TaxTMI 
TaxTMI 
2026 (8) TMI 1407
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.... passed by the Commissioner of Customs, Chennai-IV and involve common questions of fact and law. Since the impugned order emanates from a common Show Cause Notice and the issues involved are interconnected, all the appeals are taken up together and disposed of by this common order. 2. Briefly stated, Chessman Impex Pvt. Ltd./Noticee No.1 was issued a DEEC Licence dated 14.08.2000 by the Joint DGFT, Calcutta under the Exim Policy 1997-2002, permitting duty-free import of 5350 MTs of non-alloy re-rollable scrap cuttings, against an export obligation of 5000 MTs of non-alloy steel bars and rods of 5.5 mm-12 mm, which was subsequently amended to 5.5 mm-25 mm. The licence was utilised for imports under three Bills of Entry dated 25.08.2000, 05.03.2001 and 30.03.2001. The material covered by Bill of Entry No.25448 dated 25.08.2000, measuring 2480.640 MTs, was dispatched to the declared supporting manufacturer, Goyal Ispat Ltd., Chennai, and utilised for manufacture of 2353.760 MTs of CTD bars, which were exported to Bangladesh through Ghojadanga Land Customs Station under AR-4s/ARE-1s. In respect of the other two Bills of Entry, the foreign buyer, George Waller Overseas Limited, Dubai....
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....icees filed detailed replies and written submissions and attended personal hearings. By the impugned Order-in-Original dated 28.02.2017, the Commissioner confirmed against Chessman Impex Pvt. Ltd. recovery of customs duty forgone of Rs.2,16,93,068/-, together with interest and penalties of Rs.20,00,000/- each under Sections 112(a) and 114(i) of the Act, besides imposing penalties upon the co-noticees. It is pertinent that Shri Prabhas Chandra Biswas has since expired. The present appeals challenge the said common order. Submissions of the Appellant 3.3 The Ld. Advocate Shri Indranil Banerjee submitted that the allegations in the impugned order are not supported by reliable and corroborative evidence and that the findings of the CBI, which investigated the very same alleged fraudulent exports and whose final report was accepted by the competent Criminal Court, could not have been brushed aside without proper consideration. It was submitted that the CBI investigation had specifically examined the movement of the vehicles through the Immigration Check Post, the DEEC records and the realisation of export proceeds and had found material supporting the actual export of non-alloy st....
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....of 2353.760 MTs of CTD bars, which were cleared for export under AR-4s/ARE-1s bearing the certification of the Central Excise authorities. The representative of Goyal Ispat Ltd. had confirmed the manufacture and export in his statement dated 04.03.2002 and DRI, Chennai had also confirmed the position by letter dated 25.03.2002. In these circumstances, there was no basis for the adjudicating authority to conclude that the corresponding export goods had either not been manufactured or had been diverted to the domestic market. 3.7 The Ld. Counsel submitted that there was no independent evidence whatsoever to establish either diversion of the duty-free imported scrap into the domestic market or procurement and export of maize to Bangladesh. No buyers of the alleged diverted goods were examined; there was no cash trail, evidence of procurement or transportation of the alleged maize consignments, evidence of domestic disposal, seizure of the offending goods or any other material linking the appellant with the alleged diversion. Reliance was placed on Namdev Exports v. Commissioner of Customs (Port), Kolkata, (2024) 18 Centax 341 (T), the departmental appeal against which was dismissed....
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....ting authority. 4. In relation to the co-noticees, The Ld. Counsel submitted that the penalties under Sections 112(a) and 114(i) were equally unsustainable in the absence of proof of connivance or abetment. In particular, Shri Mahendra Kumar Patni had no connection with the affairs of Chessman Impex Pvt. Ltd., although the impugned order incorrectly described him as its Managing Director, and no statement of his was available on record. It was further submitted that there was nothing incriminating in the statements of Noticee No.8, Shri Samir Saha, which were, in fact, consistent with the version of Shri Prabhas Chandra Biswas. The transporter, Customs House Agent and its employee had also been penalised without any reliable evidence establishing their involvement in the alleged fraudulent exports. 5. On behalf of the Revenue, the Ld. Authorized Representatives, Ms. Rajini Menon and Shri Sanjay Kakkar supported the findings recorded in the impugned order and sought dismissal of all the appeals. It was submitted that Shri Mahendra Kumar Patni had acted as the mastermind behind the alleged fraudulent exports and was therefore rightly penalised. Revenue also contended that the C....
