Customs, Excise and Gold Tribunal - Delhi
Sanket Food Products Pvt. Ltd. vs Commissioner Of C. Ex. on 26 April, 2005
Equivalent citations: 2005(102)ECC357, 2005(188)ELT107(TRI-DEL)
ORDER P.S. Bajaj, Member (J)
1. The above captioned appeals have been directed against the common impugned order-in-original vide which the adjudicating authority i.e. Commissioner has confirmed the duty and penalties against the appellants, as detailed therein.
2. The appellants No. 1 is a company, which was engaged in the manufacture of Gutka and Pan Masala during the period in dispute i.e. January, 2001 to September, 2001 and had two factories at Distt. Jalan, known as Unit Nos. 1 & 2; and one at Delhi. The company had been availing the Modvat credit on the raw materials, such as, Printed Laminated Rolls procured and used in the manufacture of the goods. On 8-3-2002, the Central Excise Officers conducted raid at the factory premises and the sales depot of the company and seized certain documents. During the raid, raw-material, printed laminated rolls, were found excess than the balance recorded in the record and the same were seized. Similarly, some pouches were also found excess and unaccounted lying in the factory and the same were also seized. The company had also franchise agreement with M/s. J.M. Advertising & Marketing Co. Ltd. for which the company was paying royalty for using their brand name i.e 'Goa 1000'. The company had also its sales depot at Jalan and the documents seized from that depot revealed the clandestine removal of the goods. Some documents were also seized from the factory premises of the company as well as from the Office of M/s. Sanjay Agencies and Shri Sanjay Shah, who was running that agency as a Partner and who allegedly admitted the clandestine sale of the finished goods manufactured by the appellants/company. Similarly, some documents were seized from the premises of M/s. Sharda Associates, which was the proprietorship concern of Shri Suresh Nagindas Soni, who was also looking after the marketing of the Gutka manufactured by the appellants/company and those documents as well as his statement allegedly revealed the clandestine manufacture and removal of the finished goods by the company. Statements of Shri Santosh Joshi, Production Manager of the appellants/company was also recorded which too revealed the clandestine manufacture and removal of the goods. Similarly, statement of Shri Ketan v. Shah, Director of the appellants/company, was also recorded who did not deny the allegations of clandestine manufacture and removal of the goods without payment of duty. Statements of the raw material supplier were also recorded which had been detailed in the show cause notice and the impugned order. On completion of investigation, show cause notice was served on all the appellants. In reply, the appellants denied the allegations of clandestine manufacture and removal of the goods. The adjudicating authority did not accept their denial and passed the impugned order.
3. The learned Counsel has contended that the entire oral as well as documentary evidence relied upon by the adjudicating authority for confirming the demand and penalties on the appellants is not only inadmissible, but also inconclusive for proving the allegations of clandestine manufacture and removal of the goods by the appellants during the period in dispute. The impugned order has been passed on assumptions and presumptions and as such deserves to be set aside. He has further contended that the statements of the witnesses who even did not turn up for cross-examination during adjudication, had been wrongly read in evidence being inadmissible.
4. On the other hand, the learned SDR, has reiterated the correctness of the impugned order and contended that the statements of the witnesses and the documents recovered from them had been rightly relied upon while passing the impugned order by the adjudicating authority and as such the impugned order is perfectly valid.
