Customs, Excise and Gold Tribunal - Delhi
Jagatpal Prem Chand Ltd. And Ors. vs Cce on 1 October, 2004
Equivalent citations: 2005(119)ECR241(TRI.-DELHI), 2004(178)ELT792(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. In these two appeals, filed by M/s Jagat Pal Premchand Ltd., and their Director, the issue involved relates to manufacture and clearance of excisable goods without payment of duty.
2.1 Shri R. Sudhinder, learned Advocate, mentioned that the appellants manufacture Pan Masala and Gutkha from a rented premises; that the various raw materials mainly used are Supari, Katha, lime, M.C. Menthol and flavours; that laminates are used as packing material which they procure from M/s Sharp Industries Ltd., Mumbai on payment of duty; that they avail Modvat credit of the duty paid on laminates; that the Department had started the investigation against Sharp Industries on the basis of information that they had removed the laminates without payment of duty; that simultaneous search and seizure operations were carried out on 2.8.1994 at the premises of Sharp Industries and of appellants; that there was no discrepancy in the finished goods at their premises; that some stock of duty paid laminates were seized from their premises on the ground that the same were unaccounted for; that the Officers did not find any raw material in excess at the appellant's factory or office, nor did they find any incriminating document in their premises; that there was also no seizure of stock from any of their customers nor was there any seizure of their finished products in transit.
2.2 He, further, mentioned that a show cause notice dated 8.9.1995 was issued to the appellants for demanding duty on the finished goods allegedly removed by them clandestinely for the period 1991-1994 and for imposition of penalty; that the allegation in the show cause notice was that Sharp Industries had cleared non-duty paid laminates to some entities known as Shyam Sunder 8s Sons Pvt. Ltd., Delhi Zarda, Prakash Zarda and Ramlal Shyamlal which were allegedly delivered to the appellants and those laminates were used by them to manufacture and clear Gutkha and Pan Masala without payment of duty; that these charges were made on the basis of:
(i) the recovery of documents from the premises of Sharp Industries and their transporters, and
(ii) the statements of the employees of M/s Sharp Industries Ltd., wherein it had been stated that the said entities were fictitious front entities of the appellant.
2.3 He mentioned that the Commissioner, under the impugned order, has confirmed the demand of duty and imposed penalties on the basis of following findings:
(a) Appellants were given full opportunity to cross examine the witnesses inasmuch as Siddharth Ratan and Amit Shah appeared for cross examination but the appellants had sought adjournment. A.R. Patel and Rajesh Mahajan were cross examined but they did not retract their statements.
(b) The laminates cleared by Sharp Industries carried the brand names of JPPL which will be of no use to others.
(c) Documentary evidence like R.R's and L.R's recovered showed clandestine removal of the laminates in the name of fictitious entities which carried the signature of employees of the appellants.
(d) The packing material seized from their premises had been confiscated on the ground that the same was not duly accounted for.
(e) The increase in fill and seal machine vis-a-vis fall in production, increase in manufacturing expenses vis-a-visin production, comparison of electricity units consumed show the use of laminates in the manufacture of final goods.
3.1 The learned Advocate submitted that the impugned order is per se had in law as there is not even on iota of evidence to support the charge of alleged clandestine manufacture and sale of finished products by the appellants; that the Officers did not find any excess laminates or any excess raw material at their factory or office nor did they find any incriminating document in their premises; that the officers did not find any excess finished stocks at the appellants' premises nor they found any clandestine finished goods either in transit or at any transporter or at any distributor or at any of their depots; that there was no seizure of stock at any of the customers of the appellants nor were any offending goods seized while they were in transit; that not a single statement has been recorded of any person who allegedly received any final product alleged to be clandestinely cleared by them.
3.2 Regarding seizure of packing material from the premises of the appellants, the learned Advocate submitted that due to paucity of space, the duty paid laminates received were entered in the R.G. 23A register and the entire stock used to be issued on the same day; that the practice had been followed by them since the time MOD VAT was introduced and the Department was aware of the same; that Shri V.K. Singhal, Appellant No. 2, in his statement dated 2.8.1994, had explained the position to the officers. In support of the contention, the learned Advocate showed a photocopy of the R.G. 23A Part-I register which showed the removal of entire quantity of laminates on the date of receipt itself. The learned Advocate also mentioned that the Department had started the investigation on the basis of excess stock of laminates on the shop floor vis-a-vis the records, after the visit of the officers on 4.6.1991; that the practice of issuing the entire quantity of laminates in the records was made known to the Department and a reconciliation of the laminates with production was filed; that pursuant thereto a show cause notice was issued alleging shortage instead of excess; that the order confirming the show cause was eventually set aside by the Appellate Tribunal vide Final Order No. A/2007/1996-NB dated 31.7.1996.
3.3 He also mentioned that the Department caused investigations from transporters and made enquiries to assess if the appellants had indulged in procuring Supari one of the main ingredients of their finished product, in cash, that the Departmental has not found anything, that the Departmental had also, not enquired from the transporters of the appellants' final products to find out if they had transported any clandestine goods to the appellants' distributors spread all over the country.
