as per the SCN, Total74125 bag....
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....e basis of demand as the same are not reliable. Kesar Lokhande in her statement dated 22.05.2013 is said to have stated total number of inner pouches packed in a day would be 2000 to 3000 (per day per labourer) x 400 to 500 (number of labourers) = 8,00,000 to 15,00,000. Whereas, Shivaji Dhansing Rathod in his statement dated 04.06.2013 is said to have stated that total number of inner pouched packed in a day would be 2700 to 3375 (per day per pair of labourer) x 150 (pair of labourer) = 4,05,000 to 5,06,250. On the other hand, the SCN claims total number of inner pouches manufactured per day is 82,304 (95313.47). According to Kesar Lokhande, she has stated that ratio of work force: number of gunis per day is 400 to 500 workers would pack more than 600 to 750 gunis per day. On the other hand, according Shivaji Dhansing Rahod, he has stated that ratio of work force: number of gunis per day is 300 to 325 workers would pack 187.5 to 203.75 gunis per day. Thus, without prejudice to the retraction affidavits of the said packing labourers and said labour supervisors as well as without prejudice to the affidavits of all other labour supervisors of other units, even otherwise the statements....
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.... Hon'ble Delhi High Court in CEAC 40/2012] 7.4 As regards reliance placed on the letters received from the authorities of three Municipal Corporations, and the reliance placed on statements of transporter, out of total demand of alleged clandestine clearance of Rs. 31,11,78,562/-, the said so-called supporting evidence is only in regard to the total demand of Rs. 10,78,00,873/-. Therefore, demand of Rs. 20,33,77,689/- is not supported by even the said so-called evidence. It is also submitted that demand on M/s. Patel Product is based on statement of Mahendrabhai C. Patel dated 10.06.2013, wherein he is said to have stated that 50 to 75 bags of 'A' grade tobacco are diverted per trip in guise of B / C grade tobacco of M C Patel & Sons and Shree Krishna Traders. No investigation at all in regard to purchase of different /similar qualities of tobacco by any of the three firms is made by the officers of Central Excise Department to support the said allegation. Further, the demand is based on considering diversion of 75 bags per trip although Mahendrabhai C. Patel is said to have stated 50 to 75 bags were diverted per trip. Even otherwise, the reliance placed on the letters along wit....
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.... - Del). 7.5 It was further contended that even otherwise, the said data entry worksheet provided by the respective Municipal Corporations to the investigating officers claiming that 'Om Special Pandharpuri Tambakoo No. 1' is cleared within the respective Municipal Corporation limits could not be correct. It is so because, the concerned staff of the Municipal Corporation has no business to open the bags of tobacco loaded in a particular vehicle and check whether it is a branded tobacco or unbranded tobacco. The tariff rates of octroi during the period in dispute were the same, irrespective of whether branded or unbranded tobacco, being cleared inside the Municipal Corporation limits. Copies of the respective octroi tariffs of all the three Municipal Corporations in support of said submission were also placed on the appeal records. As the investigation failed to provide copies of the octroi slips, appellant had received the same under RTI from the respective Municipal Corporation. Copies of the said octroi slips are annexed with the appeal memorandum. It is observed from the same that, on none of the octroi slips 'Om Special Pandharpuri Tambakoo No. 1' is mentioned. What is menti....
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....onal V/s. Commissioner of Customs, Nahva Sheva-III - (2023) 6 Centax 11 (Tri-Bom.) (iii) Commr. of C.Ex., Ahmedabad-II V/s. Gujarat Cypromet Ltd. - 2017 (345) ELT 520 (Guj) (iv) J & K Cigarettes Ltd. V/s. CCE - 2009 (242) ELT 189 (Del) (v) CCE. V/s. Govind Mills Ltd. - 2013 (294) ELT 361 (All). 7.6 Further, appellants have also placed reliance on the following judgments in support of the submission that, even if affidavits were made before Notary public by the respective persons, whose statements are relied upon and copies of the said affidavits were submitted before the adjudicating authority for the first time after issuance of Show-cause Notice, the same is to be considered as a valid retraction: (i) Tejwal Dyestuff Industries V/s. Commr of C. Ex. Ahmedabad reported at 2007 (216) ELT 310 (Tri.-Ahmd) (ii) Commr of C. Ex., Ahmedabad-II V/s. Tejal Dyestuff Industries reported at 2009 (234) ELT 242 (Guj.) (iii) G. China Yellappa, Nizamabad V/s. Income Tax Officer, Ward - 2, Nizamabad ITTA Nos. 268/2003 dated 06.11.2014 by Hon'ble Andhra Pradesh High Court. 7.7 Without prejudice to the aforesaid submissions, it was further c....
