Customs, Excise and Gold Tribunal - Delhi
Kothari Products Ltd. vs Commissioner Of Central Excise on 29 December, 1998
Equivalent citations: 2003(159)ELT1187(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. The above appeals arise out of the order of the Commissioner of Central Excise, Kanpur confirming a duty demand of Rs. 2,64,90,086.20 P. and imposing a penalty of Rs. 25 lakhs on M/s. Kothari Products Ltd. and imposing penalties of varying amounts upon the other appellants who are Managing Director of the first appellant, and its Transport Agencies and Marketing Agencies.
2. The Revenue is in appeal (E/Appeal No. 1935/97-D) against dropping of the demand in respect of those consignments covered by Annexure C where the acknowledgement of the consignee of receipt of goods was not produced (39 truck loads are subject matter of Annexure C and the Collector has confirmed demand in respect of 13 truck loads and dropped the demand for the remaining 26 trucks while the department seeks confirmation of demand on Pan Masala transported in all 39 trucks) and against Collector's dropping of demand in respect of 42 trucks covered by Annexture E (total number of consignments covered by Annexture E is 68 truck loads - the Collector has confirmed the demand in respect of 26 truck loads where the second consignment by the consignee was established by means of acknowledgement in the Lorry Receipt Registers maintained at the destination by M/s. EITA and dropped the demand in respect of the remaining 42 trucks (the Revenue seeks confirmation of demand on the total 68 truck loads of Pan Masala),
3. The facts of the case are that on receipt of intelligence gathered by the officers of Directorate General of Anti-Evasion that appellant No. 1 who is the manufacturer of Pan Parag brand of Pan Masala was engaged in large scale evasion of Central Excise duty by way of clandestine clearances mainly to consignment agents at Bombay and Hyderabad from where the pan masala was sold to different dealers, the officers of the DGAE and the Central Excise officers visited the factory premises of Appellant No. 1 on 18-7-94 for verification and scrutiny of records. The premises of the Clearing and Forwarding Agents at Bombay and Hyderabad as well as some of their dealers were searched. Certain documents were resumed from the premises searched. The scrutiny of the documents revealed that Pan Masala was transported mainly through M/s. East India Transport Agencies (hereinafter called EITA) and M/s. Rashtrco Freight Carriers (hereinafter called RFC). Documents such as Lorry challans, Despatch Memos, consignment notes, etc. were scrutinised and it was found that certain consignment notes were cancelled but corresponding lorry challans and despatch memos were issued describing the goods as Pan Masala. It thus, appeared that the Appellant No. 1 cleared such consignments on the strength of consignment notes of M/s. EITA and after receipt of goods at destination, the consignment notes were got cancelled. Investigation also showed that there was double transportation of goods on the strength of one set of consignment notes - once when goods were cleared on payment of duty, and without payment of duty during the second transportation. The modus operandi appeared to be either clearance of non-duty paid goods on the strength of a consignment note which was cancelled after safe receipt of goods at destination, or transporting goods twice on the strength of one consignment note. It was found that on some of the consignment notes, names of fictitious firm was shown and the commodity was described as iron rods or seeds, etc. The other transporter M/s. RFC was also found to have transported pan masala manufactured by Appellant No. 1 twice on the same set of GRs.
4. Statements of various persons were recorded. Investigation revealed that Clearing and Forwarding agents of appellant No. 1 were keeping, purchasing and selling the pan masala cleared by appellant No. 1 under the reasonable belief that such pan masala was liable for confiscation. Statement of the Computer Operator, Despatch Clerk and the Managing Director of Appellant No. 1 was recorded. From the statements of the Computer Operator and the Despatch Clerk, it appeared that a particular Sl. number of Invoice/Gate pass was drafted through the computer and goods were transported on one set of consignment note of a lorry challan; after the confirmation of receipt of goods at the destination, another invoice/gate pass containing the same Sl. No. was drafted and goods were again transported on the same set of consignment notes but on a different Lorry challan. Thus by using same Sl. No. of gate passes/invoices and consignment notes, the Appellant No. 1 was alleged to have adopted the modus operandi of double transportation of pan masala.