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....be wound up in the light of the criminal court's judgment. This question has been agitated before us on the strength of a plethora of decisions. In the case of Capt. M. Paul Anthony (supra), the appellant was a security officer in the respondent-company, a government undertaking. He was placed under suspension and disciplinary as well as criminal proceedings were initiated against him on the ground that, in a police raid, mining sponge gold ball weighing 4.5 grams and 1276 grams of gold-bearing sand were recovered from his house. The raid was conducted at the appellant's residence on 2-6-85. He was placed under suspension on 3-6-85. Disciplinary proceedings were initiated against him by issuing a charge sheet on 4-6-85. On 3-2-87, the appellant was acquitted in the criminal case with a categorical finding that the prosecution had failed to establish that "raid and recovery" were made at the appellant's residence. In the meantime, the appellant had already been dismissed from service on the basis of disciplinary proceedings initiated against him. On 12-2-1987, the appellant requested for his reinstatement in service in view of his acquittal in the criminal court. This request was tu....
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....le mental state with respect to the offence charged against him. The evidence adduced by the accused should be enough to make the court believe beyond reasonable doubt that he had no such culpable mental state. What the Apex Court held in the Gopaldas' case was that, where the presumption under Section 98B of the Gold (Control) Act was rebutted by the accused, the order of confiscation of gold by the adjudicating authority under the said Act could not be allowed to stand against the order passed by the criminal court acquitting the accused after considering the same set of facts and evidences. But, at what stage was the accused to rebut the presumption? This question was also answered by the court in Gopaldas' case following its earlier decision in Inder Sain v. State of Punjab, (1973) 2 SCC 372. It was held (vide paras 18 & 19 of Gopaldas), on the facts of that case, that, once the prosecution adduced evidence of the accused having been in possession of primary gold, it was upto the accused to rebut the presumption of mens rea by proving that he did not knowingly possess the forbidden goods. In the instant case, the Criminal Court has held that the prosecution could not prove ....
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....we are of the view that the judicial approach taken in Paul Anthony's and Gopaldas' cases can be applied to this case and, accordingly, the order passed by the adjudicating authority imposing penalties on the appellants cannot stand in the face of their acquittal by the criminal Court." .... .... 10. The Hon'ble Supreme Court in the case of Capt. M. Paul Anthony v. Bharat Gold Mines Ltd., 1999 (3) SCC 679, dealing with the similar situation in service law held that where the criminal case as also the departmental disciplinary proceedings were based on identical set of facts and evidence viz., the raid conducted at the appellant's residence and recovery of incriminating articles therefrom, the same set of evidence in the form of the police officers and panch witnesses, who had raided the appellant's house and effected recovery and they were the only witnesses examined by the Enquiry Officer in the departmental enquiry also. In such circumstances, once the Criminal Court had acquitted the appellant, there was no basis to sustain the punishment imposed on the appellant in consequence of the departmental proceedings. ....... 13. The initial ....
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....ecific evidence which had not been considered by the CBI. 11. We have also examined the other evidence and circumstances available on record. The material referred to below supports the appellant's case regarding utilisation of the imported materials under the DEEC licence and export of the resultant goods to Bangladesh. i. Special permission granted in favour of Chessman Impex Pvt. Ltd by the Chief Commissioner of Customs (Preventive), West Bengal, as regards whereto there was appropriate endorsement on each Bill of Export; ii. Examination of export consignments by the then Superintendent of Customs (Prev.), Sri Prabhas Chandra Biswas and selective appraisement by the Inspector of Customs, Central Appraisement Unit, West Bengal; iii. Certification on AR-4s/ARE-1s by the Chennai Central Excise authorities as well as the confirmation by DRI, Chennai vide letter dated 25.03.2002, insofar as manufacture of export products by the supporting manufacturer, Goyal Ispat Limited was concerned; iv. Written permission dated 20.04.2001 by the foreign buyer, George Waller Overseas Company Limited, Dubai for segregation and export of unprocessed scrap; ....