5. We have heard both sides and gone through the record. From the record, it is evident that the appellants/company during the period in dispute was engaged in the manufacture of Gutka/Pan Masala and for the manufacture of which, they required the raw material, such as, Supari, Lime Powder, Kattha, Tobacco, Compound, Cardamom, Laminated/Printed Laminated Rolls, Poly Bags, Cotton Bags & HDPE Bags. No evidence, whatsoever has been collected and brought on record showing the purchase of these raw materials except the laminated plastic rolls and pouches, in a clandestine manner from the market i.e. from authorized or unauthorized dealers during the period in dispute. Regarding procurement of printed laminated plastic rolls, the Revenue has placed reliance on the evidence of Shri Arvind S. Rane, Manager Excise of M/s. Akar Laminates, Aurangabad; Shri Sanjay Gopal Sarode, Production Manager of M/s. Vishnu Vijay Packaging Ltd. (in short VVPL'). Shri Arvind S. Rane, is stated to have disclosed in his statement that M/s. Akar Laminates had 455 printed cylinders for different customers and did not had any cylinders having printing matter relating to Goa Gutka or M/s. Sanket. While Shri Sanjay Goel, Production Manager of M/s. VVPL is said to had admitted that his company had two sets of printing cylinders each for Goa 1000 and Goa Plus and that the printed plastic laminated rolls of 'YAHOO' brand after manufacture were supplied by M/s. VVPL, to M/s. Sanket Industries, Jalan, whereas, in fact, that supply of the value of Rs. 67,47,747'/- was received by the appellants/company. But the evidence of both the witnesses legally could not be used against the appellants as none of them stepped into the witness box for cross-examination for testing their veracity. It is well settled that where a witness has not stopped into the witness box for cross-examination, his testimony recorded at the back of the party, cannot be legally used against that party as laid down by the Tribunal in the case of Nu-Trend Business Machines (P) Ltd. v. CCE - 2002 (141) E.L.T. 119; and Agarwal Breweries & Textiles Ltd. v. CCE - 2002 (140) E.L.T. 547.
6. However, the appellants/company has even produced the copy of the ledger account maintained by M/s. Sanket Industries in respect of the goods detailed above received from M/s. VVPL, but without verifying the correctness of the same, the adjudicating authority has rejected it on the ground that it was not certified by the CA. But this, in our view, could not be done unless the entries made therein were found to be factually incorrect. The fact that file No. 27 (Page 108) seized from the factory premises of the appellants/company, revealed the payment of Rs. 70,22,039/- to M/s. VVPL as against the official purchase of the goods of Rs. 20,712/- was made by it did not lead to irresistible conclusion that the goods printed laminated films were received by the appellants/company and not by M/s. Sanket Industries. The CA certificate could be asked for by the adjudicating authority instead of rejecting the ledger book entries out rightly on that ground. There is no evidence on the record regarding the direct delivery of the goods/raw material by M/s. VVPL to the appellants/company. No statement of any transporter who transported the goods and delivered at the factory premises of the appellants/company had been recorded and brought on record. Even from the inadmissible statements of Shri Arvind S. Rane and Shri Gopal Sarode, referred to above, it cannot be made out that this raw material was delivered at the factory premises of the appellants/company and not to M/s. Sanket Industries Ltd. Under these circumstances, the excess payment by the appellants/company to the supplier of the raw material/printed laminated film rolls, shown in the file recovered from the factory premises, could not be made basis for holding that the material was received by the appellants/company.
7. To establish the allegations of clandestine receipt of raw material/pouches from M/s. Onion Laminates, reliance has been placed on the evidence of Shri Shanker Jhunjhunwala, Director of that company, who is said to have supplied this raw material to the appellants/company and also further admitted the shortage of this raw material in his own factory, but his evidence is of no help to the Revenue. When stepped into the witness box for cross-examination, he had denied of having supplied this raw material to the appellants/company. He had also denied of having ever supplied this raw material without payment of duty to that company, and further deposed that payments were received by his company only by cheques as and when the supply was made to the appellants/company. His cross-examination has been wrongly ignored and brushed aside by the adjudicating authority on the ground that it was an afterthought. His cross-examination is to be taken as a part of his statement. His examination-in-chief was recorded at the back of the appellants/company during investigation and on the first opportunity available, the appellants/company summoned him for cross-examination to test the veracity of his earlier statement i.e. examination-in-chief, which was recorded at their back. His statement which includes examination-in-chief as well as cross-examination, is to be read as a whole and the Commissioner (Appeals) could not accept his examination-in-chief and reject the cross-examination on the ground of afterthought, being not permissible under the law.
