TaxTMI 
TaxTMI 
2025 (8) TMI 493
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.... is the sole proprietor of the firm. The Appellants are engaged in the manufacturing of branded chewing tobacco under brand names of RATNA, PRABHAT, VIJAY etc., classifiable under HSN 24039910. Chewing tobacco is chargeable to Central Excise duty in addition to GST with introduction of GST with effect from 01.07.2017. The finished goods are sold in packing of 10 gms to 500 gms either in packing of carton or tins. The production of chewing tobacco was started w.e.f. December, 2017. The main raw materials for the manufacturing of chewing tobacco are tobacco flakes, fragrances, perfumes etc. Packing materials are small cartons & tin containers. The Appellants avail input tax credit (ITC) on raw materials and packing materials. The business of tobacco manufacturing by the firm was set up by Shri Vijay Kumar Arya, husband of Smt. Chhaya Devi, who unfortunately died in 2014. Smt. Chhaya Devi thereafter started looking after the business of her husband with a team of skilled persons. 3. The Officers of the Anti-evasion branch of the CGST Commissionerate, Noida visited factory of the Appellant No.1 (PZFO) on 28.10.2020 and searched the factory. Simultaneous searches were als....
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....gwith interest at applicable rate under Section 11AA of the Central Excise Act, 1944 and to impose penalty under Section 11AC of the Central Excise Act, 1944 for willful suppression and mis-statement of the relevant facts and contraventions of the Central Excise Act, 1944 and the rules made thereunder. Penalty under Rule 29 of the Central Excise Rules, 2017 was also proposed against Smt. Chhaya Devi, proprietor of the Appellant firm, Shri Sanjiv Kumar, Manager of the Appellant firm and M/s Maharashtra Freight Carriers Pvt. Ltd [M/s MFC]. 6. The Show Cause Notice [SCN] was adjudicated vide the impugned order after following the due process of law. Demand of duty as proposed in the SCN was confirmed and equal amount of penalty was imposed. Penalty proposed on Smt. Chhaya Devi was dropped. Penalty of Rs.75,00,000/- each was imposed on Shri Sanjiv Kumar Manager of M/s PZFO and M/s MFC under Rule 29 of the Central Excise Rules, 2017. Being aggrieved with the said order, these appeals have been filed before the Tribunal 7. Shri Abhinav Kalra, Chartered Accountant and Shri Nishant Mishra, Advocate, Counsels for the Appellants appeared to plead the case. Ld. Counsel for the App....
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....e invalid and illegal. iii. Incoming and outgoing materials are properly controlled by security deployed at entry and exit gate of the factory with proper record for outgoing and incoming materials but the record was not considered nor resumed by the visiting officers where details of materials are recorded with tax invoices. Without tax invoices, trucks of incoming or outgoing materials cannot be allowed by the security personnels. It is evident that physical movement of goods from the factory and to the factory are authentically monitored at gate and entry is made in the register maintained by the security personnels. No statement of security guard was knowingly recorded with an intent to implicate the Appellant in false charges of clandestine removal. iv. In the SCN, it is stated that the visiting officers conducted stock taking of finished goods and raw materials. However, in the Panchnama dated 28.10.2020 it is stated that stock of finished goods was obtained from the staff of the factory. It is a strong indication that no physical stock taking was conducted. The view of the Department that there was stock difference noticed consequent to stock taking is only based on pr....
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..... As per hand writing it was prepared by the same person for all dates. It is also not clear from the panchnama, from where and from whose possession said slips were recovered. Only Shri Ajay Kumar Saha in statement dated 18.01.2021 stated that said slips were prepared by either Vipin or by someone else on his direction. However, no statement of Shri Vipin was recorded for interrogation relating to said slips. What was the purpose for preparing said slips was not explained by any one in subsequent statements. - Loading Register RUD -25:- This register has been resumed as per Sl. No.08 of Annexure-A to the Panchnama dated 28.10.2020 drawn at M/s MFC. Shri Mukesh Kumar, Manager, M/s MFC stated in his statement dated 30.12.2020 that the aforesaid register is maintained regarding entries of loading of goods from the godown of the transporter. The details in the said register were available from 06.01.2020. However, from perusal of the said register, as provided by the Department, entries of loading of goods were from 03.10.2020. There is no record provided by the Department showing loading details from 06.01.2020. The chart prepared and enclosed as Annexure-B to the statement ....