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....tilisation of raw materials imported under an advance licence and to take appropriate action under Section 111(o) of the Customs Act. The said decision, however, does not advance the case of Revenue in the facts before us. The controversy in the present case is not merely whether the Customs authorities could examine the alleged violation of the DEEC conditions, but whether the Department has established, on the basis of reliable and corroborative evidence, that the appellant had in fact diverted the duty-free imported material and had substituted maize for the resultant products required to be exported. As already discussed, the very transaction had been investigated by the CBI as well as the DRI and the material relied upon by Revenue does not satisfactorily establish the alleged fraudulent exports. The ratio of Sheshank Sea Foods, therefore, is distinguishable on facts. 15. Revenue has also alleged violation of the conditions of the DEEC licence and Notifications Nos. 30/1997-Cus. and 31/1997-Cus. dated 01.04.1997 on the ground that the CTD bars manufactured by M/s. Goyal Ispat Ltd. and exported under ARE-1s/AR-4s did not conform to the description of the goods required to be....
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.... 1.2 Briefly stated facts of the case are that the appellant are engaged in the manufacture of Brass Rods. Based on the intelligence that Appellant had indulged in gross misuse of Advance Authorisation scheme, the factory premises of Appellant was searched by the officers of DRI, Jamnagar and documents were recovered. The scrutiny of the documents revealed that, besides physical exports, Appellant also cleared Brass and Copper Alloys Rods to 100% EOUs and SEZ and availed the benefit of Deemed Exports thereon and subsequently they claimed Advance Authorization from the DGFT, Rajkot for duty free import of raw materials i.e. Brass/Copper Scrap/Zinc Scrap; that they had done physical exports under claim of Rebate and also clearances were made to 100% EOU and SEZs on payment of Central Excise Duty which was later claimed back through refund from the DGFT (in case of EOU units) and their Jurisdictional Central Excise Division (in case of SEZ units); that they have availed the Cenvat Credit of CVD and SAD on imports of Brass scrap after payment of duty and same was later shown as utilized for payment of duty on clearances made for domestic sales as well as exports and deemed exports; t....
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....ongfully availed Refund of Rs. 90,59,957/ - as TED from DGFT. 1.3 On the basis of above investigation, Appellants were issued show cause notice dated 10.04.2015 proposing confiscation of goods under Section 111(o) of the Customs Act, 1962 and under Rule 25 of the Central Excise Rules, 2002, in addition to the recovery of custom duty on imported material as also Central Excise Duty on the material cleared with payment of duty under valid duty paying documents to the tune of Rs. 1,26,99,092/- and Rs. 90,59,957/- along with interest and penalty. The said show cause notice was also proposed penalty on the Director as well as respective EOUs. The show cause notice was adjudicated by the Principal Commissioner vide impugned order dated 31.03.3017, wherein he passed order as under: (i) Hold that goods of 261009 Kgs. of Brass Scrap imported is liable for confiscation under the provision of Section 111(o) of the Customs Act, 1962. Since the goods are not available either physically or released after seizure through bonds, refrain from the imposing any redemption fines under the provisions of 125 of the customs Act, 1962. (ii) confirmed the demand of Customs duty a....
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....er Authorized persons of EOUs units accepted the facts of receipts of materials and transporters and truck owners also accepted the transportation of goods from the factory of Appellant to EOU units. We also find that in the present matter Appellant had received payment for the said transaction by cheque and the said transaction were recorded in statutory books & accounts of the Appellant. We, further find that in support of their contention department nowhere produced any corroborative evidence to show that the Appellant have cleared alleged finished goods in open market. No statement of any buyer recorded to whom clearance was allegedly made, no transportation details provided, no evidence of any receipts of payment from open market buyers produced. Therefore, in the given set of facts and in absence of any adverse evidence, it cannot be said that finished goods were clandestinely cleared in open market. There are several judicial pronouncements of the Hon'ble Apex Court, High Courts and Tribunal wherein it has been consistently held that in the case of clandestine manufacture and removal of goods, Revenue has to prove it beyond doubt. We rely on the Hon'ble High Court judgment i....