8. Moreover, on account of alleged shortage of raw material in the factory of Shri Shanker Jhunjunwala, proceedings were taken out separately, but the Commissioner (Appeals) had dropped the same and this circumstance also can not be brushed aside. From his evidence, no clandestine receipt of the raw material (Pouches) by the appellants/company during the period in dispute, stands proved.
9. Regarding the procurement of other raw materials, detailed above, required for the manufacture of Gutka, there is not an iota of evidence to show that the same was received during the period in dispute by the appellants/company. Those raw materials needed were to be of big quantity as the removal of huge quantity of Gutka in Pouches/Boras, as detailed in Paras 16, 27.3, 28, 29.4 of the show cause notice had been alleged by the Department. The requirement of raw materials worked out by the appellants/company is (1) Supari - 2,90,712 Kgs.; (2) Lime Powder - 14531.76 Kgs.; (3) Kattha - 24221.75 Kgs; (4) Tobacco - 29069.90 Kgs; (5) Compound - 4841.75 Kgs.; (6) Cardamom - 3392.43 Kgs; (7) Lamination - 77949.49 Kgs; (8) Poly bags -3117980 Nos; (9) Cotton bags 62360 Nos; (10) HDPE bags 15590 nos. In the absence of any tangible evidence to prove the procurement of this much quantity of the raw materials etc. by the appellants/company, it is difficult to accept the allegations of clandestine manufacture and removal of the Gutka by it during the period in dispute.
10. The evidence brought on record by the Revenue regarding the clandestine clearance of the Gutka during the period in dispute by the appellants/company, in our view, is also inconclusive and insufficient to prove the same. Much reliance has been placed by the adjudicating authority on certain pages i.e. Page Nos. 28, 33, 35, 36, 37 & 38 of file marked as No. 1, seized from the office premises of M/s. Sanjay Agencies under Panchnama dated 8-3-2002 run by Shri Sanjay Shah, who was allegedly, at that time, managing the sale of the Gutka manufactured by the company through the sales depot. He allegedly admitted in his statement that the file/record/papers seized from his premises showed the sale of Gutka manufactured by the appellants. He also admitted that the cash recovered from his premises belonged to the appellants/company. From his statement, the adjudicating authority has raised an inference that this cash was the sale proceeds of the Gutka which was supplied to him by the appellants/company. But during the course of cross-examination, Shri Sanjay Shah, virtually retracted his statement and denied that the amount recovered from him was the sale proceeds of the Gutka supplied to him in a clandestine manner by the appellants/company. He had also denied that the papers/record recovered from his premises belonged to the appellants/company. The cash amount had been claimed by the appellants/company and its associate company, M/s. Sanket Industries and they had produced even the copies of their cash books wherein it is duly reflected, but no clear cut finding in this regard has been rendered by the adjudicating authority. Moreover, there is no cogent evidence to prove the actual sale by Shri Sanjay Shah through his firm, M/s. Sanjay Agencies, of the Gutka supplied to him in a clandestine manner by the appellants/company during the period in dispute. No statement of the buyer regarding the purchase of the Gutka from M/s. Sanjay Agencies had been recorded. There is also even no evidence regarding the actual transportation of the Gutka from the factory of the appellants/company to the premises of M/s. Sanjay Agencies or from the premises of M/s. Sanjay Agencies to the buyers in the market. In the absence of such a evidence, the cash recovered from Shri Sanjay Shah could not be taken to be the sale proceeds of the alleged clandestine sale of Gutka by him. His cross-examination wherein he had denied the correctness of his earlier statement, could not be brushed aside by the adjudicating authority on the ground of afterthought and his examination-in-chief only, which was recorded at the back of the appellants/company, could not be used against it. The purpose of cross-examination is always to test the correctness of the testimony made by a witness at the back of the other party and if a witness has not been able to stand the test of the cross-examination and contradicts his own earlier statements, no reliance can be placed on such a witness.
