Custom, Excise & Service Tax Tribunal
Patel Product Unit Noiii vs Commissioner Of Central Excise ... on 4 October, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH - COURT NO. I
Excise Appeal No. 86076 of 2015
(Arising out of Order-in-Original No. 16/RN/COMMR/M-II/2014-15 dated
30.01.2015 passed by the Commissioner of Central Excise, Mumbai-II)
Arvind N. Patel .... Appellant
5- Nagrani Building, Nr. Jalaram Temple,
Hariyanawala Lane, Kurla (W), Mumbai- 400 07.
Versus
Commissioner of Central Excise, Mumbai-II .... Respondent
9th Floor, Piramal Chambers,
Jijibhoy Lane, Lalbaugh, Parel
Mumbai- 400 012.
WITH
Excise Appeal No. 86077 of 2015
(Arising out of Order-in-Original No. 16/RN/COMMR/M-II/2014-15 dated
30.01.2015 passed by the Commissioner of Central Excise, Mumbai-II)
Mahendrabhai C Patel .... Appellant
08- Rainbow Park, Karamsad,
Vidyanagar, Dist- Anand, Gujarat- 388 120.
Versus
Commissioner of Central Excise, Mumbai-II .... Respondent
9th Floor, Piramal Chambers,
Jijibhoy Lane, Lalbaugh, Parel
Mumbai- 400 012.
WITH
Excise Appeal No. 86078 of 2015
(Arising out of Order-in-Original No. 16/RN/COMMR/M-II/2014-15 dated
30.01.2015 passed by the Commissioner of Central Excise, Mumbai-II)
Smt Kailashben M. Patel .... Appellant
Shop No.3, Pocketwala Building,
Ground Floor, Station Road, Kurla (W),
Mumbai- 400 070.
Versus
Commissioner of Central Excise, Mumbai-II .... Respondent
9th Floor, Piramal Chambers,
Jijibhoy Lane, Lalbaugh, Parel
Mumbai- 400 012.
2 E/86076-86083, 86092 &
860100-86103/2015
WITH
Excise Appeal No. 86079 of 2015
(Arising out of Order-in-Original No. 16/RN/COMMR/M-II/2014-15 dated
30.01.2015 passed by the Commissioner of Central Excise, Mumbai-II)
Rahul M Patel .... Appellant
08- Rainbow Park, Karamsad,
Vidyanagar, Dist- Anand, Gujarat- 388 120.
Versus
Commissioner of Central Excise, Mumbai-II .... Respondent
9th Floor, Piramal Chambers,
Jijibhoy Lane, Lalbaugh, Parel
Mumbai- 400 012.
WITH
Excise Appeal No. 86080 of 2015
(Arising out of Order-in-Original No. 16/RN/COMMR/M-II/2014-15 dated
30.01.2015 passed by the Commissioner of Central Excise, Mumbai-II)
Arvind N. Patel .... Appellant
5- Nagrani Building, Nr. Jalaram Temple,
Hariyanawala Lane, Kurla (W), Mumbai- 400 07.
Versus
Commissioner of Central Excise, Mumbai-II .... Respondent
9th Floor, Piramal Chambers,
Jijibhoy Lane, Lalbaugh, Parel
Mumbai- 400 012.
WITH
Excise Appeal No. 86081 of 2015
(Arising out of Order-in-Original No. 16/RN/COMMR/M-II/2014-15 dated
30.01.2015 passed by the Commissioner of Central Excise, Mumbai-II)
Shri Krishna Traders .... Appellant
Godown No.6, LBS Road, Near Patel Products,
Unit No-III, Kurla (W), Mumbai- 400 070.
Versus
Commissioner of Central Excise, Mumbai-II .... Respondent
9th Floor, Piramal Chambers,
Jijibhoy Lane, Lalbaugh, Parel
Mumbai- 400 012.
WITH
3 E/86076-86083, 86092 &
860100-86103/2015
Excise Appeal No. 86082 of 2015
(Arising out of Order-in-Original No. 16/RN/COMMR/M-II/2014-15 dated
30.01.2015 passed by the Commissioner of Central Excise, Mumbai-II)
Shri Gajanan Agency .... Appellant
5- Nagrani Building, Nr. Jalaram Temple,
Hariyanawala Lane, Kurla (W), Mumbai- 400 07.
Versus
Commissioner of Central Excise, Mumbai-II .... Respondent
9th Floor, Piramal Chambers,
Jijibhoy Lane, Lalbaugh, Parel
Mumbai- 400 012.
WITH
Excise Appeal No. 86083 of 2015
(Arising out of Order-in-Original No. 16/RN/COMMR/M-II/2014-15 dated
30.01.2015 passed by the Commissioner of Central Excise, Mumbai-II)
Ashokbhai S. Patel .... Appellant
5- Nagrani Building, Nr. Jalaram Temple,
Hariyanawala Lane, Kurla (W), Mumbai- 400 07.
Versus
Commissioner of Central Excise, Mumbai-II .... Respondent
9th Floor, Piramal Chambers,
Jijibhoy Lane, Lalbaugh, Parel
Mumbai- 400 012.
WITH
Excise Appeal No. 86092 of 2015
(Arising out of Order-in-Original No. 16/RN/COMMR/M-II/2014-15 dated
30.01.2015 passed by the Commissioner of Central Excise, Mumbai-II)
Mahendrabhai C Patel .... Appellant
Unit No. 1-4, Flat No-A/2, Ground Floor,
Mansi Apartment, New Mill Road, Kurla (W),
Mumbai- 400 070.
Versus
Commissioner of Central Excise, Mumbai-II .... Respondent
9th Floor, Piramal Chambers,
Jijibhoy Lane, Lalbaugh, Parel
Mumbai- 400 012.
WITH
Excise Appeal No. 86100 of 2015
(Arising out of Order-in-Original No. 16/RN/COMMR/M-II/2014-15 dated
30.01.2015 passed by the Commissioner of Central Excise, Mumbai-II)
4 E/86076-86083, 86092 &
860100-86103/2015
Patel Product .... Appellant
Plot No. 36, Anand Sojitra Road,
Anand, Gujarat- 388 340.
Versus
Commissioner of Central Excise, Mumbai-II .... Respondent
9th Floor, Piramal Chambers,
Jijibhoy Lane, Lalbaugh, Parel
Mumbai- 400 012.
WITH
Excise Appeal No. 86101 of 2015
(Arising out of Order-in-Original No. 16/RN/COMMR/M-II/2014-15 dated
30.01.2015 passed by the Commissioner of Central Excise, Mumbai-II)
Patel Product Unit No-III .... Appellant
Plot No. 36, Anand Sojitra Road,
Anand, Gujarat- 388 340.
Versus
Commissioner of Central Excise, Mumbai-II .... Respondent
9th Floor, Piramal Chambers,
Jijibhoy Lane, Lalbaugh, Parel
Mumbai- 400 012.
WITH
Excise Appeal No. 86102 of 2015
(Arising out of Order-in-Original No. 16/RN/COMMR/M-II/2014-15 dated
30.01.2015 passed by the Commissioner of Central Excise, Mumbai-II)
Patel Product Unit No-II ....
Appellant
Plot No. 36, Anand Sojitra Road,
Anand, Gujarat- 388 340.
Versus
Commissioner of Central Excise, Mumbai-II .... Respondent
9th Floor, Piramal Chambers,
Jijibhoy Lane, Lalbaugh, Parel
Mumbai- 400 012.
AND
Excise Appeal No. 86103 of 2015
(Arising out of Order-in-Original No. 16/RN/COMMR/M-II/2014-15 dated
30.01.2015 passed by the Commissioner of Central Excise, Mumbai-II)
Patel Product Unit No-I .... Appellant
Plot No. 36, Anand Sojitra Road,
Anand, Gujarat- 388 340.
Versus
5 E/86076-86083, 86092 &
860100-86103/2015
Commissioner of Central Excise, Mumbai-II .... Respondent
9th Floor, Piramal Chambers,
Jijibhoy Lane, Lalbaugh, Parel
Mumbai- 400 012.
APPEARANCE:
Shri Devashish K. Trivedi, Advocate for the Appellant
Shri Shambhoo Nath, Special Counsel for the Respondent
CORAM:
HON'BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)
HON'BLE MR. M.M. PARTHIBAN, MEMBER (TECHNICAL)
FINAL ORDER NO. A/86115-86127/2024
Date of Hearing: 18.06.2024
Date of Decision: 04.10.2024
Per: S.K. MOHANTY
Brief facts of the case, leading to these appeals are that M/s
Patel Product is a proprietorship firm of Shri Mahendrabhai C. Patel.
It is having its head office at Khandhali (a place near Anand),
Gujarat. It was having four different units viz. Unit-I, II, III and IV in
Kurla (West), Mumbai. All the four units were having different
registration numbers issued by the jurisdictional Central Excise
authorities. Those units manufacture 'Unmanufactured Branded
Tobacco' and after packing the same in printed pouches bearing a
brand name of 'Om Special Pandharpuri Tambakoo No. 1', were sold
in the market. All the above four units discharged their Central Excise
Duty liability on removal of the said products and also maintained
statutory records and filed their statutory returns separately. Those
units were also separately audited under the provisions of the Central
Excise statute. Shri Mahendrabhai C. Patel was a Power of Attorney
Holder of two firms viz. (a) M/s Shree M.C. Patel & Sons, a
proprietorship firm of his wife Smt. Kailashben M. Patel and (b) M/s
Shree Krishna Traders, a partnership firm of his sons Shri Neeraj M.
Patel and Shri Rahul M. Patel. Both these firms were engaged in
manufacture and sale of 'Unbranded Unmanufactured Loose/Bulk
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860100-86103/2015
Tobacco'. Both these firms were having their respective head offices
at Khandali, Gujarat and were having shop at Kurla (W), Mumbai. As
Unbranded Unmanufactured Tobacco did not attract any Central
Excise Duty, both these firms were not registered with the Central
Excise Department. The respective head office of Patel Product,
Shree M.C. Patel & Sons and Shree Krishna Traders at Khandali used
to purchase raw tobacco leaves from various middle men (dalals) of
tobacco as well as farmers of tobacco. They used to sieve and
remove the twigs, stems, veins of the raw leaf and size the same.
The quality of raw tobacco purchased by Patel Product was superior
as the same was required for manufacturing 'Unmanufactured
Branded Tobacco', whereas quality of raw tobacco purchased by the
other two firms was inferior, when compared with the raw tobacco
purchased by Patel Product, as it was to be used for sale of loose /
bulk tobacco without any brand name. All the three firms at Khandali
used to pack their respective leaves in sacks of 40 kgs. each.