5. From the above, the department alleged that Appellant No. 1 had transported 39 truck loads of Pan Masala on the cancelled consignment notes of M/s. EITA as per the details in Annexure C to the Show Cause Notice and evaded duty approximately of Rs. 2.17 crores. 68 truck loads of Pan Masala are alleged to have been transported on consignment notes of M/s. EITA without payment of duty by adopting the modus operandi on the strength of same consignment note, evading duty of Rs. 3.59 crores as per the details in Annexure E to the show cause notice. The Appellant No. 1 was alleged to have transported 12 truck loads of Pan Masala by adopting the same modus operandi on the strength of same set of consignment notes to M/s. RFC resulting in duty evasion of approximately Rs. 62 lakhs. One truck of Pan Masala was alleged to have been transported from Kanpur to Indore without cover of invoice-cum-gate pass resulting in duty evasion of approximately Rs. 5.17 crores; the total amount of duty covered by various show cause notices during the period 26-10-91 to 30-6-94 totalled approximately Rs. 6.38 crores.
6. On the above basis, a show cause notice was issued alleging mis-statement and suppression, proposing recovery of duty of Rs. 6,38,84,821.76 P. and proposing imposition of penalty for contravention of the various Rules. Rule 209A was invoked in respect of the Managing Director and two Directors of Appellant No. 1 and the transporters M/s. EITA and M/s. RFC and different Clearing and Forwarding Agents.
7. The Adjudicating authority rejected the defence of the assessee that there was no clandestine removal of any Pan Masala. He dropped the demand in respect of 26 truck loads of Pan Masala mentioned in Annexure C, dropped the demand on the charge of double transportation in respect of 42 consignments covered by Annexure E and he dropped the demand in respect of one consignment covered by Annexure G. He confirmed the demand in respect of 13 truck loads covered by Annexure C, 26 truck loads by Annexure E and 11 truck loads by Annexure G and reduced duty demand to Rs. 2,64,90,086.20 P. Penalties were imposed on the co-noticees as under :
1. M/s. Kothari Products Rs. 20 lakhs
2. Sh. Deepak Kothari, Rs. 5 lakhs Managing Director of M/s, KPL
3. M/s. East India Transport Agency Rs. 5 lakhs
4. M/s. Rashtraco Freight Carriers Rs. 3 lakhs
5. M/s. K. Mahendrakumar & Co. Rs. 1 lakh
6. Shri Sai Enterprises Rs. 50/000/-
7. M/s. Mutha Marketing Agencies Rs. 50,000/-
8. M/s. Cosmox Marketing Agencies Rs. 50,000/-
9. M/s. Meenakshi Agencies Rs. 50,000/-
10. M/s. Shah Bros. Rs. 50,000/-
11. M/s. Arihant Enterprises Rs. 50,000/-
8. We have heard Shri R. Swaminathan learned Advocate and Shri Sanjeev Srivastava, learned DR and record our findings herein below.
9. The case of the department is almost entirely based upon the documents of two transporters viz. East India Transport Agency (EITA) and Rastraco Freight Carriers (RFC). Copies of these documents were not made available to the appellants and no such documents were recovered from the premises of appellant No. 1 (manufacturer of pan masala on whom duty has been confirmed). These documents do not link Appellant No. 1 with the alleged transportation and do not establish knowledge of Appellant No. 1 of clandestine removal of pan masala. The lorry challan, consignment note and despatch memo do not give any co-relation to show a contradiction between themselves as regards the name of the consignor, description of goods carried, etc. Para (ix) of the show cause notice sets out co-relation according to the department. The details in the said para of the show cause notice are as under:
Date G.P. No. C.N. No. Lorry Lorry No. Pre paid
Challan C.N. No.