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....reme Court reported at [2015 (319) E.L.T. A-117 (S.C.)], the Tribunal held that: "5. We have carefully gone through the rival submissions and perused the records. In this case, the case of clandestine removal has been made out against the appellant M/s. Sakeen Alloys Pvt. Limited on the basis of records/pen-drive recovered from the business premises of M/s. Sunrise Enterprises. In the statements of Managing Director and the Excise persons of M/s. Sakeen Alloys Pvt. Limited and Shri Mukeshbhai V. Patel of M/s. Sunrise Enterprises it has been admitted that they have clandestinely manufactured and cleared CTD/round bars but they have retracted their statements immediately after recording the statements. It is the case of the appellants that request for cross-examination of the persons whose statements were recorded has not been made available to them by the adjudicating authority. In view of the various judgments relied upon, it was also argued that no investigation has been extended to the suppliers of raw materials or purchasers of finished goods to establish whether such clandestine removal of excisable goods have actually been undertaken by the appellants or not. It was e....
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.... call some of these purchasers for cross-examination so that true picture of the entire activities undertaken by the appellants was made clear. Appellants also requested for cross-examination of the Chartered Engineer who gave them the certificate regarding manufacturing capacity and consumption of electricity. 8. In the cases relating to clandestine removal of excisable goods, following are the indicators of clandestine removal activities by a manufacturer :- (i) Excess stock of raw materials found in the factory premises. (ii) Shortage of raw materials in the records of manufacturer. (iii) Excess/shortage of manufactured goods found in the factory premises. (iv) Excess consumption of electricity/power used in the manufacture of finished goods. (v) Any transit seizure of clandestinely removed goods made by the investigating authority. (vi) Any cash amounts seized from the factory premises or dealer's premises or residential premises searched during investigation. (vii) Confessionary statements of the persons concerned with the clandestine manufacture/ removal of excisable goods. 9. It is observed from....
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....mited v. CCE, Lucknow [2004 (160) E.L.T. 494 (Tri.-Del.)] came to the following conclusion in Paras 9 and 10 of the judgment which are reproduced below:- "9. We have considered the submissions of both the sides. The Revenue has charged the Appellants with clandestine manufacture and removal of paper mainly on the basis of documents seized from the premises of Chitra Traders and Transporters and the various statements recorded from the Proprietor of Chitra Traders, transporters and labourers working in the factory of the Appellants and also the driver or cleaner of the Truck which was in the process of loading on 22-6-2001 when the Central Excise Officers visited their factory premises. The Appellants, on the other hand, have contended that most of the persons whose statements have been relied upon have not been produced for cross-examination and the documents seized from third parties' premises have not been corroborated by adducing evidence of any of the customers though the enquiries were conducted at different places as deposed by Shri Anurag Sharma, Inspector, in his cross-examination on 4-3-2002. Out of 19 consignments said to have been cleared by the Appellant No. 1 ....
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....lants from the company, M/s. HPL, in a clandestine manner during the period in question. Similarly, no inference could be legally drawn against the Appellants of having manufactured texturised yarn out of the said polyester yarn and the clearance thereof, in a clandestine manner without the payment of duty." The Tribunal had also referred to the decision in Oudh Sugar Mills Ltd. v. Union of India, 1978 (2) E.LT. (J172) wherein "the Apex Court has observed that no show cause notice or an order can be based on assumptions and presumptions. The findings based on such assumptions and presumptions without any tangible evidence will be vitiated by an error of law". The Tribunal also took note of the decision in Kamal Biri Factory and Shri Khushnuden Rehman Khan v. CCE, Meerut - 2003 (161) E.L.T. 1197 (T) = 1997 (23) RLT 609 (CEGAT) wherein view has been taken that the allegations of clandestine removal of the goods will not stand established when based on the entries made by the assessee's employee in a diary or on the basis of third party's record in the absence of any corroborative evidence. It has also been the consistent view of the Tribunal that the statements of the witnesses, with....