Thereafter, 250 sacks used to be loaded in a transport vehicle in one
trip and were transported from Khandali to Kurla respectively. The
tobacco leaves of Patel Product were received by the four units of
Patel Product at Kurla, where they used to pack 'Unmanufactured
Branded Tobacco' viz. 'Om Special Pandharpuri Tambakoo No. 1' and
sell the same on payment of Central Excise Duty. Whereas, the
remaining two firms received their respective tobacco leaves and sold
them in loose/bulk viz., packed in sacks without any brand name. No
Central Excise Duty was payable by these firms in regard to the same
loose/bulk tobacco. In order to pack 'Unmanufactured Branded
Tobacco' bearing a brand name 'Om Special Pandharpuri Tambakoo
No. 1', Patel Product used to get the pouches printed with the said
brand name. The printed pouches were supplied to Patel Product
mainly by M/s Montage Enterprises (P) Ltd. In the four different units
of Patel Product, the labourers were employed. These labourers used
to manually pack tobacco into pouches bearing brand name and used
to seal the said pouches with the help of hand sealing machine. M/s
Jalaram Traders, proprietorship firm of Arvindbhai N. Patel and
subsequently M/s Shree Gajanan Agency, partnership firm of
Arvindbhai N. Patel and Ashokbhai S. Patel used to purchase
respective tobacco from the said three firms and sell the same to
various buyers, situated within the municipal limits of (i) Kalyan -
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860100-86103/2015
Dombivli - KDMC, (ii)Thane - TMC, (iii) Pune - PMC, (iv) Bhiwandi -
Nizamura - BNMC and (v) Ulhasnagar - UMC. They also sell these
products to various outstation buyers. Delivery of tobacco to the
buyers situated within the aforesaid municipal limits was made in
their own vehicles and delivery to outstation buyers were made
through various transporters situated at Sakinaka, Mumbai.
2. During the course of searches conducted at the premises of the
appellants as well in other places, the Central Excise officers have
recorded statements of various persons. In his statement dated
10.06.2013, Shri Mahendrabhai C. Patel, proprietor M/s Patel Product
had stated that raw tobacco used for production of 'Om Special
Pandharpuri Tambakoo No. 1' is Grade-I quality and raw tobacco
which is used for retail/bulk sale from M/s Shree Krishna Traders and
M/s Shree M.C. Patel & Sons is Grade-II and III quality tobacco. All
these bulk tobaccos are purchased at Khandhali, Gujarat in
respective firm's name and thereafter, those were stock transferred
to Kurla (West), Mumbai through All India Road Transport Company,
wherein each consignment consisted of 250 bags, each of 40 kgs.
During the course of investigation, the department had alleged that
at the time of stock transfer, from Khandhali to Kurla of Grade-II /
III raw tobacco of M/s M.C. Patel & Sons, Kurla and M/s Shree
Krishna Traders, instead of 250 bags of Grade-II and III quality, raw
tobacco about 50 to 75 bags of Grade-I quality tobacco, which is
required in production of 'Om Special Pandharpuri Tambakoo No. 1'
were also transferred from Khandhali to Kurla, under the guise of
Grade-II/III bags of raw tobacco of M/s Shree M.C. Patel & Sons and
M/s Shree Krishna Traders in respect of each consignment. It was
further alleged that the said 50 - 75 bags of Grade-I quality tobacco
were procured under guise of Grade- II / III quality tobacco in the
account of M/s Shree M.C. Patel & Sons, Kurla and M/s Shree Krishna
Traders, Kurla and subsequently diverted to M/s Patel Products, Kurla
for suppression of production and clandestine clearance of 'Om
Special Pandharpuri Tambakoo No. 1'. On the basis of sales bill /
delivery memos issued by M/s Shree M.C. Patel & Sons, Khandali and
M/s Shree Krishna Traders, Khandali, the total number of deliveries
were arrived at. As per the aforesaid statement of Shri Mahendrabhai
C. Patel, for one delivery 250 bags of 40 kgs. each were considered.
8 E/86076-86083, 86092 &
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The total quantity of raw tobacco transported by both these firms to
Kurla was worked out at the rate of 10,000 kgs. of tobacco per trip.
Diversion of 75 bags per trip was taken into consideration. This is
how number of bags of raw tobacco procured in the name of M/s
Shree M.C. Patel & Sons and M/s Shree Krishna Traders and diverted
to M/s Patel Product, Kurla for suppressed production and clandestine
clearance of 'Om Special Pandharpuri Tambakoo No. 1' were arrived
at.
3. On the basis of detailed investigation, Show Cause Notice
(SCN) dated 08.07.2013 was issued, taking into consideration the
aforesaid diversion of raw material i.e., superior grade tobacco in
guise of inferior grade tobacco at the rate of 75 bags per trip, in
regard to the period from June, 2008 to August, 2012, the alleged
clandestine clearance of packed 'Unmanufactured Branded Tobacco'
by M/s Patel Product was worked out. The assessable value of bags
of 'Om Special Pandharpuri Tambakoo No. 1' cleared clandestinely
was considered as Rs.58,46,35,230/-. Basic excise duty @ 42% upto
28.02.2010 and 50% w.e.f. 01.03.2010 along with Additional Duty of
Excise @ 4.2%, Education Cess and Secondary & Higher Education
Cess were accordingly worked out. A demand of total Central Excise
Duty payable on such clandestine clearance of 'Om Special
Pandharpuri Tambakoo No. 1' was worked out to be
Rs.31,11,78,562/-. The SCN alleged that M/s Jalaram Traders and
M/s Shree Gajanan Agency were controlled by Shri Mahendrabhai C.
Patel and therefore, the price at which these two firms used to sell
the said branded tobacco of M/s Patel Product in the open market,
should be considered as assessable value, for the purpose of
demanding Central Excise Duty from M/s Patel Product. On that
basis, a demand of differential Central Excise Duty on account of
under valuation during the period from June, 2008 to July, 2012 of
Rs.3,67,06,613/- was made. The total demand of Central Excise Duty
of Rs.34,78,85,175/- was proposed for recovery from M/s Patel
Product, Unit-I-II-III-IV, jointly and severally. It had also proposed
for imposition of personal penalty on (a) Shri Mahendrabhai C. Patel,
proprietor of M/s Patel Product [Unit-I-II-III-IV], (b) M/s Jalaram
Traders, M/s Gajanan Agency, (c) Shri Arvindbhai N. Patel,
proprietor/partner of M/s Jalaram Traders/ M/s Shree Gajanan
9 E/86076-86083, 86092 &
860100-86103/2015
Agency, (d) Shri Ashokbhai S. Patel, partner, M/s Shree Gajanan
Agency, (e) Shree M.C. Patel & Sons, proprietor of Smt. Kailashben
M. Patel, (f) M/s Shree Krishna Traders, (g) Shri Neeraj M. Patel,
Partner, M/s Shree Krishna Traders (h) Shri Rahul M. Patel, partner,
M/s Shree Krishna Trader, (i) Shri Mahendrabhai C. Patel, Power of
Attorney Holder, M/s Shree Krishna Traders and M/s Shree M.C. Patel
&Sons. Out of the aforesaid demand on clandestine clearance
amounting to Rs.31,11,78,562/-, some evidences were gathered by
the investigation to support the demand of Rs.10,78,00,874/-. The
officers of Central Excise Department had found out that M/s Jalaram
Traders / M/s Gajanan Agency were selling tobacco in the Municipal
Corporation limits in their own vehicles. The officers had requested
the municipal authorities for providing the data pertaining to
transportation of tobacco into the respective municipal limits in the
vehicles of M/s Jalaram Traders / M/s Gajanan Agency. The
respective authorities in the (a) KDMC Municipal Corporation, (b)
Thane Municipal Corporation and (c) Pune Municipal Corporation, had
provided details of tobacco transported into the respective municipal
limits in the vehicles of M/s Jalaram Traders / M/s Gajanan Agency.
Based on the said detail, a Central Excise Duty calculation in respect
of clearance of bags of tobacco in the municipal limits of said three
municipal corporations were worked out. Accordingly, it was
calculated that total duty payable in regard to the clearances made
inside the municipal limits of (a) Kalyan - Dombivli Municipal
Corporation was Rs. 5,28,85,631/- (Rs.4,50,56,544/-+
Rs.78,29,087/), (b) Thane Municipal Corporation was
Rs.1,81,55,891/- (Rs.1,06,25,446/- + Rs.75,30,445/-) and (c) Pune
Municipal Corporation was Rs.2,31,16,900/.
4. Investigation was also carried out at the end of 14 (fourteen)
numbers of transporters. On the basis of statements of the said 14
transporters, the department had made out a case that 6415 bags of
'Om Special Pandharpuri Tambakoo No. 1' were cleared without
payment of Central Excise Duty by M/s Jalaram Traders / M/s
Gajanan Agency. The total assessable value of the said tobacco was
calculated as Rs.2,49,10,908/- and the Central Excise Duty payable
in regard to the same was calculated as Rs.1,36,42,451/-. This is
how, on the basis of the said letters provided by the aforesaid three
10 E/86076-86083, 86092 &
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Municipal Corporation offices and investigation conducted at the end
of fourteen (14) transporters, a total Central Excise Duty of
Rs.10,78,00,874/- was worked out. This demand was a part of total
demand of Rs.31,11,78,562/-, being worked out on the basis of
diversion of raw material i.e. superior grade of tobacco in guise of
inferior grade of tobacco at the rate of 75 bags per trip from M/s
Shree Krishna Traders, Khandali and M/s Shree M.C. Patel & Sons,
Khandali to M/s Patel Product, Kurla. The SCN had also recorded that
Shri Mahendrabhai C. Patel, Proprietor of Patel Product was arrested
on 13.06.2013 and was granted bail by the Chief Metropolitan
Magistrate Court. He appeared before the investigation on
17.06.2013, when his statement was recorded under Section 14 of
Central Excise Act. It is also mentioned in the SCN that
Mahendrabhai C. Patel had retracted his statement dated 17.06.2013
vide affidavit dated 18.06.2013 and had also submitted a copy of
said affidavit before the investigation and in response thereto,
rejoinder letter of even number dated 26.06.2013 was sent by the
investigation to Mahendrabhai C. Patel. Likewise, the SCN had also
recorded further statement of Shri Mahendrabhai C. Patel under
Section 14 of Central Excise Act, 1944 on 20.06.2013. It is
mentioned in the SCN that Shri Mahendrabhai C. Patel, subsequently
vide his affidavit dated 21.06.2013, had retracted his said statement
dated 20.06.2013 and that a copy of the same was given to the
investigation and that a rejoinder letter dated 26.06.2013 was sent
by the Investigation to Shri Mahendrabhai C. Patel, rebutting the
retraction affidavit.