30-5-94 STC52 9501351 1247 MCY3597
30-5-94 STC 53 9501352 1247 MCY3597
4-6-94 9501351 1263 39516
30-5-94
4-6-94 9501352 1263 39516
30-5-94
10. The allegation in the show cause notice reads as under :
"It thus appears that KPL cleared 450 packages of pan masala on 30-5-94 on payment of duty and again 450 packages of pan masala were cleared on 4-6-94 without payment of duty and M/s. EITA transported both these consignments twice on the strength of C.N. No. 9501351 and 9501352 but consignment of 450 packages transported on 4-6-94 was cleared by M/s. KPL without payment of Central Excise duty. Though pre paid C.N. No. 39516 dated 30-5-94 has been issued by M/s. EITA but there is no lorry challan or despatch memo of 30-5-94 giving C.N. No. 39516. It thus appears that there was no transportation of seeds on 30-5-94 but only pre-paid C.N. issued for recovering freight for transportation of goods against C.N. No. 9501351 and 9501352 transported on 30-5-94."
Since consignment note 9501351 and 9501352 were issued for transportation of goods of appellant No. 1, he paid against these consignment notes and there was no need for pre-paid consignment note. Further this consignment was duty paid and the gate pass for the date of despatch and the goods under despatch were available. There was no lorry challan or despatch memo even according to the notice and hence there cannot be movement of goods (allegedly to be non-duty paid) on 30th May 1994 and so the question of collecting freight through a pre-paid consignment note on 30th May 1994 does not arise. Further there is no dispute that the consignment notes were cancelled and intimation of cancellation was given to the Excise authorities within the stipulated period of 24 hours and in such circumstances, it was necessary for the transporters to identify the person who has booked the consignment or taken delivery thereof, in order to implicate appellant No. 1. If identification is not done, then the transporter can mention any name of his choice contrary to the details contained in the documents but this cannot form the basis of a charge. In the absence of any supporting document or evidence to link appellant No. 1 with the transporter's document, it was absolutely necessary for the transporter to establish the identity of the person who took the consignment or has taken the delivery thereof and since this has not been done, it will amount to charging a person merely on suspicion which is not legally permissible. The books and records maintained by the transport agency were also not approved in the regular course of business or in the normal course of business. They contained interpolations and therefore, their credibility is doubtful. The details in the transporters documents also do not tally with each other which would show that the documents were not maintained in the normal course of business. The insufficiency or inadequacy of the evidence to charge the appellant No. 1 with alleged clandestine removal is evident from the findings recorded by the Commissioner for dropping the demand pertaining to 70 truck loads. The Commissioner's findings on transport of two consignments against same consignment note where he has dropped the charge in respect of some of the trucks, are reproduced below:
68 by EITA - Charge established in 26 cases (42 cases dropped) 12 by RFC - 11 established 1 dropped "In respect of the cases in Annexure E, it is seen that there is no evidence regarding receipt of second consignment at the destination. As such it may at the most become a case of only presumption and without conclusive evidence it cannot be established that the party had actually cleared pan masala without payment of duty. The investigation has not been able to produce even corroborative evidence regarding rest 42 consignments of Annexure E which can prove that 42 consignments were also cleared and consignments received at different destinations. Therefore, I have no alternative but to extend the benefit of doubt to the party. I agree with the contention of the party that assumption and presumption are not a substitute for proof.
His findings on the charge of excess quantity in one consignment note is reproduced below :
"I find the investigation has not been able to adduce any corroborative evidence like consignor and consignees name, receipt and delivery at destination or for that matter any statement of either transporter to support the allegation. Hence dropped."
Some of the other relevant findings are also reproduced below :
"In this connection it would be pertinent to point out that the investigating officers had resumed all the cancelled GPIs/invoices of M/s. KPL which were available in the Range office but no credence was given by them to these documents while making out a case against the party. These GPIs, invoices were neither relied upon in the case nor returned to the Range office, In fact this being a very vital document, investigating officers should have reflected and discussed its relevance while describing the details of cancelled consignment notes shown in Annexure C."
11. The Commissioner has also held that non-recognisation by the transporter or their agents of the person who made cash payment on behalf of Appellant No. 1, does not appear to be very logical in the face of the modus operandi alleged to be adopted by M/s. Kothari Products Ltd. in a regular and planned way in effecting huge evasion of Central Excise duty as alleged in the show cause notice.