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.... said clearances made from M/s Patel Product. The appellant has contended that the transaction value shall be determined under Section 4 of the Central Excise Act, 1944. The Valuation Rules can only be resorted to, if the assessee and the buyer of the goods are related and the price is not the sole consideration for the sale. Thus, the appellants have submitted that related party concept would not be applicable, as per the statements of the partners / proprietors of M/s Gajanan Agency / M/s Jalaram Traders as well as statement of Shri Mahendrabhai C. Patel, proprietor of M/s Patel Product. It was further stated that they have no interest in the business of each other; the sale effected by M/s Patel Product to M/s Jalaram Traders / M/s Gajanan Agency were independent transactions. It has further been submitted that even if it is assumed that they fall under the definition of "related party" as provided in Section 4 of Central Excise Act, 1944, even then while applying the Valuation Rules, first of all Rule 4 contained therein is required to be applied first. As per said Rule, if an assessee is found to be selling identical goods to related buyers as well as unrelated buyers, then fo....
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....s the submissions of the appellants that the said amendment came into force w.e.f. 01.12.2013. Prior to the said date, Rule 9 and Rule 10 applied only in case, where 100% of total sales were made by an assessee to related buyer. Only w.e.f. 01.12.2013, the amendment took place in the statute was to the effect that if a part sale is made to related buyer, then for that particular sale only, the amended rules have to be applied. Prior to 01.12.2013, since the amended Rule 9 and Rule 10 were not attracted, then the Rule 4 of Valuation Rules alone were applicable. As regards the appeal filed by the other co-appellants, it has been stated that when clandestine clearance of branded tobacco had not been substantiated with documentary evidences by the department, confirmation of the adjudged demand fails in respect of the appellant M/s Patel product and consequently, the penalties imposed on the other appellants cannot be sustained. 8.1 Shri Shamboonath, learned Special Counsel appearing for the Revenue has brought to the notice of the Bench the findings recorded at page 175 to 180 in the impugned order, to state that the affidavits were forged by the appellants. Therefore, he submitted....
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....s, where no corroborative invoices of 'Om Special Pandharpuri Tambakoo No. 1' were found, but only the LRs were found, those clearances should be treated as clandestine clearance of the said branded tobacco. He further submitted that Revenue is not required to prove its case of clandestine clearance with mathematical precision. According to him, the evidences unearthed during the course of investigation were sufficient to conclude that clandestine clearance of 'Om Special Pandharpuri Tambakoo No. 1' were made by M/s Patel Product. It is his submission that the Revenue has successfully proved its case and the adjudicating authority has rightly confirmed the adjudged demands against M/s Patel Product and adjudged penalties against all other appellants. 9. We have heard both sides and examined the case records, including the written submissions filed during the course of hearing of appeals. 10.1 We find from the impugned order that M/s Patel Product in their reply to the SCN filed before the adjudicating authority, had submitted copies of retraction affidavits of the persons, whose statements were recorded under summons during the course of investigation of the present dispute. ....
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.... i.e., after the dates of disputed affidavits; but from the statement of his daughter-in-law Ms. Charmaine Sanjay Phatarphekar, it was found that the affidavits were not notarized by the said Notary Public. We find from the impugned order that the details of enquiry into the retraction affidavits were communicated to all the fourteen noticees vide letter No.V/Adj(30)HPU-I/CR-44/Commr/M-II/13-14, dated 08.12.2014 and they were requested to make their submission on the enquiry and the findings of the enquiry. In reply to the said letter, M/s Patel Product and Shri Mahendrabhai C. Patel submitted letters dated 30.12.2014 and 02.01.2015, wherein they had disputed the authority to initiate enquiry at the adjudication stage. They had also stated that the statements claimed to have been recorded were not reliable. They requested for cross examination of the stamp vendor (Umar Sharif Mohammad Nawaz), Notary Public (Chowdhary Munir Hussain), daughter-in-law of the deceased Notary (Ms. Charmaine Sanjay Phatarphekar). M/s Patel Product and Shri Mahendrabhai C. Patel had also requested to afford cross examination of the District Revenue Officer, Thane, whose letter dated 12.03.2014 was relied ....
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.... department has made out a case against the appellants, alleging involvement in the fraudulent activity of clandestine removal of excisable goods. Thus, placing reliance only on the confessional statements, without proper corroboration with the documentary evidences cannot be considered as valid or justified action, which would suffice to prove the charges of clandestine removal of excisable goods. The law is well settled in the cases of Ghodavat Pan Masala Products Ltd. Vs. Commissioner of Central Excise, Pune- 2004 (175) E.L.T. 182 (Tri. - Mumbai); Radheshyam Kanoria Vs. Commissioner of Central Excise, Thane-II- 2006 (195) E.L.T. 130 (Tri.- Mumbai); Pioneer Industries Vs .Commissioner of Central Excise, Mumbai-II- 2006 (193) E.L.T. 506 (Tri.- Mumbai) and Chandan Tobacco Company Vs. Commissioner of Central Excise, Vapi- 2014 (311) E.L.T. 593 (Tri. Ahmd.), that statements relied upon, which were subsequently retraced in writing, cannot prove the case of clandestine removal, and to make out a case, the department has to bring sufficient corroborative evidence to substantiate such case and that demand confirmed on presumption/assumptions are not sustainable. 10.2 Further, we also ....