5. The SCN issued by the department was adjudicated by the
learned Commissioner of Central Excise, Mumbai-II vide Order-in-
Original No. 16/RN/COMMR./M-II/2014-15 dated 30.01.2015 (for
short, referred herein as 'the impugned order'), in confirming the
proposals made therein. The following order was passed by the
learned adjudicating authority:
"ORDER
(i) I confirm the demand of Rs. 34,78,85,175/- [Rupees Thirty
Four Crores, Seventy Eight Lakhs Eighty Five Thousand One
Hundred seventy five] and order its recovery from Shri
Mahendrabhai. C. Patel, Proprietor of M/s Patel Product [Unit-1-
II-III-IV], under sub-section (4) & (10) of Section 11A of the
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Central Excise Act, 1944 [erstwhile proviso to Section 11A(1)] of
the Central Excise Act, 1944];
(ii) I appropriate the amount of Rs.5,00,00,000/- (Rupees Five
Crore) paid by M/s. Patel Product, during the course of the case
investigations, vide its GAR-7 challans No. 04/2012 dated
12.11.2012 [Rs 75,00,000/-], Challan No. 10/2012 dated
27.11.2012 (Rs 2,50,0000/-]; Challan No. 22/2013 dated
22.01.2013 [Rs 50,00,000/-); Challan no. 74/2013 dated
23.03.2013. Rs 2,50,00,000/-], Challan No.11 dated 25.04.2013
[Rs 50,00,000/-]; and Challan No. 12 dated 29.04.2013(Rs
50,00,000/-], against the demand confirmed in para above;
(iii) I order recovery of interest at appropriate rate from Shri
Mahendrabhai C.Patel, proprietor, M/s. Patel Product, Unit I-II-
III-IV, under provisions of Section 11AA (erstwhile Section
11AB) of the of the Central Excise Act, 1944, read with rule 8 of
the Central Excise Rules, 2002;
(iv) I refrain from ordering confiscation under Rule 25, of the CER
2002, the excisable goods total valued at Rs 65,39,86,112/-(Rs.
Sixty five Crores Thirty Nine lakhs eighty six thousand, one
hundred, twelve) as the same are not available for confiscation;
(v) I impose a penalty Rs. 34,78,85,175/- [Rupees Thirty Four
Crores, Seventy Eight Lakhs Eighty Five Thousand One Hundred
seventy five] under the provisions of Section 11AC of the Central
Excise Act, 1944, on Shri Mahendrabhai C. Patel, proprietor of
M/s. Patel Product [Unit-I-II-III-IV];
(vi) I impose a penalty of Rs. 1,00,00,000/- (Rupees One crore
only) on Shri Mahendrabhai Patel, under the provisions of Rule
26 of the Central Excise Rules, 2002;
(vii) I impose a penalty of Rs. 25 lakhs on Shri Arvindbhai
N. Patel, proprietor of M/s Jalaram Traders (Noticee No 6) under
Rule 26 of the Central Excise Rules 2002;
(viii) I impose a penalty of Rs. 10,00,000/- (Rupees Ten
lakhs only)under Rule 26 of the Central Excise Rules 2002, on
M/s Shree Gajanan Agency (Noticee No.7), which devolves on
Shri Mahendrabhai Patel, the defacto owner of M/s Shree
Gajanan Agency;
(ix) I impose a penalty of Rs. 10,00,000/- (Rupees Ten lakhs
only) on Shri Arvindbhai N Patel & Rs. 10,00,000/- (Rupees Ten
lakhs only) on Shri Ashokbhai S Patel, (Noticee No 8 & 9) under
Rule 26 of the Central Excise Rules 2002;
(x) I impose a penalty of Rs. 20,00,000/- (Rupees Twenty lakhs
only) on Smt Kailashben M Patel, Proprietor, M/s. Shree M.C.
Patel & Sons (Noticee No. 10), under Rule 26 of the Central
Excise Rules 2002;
(xi) I impose a penalty of Rs. 20,00,000/- (Rupees Twenty lakhs
only) on M/s. Shree Krishna Traders (Noticee No.11), which
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devolves jointly and severally on Shri Neeraj M Patel & Shri
Rahul M Patel, partners of M/s. Shree Krishna Traders, (Noticee
No.12 & 13) under the provisions of Rule 26 of the Central Excise
Rules, 2002;
(xii) I impose a penalty of Rs. 50,00,000/- (Rupees Fifty
lakhs only) on Shri Mahendrabhai C Patel, Power of Attorney
Holder of M/s Shree M.C. Patel & Sons and M/s Shree Krishna
Traders, (Noticee No. 14), under the provisions of Rule 26 of the
Central Excise Rules, 2002."
6. Feeling aggrieved with the impugned order dated 30.01.2015,
the appellants have preferred these appeals before the Tribunal.
7.1 Learned Advocate Shri Devashish K. Trivedi, appearing for the
appellants, at the time of hearing of appeals and in the written
submissions has submitted as follows:-
7.2 The impugned Order records that during the course of personal
hearing, M/s. Patel Products had submitted replies dated 20.12.2013
for all the four units of M/s. Patel Products. Further written submission
dated 03.03.2014 was also submitted by the said four units of M/s.
Patel Products. Entire reply dated 20.12.2013 as well as further
written submission dated 03.03.2014 of M/s. Patel Products are
reproduced in the impugned order, from which it is found that M/s
Patel Product had submitted before the adjudicating authority copies
of retraction affidavits of all those persons, whose statements were
recorded and relied upon for the purpose of SCN. In their reply, the
appellants had also submitted before the adjudicating authority (i)
affidavit dated 17.02.2014 of one Mr. Deepaq Modgil, Chief Marketing
Officer, M/s. Montage Enterprises (P) Ltd., along with copy of his
statement, the fact of which though was recorded by the officers but,
was not relied upon in the SCN, (ii) affidavits of twenty-five different
farmers / middle men (dalals) of raw tobacco, who had supplied raw
tobacco to (a) M/s. Patel Products, Khandhali, (b) M/s. Shree Krishna
Traders, Khandhali and (c) M/s. Shree M.C. Patel & Sons, Khandhali,
(iii) affidavits of Production Supervisor of Unit - I, Unit - II & Unit -
IV of M/s. Patel Products, wherein the said supervisors have explained
the packing process, affirmed the number of packing labourers
employed in respective units, number of working days and also
affirmed the number of inner pouches, outer pouches and bags of
13 E/86076-86083, 86092 &
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`Om Special Pandharpuri Tambakoo No. 1' packed in a month by the
respective unit, (iv) affidavits of three buyers of tobacco viz. (a) Jiya
Pradeep Jagiasi, Proprietor of M/s. Ekta Traders, (b) Md Anjum Abdul
Gafar, Partner of M/s. Haya Traders, Mumbai, and (c) Md Javed Haji
Yakub, Partner of M/s. Heena Enterprise, who have affirmed that the
officers of Central Excise Department had visited them and tried to
threaten them and obtain statements, but failed in their such action.
M/s. Patel Products had requested the Adjudicating Authority to afford
cross examination / examination-in-chief of:
1) Gulammiya Jamalmiya Sekh, Sandhana
2) Mahendrabhai Vishnubhai Patel, Ramol
3) Dhaneshbhai Manibhai Patel, Sandhana
4) Babubhai Valabhai Patel, Godhaj
5) Amratbhai Devabhai Patel, Der
6) Hirjibhai Narayanbhai Patel, Godhaj
7) Mukanji Hirji Patel, Kunda
8) Gautambhai Chanciabhai Patel, Maherav
9) Kashibhai Lallubhai Solanki, Dedarada
10) Maheshbhai Kantibhai Patel, Maherav
11) Manojkumar Kantilal & Co., Tundav
12) JC Tobacco, Unja
13) Kantibhai Mathurbhai Patel, Maherav
14) Revabhal Ishwarbhai Patel, Balisana
15) Shri Brahmani Tobacco, Hansapur
16) Shri Ambica Tobacco, Hansapur
17) Bhagwati Tobacco Co, Unja
18) Rameshbhai Dahyabhai Patel, Sandhana
19) Sureshbhai Gordhanbhai Patel, Sandhana
20) Kiritbhai Kanubhai Patel, Sandhana
21) Rajnibhai Chandubhai Patel, Sandhana
22) Shri Shivaji Dhansinh, Rathore, Production supervisor of
Unit-III of M/s. Patel Products.
23) Shri Raju Maganbhai Parekh, Production supervisor of Unit-I
of M/s. Patel Products,
24) Shri Anil Damor, Production supervisor of Unit-II
25) Shri Santosh Kantibhai Patel, Production supervisor of Unit-
IV
26) Shri Vishnudutt Vyas,
14 E/86076-86083, 86092 &
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27) Shri Deepaq Modgil,
28) Shri Abdul Razzaq Chouhan of M/s Arco Transport Co.
29) Shri Saleem Abdul Kadar Sheikh of M/s Batco Roadlines
Corporation.
30) Shri Suresh Gopal Suvarna of M/s Sholapur Goods
Transport,
31) Shri Nagesh Chalak of M/s Jagrut Transport Co.
32) Shri Raja Ram K. Katkar of M/s Sachdeva RoadlinesPvt.
Ltd.,
33) Shri Avinash Subhash Nigadikar of M/s Jyoti Roadlines,
34) Shri Mohd. Anis of M/s Panchmahal Transport Co.
35) Mahendra K. Thakkar of M/s Satara Koregaon Motors
Transport Co.
36) Shri Bhupinder Singh of M/s Southern Travel andCarriers
37) Shri Raghunath K Panwar,Manager of M/s Milan Logistic,
38) Shri Altaf Patni alias Altaf Chand of M/s Anupam Transport
Corporation.
39) Shri Jayesh Ramanlal Vora of M/s Sapna Roadways,
40) Shri Shashi Nair of M/s Maa Annarpurna Transport Agency
Ltd.
41) Shri Sadik Kapadia of M/s Kapadia Transport Co.
42) Shri Arvindbhai Narsinhbhai Patel Proprietor/Partner-M/s
Jalaram Traders/ M/s Shri Gajanan Agency-7,
43) Shri Ashok S. Patel Partner, Shri Gajanan Agency,
44) Shri Pankaj Vithalbhai Patel, Accountant of M/s M.C. Patel &
Sons
45) Shri Jitendrakumar Vinubhai Patel, Accountant of M/s
M.C. Patel & Sons
46) Shri Mahendrabhai IshwarbhaiPatel, Proprietor of M/s Shri
Durga Tobacco
47) Shri Jayesh N. Patel
48) Dharmendrakumar Suratwala.
49) Mohd Javed Haji Yakub
50) Mohd Anjum Abdul Gaffar
51) Mrs. Jiya Pradeep Jagiasi
52) Authorised signatory of M/s. Konark Infrastructure Ltd. who
had issued letter dated 12.10.2012 and letter dated
27.11.2012
53) Respective staff of M/s. Konark Infrastructure Ltd. who
is said to have physically collected octroi and issued octroi
slips to tobacco importers within the limits of Kalyan and
Dombivli Municipal Corporation during the period from
25.07.2009 to 24.06.2012 and period from 01.06.2008 to
06.07.2009.