12. The Commissioner has dropped the demand where-ever there was no evidence of proof of delivery of goods at destination but has confirmed the demand in cases there was evidence of transportation. However, transportation or receipt at destination is not sufficient and what is to be established by sufficient evidence is that either Appellant No. 1 or its representative, had either booked or received the consignment. Such evidence is missing in this case.
13. The Department has also relied upon the statements of some of the transporters. The appellants had specifically requested both in their written reply and during the hearing, for cross examination of the transporters from whom statements were recorded, but the witnesses were not offered for cross examination and the impugned order does not contain any reason for denial of this opportunity; hence the testimony of the transporter has not stood the test of cross examination.
14. Let us now examine some of the statements. In the statement of Shri S.N. Tiwari, he has nowhere stated that the consignor who has cancelled the consignment note and instructed that the goods are not being despatched, is still despatching the goods and despatched the goods against such cancelled consignment notes. He has only suggested that the consignment may be of Appellant No. 1. Further his statement also stands un-tested by cross examination and in any case, he has disowned his statement of 11-8-94 at the first available opportunity on the next date i.e. 12-8-94.
Regarding the statement of Shri Ashwin Thakker of M/s. K. Mahendrakumar & Co., he has disowned his statement and filed a complaint alleging duress, and coercion in extracting the statement from him. Further the Department itself has not accepted the veracity of Shri Thakker's statement as can be seen from the fact that while according to Shri Thakker, only 18 trucks were received, the show cause notice alleges receipt of 24 trucks and his statement that 50% of consignment were received without payment of duty, has not been accepted by the Department itself. The statement also remains untested by cross examination. Further no unaccounted goods were recovered from M/s. K. Mahendrakumar & Co. and stock available duly tallied with the duty paid documents under the cover of which they were purchased from Appellant No. 1.
As for the statements of Shri Yashpal Batra and Shri Deepak Kothari, Shri Batra has confirmed that a consignment sent by Appellant No. 1 through M/s. RFC was lost in transit and this fact was also confirmed by Shri Deepak Kothari. However, this would not mean that all other aspects stated by Shri Batra are to be taken as a fact. Regarding the statement of Shri Ajay Kumar Nigam, Computer Operator of M/s. Kothari Products Ltd., we find that this statement has not been relied upon in the show cause notice and that appellant No. 1 vide its letter dated 21-8-95, requested for a copy of his statement but it was not made available and hence no support or inference can be drawn from the statement of Shri Nigam. Similarly, even though 6 note books were recovered during investigation, no adverse inference was drawn from the same and in fact, the entries in the note books clearly established that all the despatches were made against orders received, duty was paid and there was cross reference to the number of duty paying documents. Hence these note books support the case of Appellant No. 1 and not the case of the Department. Significantly, nothing incriminating was found or recovered from the premises of appellant No. 1 either in the form of documents for receipt of raw material or documents for despatch of any of the consignments or copy of the gate passes allegedly to have been used for clandestine removal, etc. The show cause notice does not allege any discrepancy regarding raw material account and does not show that appellant No. 1 received any unaccounted raw material. The adjudicating authority has found a serious omission in the investigation. Similarly the Adjudicating authority has also found that there was no discrepancy in the stock of finished products. Therefore, the obvious conclusion to be arrived at is that this aspect was thoroughly investigated and nothing adverse found.
15. We find that in the case of Gurpreet Rubber Industries v. Collector of Central Excise reported in 1996 (82) E.L.T. 347, the Tribunal has set aside the demand of duty based upon entries in a private note book (diary) by a honorary worker in the appellants firm, holding that "admittedly in the instant case, except the said diary, no other evidence such as installed capacity of the factory, raw material utilisation, labour employed, power consumed, goods actually manufactured and packed etc. has been produced by the Department to prove the alleged clandestine production of the factory and the removal of the same. On the other hand, admittedly at the time of visit to the factory, no discrepancy in raw material account was found....". The Tribunal observed that in the light of the foregoing, it cannot be concluded that the note book is a authenticated private record of production so as to raise a demand based on the figures indicated therein. At the most, it may raise a doubt but that cannot take place of proof. Even though there may be certain element of truth in the subsequent story, between 'may be true' and 'must be true', there is a long distance to travel and the whole of the distance must be covered by legal and un-impeachable evidence before a person can be convicted." Applying the ratio of the above order to the present case, we find that apart from transporters documents, there is no evidence either in the form of discrepancy in raw material, consumption of power, actual manufacture of pan masala, discrepancy in stock of final product, etc. to establish the charge of clandestine production and clearance by Appellant No. 1. Further in respect of the goods seized from dealers' premises, the Appellant No. 1 furnished a complete reconciliation to show that the entire goods were duly reflected in the books of account and fully covered by duty paying documents and that these were received from appellant No. 1 against valid documents and this reconciliation has not been disputed by the authorities (see pages 561, 567 and 572 of the reply filed before the Commissioner).