11. Apart from this, the pages No. 28, 33, 35 to 38 of file described as No. 1 in the show cause notice recovered from the premises of M/s. Sanjay Agencies also did not lead to a conclusion that Gutka was received in a clandestine manner by Shri Sanjay Shah from the appellants/company and thereafter disposed of without payment of duty. On pages No. 28 and 33 (copies of which are at pages 110 & 111 of the paper book filed by the learned SDK) neither name of any sender/supplier of the goods nor of any consignee is recorded. On left side of these pages, vehicle numbers are given and against two vehicle numbers the words 'Delhi' and 'RLY' are only mentioned. From the entries made in both these pages, it cannot at all be made out that any boras or bags of Gutka were received by M/s. Sanjay Agencies from the appellants/company. The dates of the receipt of the goods had been also not recorded therein. None of the owner/driver of these vehicles numbers was ever interrogated or questioned regarding the transportation of the goods. At some places in these pages, name of the goods recorded is China Supari and not the finished goods Gutka. Shri Sanjay Shah is also dealing in the trading of these raw materials and there is nothing on the record to suggest that the same were received by him from the appellants/company. Similarly, entries at other pages i.e 35 to 38 (copies at pages 112 to 115 of the paper book) filed by the SDK, do not in any manner indicate the receipt of Gutka by M/s. Sanjay Agencies from the appellants/company. The vehicle numbers are no doubt recorded therein, but neither owner nor driver of those vehicles were examined to ascertain if the goods transported were Gutka or something else. Therefore, from these documents, the adjudicating authority has wrongly inferred that M/s. Sanjay Agencies sold the Gutka without payment of duty and the same was received by his agency from the appellants/company. From the statement of Shri Ketan V. Shah, we also find that he had stated that M/s. Sanjay Agencies is trading in different commodities like Tea, Biri, Raw Tobacco, Cloves, Packing Material etc. and that he and Shri Sanjay Shah were also running another company by the name of M/s. Sanjay Industries in which they were Directors and said company deals in flavored drinks, mineral water etc.
12. The file No. 1 and the pages contained therein, referred to above, recovered from the premises of M/s. Sanjay Agencies, also did not bear the name of the appellants/company or signatures of any of its Directors/Employees, on which the adjudicating authority has placed much reliance without seeking any corroborative evidence to correlate the same with any transaction of clandestine removal of the Gutka by the appellants/company to M/s. Sanjay Agencies.
13. Another piece of evidence on which reliance has been placed by the adjudicating authority heavily is the file/papers recovered from the residential premises of Shri Suresh N. Soni, who is running his own company, known as M/s. Sharda Associates at Jalan and is engaged in the manufacture of scented tobacco, which is one of the inputs required by Gutka manufactures. He has allegedly deposed during the investigation that he was also looking after the marketing of the Gutka manufactured by the appellants' company for the last five years and receiving the salary of Rs. 14,000/- from that company. Regarding the documents recovered from his residential premises and cash of Rs. 2 lakhs, he had allegedly deposed that the same belonged to the appellants/company. But he did not stick to his statement and when cross-examined during adjudication proceedings, he resiled from his statement altogether. He did not produce any document showing his appointment as a marketing officer on salary basis by the appellants' company and receipt of Rs. 2 lakhs towards bonus from that company. Regarding the documents (indicated as Pages 12 & 13 of file No. 1 in the impugned order) he has stated that the same reflected his own accounts for the sale of scented tobacco and raw-tobacco, and not sale of Goa Gutka. He had denied that these documents contained any entries pertaining to the sale of the Goa Gutka on behalf of the appellants/company by him. His statement has been wrongly kept aside by the adjudicating authority on the ground of afterthought. His entire statement i.e. examination-in-chief and the cross-examination, were required to be read and appreciated by the adjudicating authority as a whole, but has failed to do so. Even otherwise, from the entries at Pages 12 & 13 of the file recovered from him (copies at Pages 116 & 117 of the paper book), it is difficult to even infer much less expressly conclude that the entries therein reflected the sale of the Goa Gutka received by him in a clandestine manner from the appellants/company. None of the entries in these pages bear signatures of any representative of the appellants/company. The names of the consignor and the consignee are also not recorded therein. The numbers of the vehicles who transported the goods are also not mentioned therein. Shri Suresh N. Soni had even retracted his earlier statement before the Court where he was produced after arrest. The adjudicating authority itself had released the seized amount of Rs. 2 lakhs for want of any evidence to prove that it was the sale proceeds of the Goa Gutka, disposed of by Shri Suresh N. Soni, on behalf of the appellants/company by not ordering the confiscation of the same. It also does not stand proved that M/s. Sharda Associates did not belong to Shri Suresh N. Soni but to the appellants/company. Under these circumstances, no reliance could be placed by the adjudicating authority on the evidence of Shri Suresh N. Soni and the documents allegedly recovered from his possession for saddling the appellants/company with the duty demand.