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....considered as a valid retraction. 10.4 Learned Special Counsel appearing for the Revenue has placed the argument that the affidavits were backdated, and therefore, the same being forged cannot have any evidentiary value. We have perused the impugned order at paragraphs 59, 60 and 61, wherein the learned adjudicating authority has recorded that during the course of investigation, a statement dated 17.06.2013 of Shri Mahendrabhai C. Patel was recorded, and the said statement was retracted, by way of filing an affidavit under the cover of letter dated 18.06.2013, on the ground that it was not voluntarily given and the statement given thereunder was not true and correct. Moreover, in response to the said retraction affidavit, a rejoinder letter dated 26.06.2013 was also issued by the department, for ascertaining the veracity of the submissions made in the statement dated 17.06.2013. Likewise, statement dated 20.06.2013 of Shri Mahendrabhai C. Patel was also recorded. Same was retracted on the very next date vide affidavit dated 21.06.2013, for which rejoinder dated 26.06.2013 was also issued by the officers of the department. The facts regarding recording of statements, their retrac....
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....t i.e., respective octroi slips, the adjudicating authority could not have relied upon the same for confirmation of the duty demand. Further, the said worksheets prepared in a tabular form on a computer, in the absence of required certificate under Section 36B ibid, cannot be considered as the basis for confirming the duty demand. We find that the Co-ordinate Bench of the Tribunal, in the case of Trikoot Iron & Steel Casting Ltd. Vs. Additional Director General (Adjn.) Directorate General of GST Intelligence (Adjudication Cell), New Delhi, in Final Order No. 58546/2024 dated 09.09.2024, upon placing reliance on the judgements of Hon'ble Supreme Court in the case of Anwar P.V. Vs. P.K. Basheer and Others - AIR 2015 S.C. 180 and Arjun Panditrao Khotkar Vs. Kailash Kushanrao Gorantyal & Others - AIR 2020 S.C. 4908, has held that a printout generated from the personal computer, that has been seized, cannot be admitted in evidence, unless the statutory conditions laid down in section 36B of the Central Excise Act are complied with. It has also been held that if the data is not stored in the computer, but officers take out a printout from the hard disk drive by connecting it to the compu....
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....tobacco of M/s. Shree M.C. Patel & Sons and M/s. Shree Krishna Traders from Khandhali to Kurla, 50 - 75 bags, for each trip of the said tobacco, were diverted to M/s. Patel Product, Kurla, which were further used for manufacturing 'Om Special Pandharpuri Tambakoo No. 1'. It is noticed from the available case records that during the course of adjudication proceedings, the appellants had submitted affidavits of various farmers / dalals of raw tobacco, who had supplied tobacco to the said three firms at Khandhali; that the said farmers have deposed that the quality of tobacco supplied to M/s. Patel Product was superior (A' grade) and the quality of tobacco supplied to the other two firms was inferior ('B' grade) and that such 'B' grade tobacco could not be used for packing branded tobacco i.e., 'Om Special Pandharpuri Tambakoo No. 1'. It has further been observed that though the appellants had requested the adjudicating authority to afford examination of the said farmers/dalals, but such requests made was turned down by him. In such scenario, we are of the considered view that allegation of diversion of tobacco of M/s. Shree M.C. Patel & Sons and M/s. Shree Krishna Traders for packing....
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...., were recorded and relied upon in the adjudication order. On that basis, the adjudicating authority has observed that 'Om Special Pandharpuri Tambakoo No. 1' was produced in excess, and were removed outside the premises in a clandestine manner. It is an admitted position that the appellants had requested the adjudicating authority for affording cross examination of the said labour supervisor and packing labourer. However, the same was denied. Under such circumstances, we are of the view that in terms of Section 9D ibid, such statements have lost their evidential value and cannot be relied upon in isolation, without any further documentary evidence for confirmation of the adjudged demands. Further, the allegation of clandestine manufacture and clearance of excisable goods is a serious charge, and the burden to prove such charge is entirely lies with the Revenue. In this case, we find that the Revenue has not brought on any substantial evidence to prove such allegation levelled against the appellants. 10.12 Learned Special Counsel has relied upon various judgements delivered by the judicial forum, to strengthen the case of Revenue in support of confirmation of adjudged demands on....