TaxTMI 
TaxTMI 
TaxTMI 
2026 (3) TMI 147
X X X X Extracts X X X X
X X X X Extracts X X X X
.... merits and evidence on the issue of levy of penalties on the assessee. The relevant portion of the order is as below:- "In our view, the Tribunal has erred in ignoring material evidence and has not recorded any findings for setting aside the penalty imposed by the Adjudicating Officer. No reason has been recorded for setting aside the penalties. After careful consideration of the matter, we are of the view that the finding of the Tribunal, setting aside the penalties imposed by the Adjudicating Officer needs to be interfered with. Accordingly, it is set aside. The matter is remitted to the Tribunal to reconsider the matter on the question of penalties afresh. The appeal is, accordingly, disposed of. There shall be no order as to costs." 2. The assessee had thereafter preferred a review application before the Hon'ble Allahabad High Court, being Review Application No.14877 of 2015, for review of aforesaid order dated 03.11.2014 passed by it. The Hon'ble Allahabad High Court disposed of the aforesaid review application vide its order dated 21.08.2025, passing the following order:- "1. Heard learned counsel appearing on behalf of the parties. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....katha and laminated packing material (O1O at pp 63 of PB 1) and alleged that the same was used to manufacture unaccounted goods which were removed clandestinely. During the search, the Appellant was made to deposit Rs.1,81,006/- vide PLA Entry No.1683 dated 20.01.2003. At the premises of Basudeo Prasad & Sons, the following seizures were made:- a. 170 bags of Gold Mohar Zarda valued at Rs.11,60,159/- b. 16 bags of Gold Mohar Pan Masala Sada valued at Rs.1,98,263/- c. 420 small tin boxes of 100 gm each of Gold Mohar Pan Masala valued at Rs.18,920/- d. Thus, a total of goods worth Rs.13,77,342/- were seized e. During the search, the books and stock registers of Basudeo Prasad & Sons were also examined. 4. Later on, the partner of Basudeo Prasad & Sons filed a letter explaining its books and stock registers. The premises of M/s Jain General Stores were also searched but the facts of the same are not discussed as they are no longer a subject of the present appeal. 5. Details of Show Cause Notice [SCN] dated 16.07.2003 (at p. 58 of PB 2) The Appellants were issued SCN dated 16.07.2003 (SCN-1) for confiscation of the seized goods and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ial has been calculated on the basis of the cut supari consumption. d. The Appellant was paying over-time to their workers and on the basis of the availability of the machines, their normal working hours and capacity of the machines, it was concluded that the Appellant manufactured and cleared Pan Masala, Gurkha without payment of Central Excise duty. e. Two separate Chart Annexures-A&B of the SCN were prepared to conclude that the Appellant consumed more raw material in comparison to the formula submitted by Shri Deepak Mehra. f. On the basis of the above Chart, it was concluded that the Appellant manufactured and cleared un-accounted for Pan Masala Gutkha valued at Rs.54,80,131/- As such the Appellant evaded duty of Rs.32,88,080/-. 7. Thus, the Appellant was asked to show cause against the, inter alia, following proposed levy of duty and penalty:- a. Central Excise duty amounting to Rs.1,81,006/- involved on the shortage found on 20.01.2003 of 603350 number of pouches of Gold Mohar Brand Gutkha valued at Rs.3,01,6751/- and voluntarily debited by them through P.L.A. Entry No.1683 dated 20.01.2003. b. Central Excise duty amounting to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....riginal. The followings findings were arrived at in the OIA (findings from p. 42 of the PB 1) Order-in-Appeal No.466-70-CE/APPL/KNP/06 dated 14.09.2006 (at p. 31 of the PB 1).:- a. OIA confirmed the confiscation of goods of Basudeo Prasad & Sons basis the following findings:- i. As per the Department a business is required to keep some books of accounts, and they don't alter or re-write them. The fact that Basudeo Prasad & Sons kept the records in pencil to be able to re-write the books indicated connivance. ii. That the stock maintained in pencil did not tally with the actual stock found during physical verification. iii. The above indicated connivance. b. OIA confirmed the confiscation of cash seized at the premises of the Appellant and rendered the following finding (at p. 43 and 44 of the PB 1):- i. The explanation furnished for cash at home is not probable as income. The reason for keeping the huge amount of cash and not depositing the same is unexplained. ii. The reasons furnished later by the Appellant are an afterthought as they were not given at first instance. iii. The explanation of Rs.3.46 lakhs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ithout any basis and not supported by any cogent evidence. b. The cash of Rs.15.97 lakhs found at the residence of the Sarin family belonged to the family and the same arose from various sources which include sale of gold bullion and bars by Rani Sarin (mother of Anil and Davi Sarin), Nitin Sarin (S/o of Davi Sarin), Rishi Sarin (S/o Davi Sarin), Bela Sarin (w/o of Davi Sarin), Davi Sarin, Anil Sarin and Abha Sarin (w/o of Anil Sarin), agricultural receipts of Davi Sarin and Anil Sarin and some consideration for property received by Anil Sarin ( page 160 to 163 of