15 E/86076-86083, 86092 &
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54) The Assistant Commissioner of Octroi, The Municipal
corporation of the City of Thane, Mahapalika Bhavan, who
has issued letter dated 26.09.2012 and 24.12.2012
55) Respective staff of M/s. Thane Municipal Corporation of
Thane who is said to have physically collected octroi and
issued octroi slips to tobacco importers within the limits of
Thane Municipal Corporation during the period from
04.07.2011 to 05.08.2012 and period from 26.09.2010 to
23.05.2011
56) The Assistant Commissioner of Octroi, Pune Municipal
Corporation who has issued letter dated 23.11.2012.
57) The Respective Staff of the Pune Municipal Corporation who
has collected Octroi in regard to tobacco being imported
inside the jurisdiction of Pune Municipal Corporation
within the period from 2007 to 2012.
7.3 During the course of investigation, various statements of (a)
Arvindbhai N. Patel, Proprietor of M/s. Jalaram Traders and Partner of
M/s. Shree Gajanan Agency, (b) Mahendrabhai C. Patel, Proprietor of
M/s. Patel Products, (c) Mahendrabhai C. Patel in capacity of Power of
Attorney Holder of M/s. Shree Krishna Traders and M/s. Shree M.C.
Patel & Sons, (d) Pankaj Vitthalbhai Patel, Counter Salesman
(Accountant) of Shree M.C. Patel &Sons, Kurla (W), (e) Ashok
Shanabhai Patel, Partner of M/s. Shree Gajanan Agency, (f) Keshar
Balkrishna Lokhande, Packing Labourer of M/s. Patel Products, Kurla
(West), (g) Shivaji Dhansing Rathod, (h) Mahendra Ishwarbhai Patel,
Proprietor of M/s. Shree Durga Tobacco, (i) Jayesh N. Patel of M/s.
Ashok Somabhai & Co., Kalyan were recorded. Each of them had
retracted their respective statements on the very next day in which
those were recorded. Copies of each of the statements and the
respective retraction affidavits are annexed in the appeal
memorandum filed by M/s Patel Product. The officers of Central Excise
department had, during the course of investigation, recorded
statement dated 15.04.2013 of Mr. Deepaq Modgil, Chief Marketing
Officer, Montage Global Enterprises (P) Ltd. He has also invited
attention of the Bench to the said statement, as per which Mr. Modgil
was shown statement dated 06.11.2022 of Shri Mahendrabhai C.
Patel, stating therein conversion ratio of plastic pouches as 840 per
KG. Mr. Modgil had stated that on an average, depending upon GSM
variation, the number of pouches per KG would be about 900. It is his
submission that since the said statement was of no avail to the
officers of the department, they had suppressed the said statement
16 E/86076-86083, 86092 &
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and not relied on the same. Learned Advocate for the appellants
invited attention to affidavit dated 17.12.2014 of Shri Modgil wherein
he has affirmed that they supply printed packing pouches and printed
packing bags (inner pouches and outer packing bags) to M/s Patel
Product. M/s Patel Product is engaged in manufacture of 'Om Special
Pandharpuri Tambakoo No. 1'. Therefore, the printed pouches are
printed with said brand. He was called by the Central Excise officer
vide summons. He had attended the Central Excise Office on
15/04/2013. When he particularly informed that the printed packing
pouches were supplied in kilograms and not on piece basis, the
officers wanted him to state more number of pouches were contained
in one kilogram, than what was in actual. He had very promptly stated
the correct ratio. In case of paper foil pouches, the ratio varies, but it
cannot be more than 900 pouches per kilogram. He was shown
statement of Mahendrabhai C. Patel, wherein he has stated that in one
kg. 840 pouches would be made. He explained that thicker ply of
plastic / paper, one kilogram would consist of less number of pouches,
whereas thinner ply, one kilogram would consist of more number of
pouches. He confirms that what Mahendrabhai C. Patel has stated is
correct. Under no specification / size, the yield has gone above 900
pouches per kilogram. Learned Advocate placed reliance on the
affidavits of 25 different farmers / dalals of raw tobacco, who had
supplied raw tobacco to (a) M/s. Patel Product, Khandhali, (b) M/s
Shree Krishna Traders, Khandhali and (c) M/s Shree M.C. Patel &
Sons, Khandhali. It is his submission that despite the fact that Shri
Mahendrabhai Patel in his statement had categorically said that the
quality of raw tobacco purchased by (a) M/s Patel Product, Khandhali,
Anand, Gujarat, (b) M/s Shree Krishna Traders, Khandhali, Anand,
Gujarat, and (c) M/s Shree M.C. Patel & Sons, Khandhali, Anand,
Gujarat are different, inasmuch as, M/s. Patel Product purchased only
"A"-Grade i.e., best quality tobacco as they pack branded tobacco and
that the remaining two firms does business of unbranded tobacco,
therefore, they purchased "B" Grade / "C" Grade tobacco. No
investigation was carried out at the end of said Dalals / Farmers of
raw tobacco suppliers to find out the veracity of the same. Instead,
arbitrarily it was concluded that there was no difference in the quality
and therefore, tobacco purchased by the remaining two firms were
diverted to M/s. Patel Products. Attention was also invited to the
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contents of affidavits, wherein the farmers / dalals who have supplied
raw tobacco to all the three firms have clearly affirmed that the
quality of tobacco purchased by M/s Patel Product, was superior
quality (A Grade); whereas, the quality of raw tobacco purchased by
remaining two firms was of inferior quality (B/C Grade). The farmers /
dalals have affirmed that the quality depends on the thickness of leaf
i.e., thicker the leaf, better the quality. Best quality is used for
packing branded tobacco and inferior quality is used for unbranded
tobacco. A packer of branded tobacco cannot use the tobacco supplied
for unbranded tobacco. Further, reliance was also placed on the
affidavits of Production Supervisors of remaining three units of M/s.
Patel Product, Kurla (W), viz. Unit - I, Unit - II and Unit - III. It has
been submitted that the said three production supervisors as well as
Mr. Shivaji Dhansingh Rathod, the Production Supervisor of M/s. Patel
Product, Unit - IV, in their respective affidavits have deposed, giving
details of the total number of labourers employed in the respective
units as well as total number of pouches packed in a day, in the
respective units. They have also deposed the number of working days,
in which the activities were undertaken during the entire period in
dispute. It is the submission of the appellant that if the affidavits are
compared with the recorded quantity of production as per statutory
returns filed, in Form ER-1 for respective units, the data would match.
This means, there is no illicit manufacture over and above the
recorded quantity being manufactured and cleared from the four units
of M/s. Patel Product. Respective affidavits of production Supervisor of
Unit-I, II & IV of M/s Patel Product are annexed with the appeal
memorandum of M/s Patel Product. He further submitted that during
the course of investigation, although officers of Central Excise
Department had visited other three buyers of tobacco and tried to
threaten them and obtain their statements as per their requirement,
the said three buyers had not agreed to give false statements.
Therefore, the officers had not recorded the statements of said three
buyers. These three buyers have filed respective affidavits, narrating
the whole incident. Copies of the affidavits of (a) Jiya Pradip Jagiasi,
Proprietor of Ekta Traders, (b) Mohd. Anjum Abdul Gafar, Partner of
Haya Traders, Mumbai, (c) Mohd. Javed Haji Yakub, Partner of Heena
Enterprise are annexed with the appeal memorandum filed by M/s
Patel Product. He further submitted that if the SCN is referred to, then
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as per Annexure MCP 58800 bags of 40 KGs of `A' grade are alleged
to have been diverted. Likewise, as per Annexure SKT 15325 bags of
40 KGs of `A' grade are alleged to have been diverted. Thus, as per
the SCN, Total74125 bags of 40 KGs of `A' grade were diverted. This
means, 74125 bags x 40 KGs = 2965000 KGs, 2965000 KGs =
296500000 inner pouches of 10 gms. and 7412500 outer pouches
containing 40 inner pouches each and 185313 gunis (big bags)
containing 40 outer pouches each. All these must be in addition to the
recorded quantity of finished goods as per ER-1 returns. The recorded
quantity of inner pouches during Financial Year 2008-2009 was
51950300, Financial Year 2009-2010 was 43438200, Financial Year
2010-2011 was 39828000, Financial Year 2011-2012 was 29053000
and Financial Year 2012-2013 was 10174400. The total recorded
quantity of inner pouches during five years was 174443900.
Therefore, if the case of the department is to be believed, then total
inner pouches manufactured and cleared during the period in dispute
would be 296500000 + 17444390 = 470943900 inner pouches. It is
the submission of the appellant that there is absolutely no evidence of
procurement of the packing material i.e., rolls for printed pouches. He
further submitted that total number of working days as summarized in
a worksheet annexed at Annexure `D' to the Appeal Memorandum is
4941 days in all five years. Therefore, if the SCN is to be believed,
then licit and illicit inner pouches manufactured per day would be
470943900 ÷ 4941 = 95313.47. On the other hand, as per ER-1
Return, total inner pouches of 10 gms. manufactured from 2008 - 09
to 2012 - 13 is 174443900, therefore, total KGs of tobacco sold is
17444390 KGs. Total number of pouches purchased is 61462000 inner
pouches, 3544050 outer pouches and 155711 bags. It is the
submission of the appellant that there is no evidence to show
surreptitious procurement of printed pouches for packing and selling
clandestinely 2965000 KGs. of tobacco. In order to do so, the
appellant would need 348.82 tons (348824 KGs of inner pouches) i.e.,
296500000 nos. of inner pouches. Likewise,44.47 tons (44475 KGs of
outer pouches) i.e. 7412500 outer pouches and (296500000 ÷ 40)
large quantity of bag. The weight is calculated based on statement of
Mahendrabhai C. Patel dated 06.11.2012, wherein he is said to have
stated that 840 printed pouches would be manufactured out of 1 KG of
packing material. The said statement is relied upon in the SCN itself.
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As regards, statements of Kesar Lokhande and Shivaji Dhansing
Rathod, the appellant has stated that same could not be made basis
of demand as the same are not reliable. Kesar Lokhande in her
statement dated 22.05.2013 is said to have stated total number of
inner pouches packed in a day would be 2000 to 3000 (per day per
labourer) x 400 to 500 (number of labourers) = 8,00,000 to
15,00,000. Whereas, Shivaji Dhansing Rathod in his statement dated
04.06.2013 is said to have stated that total number of inner pouched
packed in a day would be 2700 to 3375 (per day per pair of labourer)
x 150 (pair of labourer) = 4,05,000 to 5,06,250. On the other hand,
the SCN claims total number of inner pouches manufactured per day is
82,304 (95313.47). According to Kesar Lokhande, she has stated that
ratio of work force: number of gunis per day is 400 to 500 workers
would pack more than 600 to 750 gunis per day. On the other hand,
according Shivaji Dhansing Rahod, he has stated that ratio of work
force: number of gunis per day is 300 to 325 workers would pack
187.5 to 203.75 gunis per day. Thus, without prejudice to the
retraction affidavits of the said packing labourers and said labour
supervisors as well as without prejudice to the affidavits of all other
labour supervisors of other units, even otherwise the statements of
both these people are not reliable. He further submitted that there is
no investigation even in the direction of surreptitious procurement of
plastic material / pouch / bag. The officers took a shortcut route and
have mentioned in the SCN that a supplier of pouches Mr. Vyas has
expired. They had in fact recorded statement of Mahendrabhai C.