14. We find that some documents which had been marked as Pages 52, 67, 97, 106, 112 & 113 of file No. 27, were allegedly recovered from the factory premises of the appellants located at Jalan and the adjudicating authority has relied upon the same also for confirming the duty demand. The statement of Shri Santosh Joshi, Production Manager, was recorded who is alleged to have stated that these documents contained the details of daily stock position of the raw material and the finished goods manufactured at Unit 1 of the appellants/company. The entries in these pages/slips varied from the entries made in the RG-1 Register. Page No. 52 of File No. 27 allegedly contained entries regarding the production of the Goa Gutka by the appellants/company and the quantity referred therein was of 674, while the RG-1 Register did not contain entry in that regard and statement in this regard was also recorded of Shri V.V. Muley, authorized Signatory of the appellants/company. But this entire evidence, in our view, has been misinterpreted by the adjudicating authority. The copies of the above referred pages are at Page Nos. 119 to 122 of the paper book submitted by the learned SDR. But from none of these entries, it can be said or inferred that there was suppressed production and clearance of the Goa Gutka by the appellants/company during the period in dispute. The entries in these documents pertain to some raw material i.e Kattha, lime powder, minni, satyam, poly bags, cater super. Both the witness, namely, Shri V.V. Muley and Shri Santosh Joshi, in their cross-examination has resiled from their earlier statements and stated that the entries in the documents did not pertain to the clandestine manufacture and removal of the Goa Gutka by the appellants/company. Their statements could not be disregarded on the ground of afterthought, especially when there is no corroborative evidence to prove the purchase of the raw materialis required for the manufacture of Goa Gutka, by the appellants during the period in dispute, in a clandestine manner from any source, as observed above.
15. Similarly, the statement of Shri Ketan V. Shah, Director of the appellants/company, wherein he is said to have initially admitted the receipt of the raw material, production and clearance of the Goa Gutka without payment of duty during period in dispute, could not be made basis for saddling the appellants/company with duty demand as he himself during adjudication denied of having made any such admission. Moreover, there is no corroborative evidence at all on the file to prove the excess receipt of raw materials by the appellants/company for the manufacture of Goa Gutka. There is also no evidence, as observed above, to prove the clearance of the Goa Gutka in a clandestine manner during the period in dispute, by the company.
16. Likewise, the ocular testimony of Shri Dinesh Gupta, employee of the appellants/company recorded on 21-2-2002 and 26-6-2002, did not advance the case of the Revenue against the appellants/company regarding the clandestine manufacture and removal of the Goa Gutka for lack of any corroborative evidence.