16. Let us now deal with the case law cited by the learned DR. We find that the case law does not support the case of the Department.
(1) In the case reported in [1984 (15) E.L.T. 129], [Kallatra Abbas Haji] the Court found that the petitioner did not deny the allegation contained in the statement of the co-accused and the Court observed that this amounted to an admission - however, in the present case, Shri Deepak Kothari specifically denied the allegation of clandestine removal when faced with the transporter's statement.
(2) the decision reported in [1996 (87) E.L.T. 478] [S.K. Asraf Hossain] is distinguishable since the fact of admission by partner of the appellants firm corroborating entries in the seized records does not exist in the present case.
(3) in the case reported in [1996 (84) E.L.T. 244], [Popular Carpet Industries] the Tribunal held that the refusal to offer the co-noticee for cross examination was justified because the co-noticee refused to be cross examined. This is not the position in the case before us. We also find that the Tribunal had remanded the case to the Adjudicating authority on the ground that direct evidence was not available and that the secondary evidence was not properly examined. Therefore, this decision is not applicable to the facts of the present case.
(4) the decision reported in 1996 (84) E.L.T. 229 (Aditya Steel Industries) relates to a case where it was an admission by the partner who had removed the goods. This was corroborated by the factory Manager, slips and the factory gate pass corroborated the evidence which also indicated Removal of one consignment in the morning and another consignment later, which was intercepted. The Tribunal accordingly confirmed that there were two removals. In the present case, however, there is no statement from the partner, no admission by any of the employees of the Appellant No. 1 and there is no recovery of any slip or gate pass of factory of Appellant No. 1 and hence the decision relied upon by the DR is not applicable.
(5) the ratio of the decision of the Supreme Court reported in [1993 (13) E.L.T. 1546 (S.C.)] (D. Bhoormull) that the prosecution is not required to furnish evidence with regard to each and every minute detail, when the acquisition/possession of the goods was established, is not applicable in the present case where the basic fact that pan masala was manufactured and clandestinely removed by Appellant No. 1 is itself in dispute and insufficient evidence has been adduced on this aspect.
(6) in the case of K.I. Pavunny reported in 1997 (90) E.L.T. 241 (S.C.), the Apex Court has held that a confessional statement of an accused, if found to be voluntary, is a substantial piece of evidence. In the present case, there is no confession, conspiracy is not established, statement of transporters have not been corroborated in any material particulars by any reliable evidence and statements were also untested for their veracity by cross examination.
(7) in the cases of Jadunath Singh and Anr. (AIR 1971 SC 363), Ramesh Singh (AIR 1972 SC 102) and Mehtab Singh and Ors. (AIR 1975 SC 274), it has been held that there is no necessity for identification parade where the identity of the accused is previously known but it has also been very clearly held that identification parade is necessary in case of doubt. In the present case, identity is not established at all and in fact, the transporters' representative has stated that he is unable to identify the person who had booked the consignment or taken delivery of pan masala on which duty has been demanded.
The learned DR has relied upon certain decisions namely Naresh Sukhawani reported in [1996 (83) E.L.T. 258] and Ugar Ahir & Others reported in [AIR 1965 SC 277] to support his contention that if there is any incorrectness or falsehood in one part of the statement, the remaining parts of the statement are not affected and are still valid pieces of evidence. However, in this case, the statement of Shri Ashwin Thakker was not voluntary as he had retracted his statement and complained against the statement being forced out of him, supporting his complaint with medical certificates. His statement is also disbelieved by the department in material particulars which would show that the statement is not voluntary at all and therefore, cannot be relied upon by the Department to sustain the demand.