Patel, wherein they have got wrongly recorded that Mr. Vyas has
expired, however, he is very much alive. He used to supply printed
plastic bags / pouches to M/s. Patel Product only until the year 2001.
Thereafter, he has discontinued supplying the same. The appellant
had provided all the details of Mr. Vyas and requested to allow cross
examination of Mr. Vyas before the adjudicating authority. However,
the learned adjudicating authority failed to allow his cross
examination. The appellant had assailed the demand by simply
showing a comparison that as per ER-1, the total manufacture and
sale is of 173614 KGs during the entire period in dispute and the total
duty paid as per ER-1 is Rs.12,19,89,650/-. On the other hand,
the SCN alleges procurement of diverted 2778000 KGs for which the
duty demanded is Rs.31,11,78,562/-. If the ratio as per ER-1 is
20 E/86076-86083, 86092 &
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considered, it would have been Rs.19,50,97,103.557 [2778000 KGs x
Rs.12,19,29,650/- ÷ 1736164 KGs]. Thus, as per the appellant, the
demand is even otherwise is completely unbelievable. In support of
above submissions, that in absence of any corroborative evidence
supporting illicit manufacture, no demand could be confirmed alleging
clandestine clearance of goods, the following orders/ judgements
delivered by various judicial forum, were relied upon by the
appellant:-
(i) Sakeen Alloys Pvt. Ltd., versus C.C.E., Ahmedabad - 2013
(296) ELT 392 (Tri.-Ahmd.)
(ii) Commissioner of Central Excise versus Sakeen Alloys Pvt.
Ltd., 2014 (208) ELT 655 (Guj.)
(iii) Commissioner versus Sakeen Alloys Pvt. Ltd., - 2015 (319)
ELT A117 (S.C.)
(iv) Vishwa Traders Pvt. Ltd., versus Commissioner of C.Ex.,
Vadodara - 2012 (278) ELT 362 (Tri.-Ahmd.)
(v) Commissioner of C.Ex.,Cus. & Service Tax v/s Vishwa
Traders P. Ltd., - 2013 (287) ELT 243 (Guj.)
(vi) Commissioner versus Vishwa Traders Pvt. Ltd., - 2014 (303)
ELT A24 (S.C.)
(vii) Commissioner of Central Excise V/s. Kuber Tobacco
Products Pvt. Ltd. &Anr. [Judgement dated 11.03.2024 by
Hon'ble Delhi High Court in CEAC 40/2012]
7.4 As regards reliance placed on the letters received from the
authorities of three Municipal Corporations, and the reliance placed
on statements of transporter, out of total demand of alleged
clandestine clearance of Rs.31,11,78,562/-, the said so-called
supporting evidence is only in regard to the total demand of
Rs.10,78,00,873/-. Therefore, demand of Rs.20,33,77,689/- is not
supported by even the said so-called evidence. It is also submitted
that demand on M/s. Patel Product is based on statement of
Mahendrabhai C. Patel dated 10.06.2013, wherein he is said to have
stated that 50 to 75 bags of `A' grade tobacco are diverted per trip
in guise of B / C grade tobacco of M C Patel & Sons and Shree
Krishna Traders. No investigation at all in regard to purchase of
different /similar qualities of tobacco by any of the three firms is
made by the officers of Central Excise Department to support the
21 E/86076-86083, 86092 &
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said allegation. Further, the demand is based on considering
diversion of 75 bags per trip although Mahendrabhai C. Patel is said
to have stated 50 to 75 bags were diverted per trip. Even otherwise,
the reliance placed on the letters along with enclosed data provided
by (a) M/s Konark Infrastructure Ltd. i.e. octroi collecting agent for
Kalyan and Dombivli Municipal Corporation, (b) Thane Municipal
Corporation and (c) Pune Municipal Corporation is not sustainable. It
has further been stated that the said worksheet provided by the said
authorities to the office of the Central Excise Department were
prepared by using computer. However, mandatory provisions of
Section 36B of Central Excise Act, 1944 has not been followed. No
certificate required under Section 36B(4)has been issued. Therefore,
the said worksheets are not reliable. Despite repeatedly requesting
for copies of octroi slips i.e. the source document on the basis of
which it is alleged that clandestine clearance of 'Om Special
Pandharpuri Tambakoo No. 1' was made inside the municipal limits of
respective Municipal Corporations, had also not been provided by the
officers of Central Excise Department. The appellant has shown
copies of numbers of letters written to the Commissioner of Central
Excise, Mumbai-II, requesting him to provide copies of said octroi
slips. Response letter received from the Superintendent (Preventive),
Central Excise, Mumbai-II was also referred to, wherein he has
admitted that the investigation had only obtained concerned
information from the concerned Municipal Authorities, attested copies
of which were submitted by the respective Municipal Corporations in
tabular form. Therefore, the investigating office does not have the
original receipts of octroi paid on the basis of which it is alleged that
'Om Special Pandharpuri Tambakoo No. 1' was cleared into the
municipal limits of said Municipal Corporation. It has been contended
that no demand of Central Excise Duty could be made without a
source document, particularly only on the basis of a data entry
worksheet prepared in a tabular form on a computer, in absence of
required certificate u/s 36B of Central Excise Act, 1944. In support of
such submission, the appellant has relied upon the following
judgements:
a. Commissioner of Customs, Lucknow V/s. Sanjay Soni -
2022 (381) ELT 509 (Tri.-All.)
b. Anvar P. V. V/s. P. K. Basheer - 2017 (352) ELT 416 (S.C.)
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c. J.P. Iscon Pvt. Ltd. V/s. Commr of Central Excise,
Ahmedabad - I, - 2022 (63) GSTL 64 (Tri - Ahmd)
d. S.N. Agrotech V/s. Commissioner of Customs, New Delhi -
2018 (361) ELT 761 (Tri - Del).
7.5 It was further contended that even otherwise, the said data
entry worksheet provided by the respective Municipal Corporations to
the investigating officers claiming that 'Om Special Pandharpuri
Tambakoo No. 1' is cleared within the respective Municipal
Corporation limits could not be correct. It is so because, the
concerned staff of the Municipal Corporation has no business to open
the bags of tobacco loaded in a particular vehicle and check whether
it is a branded tobacco or unbranded tobacco. The tariff rates of
octroi during the period in dispute were the same, irrespective of
whether branded or unbranded tobacco, being cleared inside the
Municipal Corporation limits. Copies of the respective octroi tariffs of
all the three Municipal Corporations in support of said submission
were also placed on the appeal records. As the investigation failed to
provide copies of the octroi slips, appellant had received the same
under RTI from the respective Municipal Corporation. Copies of the
said octroi slips are annexed with the appeal memorandum. It is
observed from the same that, on none of the octroi slips 'Om Special
Pandharpuri Tambakoo No. 1' is mentioned. What is mentioned in
only 'tobacco'. M/s Jalaram Traders and M/s Shree Gajanan Agency
used to purchase branded tobacco of M/s Patel Product as well as
unbranded loose / bulk tobacco of M/s Shree Krishna Traders and
M/s M.C. Patel & Sons. The said octroi slips only mentions 'Tobacco'.
Wherever, no corresponding invoice, evidencing clearance of 'Om
Special Pandharpuri Tambakoo No. 1' by M/s Patel Product is found,
it is all clearance of unbranded loose / bulk tobacco of M/s Shree
Krishna Traders and M/s M.C. Patel & Sons. As regards, the
statements of transporters relied upon by the investigation, it has
been submitted that, a reading of the said statement would show
that on the respective LRs, which were found during investigation,
'Om Special Pandharpuri Tambakoo No. 1' is nowhere mentioned. It
is clear that the LRs only mentioned that 'Tobacco', 'Bag', 'Bulk',
'Tambaku', 'Tambakhu', 'Tabakhu', 'Pan Chatni' on the respective
LRs. Further, the appellants have also written various letters to the
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Commissioner of Central Excise, Mumbai-II, requesting for supply of
copies of LRs, which were reluctantly supplied by the department.
The said LRs are also annexed with the appeal memorandum. Even
the said LRs show that 'Om Special Pandharpuri Tambakoo No. 1' is
nowhere mentioned on the same. The LRs only show that the
respective transporters had transported 'Tobacco', 'Bag', 'Bulk',
'Tambaku', 'Tambakhu', 'Tabakhu', 'Pan Chatni'. The appellants also
submitted that wherever corresponding invoice issued by M/s Patel
Product evidencing clearance of 'Om Special Pandharpuri Tambakoo
No. 1', the same is clearance of unbranded loose / bulk tobacco by
M/s Jalaram Traders or M/s Gajanan Agency. Thus, they pleaded that
the demand of Central Excise duty is required to be set aside.
Reliance was also placed on the statements of respective persons,
which were not admissible in evidence because, despite requesting
for cross examination of all those people, in gross violation of Section
9D of Central Excise Act, 1944, the Adjudicating Authority has not
afforded opportunity of cross examination. Therefore, it was
submitted that all the statements require to be discredited. In
support of the said submission, reliance has been placed on following
judgements:
(i) Andaman Timber Industries V/s. Commr. of C.Ex., Kolkata -
II, - 2015 (324) E.L.T. 641 (S.C.)
(ii) Jeen Bhavani International V/s. Commissioner of Customs,
Nahva Sheva-III - (2023) 6 Centax 11 (Tri-Bom.)
(iii) Commr. of C.Ex., Ahmedabad-II V/s. Gujarat Cypromet Ltd.
- 2017 (345) ELT 520 (Guj)
(iv) J & K Cigarettes Ltd. V/s. CCE - 2009 (242) ELT 189 (Del)
(v) CCE. V/s. Govind Mills Ltd. - 2013 (294) ELT 361 (All).
7.6 Further, appellants have also placed reliance on the following
judgments in support of the submission that, even if affidavits were
made before Notary public by the respective persons, whose
statements are relied upon and copies of the said affidavits were
submitted before the adjudicating authority for the first time after
issuance of Show-cause Notice, the same is to be considered as a
valid retraction:
(i) Tejwal Dyestuff Industries V/s. Commr of C. Ex. Ahmedabad
reported at 2007 (216) ELT 310 (Tri.-Ahmd)
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(ii) Commr of C. Ex., Ahmedabad-II V/s. Tejal Dyestuff
Industries reported at 2009 (234) ELT 242 (Guj.)