PB 2). All supporting evidences were also supplied (at p. 178 of the PB 2) c. The details of the supporting evidence furnished by the Appellant are as under:- Sr. No. Particulars to whom the cash belonged Amount (Rs.) Page in Reply to SCN dated 25.09.20 03 (p. 157 onwards) Details and Page No. of relevant annexure Affidavit s in Support 1. Rani Sarin W/o of R.N.S. Sarin 2,17,894 160 A at p. 180 (Certificate of ACIT for Opening Cash Balance Rs.2,09,800) A1 at p. 181 (sale voucher of Bullion Rs.8,094) H at p. 222 2. Davi Sarin 3,82,659 160 B at p. 182 (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le of Qualis Car p. 164 Annexure M at p. 273 Affidavit of Shri R.N.S. Sarin P. 164 Annexure N at p. 276 f. No statement of Anil Sarin was taken at the time of search. Mere non-recovery of Rs.4,000/- cannot be any basis for treating the cash of Rs.3.46 lakhs as cash from sale of clandestinely removed goods, especially considering that the OIA and OIO have not been to controvert the submissions of the Appellant with any substantial finding or document. g. The allegation that cash was from sale of clandestinely removed goods is not supported by any documentary evidence and cannot be sustained in law. Submissions against the confiscation of goods found at the premises of Basudeo Prasad & Sons:- I. The findings in the OIA and OIO have been returned without considering the submissions of the Appellant and Basudeo Prasad & Sons and are based on surmises and conjectures. II. Basudeo Prasad & Sons were not required to maintain any books of accounts (in law). Merely because they kept records in pencil so as to finalize them after verification, cannot be any basis to hold that they were manipulating their books. In fact, the very allegatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ir details are as under: 1637 18.01.2003 30 Rs.2,04,734.00 289 1635 18.01.2003 30 Rs.2,04,734.00 282 1632 17.01.2003 40 Rs.2,72,979.00 283 1622 16.01.2003 40 Rs.2,72,979.00 284 1621 16.01.2003 30 Rs.2,04,734.00 285 1616 15.01.2003 20 Rs.1,36,490.00 286 1615 15.01.2003 30 Rs.2,04,734.00 287 A TOTAL 220 Rs.15,01,384.00 Submissions regarding the invoices of Sada Pan Masala are made from p. 174 para 45 onwards and their details are as under: 1611 14.01.2003 9 Rs.1,17,306.00 288 1574 08.01.2003 9 Rs.1,17,306.00 372 1525 31.12.2002 4 Rs.58,653.00 290 1457 20.12.2002 9 Rs.1,16,975.60 291 B TOTAL 31 Rs.4,10,240.60 Submissions regarding the invoices of Sada Pan Masala in Tins are made from p. 175 para 46 onwards and their details are as under: 1636 18.01.2003 310 Rs.13,965.00 292 1595 11.01.2003 310 Rs.13,965.00 293 1552 04.01.2003 310 Rs.13,965.00 294 C TOTAL 930 Rs.41,985.00 TOTAL of A+B+C ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....high-pitched duty and a statement of Deepak Mehra which was obtained under pressure. VII. The OIO and OIA suffers from non-application of mind and demand of duty is clearly not sustainable in law fact. Furthermore, the allegations of suppression of records and willful suppression do not survive considering that the Appellant has duly maintained registers and furnished the same. 12. The learned Departmental Authorized Representative appearing for the Revenue supported the findings recorded in the impugned order and prayed that the appeal filed by the Appellant, being devoid of any merits, may be dismissed. 13. Heard both the sides and perused the appeal records. 14. I find that the cash seized was not received against any goods clandestinely removed. The said allegation of the Department is without any basis and not supported by any cogent evidence. It is submitted that the cash of Rs.15.97 lakhs found at the residence of the Sarin family belonged to the family and the same arose from various sources which include sale of gold bullion and bars by Rani Sarin (mother of Anil and Davi Sarin), Nitin Sarin (S/o of Davi Sarin), Rishi Sarin (S/o Davi Sarin), Bela Sarin (w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d goods. In all such cases, the Department must put forth some reliable evidence in order to discharge their initial burden. 6. It is no doubt proved that the Department is not expected to prove all their cases with mathematical precison but all the more it is necessary that they should produce some evidence in order to discharge the initial burden cast on the Department. Once if the initial burden is discharged by the Department, then the onus shifts on to the appellants. The Department cannot start with the evidence produced by the appellants. They must have some evidence on their side to discharge their burden. Hence it will not be correct to hold that in view of the fact that the appellants have not produced accounts it should be held as something obtained by the sale of smuggled silver. The relevant observation of the adjudicating authority is found at Paras 127 to 130 of the impugned order: "127. On the perusal of the statement of Shri V. Somasundaram, it is found that while explaining the documents seized he stated that the document Sl. No. 33 relates to the amount of sale proceeds of the smuggled silver bars. As per the said document Shri Somasundaram had ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ient to hold that this is the sale proceeds of smuggled goods. All that relied on by the learned adjudicating authority is the mention Yuwaraja 5 + 5 = (10) Rs. 15,00,000. This entry has no connection with the amount in question. In