In the light of the above analysis on the above evidence and case law, we hold that the Department has not discharged the burden of proof of clandestine removal by Appellant No. 1 and therefore, set aside the duty demand and penalties imposed on the Appellant No. 1 to 12.
17. In the appeal filed by the Revenue, the Department has not challenged any of the findings recorded by the Adjudicating authority including his findings on deficiency in investigation and inefficiency of evidence. Some of the findings which remain in challenge are listed below:
"(1) during the entire operation of DGAE, no discrepancy in the stock of inputs or in the finished products in the manufactory of M/s. Kothari Products Ltd. was found by the officers;"
"(2) no incriminating document relating to illicit receipt of inputs was found in their manufactory or in their office premises".
"(3) It is also a fact that no seizure was effected either in the factory or in other premises of M/s. KPL or in the premises of any transporters while the raids were conducted by the Department simultaneously in all the sensitive places relating to the manufacture of Pan masala, transportation and sale of pan masala of M/s. KPL."
"(4) But I find that the investigation officers have not thoroughly examined this important point and during their entire operation, they could not find any discrepancy with regard to the input and output in the manufactory of M/s. KPL. This fact could have been investigated thoroughly before proposing the demand of duty."
"(5) Further I find that where there is allegation of clandestine removal of pan masala, either against cancelled consignments or against double transportation the freight has been paid in cash, the transporters and their agents at no stage could recognise the person who made cash payment on behalf of M/s. KPL."
"(6) This non-recognisation does not appear very logical in the fact of the modus operand] alleged to be adopted by M/s. KPL in a regular and planned way in effecting huge evasion of Central Excise duty as alleged in the show cause notice."
"(7) In this connection, it would be pertinent to point out that the investigating officers had resumed all the cancelled GPIs/invoices of M/s. KPL which were available in the Range office but no credence was given by them to these documents while making out a case against the party. These GPIs/invoices were neither relied upon in the case nor returned to the Range office. In fact this being a very vital document investigating officers should have reflected and discussed its relevance while describing the details of cancelled consignment notes shown in Annexure C."
"(8) Excess quantity in one consignment : I find the investigation has not been able to adduce any corroborative evidence like consignor and consignees name, receipt and delivery at destination or for that matter any statement of either transporter to support the allegation. Hence dropped."
18. The Commissioner has, in our view, rightly dropped the demand in those cases where there was no evidence or proof of delivery of goods at destination. However, according to the Department, evidence of transportation of pan masala is sufficient to confirm demand even in such cases. However, in the absence of any evidence to prove that either Appellant No. 1 or its representative (for example distributor or C & F Agents) had either booked or received such consignments, we do not agree with the DR that transportation of goods is sufficient. We also note that in a recent decision reported in 1998 (29) RLT 183 in the case of Jindal Aluminium Ltd., the Tribunal has held that "for the purpose of upholding the charge of clandestine removal, the burden is very heavy upon the Revenue to show that the assessee had unaccounted balance in the input registers or transported the inputs without maintaining separate register and manufactured the goods which flows from the use of excess electricity bills and unaccounted production of finished product.....". The relevant portions of this order are reproduced below :
"The Revenue knew their case better. They had made thorough investigation in the respondents factory and not an iota of evidence had been found against them. They had produced all the registers, records. They had filed affidavits. There was no examination of a single witness or seizure of goods to show clandestine removal of goods or sale of such goods. It is the duplicate challans of the transporter, on the basis of which the alleged clandestine removal of the goods is being attempted to be proved. This is against the principles known in law. The aspect pertaining to clandestine removal has been laid down in the judgment rendered by the Tribunal in the case of Kashmir Vanaspati (P) Ltd. v. CCE, reported in 1989 (39) E.L.T. 655 (Tribunal) wherein it has been held that the Revenue cannot proceed even on the basis of private note book maintained by labourers containing unauthenticated entries and over writings has been held to be not dependable record to establish clandestine removals unless the same is supported by other evidence such as raw materials consumed, goods actually manufactured and packed. In the case of Sayaji Iron & Engg. Co. Ltd. v. CCE, reported in 1990 (45) E.L.T. 104 (Tribunal) it has been held that irregularities in the maintenance of RG1 Register cannot be a conclusive evidence of clandestine removal of goods. It was held that the whole discrepancy appeared to be the result of erroneous methods adopted by the appellants for making entries in the Register. Although plausible explanation has been provided by them the department has not investigated further and proved by cogent evidence that explanations were patently improbable. There is no positive evidence to prove the alleged clandestine removal which is based merely on assumption. The Tribunal while coming to this conclusion relied upon the following judgments:
(a) Ambalal v. Union of India and Ors. reported in 1983 (13) E.L.T. 1321 (S.C.)