(iii) G. China Yellappa, Nizamabad V/s. Income Tax Officer,
Ward - 2, Nizamabad ITTA Nos. 268/2003 dated 06.11.2014 by
Hon'ble Andhra Pradesh High Court.
7.7 Without prejudice to the aforesaid submissions, it was further
contended that even otherwise, the Show-cause Notice itself was not
sustainable. It is so because, vide the Show-cause Notice, all the four
units of M/s Patel Product which are separate registered
manufacturers under the Central Excise Law, were jointly and
severally called upon to show cause as to why Central Excise Duty
should not be demanded from them. It is his submission that duty of
Central Excise can only be demanded in regard to the goods
manufactured. It can only be demanded from a particular
manufacturer, who has manufactured the goods. The Show-cause
Notice proposed demand of duty for the goods manufactured by one
unit from all the four units. This was against the very concept of
Central Excise Law. The appellants further submitted that four
different units had four separate Central Excise Registration
numbers. They were all filing separate statutory returns. They were
all separately paying Central Excise Duty. They were all separately
audited by the officers of Central Excise Audit. Learned Advocate for
the appellants at the time of hearing of appeals has referred to the
copies of different audit reports, different ground plans, which were
submitted while obtaining separate registration in regard to separate
units. In support of the submission that, no demand could be made
jointly and severally from four different registered manufacturers and
that there can be only one manufacturer of one product, he placed
reliance on following judgements:
(i) Sree Aravindh Steels Limited Vs. Commissioner of C. Ex., Trichy
-
2007 (216) E.L.T. 332 (Tri.-Chennai)
(ii) Famous Textile versus Commissioner of Central Excise - 2005 (191) E.L.T. 592 (Tri.-Mumbai)
(iii) Rimjhim Ispat Ltd., versus Commissioner of Central Excise, Kanpur - 2013 (293) ELT 124 (Tri - Del.) 25 E/86076-86083, 86092 & 860100-86103/2015
(iv) Rao Industries versus C.C.E. - 2009 (237) ELT 128 (Tri. - Bang.) 7.8 With regard to the demand of Rs.3,67,06,613/- along with interest and imposition of equivalent penalty, the appellants' submissions are that the Adjudicating Authority had applied Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 ("Valuation Rules" for short) and had concluded that the price at which the goods are sold in the open market by M/s Jalaram Traders and M/s Gajanan Agency, shall be considered as the value for the purpose of demanding duty in regard to the said clearances made from M/s Patel Product. The appellant has contended that the transaction value shall be determined under Section 4 of the Central Excise Act, 1944. The Valuation Rules can only be resorted to, if the assessee and the buyer of the goods are related and the price is not the sole consideration for the sale. Thus, the appellants have submitted that related party concept would not be applicable, as per the statements of the partners / proprietors of M/s Gajanan Agency / M/s Jalaram Traders as well as statement of Shri Mahendrabhai C. Patel, proprietor of M/s Patel Product. It was further stated that they have no interest in the business of each other; the sale effected by M/s Patel Product to M/s Jalaram Traders / M/s Gajanan Agency were independent transactions. It has further been submitted that even if it is assumed that they fall under the definition of "related party" as provided in Section 4 of Central Excise Act, 1944, even then while applying the Valuation Rules, first of all Rule 4 contained therein is required to be applied first. As per said Rule, if an assessee is found to be selling identical goods to related buyers as well as unrelated buyers, then for the purpose of charging duty of Central Excise in regard to the goods cleared to the related buyers, the price at which identical goods are cleared to unrelated buyer at the nearest time and place of removal shall apply. In this context, they have relied upon the relevant invoices, evidencing sale of same products by M/s Patel Product to M/s Jalaram Traders / M/s Gajanan Agency as well as to third parties during the same period. It was further contended that the price at which identical goods are sold to third parties, at times, is lower than the price at which said goods are sold to M/s Jalaram Traders / M/s Gajanan Agency. Thus, in that view of the 26 E/86076-86083, 86092 & 860100-86103/2015 matter, there cannot be any allegation of under valuation. The demand of Rs.3,67,06,613/- confirmed on the basis of said allegation along with interest is required to be set aside. In support of the said submission, the appellant has placed reliance on following judgements:
a. Jagajothi Spinning Mills Vs. Commissioner of C. Ex., Salem -
2015 (329) E.L.T. 374 (Tri.-Chennai) b. Aquamal Water Solution LimitedVs. Commr of C. Ex., Hyderabad - II - 2005(182) E.L.T. 196 (Tri.- Bang.) c. Birdi Steels Vs. Comm of Cent Ex. Ludhiana- 2005(179) E.L.T.82 d. GKN Sinter Metals Ltd Vs. Commissioner of Central Excise, Pune - I - 2017 (348) E.L.T.583 (Tri - Mum) e. Commissioner Vs. H.H. Interior & Auto Components Ltd. -
2018 (360) E.L.T.A312 (S.C.) f. Commissioner V/s. Sudarshan Castings (P) Ltd. - 2018 (362) E.L.T.A174 (S.C.) g. Jai Corporation Vs. Commissioner of Central Excise & Service Tax, Daman - 2015 (317) E.L.T.353 (Tri - Ahmd) h. Ultra Refrigerators Pvt Ltd. Vs. Commissioner of C. Ex., Del-
IV - 2004(170) E.L.T. 341(Tri. - Del.) i. Commissioner of Central Excise, New Delhi Vs. Kanam Foam Industries - 2004 (170)E.L.T. 237 (Tri. - Del.) j. Pepsico India Holdings (P) Ltd. Vs. Commissionerof C.Ex., Mumbai - 2004 (163) E.L.T.478 (Tri. - Del.) k. Commissioner of C. Ex, Pune Vs. Arfoline Polymers Limited - 2007 (214) E.L.T. 241 (Tri. - Mumbai) l. Oswal Wollen Mills Limited Vs. Commissioner of Cen. Exc.
Ludhiana - 2012 (282) E.L.T. 547 (Tri. - Del.) 7.9 Reliance has also been placed on the Notification No. 14/2013
- C.E. (N.T.) dated 22.11.2013, whereby Rule 9 and Rule 10 of the Valuation Rules were amended. It is the submissions of the appellants that the said amendment came into force w.e.f. 01.12.2013. Prior to the said date, Rule 9 and Rule 10 applied only in case, where 100% of total sales were made by an assessee to related buyer. Only w.e.f. 01.12.2013, the amendment took place in the statute was to the effect that if a part sale is made to related buyer, then for that particular sale only, the amended rules have to be applied. Prior to 01.12.2013, since the amended Rule 9 and Rule 10 were not attracted, then the Rule 4 of Valuation Rules alone were 27 E/86076-86083, 86092 & 860100-86103/2015 applicable. As regards the appeal filed by the other co-appellants, it has been stated that when clandestine clearance of branded tobacco had not been substantiated with documentary evidences by the department, confirmation of the adjudged demand fails in respect of the appellant M/s Patel product and consequently, the penalties imposed on the other appellants cannot be sustained.
8.1 Shri Shamboonath, learned Special Counsel appearing for the Revenue has brought to the notice of the Bench the findings recorded at page 175 to 180 in the impugned order, to state that the affidavits were forged by the appellants. Therefore, he submitted that the said affidavits cannot be relied upon to decide the issue differently. In support of the submission that the appeals filed by the appellants are deserved to be dismissed, learned Special Counsel has relied upon the following judgements delivered by the judicial forum:
a. Shyam Lal Biri Merchant Vs. Union of India - 1993 (68) E.L.T. 548 (All.) b. G Guru Instruments (North India) Pvt. Ltd. Vs.C.C.E. Meerut - 1995 (80) E.L.T. 846 (Tribunal) c. Collector of Customs, Madras & Others Vs. D. Bhoormull-
2002 -TIOL-253-SC-Cus.
d. C.C. Excise, Surat I Vs. N.D. Textiles - 2004 (168) E.L.T. 381 (Tri. Mumbai) e. Judgement of C.C. EX. New Delhi Vs. Modi Alkalies& Chemicals Ltd - 2004 (171) E.L.T. 155 (S.C.) f. Judgement of Gulabchand Silk Mills Pvt Ltd. Vs.C.C. E. Hyderabad - 2005 (184) E.L.T. 263 (Tri. Bang.) g. Judgement of Commissioner C. Ex. Vs. International Cylinders Pvt Ltd. - 2010 (255) E.L.T. 68 (H.P.) h. Judgement of R. Shreekumar Vs. CESTAT, Bangalore - 2014 (306) E.L.T. 531 (Ker.) 8.2 Learned Special Counsel further submitted that from the investigation conducted by the officers of Central Excise Department, it was clear that M/s Jalaram Traders and M/s Gajanan Agency were controlled by Shri Mahendrabhai C. Patel, the proprietor of M/s Patel Product. It is his submission that, since it is so, the price at which the branded tobacco was sold in the open market by the said two firms shall be considered as the assessable value for the purpose of demanding Central Excise Duty in regard to the branded tobacco removed from M/s Patel Product. He has placed reliance on the letters along with attached worksheet received by the investigation wing from the authorities of three municipal corporations viz. Kalyan 28 E/86076-86083, 86092 & 860100-86103/2015 and Dombivli, Pune and Thane Municipal Corporation. He submitted that from the details of 'Om Special Pandharpuri Tambakoo No. 1' brought into the respective municipal corporation limits, as evident from the letters / details sent by said authorities, it is clear that in the absence of corroborative Central Excise Invoices, all such removals should be considered as clandestine clearances of the said branded tobacco. He placed reliance on the statement of the respective transporters as well as LR found during the course of investigation. It is his submission that in all those cases, where no corroborative invoices of 'Om Special Pandharpuri Tambakoo No. 1' were found, but only the LRs were found, those clearances should be treated as clandestine clearance of the said branded tobacco. He further submitted that Revenue is not required to prove its case of clandestine clearance with mathematical precision. According to him, the evidences unearthed during the course of investigation were sufficient to conclude that clandestine clearance of 'Om Special Pandharpuri Tambakoo No. 1' were made by M/s Patel Product. It is his submission that the Revenue has successfully proved its case and the adjudicating authority has rightly confirmed the adjudged demands against M/s Patel Product and adjudged penalties against all other appellants.
9. We have heard both sides and examined the case records, including the written submissions filed during the course of hearing of appeals.