the statement of Shri V. Somasundaram, he has stated that this amount of Rs. 15,00,000/- represents the partial amount from the devotees of Lord Ayyappa. There is no nexus established between this amount of Rs. 15,00,000/- and the amount of Rs. 10,75,000/- seized in this case. Except these three appellants none else claimed the same. These three appellants admittedly are residing in the same premises from where the amounts are seized. Since there are no claimants for this amount there is no reason to dis-believe their version that they are the owners. The mere non0accountal as to the receipt of this amount by them is not sufficient to hold that these are sale proceeds of smuggled silver. The reason is that the burden is on the Department to prove the same. The mere non-accountal of the amount and as to how they received the same is not sufficient evidence to hold that these are sale proceeds of smuggled silver. The Income Tax Department may have some ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... accordingly set aside the portion of the Order confiscating the Indian Currency and order its release to the appellants." 16. Further, in the case of Patidar Products vs. CCE & ST, Bhavnagar (2023) 9 Centax 231 (Tri.-Ahmd.) it was held that confessional statements of various persons such as proprietor of assessee firm, raw material suppliers, transporters and various buyers, recovery of kachcha chits and huge amount of Indian currency from residential premises of proprietor of assessee firm and seizure of finished goods in factory premises found loaded in truck without any documents could not be grounds to uphold charge of clandestine removal in absence of any other corroborative evidences in form of receipt and utilization of raw materials, excess consumption of electricity, transporter's documents, receipt of consideration etc., especially when persons giving statements were not offered for cross-examination before Adjudicating Authority. Indian currency seized during investigation from residential premises of assessee could not be confiscated in absence of any evidence to show that same was sale proceeds of excisable goods cleared clandestinely without payment of duty and on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ra Patel, Partner of M/s. Micro Seal Packaging in his statement dated 11-102011 agreed to have sold 700 kgs of Flexible Packing Materials of Patidar Zafrani Zarda & Patidar Gutka. The same facts were also admitted by Shri Dipakkumar Ganpatbhai Patel, partner of M/s Multi Color Flexi Pack, in his statement dtd, 14-7-2011, wherein he admitted to have sold 600 -700 kgs. of Flexible packing materials of Patidar Zafrani Zarda &Patidhar Gutka per month during the period from Sept. 2008 to Feb. 2011 to M/s Patidar. Shri Vasantbhai Makanjibhai Gadesha, Director of M/s. Rototon Poly Pack Pvt. Ltd., Rajkot, explained in his statement dated 21-7-2011 that as per the usual practice in his business, the quantity in kgs. was shown in the invoices by his company, however, the approximate weight of one empty pouch of Zafrani Zarda, sold to M/s Patidar, was 4.5 grams. Accordingly, 210 pouches (approx.) could be made in 1 Kg. of packing material. xxxxxxxxxx xxxxxxxxxx xxxxxxxxxxx 4.9 It is well settled law that clandestine removals cannot be arrived at based upon the confessional statement of persons only. The statements itself are not sufficient for holding so. There is catena of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cil are made so that after due reference with Pappu Long Books, the stock register could be maintained. I find that the Department failed to appreciate that all 14 invoices for the goods seized were entered in the PLA Register and duly entered in the Pappu Long Book of Basudeo Prasad & Sons. These details were part of reply dated 25.09.2003. But same has not been considered. Pappu Long Books were the basic document, basis which stock reference book was maintained in pencil. I find that Basudeo Prasad & Sons filed letter dated 31.01.2003 stating that goods seized were duty paid and invoices were issued. The said letter was not considered, but Department on a half-baked information and basis has confirmed the confiscation of the goods. The finding of alteration of record and connivance between Basudeo Prasad and Appellant as contained in the OIA are not maintainable as all 14 invoices basis which goods were cleared have been entered in the Pappu Long Book which was not considered by the OIO and the OIA thereafter. The documents filed i.e. the Pappu Long Books and details of invoices referring to the goods prove that goods valued at Rs.13.77 lakhs are duty paid and cannot be confiscat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....allegations of suppression of records and willful suppression do not survive considering that the Appellant has duly maintained registers and furnished the same. 19. I find that the Hon'ble Allahabad High Court in the case of Commissioner of Customs, CCE & ST, Ghaziabad vs. Auto Gollon Industries Pvt. Ltd. 2018 (360) E.L.T. 29 (All.) arising from the allegation of clandestine removal of goods, quashed the levy of duty based on theoretical basis as the Department has failed to bring any evidence supporting the allegation of clandestine removal of goods. The relevant paragraphs are reproduced as under:- "13. Upon examining the matter, the Tribunal has recorded a clear finding of fact that the revenue failed to establish the case of clandestine removal. The only thing, the revenue produced was a rough work progress register, which was admittedly not a statutory register. 