(b) B. Lakshmichand v. U.O.I, reported in 1983 (12) E.L.T. 322
(c) M. Koyakutty, Kayamkulam v. Collector of Customs and Central Excise, Cochin reported in 1978 (2) E.L.T. (J 494)
(d) Harchand v. Additional Collector of Customs reported in 1981 (8) E.L.T. 699 (Calcutta).
13. Therefore, the Tribunal has laid down the law in regard to clandestine removal and it is well settled that for the purpose of clandestine removal the burden is very heavy on the Revenue to show that the assessee had unaccounted balance in the input registers or transferred the inputs without maintaining separate register and manufactured the goods, which flows out from the use of excess electricity bills and unaccounted production of finished product and removed such goods by way of sales to parties. In this case, it was strongly contended that the Revenue has not found any evidence to support their case nor have they recorded statement of any of the employees of the M/s. JAL or their dealers to the effect that there was manufacture or receipt of goods which are unaccounted and removed without payment of duty or without gate pass. On the other hand the respondents have produced enormous evidence in the nature of purchase of inputs from Public Sector Undertakings. The records have been duly certified and as per records, their production has been 98% which is totally accounted for and duly certified by the Chartered Accountant and further certified by the Supdt. of Central Excise. In the absence of any evidence worth the name that the appellants have manufactured and cleared goods clandestinely it is totally beyond comprehension that even if there is suspicion the same cannot be used as there was total and complete investigation by the Revenue and they found nothing on record against the assessee.
14. The only ground on which the department proceeded is maintenance of duplicate challan by the transporter which has been explained in great detail by the transporter himself. Annexure D1 for example indicates challans 109-2095 dated 12-5-93 which corresponds consignment 109-8178 dated 5-5-93 and the corresponding GP is 282 dated 5-5-93. In respect of this challan No. the vehicle No. MED 2313 has been used for removal of goods from the factory gate to the godown of the transporter and at the godown the lorry transporter has indicated another lorry DL-1 GA 1487 and transported the same quantity of goods i.e. 9065 to New Delhi. He has provided another challan 109-2101. This duplicate challan has only indicated further transportation to Delhi. This lorry challan cannot be construed to mean that there was clandestine removal of goods without accountal. It is not understandable as to how the lorry can cross the many check post from Nelamangala to New Delhi without accountal. Further the Revenue has not examined the lorry driver 1 GA 1487 by which another quantity of 9065 Kg. is alleged to have been removed. The department has not examined the security officer of the Company or security gate records to show that this lorry had entered the factory gate without gate pass. There is no corresponding figure for 9065 for that particular date i.e. 12-5-93 or 14-5-93 to show that another quantity of 9065 Kgs was produced during these days. It was for the Revenue to have shown that the assessee had transferred the inputs without payment of duty and utilised it for manufacture of the goods or there was excess electricity consumption on that to the extent of this quantum of production. No such corroboration has been produced. Hence, merely because, the lorry transport company has kept another challan 109-2101 in respect of clearance made by challan 2095, nothing can be imputed. Further challan No. 109-2095 which represented the clearance from the factory gate has all the details connected in challan No. 109-2101, yet the department has presumed that there is another clearance on this challan No. It is difficult to understand as to how there can be two clearances on the same day in respect of same lorry No. and the same quantity. The same charge is rested on other challan nos. It is an imagination unsupported by any logical basis and it is beyond comprehension as to how the Revenue can build up cases of this nature without any semblence of evidence on record. The Collector has examined all these facts and each evidence of both the Revenue as well as the respondents including M/s. ACTL and have thoroughly examined and came to the conclusion in para 95 of his order that no evidence was