10.1 We find from the impugned order that M/s Patel Product in their reply to the SCN filed before the adjudicating authority, had submitted copies of retraction affidavits of the persons, whose statements were recorded under summons during the course of investigation of the present dispute. The department had also conducted an enquiry into the retracted affidavits, the fact of which is evident from the available case records. The department had called for the information about the authenticity and veracity of the stamp papers from the Collector of Stamps (stamp paper issuing authority), Thane, in context with the officially recorded dates, on which the stamp papers were issued by them; the name of the stamp vendor to whom they were issued; the date of subsequent sale by the stamp 29 E/86076-86083, 86092 & 860100-86103/2015 vendor and the name of the person to whom such stamps were ultimately sold for actual use by the stamp vendor etc. On the basis of the reply furnished by the said authority, it was observed by the department that the stamp papers were issued between 03.09.2013 and 11.09.2013 to stamp vendor Shri Umar Sharif Mohammad Nawaz and that the statement of said stamp vendor was recorded on 10.03.2014. It was also observed that the stamp papers, on which the retracted affidavits made, were bearing a stamp vendor's registration number issued after April, 2013; although the dates of retractions were prior to the said date. Thus, it was contended by the adjudication wing that the retracted affidavits were back dated, and were made in such a fashion, so as to demonstrate that the persons, whose statements were recorded during the course of investigation, had retracted their respective statements on the very next day. We find from the impugned order that the department had conducted an enquiry of the Notary Public Shri Chowdhary Munir Hussain, who had notarized the affidavits, retracting individual statements. In the statement recorded on 03.12.2014, he had stated that none of the concerned affidavits are recorded / diarized in his prescribed form XV Notarial Register, maintained by him during the relevant period. He also denied that he had not signed the affidavits. The Notary Public had also stated that he had never met the concerned persons i.e., Mahendrabhai C. Patel, Arvindbhai Patel, Ashokbhai Patel, etc., whose affidavits were shown to him. He had also never met the Advocate B.S. Moorzani, who had supposedly identified the said deponents. It was also found from the enquiry into the retraction affidavit that five affidavits of retracting individual statements were notarized by a Notary Public, Shri Ramesh S. Phatarphekar. Although he expired at the age of 87 years on 30.12.2013 i.e., after the dates of disputed affidavits; but from the statement of his daughter-in-law Ms. Charmaine Sanjay Phatarphekar, it was found that the affidavits were not notarized by the said Notary Public. We find from the impugned order that the details of enquiry into the retraction affidavits were communicated to all the fourteen noticees vide letter No.V/Adj(30)HPU-I/CR-44/Commr/M-II/13-14, dated 08.12.2014 and they were requested to make their submission on the enquiry and the findings of the enquiry. In reply to the said letter, M/s Patel Product and Shri Mahendrabhai C. Patel submitted letters dated 30 E/86076-86083, 86092 & 860100-86103/2015 30.12.2014 and 02.01.2015, wherein they had disputed the authority to initiate enquiry at the adjudication stage. They had also stated that the statements claimed to have been recorded were not reliable. They requested for cross examination of the stamp vendor (Umar Sharif Mohammad Nawaz), Notary Public (Chowdhary Munir Hussain), daughter-in-law of the deceased Notary (Ms. Charmaine Sanjay Phatarphekar). M/s Patel Product and Shri Mahendrabhai C. Patel had also requested to afford cross examination of the District Revenue Officer, Thane, whose letter dated 12.03.2014 was relied upon. They requested for cross examination of Ajay Chandrakant Parmar, to whom, as per the enquiry, the stamp vendor had sold the stamp papers. In their response letter / reply to enquiry, M/s Patel Product and Shri Mahendrabhai C. Patel have also submitted that when the Notary Public (Chowdhary Munir Hussain) denied his signature on the stamp papers, the same may be verified by a handwriting expert. We find that the learned adjudicating authority had not afforded opportunity of cross examination of any of the said persons viz., (a) the stamp vendor (Umar Sharif Mohammad Nawaz),
(b) the Notary Public (Chawdhary Munir Hussain), (c) daughter-in- law of deceased Notary, whose statement was recorded (Ms. Charmaine Sanjay Phatarphekar), (d) the person to whom the stamp vendor stated to have sold the stamp papers (Ajay Chandrakant Parmar) and (e) the District Revenue Officer, Thane, whose letter is relied upon by the learned adjudicating authority in the impugned proceedings. We are of the view that the adjudicating authority was required to afford cross examination of the aforesaid persons inasmuch as their statements and letter(s) were important documents for impleading the appellants, with the serious charge of clandestine removal of the goods. On careful reading of the judgements relied upon by the appellants, as at paragraph 7.5 above, we find that it is the mandate of law, which requires that the adjudicating authority has to afford cross examination of all those persons, whose statements were relied upon for levelling the charge of clandestine removal of goods. In the present case, the facts are not under dispute that the retracted affidavits are completely ignored and not taken into consideration, then in that case, what remains for consideration is mere confessional statements. It is a settled principle of law that demand cannot be sustained, based on stand-alone 31 E/86076-86083, 86092 & 860100-86103/2015 confessional statements, in the absence of corroborative evidences. When the officers of the Central Excise Department had failed to carry out any investigation at the end of raw material suppliers and were also unable to have brought out any independent evidence to prove that printed plastic pouches of 'Om Special Pandharpuri Tambakoo No.1' were procured surreptitiously for the purpose of packing the said branded tobacco, it cannot be said that the department has made out a case against the appellants, alleging involvement in the fraudulent activity of clandestine removal of excisable goods. Thus, placing reliance only on the confessional statements, without proper corroboration with the documentary evidences cannot be considered as valid or justified action, which would suffice to prove the charges of clandestine removal of excisable goods. The law is well settled in the cases of Ghodavat Pan Masala Products Ltd. Vs. Commissioner of Central Excise, Pune- 2004 (175) E.L.T. 182 (Tri. - Mumbai); Radheshyam Kanoria Vs. Commissioner of Central Excise, Thane-II- 2006 (195) E.L.T. 130 (Tri.- Mumbai); Pioneer Industries Vs .Commissioner of Central Excise, Mumbai-II- 2006 (193) E.L.T. 506 (Tri.- Mumbai) and Chandan Tobacco Company Vs. Commissioner of Central Excise, Vapi- 2014 (311) E.L.T. 593 (Tri. Ahmd.), that statements relied upon, which were subsequently retraced in writing, cannot prove the case of clandestine removal, and to make out a case, the department has to bring sufficient corroborative evidence to substantiate such case and that demand confirmed on presumption/assumptions are not sustainable.
10.2 Further, we also find from the impugned order as well as the submissions made by learned Special Counsel, that the retraction affidavits of all those persons, whose statements were recorded during the course of investigation, were backdated. The adjudicating authority at paragraph 12 on internal page 192 of the impugned order had recorded that the copies of statements were not provided to the respective persons immediately after the same were recorded. It is an admitted fact that the statements were provided to the noticees (the appellants, herein) only after issuance of the SCN. Though, it has been admitted by the adjudicating authority that when the statements were not provided to the noticees, it was not possible 32 E/86076-86083, 86092 & 860100-86103/2015 for them to retract the same without having benefit of copy of the said statements; but he has drawn an inference that the makers of the affidavit were having benefit of copy of the statements. We find that such logic advanced by the adjudicating authority for holding that the affidavits were backdated cannot be sustained. Further, considering the findings that the makers of affidavit were having prior knowledge about the statements, then there is serious lapse on the part of the department, firstly for the reason that immediately after recording of such statements, copies were not forwarded by the investigating agency to the persons concerned; and secondly, when such statements under official record were kept in custody of the department during investigation, then how and under what circumstances those were accessible to the signatories of the statements. Thus, it has to be construed that the statements were leaked out, in an un-official manner, which is a matter of grave concern for the sustainability of issuance of the notice itself.
10.3 In this context, this Tribunal, in the case of Jeen Bhavani International (supra), has held that in a case, where statement recorded by the officers of the department are not provided to the respective person at that very moment and that the same are provided only along with the SCN, in that case, the only opportunity which the deposer of the statement would get for the purpose of retracting the statement is only after the issuance of SCN, when he is handed over with the said statement. In such a case, the Tribunal has held that if a retraction affidavit is made after the issuance of SCN, then the said retraction would be considered as a valid retraction.
10.4 Learned Special Counsel appearing for the Revenue has placed the argument that the affidavits were backdated, and therefore, the same being forged cannot have any evidentiary value. We have perused the impugned order at paragraphs 59, 60 and 61, wherein the learned adjudicating authority has recorded that during the course of investigation, a statement dated 17.06.2013 of Shri Mahendrabhai C. Patel was recorded, and the said statement was retracted, by way of filing an affidavit under the cover of letter dated 18.06.2013, on the ground that it was not voluntarily given and the 33 E/86076-86083, 86092 & 860100-86103/2015 statement given thereunder was not true and correct. Moreover, in response to the said retraction affidavit, a rejoinder letter dated 26.06.2013 was also issued by the department, for ascertaining the veracity of the submissions made in the statement dated 17.06.2013. Likewise, statement dated 20.06.2013 of Shri Mahendrabhai C. Patel was also recorded. Same was retracted on the very next date vide affidavit dated 21.06.2013, for which rejoinder dated 26.06.2013 was also issued by the officers of the department. The facts regarding recording of statements, their retractions and subsequent issuance of rejoinders were also recorded in the SCN.
10.5 We find that apart from the said two retraction affidavits, which were made before the Notary Public on the very next day of the said statements, in response to statement dated 10.06.2013 of Shri Mahendrabhai C. Patel, retraction affidavit was made before the Notary Public immediately on 11.06.2013 and the said retraction affidavits were also submitted through Registered Post with Acknowledgement Due (RPAD) to the officers of the department. We have also perused copy of the 'Acknowledgement Card' of the Department of Post, evidencing receipt of the Registered Letter/Parcel by the 'Superintendent (Preventive), Central Excise, Piramal Chamber, 7th Floor, Jijibhoy Lane, Lalbagh, Mumbai - 400 012".
10.6 We find that even if retraction affidavits in regard to all other statements were not taken into consideration, believing the same to be backdated / forged, but with regard to the last three statements, which were recorded by the officers of department just before and after the arrest of Shri Mahendrabhai C. Patel, the retraction affidavits deposed on the very next day of the respective statements cannot be ignored. Thus, there cannot be any dispute that the said last three affidavits were genuine affidavits. We find that unlike other affidavits, the enquiry on the retraction affidavits as recorded in the impugned order also do not dispute the genuineness of the said last three affidavits. That being the case, we are of the view that when number of statements are recorded consecutively and if only the last three statements are retracted, it shall mean that the entire version given in all the statements are retracted. Therefore, we hold that 34 E/86076-86083, 86092 & 860100-86103/2015 statements alone, in absence of any evidence of procurement of packing material printed with the brand `Om Special Pandharpuri Tambakoo No. 1' would have to be considered as not corroborated and demand of duty on such basis cannot be fastened on the appellants.