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....20 40 box 21.10.20 213 box 21.10.20 80 box 20.10.20 225 box 20.10.20 40 box 19.10.20 194 box 19.10.20 120 box 17.10.20 280 box 17.10.20 120box 18.10.20 18.10.20 79 box 14.10.20 200 box 14.10.20 290 box 12.10.20 40 box 12.10.20 -- 16.10.20 157 box 16.10.20 80 box 15.10.20 348 box 15.10.20 69 box It may be seen from the above that there is variation in figures of dispatch of goods from the factory and goods received by the transporter. It clearly shows that dispatch quantity which has been taken by the Department from 'dispatch slips' is bogus and baseless. By no stretch of imagination, it can be considered as authentic removal of goods. There are series of decisions where it has been held that clandestine removal cannot be established only on the basis of resumption of some loose papers showing some entries related to removal of goods. Further, on the basis of entries made in stock register and loading register a comparative chart, date-wise, relating to removal of goods, has been prepared as below:- Date Dispatch quantity as per stock registe....
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.... to be cleared clandestinely, a huge quantity of raw material, extra man power for manufacturing, additional electricity, packing materials were required. The Department did not make any investigation in the said aspects. In the factory, during stock taking, no discrepancies were found in the stock of raw materials and in packing materials. It is strong proof that no goods were manufactured clandestinely. Even no statement was recorded from the personnel of the factory as to how goods said to be cleared without payment of duty were manufactured clandestinely. Without deployment of extra man power, it is not possible to manufacture such huge quantity of clandestinely cleared goods. It is undisputed fact that finished goods were cleared in packaging of tin containers or paper boxes which are tailor made items as they are carrying brand name, manufacturer's name of the Appellant-1. Such packaging materials must have been manufactured by a factory on specific order of the Appellant. The Department did not make any effort to find out manufacturer of packing materials who supplied them in unaccounted manner. In absence of above, charges of clandestine removal is based on only assumption ....
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....7.10.2020 as per 'dispatch slips' recovered from the factory were already included in the Stock Register. However, demand of duty on goods shown on 'dispatch slips' was separately worked out as per Annexure-B to the SCN. Duty demanded as per the SCN is sum of Annexure-B & Annexure-D. It is thus double demand on the goods mentioned on 'dispatch slips'. One by way of receipts shown in Stock Register' and other by determination of duty on the basis of entries show on dispatch slips. Demand of duty & NCCD on the basis of dispatch slips, amounting to Rs.1,85,97,560/-, is liable to be dropped. Further, in stock register, entry of receipt of goods was shown in cartons without disclosing as to how much goods were received brand wise and variety wise. In Annexure-D, duty has been worked out variety-wise on the basis of stock register which is based on presumption basis. Thus, the duty determination is patently incorrect and has been made in such a way to inflate the demand figures. Thus, the demand of duty and NCCD on the basis of stock register is incorrect. xii. As demand of duty and NCCD is not sustainable, no interest is payable by the Appellant. Even if the demand survives, no....
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.... huge amount of cash cannot be hidden by anyone. It is an important factor which was required to be investigated but was not done at all. In case, the goods are sold by way of evading duty, it is logical that amount equal to duty which was to go to the Government exchequer was retained by the seller. To avoid the disclosure of clandestinely removed goods, payment is always received in cash. So, non-recovery of cash received from such alleged sale of clandestinely removed goods indicate that allegation of clandestine removal is based on assumption and presumption only. Evasion of duty cannot be established. Ld. Commissioner has given finding on the said issue as below:- "I note that the allegation of clandestine removal from the factory of the noticee is not based on recovery of cash but is based on overwhelming evidence in the shape of physical seizure of goods not only from the godowns of transporters but also found loaded in various trucks." It is also noticed that the Department has alleged that transportation of goods without invoice was going on from last eleven months. Full truck goods were transported without invoice from the factory to transporters at Delhi and ....
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....covery of some loose papers where name of the factory and description of goods were not shown, Clandestine removal is not established. The Tribunal in the case of Shivam Steel Corporation [2016 (339) E.L.T. 310 (Tri. - Kolkata] has observed that demands are not sustainable on the basis of loose papers/loading slips unless corroborated appropriately by other independent evidence. In the case of New India Dyeing vs. CCE [2004 (165) E.L.T. 316] the Tribunal had held that demand based on recovered sale bills and recorded statements without any other evidence is not sustainable. We find that in Shivalya Ispat and Power Ltd. [2017 (357) E.L.T. 742 (Tri. - Del.)], it has been held that demand cannot be made against them merely on the basis of some loose papers showing some raw material and assuming that the goods were produced and removed without payment of duty. 11. In the SCN, 'Loading Register', RUD-25 recovered from the premises of M/s MFC was also made evidence to prove the clandestine removal by the Appellant. It has been explained that the said register contained entries of loading of goods received from the factory of M/s PZFO, date-wise, in trucks for further transportation....