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....quiry further down the line was not considered necessary." The onus of proof that the goods were removed by the Appellants without payment of duty and without entering the same in their records is upon the Revenue which cannot be discharged merely on the strength of the entries made in the records of a third party without linking the removal of goods from the premises of the Appellant-company. The mere fact that the Appellant-company had business relation with Chitra Traders, does not mean that they will be liable to each and every entry made by Chitra Traders in their books of account. It is also noted that none of the transporters and none of the labourers whose statements have been relied upon by Revenue have mentioned that the goods in question were delivered to Chitra Traders from the premises of the Appellants. The material brought on record may at the most create a doubt only. But doubt cannot take the place of evidence. The Revenue has, thus, not proved its case against the Appellants in respect of 149 consignments. We, therefore, set aside the demand of duty and penalty imposed on Appellant-company and consequently the demand of interest." 11. From the above settl....
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.... this purpose cross-examination of the person Incharge looking after the records of M/s. Sunrise Enterprise was must, which was not allowed by the adjudicating authority. In view of the above observations, the demand of duty of Rs. 1,85,10,861/- is not sustainable and is required to be set aside." In the light of the ratio of law declared in the above judgments, we find that the entire case of the Revenue is based upon the surmises and conjectures. No concrete, positive and tangible evidence appears on record. The evidences brought into the record by the department are incomplete, inconsistent and not a reliable piece of evidence to prove charges of clandestine removal. Relying on these judgments, we also hold that the charges of clandestine removal of the alleged goods not sustainable in the present matter. 4.11 By following the ratio of above decisions, we hold that the central excise duty liability cannot be fastened upon the appellant. ............" 18. The decisions in M/s. Bharat Udyog and Ors. v. Commissioner of Customs, Noida, 2019 (6) TMI 1033 (CESTAT Allahabad) and Dhaval Agri Exports LLP and Anr. v. CC-Mundra & other appeals, 2024 (10) TMI 3....
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....e evidence. A retracted statement cannot, without examining the circumstances in which it was recorded and retracted and without considering the corroborative material on record, be treated as conclusive evidence of the alleged fraud. The evidentiary value of these statements is therefore required to be examined in the light of the settled legal position discussed hereunder. i. Priya v. Commissioner of Customs, reported in 2019 (370) ELT 1668 (T) --- appeal thereagainst dismissed as nonmaintainable in (2025) 27 Centax 324 (Bom.); ii. Union of India v. Kisan Ratan Singh, reported in 2020 (372) ELT 714 (Bom.); iii. Vinod Solanki v. Union of India, reported in 2009 (233) ELT 157 (SC); iv. Mohtesham Mohd. Ismail v. Spl. Director, reported in 2007 (220) ELT 3 (SC). In the preceding paragraphs, we have already found that there is no sufficient corroborative evidence on record to establish diversion of the duty-free imports made under the DEEC licence, procurement of maize or export of maize under the 73 Bills of Export. In the absence of such corroborative evidence, the reliance placed by the adjudicating authority on the alleged incriminating state....
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.... Bangladesh following his instructions. However, both Mahendra Kumar Patni and Satyendra Nath Mishra remained unexamined. v. In both his statements dated 11.02.2002 and 12.02.2002, Sri Samir Saha affirmed that the customs authorities had physically examined some of the export goods loaded in the vehicles, to which he had been a witness. The said statements confirmed the version of Sri Prabhas Chandra Biswas, since deceased, given during the course of recording of his statement on 21.05.2004. vi. The appellants' counsel also submitted that the alleged statement dated 21.03.2002 of the truck owner, Sri Satish Tripathi was doubtful and appeared unreliable due to the reasons mentioned in page No. 27 of the appeal at ground S. He has contended that it was indeed surprising that the said truck owner could correctly recall as to the movement of his truck on a particular day after lapse of several months from the date of export without referring to any document. It was equally surprising that the drivers of the trucks owned by the said Satish Kumar Tripathi remained unexamined and that no other statement from another truck owner or driver at all could be obtained by the i....