14.The revenue failed to produce any cogent evidence in respect of raw-materials, which was required for production of Starter Motors. Also, the revenue did not allege anywhere that the assessee was buying any unaccounted for copper wire, yolk, bearings, brakes, slot insulators, laminations and co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... d) no enquiry as regards the receipt of consideration of the said clandestinely removed final product. 20. Similarly, in the present case the Department without any corroborative evidence has only relied on the statement of Deepak Mehra where the AO has cherry picked parts convenient to the Department's case and relied on only the Form IV register and wastage allegedly discovered, without considering he QTR. The Department has not made any enquiry regarding the proceeds arising from sale of clandestinely removed goods, their buyers and the transportation of the goods to support its theory. The currency seized at time of search is also not commensurate to the duty being levied on the Appellant for unaccounted manufacture and removal goods. 21. Further, in the case of Nutech Polymers Ltd. vs. CCE, Jaipur-II 2004 (173) E.L.T. 385 (Tri.-Del.), the Tribunal did not uphold the duty based on a theoretical assumption. The relevant paragraphs are reproduced as under:- "6. We have considered the submissions of both the sides. Regarding duty amounting to Rs. 1,44,572/- in respect of 11,854 number of HDPE/PP bags, we observe that Shri K.K. Mahajan, Works Manager, who looks aft....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be demanded for the period the daily production reports are not available. The onus of proof regarding clandestine removal is on the Department and cannot be shifted to the Appellants without discharging its onus. We find no force in the finding of the Adjudicating Authority that "in the absence of said reports for the earlier period, the Department had been left with no other option but to calculate the quantity of wastage actually generated before November, 2000 on average basis arrived at from the Daily Production Reports resumed for the period of November, 2000 to 18-3-2001 when no other documents had been produced by the assessee relating to actual generation of wastage." It is for the Department to bring evidence to prove that the wastage reflected in statutory records is not the actual wastage and the burden is not cast upon the assessee to produce the documents relating to actual generation of wastage. The learned Advocate has also contended that the input-output norm as per EXIM Policy is 8% in respect of HDPE Woven Fabrics and 10% in respect of HDPE Woven sacks. This contention has also not been controverted by the Revenue. In a similar situation in the case of Rajasthan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le money, transportation details of such goods, details additional consumption of electricity for such suppressed production, the finding of suppressed production and clandestine removal not sustainable. It also flows the burden of proof was not satisfied. I find that the Department's case is only based on their own version of the formula which has been calculated on basis of incomplete information and material. The Department's case is totally theoretical and no document in the nature of dispatch details for production, receipt details of raw material, transaction of sale money has been brought forth. The OIA and OIO have no legs to stand upon in the absence of cogent corroborative documents. The vague dismissal of submissions of the Appellant without satisfying the burden of proof fastened on the Department cannot render the present demand based on surmises and conjectures sustainable. The relevant paragraphs are reproduced as under:- "6.2 The department has not gone beyond the approximation and the statement of Shri Agarwal. Any prudent person would not so conclude on extra production by approximation and by a mere statement of the Director of the company. Unless there ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ugam Chand Bhandari vs. CCE, Madras 2004 (167) E.L.T. 491 (S.C.). The relevant paragraph is reproduced as under:- "9.In so far as the contention raised by the appellants whether the extended period of limitation under proviso to Section 11-A of the Central Excise Act could be invoked in the present cases is concerned, what is to be seen is whether there was no deliberate intention on the part of the appellants to have suppressed any material information. The plea taken by them is that under bona fide belief that the fabrics are classifiable under heading 52.07 they classified the same and the authorities had been visiting the appellants from 1986 onwards and they were aware of the process adopted in manufacturing the end product by them. The Tribunal rejected this contention. Apart from the fact that there was difference of opinion even in the Department, the fact remains that the department officials had been regularly visiting the factory of the appellants and were in the know of the process of manufacture adopted by the appellants and to state that the appellants had played fraud on the department is difficult to sustain. In the circumstances, we think, the application....