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....s shown. On comparison the figures of quantity of goods shown as dispatched in Stock Register, Loading Register and Slips issued by Om Sai Cargo, mismatch was observed as per details given below:- Date Quantity dispatched as per stock register Quantity dispatched as per loading register Quantity dispatched as slips of Om Sai Cargo 13.10.20 131 47 130 14.10.20 nil nil 69 15.10.20 nil nil - 18.10.20 nil nil 79 19.10.20 170 170 91 20.10.20 65 134 65 21.10.20 77 146 77 22.10.20 nil 24 24 23.10.20 83 nil - 24.10.20 nil 128 59 25.10.20 nil nil - 26.10.20 42 161 132 27.10.20 nil 164 55 The above chart indicates that there was mismatching among figures of dispatch draw....
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....dence and assessee - Rules 11 and 25 of Central Excise Rules, 2002. [para 50] e. Synergy Steels Ltd [2020 (372) E.L.T. 129 (Tri. - Del.)]- The Tribunal in this case held that- Third Party Evidence - Said demand has been confirmed only on basis of certain loose slips/pages resumed from third party i.e. consignment agent - No reliance can be placed on these loose sheets as name of appellant is not mentioned on them. 13. We find that there is no investigation in regard to procurement of raw material and packing material used in the manufacture of finished goods. For manufacturing huge quantity of goods alleged to be cleared clandestinely, a huge quantity of raw material, extra man power for manufacturing, additional electricity & packing materials were required but there is no evidence regarding procurement of raw material or packaging material. It shows that the Department could not prove clandestine procurement of raw material and packaging material. Packing material used by the Appellant has printing of name of the brand, factory along with address and other particulars. It means packing materials are tailor made items. Such packaging materials must have been manufactur....
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....ity of raw materials as shown in Appeal and investigation has not adduced any evidence of excess procurement and use of Raw materials, packing materials. I find that Appellant has also submitted that levy of duty is on actual manufacture of goods and no manufacture of goods can be proved without proving excess procurement and use of excess Raw materials, packing materials, electricity consumption, men power etc. Therefore, it is contention of Appellants that when production of goods is not proved first, alleged clandestine removal of such goods is consequently not proved. Investigation has not adduced any such evidences on record to prove their case. I find that in absence of any such corroborative clinching, positive evidences of excess procurement and use of required Raw materials, packing materials and confirmation from buyers of receipt of such clandestinely removed goods, receipt of sale proceeds etc, and without proper verification of stock of finished goods, the case of clandestine removal is also not proved for demand of Rs. 1,85,994/-. In the case of Oudh Sugar Mills Ltd. v. U.O.I.,[ 1978 (2) E.L.T. (J 172)], the Supreme Court has held that the findings based o....
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....rds of the factory, no evidence has been brought on record either regarding manufacture of the finished goods or clearance of the same." The ratio of above decisions is squarely applicable in the present case. 14. We find that during investigation of the case, statements of various persons of the factory, transporters, truck drivers and dealer of M/s PZFO were recorded. Smt. Chhaya Devi Proprietor stated in her statement dated 09.03.2021 that she did not know M/s MFC and Mahalaxmi Freight. She did not accept the allegation of clandestine removal of goods from the factory. Ajay Kumar Saha In-charge of production and transportation in his statement dated 18.01.2021 stated that he did not do work relating to issuance of invoice or e-way bills but side by side he confirmed that goods found at the transporters premises were of M/s PZFO. These are contradictory statements. It is also significant to note that no statement of Vipin was recorded whereas as per the statement of Shri Saha he was maker of dispatch slips. The reason for not recording statement of Vipin was not explained anywhere in the SCN. The above statement of Shri Saha does not seem authentic and based on correct fact....
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.... said goods for onward transmission. He further stated that every carton was marked with marka "HN", "KT", "KGF" & "MB' which were short form of dealers of PZFO located at Karnataka but which marka represent which dealer was not stated. In his statement dated 19.11.2020, he stated that goods received from M/s PZFO were entered in Stock Register, goods dispatched were shown in Loading Register and for transportation of goods of M/s PZFO, slips of Om Sai Cargo were issued. However, on comparison of entries of dispatch shown in loading register, stock register and slips of Om Sai Cargo, a huge variation was noticed which indicates that statement of Mukesh Kumar is not authentic but contrary to documentary evidence. In the statement dated 30.12.2020, he reiterated the earlier statement. He confirmed that 9235 cartons were transported clandestinely from 01.06.20 to 27.10.2020. As per stock register, 12221 Cartons were received from M/s PZFO from 23.11.2019 to 28.10.2020. However, comparative charts discussed in foregoing paras indicates a lot of difference in figures among various records maintained at the transport's end. Thus, there is no documentary corroboration of the s....