17. From the record, we find that some documents were recovered from the residential premises of Shri Sudhir Khanna which have been referred as Pages 22, 22 & 25 of the file (copies at pages 170 to 172 of Paper Book filed by SDR) and his statement was also recorded in respect thereof wherein he allegedly stated that he was working as marketing representative having base at Delhi for the sale of products manufactured by the appellants' company at Jalan and the documents recovered from the premises of Shri Suresh N. Soni, Marketing Officer also indicated the transportation of the goods from Jalan to New Delhi during the period July, 2001 to September, 2001. He had also disclosed that Gutka sold in Delhi prior to December, 2001 was received from the factory of the appellants/company at Jalan without payment of duty. The entries at Page 21 allegedly pertained to the Boras of Gutka received by him at New Delhi, from Jalan during October, 2000 to February, 2001 and the entries at Page 22 indicated the summary of the account while entries at Page 25 showed the summary of the account of the marketing representative, in respect of Boars of the Goa Gutka received during February, 2001 to March, 2001 from the appellants/company. But Shri Sudhir Khanna during the cross-examination, had denied all these facts. His denial cannot be said to be meaningless as the same was made by him when he was cross-examined by the appellants during adjudication, for testing the veracity of his earlier statement made at their back before the Investigating Officer. Moreover, even from the reading of these pages/documents, referred to above, it cannot be made out that the goods were received by him in a clandestine manner from the appellants/company at Jalan and disposed of in the market without payment of duty. The names of the buyers are not mentioned in any of these documents. The registration number of the vehicles who transported the goods from Jalan to Delhi, are also not reflected therein. No statement of any buyer had been recorded regarding the purchase of Goa Gutka from Shri Sudhir Khanna. Therefore, in the absence of any corroborative evidence, bare entries without any details of the goods received by Shri Sudhir Khanna and names of buyers, particulars of vehicles who transported the goods, could not be related to the actually supply of the goods to him by the appellants, during the period, detailed above.
18. We also find that statement was also obtained from Shri Sitaram Suri, booking agent of the Railway at Delhi, to prove that the goods were also booked from Railway to various destinations by the appellants in a clandestine manner and that Shri Animesh Gupta, acted as the agent for the appellants at the time of booking of the goods, but from the copy of that statement, it is not evident who booked the goods and what was the destination where the goods were to be delivered as none of these particulars are mentioned therein. Even the details of the goods booked, had not been indicated in that statement (copy at page 236 of SDRs Paper Book). Similarly, from the copies of the details of the Railway Receipts (Page 232 of SDRs paper book) through which the goods were allegedly transported from Old Delhi Railway Station to various destinations, it cannot be made out that the goods were Goa Gutka which were manufactured and supplied by the appellants/company. The details of numbers of the GR Book, dates, numbers of railway receipts, names of consignees and of the consignors are no doubt recorded in these copies, but no investigation had been carried out to verify the correctness of the same. No copies of the Railway Receipts had been also brought on record. Shri Sitaram Suri, Railway Booking Agent, was not even tendered for cross-examination from whom the statement pertaining to the booking of the goods was seized. Therefore, this entire evidence did not help the Revenue for proving the charge of clandestine manufacture and clearance of the goods by the appellants during the period in dispute.
19. We thus find that the adjudicating authority has, in fact, confirmed the duty demand and imposed penalties against the appellants only by drawing inferences and placing reliance on inadmissible, inadequate evidence, discussed above. Therefore, the impugned order, in our view, cannot be sustained. The ratio of the law laid down in the case of K.I. Pavunny v. CCE, Cochin - and Gobind Lal v. CCE, Jaipur, 2000 (117) E.L.T. 515, cited by the learned SDR, regarding the probative value of the retracted confession by the accused/party is not attracted to the facts of the present case, in the light of the facts and circumstances, discussed above. Similarly, the observations in the case of Siemens Ltd. v. CCE, Calcutta, 1994 (70) E.L.T. 305, referred to by the learned SDK, that appropriate inference can be drawn from circumstantial evidence and conduct of the party and other material factors, as direct evidence in clandestine removal is seldom available, is of no help to the Revenue. In the present case, even from the evidence brought on the record and referred to above, no such inference can be drawn that the appellants had indulged in the clandestine manufacture and removal of the goods without payment of duty during the period in dispute. Similarly, the observations of the Tribunal in the case of Bute Cosmetics v. CCE, Tricky, 2001 (135) E.L.T. 886 and Columbia Electronics Ltd. v. CCE, Indore, 2002 (143) E.L.T. 635 (Tribunal), referred by learned SDK, that absence of the receipt of the raw material is not enough to conclude that there was no clandestine removal of the goods, are not attracted to the present case, in the light of the discussion made above.
20. Consequently, the impugned order-in-appeal is set aside against all the appellants in toto. The appeals of the appellants are allowed with consequential relief, if any, permissible under the law.