available to prove that extra quantity of goods were transported from Bangalore to Delhi and hence he held that in terms of the evidence the charges levelled against the respondent has been unsubstantiated. He also examined the discrepancy found in respect of charges of clandestine removal in subsequent paras and has found that there was no evidence to show that such allegation did exist. M/s. JAL had submitted that the figures furnished by the department itself showed that the actual out-put ratio was 95.48%, 97.21%, 96.66% and 98.23% for 90-91, 91-92, 92-93 and 93-94 respectively supported by the certificate issued by the Chartered Accountant and further certified by the Supdt. of Central Excise. Therefore, he held that the allegation in the show cause notice that the yield of M/s. JAL has suddenly dropped to 77% from a high of 96.7% is not correct. He held that the yield was never below 96.66% in any financial year. He has perused letter dated 25-10-94 of Bhoruka Aluminium Ltd. relied upon by the department as a piece of evidence against the respondent. In the said letter Bhoruka Aluminium Ltd. have stated as under:
"The whole process involves some returns in terms of process scrap and some losses in terms of melting and invisible loss. At melting unit, the melting loss is around 5% of the raw material consumed and invisible loss is around 1% of the total billets extruded, the rest of the quantity are recycled"
The Collector has noted that from the above letter it can be seen that the process loss is less than 1% and the allegation of the department that according to Bhoruka Aluminium Ltd. it is almost nil is misplaced. The above observation of the Collector is totally acceptable, especially the requirements that are required to substantiate the clandestine removal not having been brought on record by the Revenue, hence the charges made by Revenue is totally unsubstantiated. Further we note that the Collector has examined thoroughly the evidence pertaining to the lorry challans from para 72 to para 99. We have perused this finding including the allegation of non carrying of household goods by ex-employees and that it was clandestine removal of goods. We notice that the Collector after thorough examination of the records has come to the conclusion that no evidence was available to prove that extra quantity was transported from Bangalore to Delhi. We find that the order of the Collector is most judicious, well written after full analysis of the evidence and it does not call for interference on any account. We place on record that the Collector has written a very detailed order after analysing all the evidences and his order is sustainable in law."
The ratio of this case is squarely applicable to the facts and circumstances of the present case. The only argument of the learned DR in support of the Department's appeal is that duty liability would arise as soon as the goods are cleared from the factory and not at the time when the goods are received at destination. We do not agree. The Adjudicating authority, after analysing the entire evidence, has come to the conclusion that the evidence on record is not sufficient to uphold the charge and the demand cannot be based on assumptions and presumptions. The findings of the Adjudicating authority which we have set out above, have not been controverted or rebutted by the Department in their appeal. The learned DR's contention that the statement of Shri A.K. Nigam and Ms. Ritu Bhalla, Computer operators of Appellant No. 1 that they had been preparing invoices/gate passes bearing same Sl. No. on the basis of instructions/chits given by Shri Anil Mishra, Despatch Clerk, support his case, is not acceptable in view of the fact that copies of these statements were not provided to Appellant No. 1 despite request dated 21-8-95. On the other hand, the Deputy Director Anti Evasion vide letter dated 26-6-96, has categorically refused to give copies of these statements and therefore, they cannot be relied upon at this stage.
19. In the light of the above discussion, we hold that the evidence on record is not sufficient for the purpose of upholding the charge of clandestine manufacture and clearance of pan masala by Appellant No. 1 and accordingly, we set aside the duty demand and the penalty imposed upon Appellant No. 1 and other appellants. In the result, the appeals filed by the Manufacturer, Transport Agencies and other co-noticees are allowed, while the appeal filed by the Revenue is rejected.