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....statements recorded during investigation if the same is not supported by documentary evidence. In the case of Commissioner of C.Ex. & Service Tax Vs. Mittal Pigment Pvt. Ltd [2018 (16) E.L.T. 41 (Raj), Hon'ble Rajasthan High Court held that statement which is further corroborated in the form documentary evidence cannot be considered a valid evidence. In lack of corroborative evidence, it would be treated that the Department has not discharged burden to prove allegation conclusively. In view of the above, the demand of duty on clandestine removal is liable to be dropped. 15. As regards penalty on Shri Sanjiv Kumar Manager of M/s PZFO under Rule 29 of the Central Excise Rules, 2017, the provisions of said Rule is reproduced for ready reference:- "Rule 29. Penalty for certain offences. - (1) Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exc....
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....mmissioner of Central Excise Vs. M/s. Ramesh Kumar Rajendra Kumar & Co. & Anr [2015 (325) E.L.T. 506 (Bom)], in paragraph 7 after extracting Rule 209A has held that:- "The sine qua non for a penalty on any person under the above rule is: either he has acquired possession of any excisable goods with the knowledge or belief that the goods are liable to confiscation under the Act or Rules or he has been in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or has in any other manner dealt with any excisable goods with such knowledge or belief. Acquisition of possession of goods is, indisputably, a physical act i.e. the act which could not have been done without handling or movement of excisable goods as mentioned in the rule. The words "who acquires possession" would indicate that the person sought to be penalized under this rule has to first acquire the possession and then do the activity of transportation etc. as contained in the rule. It is, thus, clear that the physical possession of the goods is a must for doing the activity of transporting referred in rule 209A. The ratio laid down by Court in Jayantilal Thakkar & C....
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....on of any excisable goods with the knowledge or belief that the goods are liable to confiscation under the Central Excise Act or Rules or he has been in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or has in any other manner dealt with any excisable goods with such knowledge or belief. Acquisition of possession of goods is, indisputably, a physical act, and so is each of the various ways of dealing with goods, specifically mentioned in the rule. The expression "any other manner" should be understood in accordance with the principle of ejusdem generis and would, then, mean "any other mode of physically dealing with the goods". In the instant case, it is a fact that Shri Sanjiv Kumar had not dealt the impugned goods physically or in any other manner. Hence not liable to penalty under Rule 29. It has been held by various Appellate Authorities that where there is no allegation in SCN regarding particular commission or omission on part of a person which shows that there was intention to evade the duty, the personal penalty is not imposable. Reliance is placed on following case laws in this regard:- a. COLLECT....
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.... the target. He was also supervising marketing of the products along with marketing team to develop vendors and customers. His team also gathered market feedback on various products of M/s PZFO. The orders were collected and handed over to the dispatch section for delivery of goods after following the procedures and rules. Similarly, he also identified suppliers of raw materials and packaging materials and ordered them to supply the same as per requirement of the unit. On the basis of above submissions, it is crystal clear that the Noticee was not involved in any activities of dispatch of goods whether made following the law or otherwise. He never directed any staff to clear the goods without payment of duty. We further find that no incriminating documents were recovered showing involvement of his to any degree in transactions of clandestine removal. Only statements of Shri Ajay Kumar Saha, Shri Ganesh Prasad Gupta and Shri Rajan Shrivastava employees of M/s PZFO were relied upon to allege his involvement. The said statements were not corroborated by any documentary evidence. Not even a single documentary evidence was discussed in support of the allegation. The overall superv....
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....liable to a penalty not exceeding three times the value of such goods or five thousand rupees, whichever is greater." The sine qua non for a penalty on any person under the above rule is that either he has acquired possession of any excisable goods with the knowledge or belief that the goods are liable to confiscation under the Central Excise Act or Rules or he has been in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or has in any other manner dealt with any excisable goods with such knowledge or belief. Acquisition of possession of goods is, indisputably, a physical act, and so is each of the various ways of dealing with goods, specifically mentioned in the rule. The expression "any other manner" should be understood in accordance with the principle of ejusdem generis and would, then, mean "any other mode of physically dealing with the goods". In the instant case, it is a fact that M/s MFC had not dealt the impugned goods physically or in any other manner knowingly that they were liable to confiscation. Hence not liable to penalty under Rule 29. It has been held by various Appellate Authorities that where there ....