10.7 The learned adjudicating authority has based his findings that `Om Special Pandharpuri Tambakoo No. 1' has been cleared without invoices inside the jurisdiction of respective municipal corporations, and for that purpose, has referred to the worksheets enclosed with the letters issued by the authorities in the municipal corporations. We find that in absence of the source document i.e., respective octroi slips, the adjudicating authority could not have relied upon the same for confirmation of the duty demand. Further, the said worksheets prepared in a tabular form on a computer, in the absence of required certificate under Section 36B ibid, cannot be considered as the basis for confirming the duty demand. We find that the Co-ordinate Bench of the Tribunal, in the case of Trikoot Iron & Steel Casting Ltd. Vs. Additional Director General (Adjn.) Directorate General of GST Intelligence (Adjudication Cell), New Delhi, in Final Order No.58546/2024 dated 09.09.2024, upon placing reliance on the judgements of Hon'ble Supreme Court in the case of Anwar P.V. Vs. P.K. Basheer and Others - AIR 2015 S.C. 180 and Arjun Panditrao Khotkar Vs. Kailash Kushanrao Gorantyal & Others - AIR 2020 S.C. 4908, has held that a printout generated from the personal computer, that has been seized, cannot be admitted in evidence, unless the statutory conditions laid down in section 36B of the Central Excise Act are complied with. It has also been held that if the data is not stored in the computer, but officers take out a printout from the hard disk drive by connecting it to the computer, then a certificate under section 36B of the Central Excise Act is mandatory. In the present case, admittedly the exercise envisaged under Section 36B ibid, has not been complied with by the department.
10.8 The learned adjudicating authority has placed reliance on the statements of various transporters stationed at Saki Naka, Mumbai and has also referred to the copies of Lorry Receipts (LRs), to conclude that `Om Special Pandharpuri Tambakoo No. 1' has been 35 E/86076-86083, 86092 & 860100-86103/2015 clandestinely cleared through those transporters and that wherever LRs are found without corroborative Central Excise invoices, the same were clandestinely removed by M/s. Patel Product. However, on perusal of the statements of the transporters as well as the LRs (annexed in the appeal memorandum), we find that the description of the goods mentioned therein were `Tambakoo', `Tambakhoo', `Pan Chutney', etc. However, none of these documents described the goods as `Om Special Pandharpuri Tambakoo No. 1'. We accept the submissions of the appellants that in absence of compliance of Section 9D of Central Excise Act by affording cross examination, statements of transporters need to be discarded. Further, we are of the considered opinion that for the same reason, statements of all those persons, whose cross-examination were specifically requested for, but denied by the adjudicating authority, also needs to be discarded and could not be made as the basis for confirming the adjudged demands.
10.9 We find that entire demand of Rs.31,11,78,562/- has been based on the theory that M/s. Patel Product, M/s. Shree M.C. Patel & Sons and M/s. Shree Krishna Traders were having their Head Offices at Khandhali, Gujarat, wherein those firms were purchasing raw tobacco; and undertaking the activities such as, sieving; removing the twigs, stems and veins of the raw leaf; size the same and thereafter, transporting those to Kurla, Mumbai. In the receiving end at Kurla, the tobacco of M/s. Patel Product was used for packing branded tobacco, whereas, the tobacco of the other two firms were sold in loose / bulk without any brand. We find that the officers of the department have relied on the statement dated 10.06.2012 of Shri Mahendrabhai C. Patel, wherein he has stated that the quality of tobacco used for branded and unbranded tobacco are different. However, it has been contended by the department that while transporting tobacco of M/s. Shree M.C. Patel & Sons and M/s. Shree Krishna Traders from Khandhali to Kurla, 50 - 75 bags, for each trip of the said tobacco, were diverted to M/s. Patel Product, Kurla, which were further used for manufacturing `Om Special Pandharpuri Tambakoo No. 1'. It is noticed from the available case records that during the course of adjudication proceedings, the appellants had submitted affidavits of various farmers / dalals of raw tobacco, who 36 E/86076-86083, 86092 & 860100-86103/2015 had supplied tobacco to the said three firms at Khandhali; that the said farmers have deposed that the quality of tobacco supplied to M/s. Patel Product was superior (A' grade) and the quality of tobacco supplied to the other two firms was inferior (`B' grade) and that such `B' grade tobacco could not be used for packing branded tobacco i.e., `Om Special Pandharpuri Tambakoo No. 1'. It has further been observed that though the appellants had requested the adjudicating authority to afford examination of the said farmers/dalals, but such requests made was turned down by him. In such scenario, we are of the considered view that allegation of diversion of tobacco of M/s. Shree M.C. Patel & Sons and M/s. Shree Krishna Traders for packing `Om Special Pandharpuri Tambakoo No. 1' by M/s. Patel Product would not be sustained. Further, we have also noticed from the impugned order that the learned adjudicating authority, has denied the gradation of the tobacco mentioned in the invoices issued by the suppliers. In this context, we find that such allegation made by the department was not considered at the time of investigation into the matter, which is evident from the fact that no such allegation has been levelled in the SCN issued by the department. Insofar as, investigation of alleged duty evasion is concerned, the investigation wing's role is confined only to the stage of unearthing of evidences, facts, etc., and once such investigation is concluded, then all the material particulars are to be placed before the adjudication wing, for initiation of the Show cause proceedings and for adjudication of the matter arising therefrom. In other words, the adjudication order cannot make out a new case, which was not canvassed in the base document i.e., the SCN, and the adjudication proceedings cannot be culminated, without the evidence that such allegation or the material particulars having been dealt with in the SCN.
In this context, the Hon'ble Supreme Court, in the case of Commissioner of Customs, Mumbai Vs. Toyo Engineering India Ltd. 2006 (201) E.L.T. 513 (S.C.), have held that the Department cannot travel beyond the show cause notice.
10.10 Even assuming that the findings recorded in the impugned order are correct, that there was no mention of the gradation of the tobacco supplied to the appellants, but on perusal of 37 E/86076-86083, 86092 & 860100-86103/2015 the documents, more particularly the invoices issued for supply of tobacco, we find that there is a considerable price difference in the price of tobacco purchased by M/s Patel Product and those purchased by M/s Shree M.C. Patel & Sons or M/s Shree Krishna Traders. Therefore, it is quite evident that the quality of tobacco purchased by M/s Patel Product is superior, when compared to the quality of tobacco purchased by M/s Shree Krishna Traders or M/s Shree M.C. Patel & Sons. Hence, the allegation regarding non-mention of gradation of tobacco in the invoices cannot be the defensible ground for confirmation of the adjudged demands.
10.11 We find that during the course of investigation, statements of the packing labourer and labour supervisor of Unit III of M/s. Patel Product, Kurla, were recorded and relied upon in the adjudication order. On that basis, the adjudicating authority has observed that 'Om Special Pandharpuri Tambakoo No. 1' was produced in excess, and were removed outside the premises in a clandestine manner. It is an admitted position that the appellants had requested the adjudicating authority for affording cross examination of the said labour supervisor and packing labourer. However, the same was denied.
Under such circumstances, we are of the view that in terms of Section 9D ibid, such statements have lost their evidential value and cannot be relied upon in isolation, without any further documentary evidence for confirmation of the adjudged demands. Further, the allegation of clandestine manufacture and clearance of excisable goods is a serious charge, and the burden to prove such charge is entirely lies with the Revenue. In this case, we find that the Revenue has not brought on any substantial evidence to prove such allegation levelled against the appellants.
10.12 Learned Special Counsel has relied upon various judgements delivered by the judicial forum, to strengthen the case of Revenue in support of confirmation of adjudged demands on the appellants. As far as Shyam Lal Biri Merchant (supra) is concerned, the same was a judgement of Hon'ble Allahabad High Court in a 38 E/86076-86083, 86092 & 860100-86103/2015 petition, challenging the stay order for pre-deposit; it was held by the Hon'ble High Court that grant of stay was a discretion of the Tribunal, either to grant stay or to order for making pre-deposit; the said judgement is not applicable in the present case, inasmuch as clandestine manufacture and clearance of goods was not the subject matter dealt with therein. The Order of the Tribunal in the case of G Guru Instruments (North India) Pvt. Ltd. (supra) has dealt with the issue of valuation of excisable goods and not the issue dealt with in the present dispute. In the case of D. Bhoormull (supra), the Hon'ble Supreme Court have held that the case of clandestine clearance may not be proved with mathematical precision. On the contrary, the present case is not a one, wherein some part of investigation is not precise. The present case is the one, wherein there is absolutely no investigation in the direction of procurement of packing material printed with the brand 'Om Special Pandharpuri Tambakoo No. 1', particularly when the allegation is regarding clandestine clearance of branded tobacco, bearing the said brand name. Therefore, the ratio of the said judgement would not apply in the present case. As regards, N.D. Textiles (supra), the said order of the Tribunal has already been distinguished by the CESTAT, Ahmedabad, in the case of Kelvin Industries Vs. Commissioner (2023) 3 Centax 252 (Tri - Ahmd), by holding that in the matter of recording of statement, the provisions of Section 9D ibid have to be strictly applied. In the case of Modi Alkalies & Chemicals Ltd (supra), the issue was in context with availment of the benefit of Small Scale Industry (SSI) exemption. Since, clubbing of turnover of different units for the purpose of such exemption is not the subject matter of dispute in the present case, the said judgement is distinguishable from the facts of the present case. The issue dealt with by the Tribunal, in the case of Gulabchand Silk Mills Pvt. Ltd. (supra), was in context with interception of truck carrying the goods in clandestine manner. The said order of the Tribunal was subsequently remanded back by the Hon'ble Andhra Pradesh High Court, reported in 2012 (275) ELT 388 (AP). Since, the issue involved therein was different from the present case and that the said order of the Tribunal was set aside by way of remand, it cannot be relied upon in the present case. As regards International Cylinders Pvt. Ltd. (supra), this judgement also considers the point of investigation without mathematical precision.
39 E/86076-86083, 86092 & 860100-86103/2015 It is held that department is not required to prove quantity of goods carried in each truck for which no entry was made in company records. The facts of said case are entirely different, than the issue involved and dealt with in the present case. The judgement of Hon'ble Kerala High Court, in the case of R. Shreekumar (supra), was in context with mis-declaration of imported goods covered under bill of entry. Since the issue involved therein was not in context with clandestine manufacture and clearance of excisable goods manufactured or produced within India, ratio cannot be drawn from such judgement to decide the present appeals differently.
10.13 From the observations made herein above, we are entirely convinced that the charges of clandestine clearance of branded tobacco, as levelled against the appellant M/s. Patel Product cannot be sustained inasmuch as Revenue has not brought out any substantial documentary evidences to prove such charges. Therefore, the adjudged demands confirmed on the appellant M/s. Patel Product fails and consequently, the penalties imposed on the other appellants in the impugned order cannot be sustained.
11. In view of the foregoing discussions and analysis, we do not find any merits in the impugned order, insofar as it has confirmed the adjudged demands on the appellants. Therefore, the impugned order is set aside and the appeals are allowed in favour of all the above mentioned appellants.
(Order pronounced in open court on 04.10.2024) (S.K. Mohanty) Member (Judicial) (M.M. Parthiban) Member (Technical) SM