4.1 The learned Advocate contended that the entire case has been made against the appellants on the basis of statements of various persons of Sharp Industries despite the fact that the veracity of those statements has not been tested by cross examination; that except two wtinesses, none had turned up for cross examination; that the appellants successfully established in the cross examination of those two witnesses that they had no knowledge about the delivery of alleged clandestine material to the appellants; that Shri A.R. Patel, Managing Director of Sharp Industries, has answered in his cross examination, in reply to question, as to whether the goods cleared to three companies namely Ramlal Shyamlal and Shyam Sunder & Sons were delivered to the appellants, that "only Siddharth Ratan can say"; that in reply to question as to whether he had any proof to show that they were front companies of the appellants, Shri Patel had mentioned that they had no time to go into those questions and relied on their Manager, that he also denied to have meet Mr. Mathur of the appellants' company. He further, mentioned that Shri Rajesh R. Mahajan, Executive Director of Sharp Industries Ltd., has denied to have meet any person representing the above named firms; that he has also stated in cross examination that he was not aware personally that the laminates cleared by Sharp Industries without payment of duty were cleared to any particular party or consignee and that there was no valid basis for confirming the statement of Shri Sddharth Rattan. The learned Counsel emphasized that it is thus apparent from the cross examination of these two high officials of Sharp Industries Ltd., that they were not aware of the recipients of the laminates said to be removed by Sharp Industries without payment of duty.
4.2 He mentioned that the entire demand has been confirmed against the appellant company on the basis of statement of Shri Siddhartha Rattan, Regional Manager of Sharp Industries Ltd., and Amit Shah who have not been cross examined and as such their statements along with the statements of those who have also not been produced for cross examination have to be ignored. He relied upon the decision in the case of Arsh Castings Pvt. Ltd. v. CCE, Chandigarh wherein it has been held that "It is an elementary principle of natural justice and fair play that a person who is sought to be proceeded against and penalized in adjudication on the basis of third party statements should be afforded effective opportunity to challenge the correctness of the same as per law by cross examination, if he so desired. If witnesses do not turn up for cross examination, it is open to the adjudicating authority to proceed with the adjudication without relying on these statements against the person so charged. Failure of witness to appear for cross examination will not be a ground to penalize the appellants in law when the appellant is entitled to an opportunity of cross examination of third party on whose statements reliance is placed." Reliance has also been placed on the decision in Emmtex. Synthetics Ltd. v. Commissioner of/C.Ex., New Delhi wherein it has been held by the Tribunal that no presumption on the basis of uncorroborated, uncross-examined evidence of person can be drawn about the receipt of the goods in a clandestine manner. Reliance has also been placed on the following decisions:
(i) Takshila Spineersv. CCB, Chandigarh wherein the Tribunal has held that "ocular and uncorroborative statements of the witnesses recorded during investigation at the back of the appellants, without allowing them to test the correctness of the same by cross-examining those witnesses, could not be made basis for holding that the allegations against them as set out in the show cause notice stood proved by the Commissioner. That was, in fact no evidence in the eyes of law which could be used against them.
(ii) Shalimar Agencies v. CC, Kandla
(iii) Balbir Steel (P) Ltd. v. CCE, Kanpur .
(iv) Sita Ram v. CCB, Jaipur .
4.3. He also mentioned that the Commissioner has mentioned in the Adjudication Order that they were given full opportunity of cross-examining the witnesses as Siddharth Rattan and Amit Shah appeared for cross-examination and the appellants had sought the adjournment. The learned Counsel explained that the notice for hearing dated 22.2.1999, informing them that these two persons had been called for being present for cross examination on 9.3.1999, was received by the appellants on25.2.1999 and on the same day their counsel sought adjournment as matters were posted for hearing before the Appellate Tribunal for hearing; that subsequently after they filed their detailed application setting out the reasons for the cross-examination of these two persons, fresh summons were issued to these two witnesses as well; that in view of these facts it can not be held by the commissioner that the appellants did not avail of the opportunity; that as these persons had not appeared for cross examination, their statements cannot be relied upon by the Department.
5.1 The learned Counsel also contended that apart from bald assertion that the laminates cleared by Sharp Industries clandestinely were delivered to the appellants, there are no documents in support of the same; that they only documents relied in the show cause notice are couple of LRs and couple of RRs on which there is allegedly signatures of the erstwhile employees of the appellants; that mere presence of signature of their employees who were acting in concert with the employees of Sharp for ulterior motives cannot establish that all the clearance claimed by Sharp Industries were actually delivered to them; that in absence of any direct evidence or statement of any of the person who actually delivered the alleged clandestine material it cannot be alleged by the Department that the appellant received such material and used the same in the manufacture of final products which were cleared clandestinely; that though Shri Akhil Jain has identified the signature of Rajdev Maurya, he has never admitted the receipt of the material in the factory of the appellants; that in respect of one R.R. the delivery of the consignment has been taken by one Gauri Dutt, Peon of Sharp Industries Ltd., who has not been examined by the Department; that similarly Department has not recorded the statement of V.K. Jain who has signed one L.R.; that mere identification of his signature can not be construed to be receipt of material by the appellants; that V.K. Jain left their employment on 21.7.1993 as he was caught pilfering goods in the company in connivance with a driver; that unless the Department produces the transport documents of all the transactions supported by the statements of the transporter it cannot be assumed that whatever quantity of laminates Sharp Industries claim to have supplied to the units were actually sold to the appellants; that the law does not permit such wholesale assumptions to be made without any supporting documents. Reliance has been placed on the Judgment in the case of Oudh Sugar Mills Ltd. v. Unionof India 1978 ELT J172 (SC) : 1976 Cen Cus 81 D (SC) : ECR C 198 SC wherein it has bee held by the Supreme Court that the finding which "has been arrived at without any tangible evidence and is based only on inferences involving unwarranted assumptions" is vitiated by an error of law. He also asserted that the fact of the matter is that the alleged non duty paid laminates had been supplied by Sharp Industries to spurious manufacturer thereby bringing down the sales of the appellant resulting in the ultimate closure of their manufacturing activities from September, 1999.
5.2 He also mentioned that during the relevant period, there have been at least six internal audits and in addition three Accountant General's audit and nothing incriminating and/or excess finished goods/raw material/cash has ever been found. Regarding electricity bill, the learned Advocate submitted that the rent paid by them to the landlord included the electricity charges and they were not paying anything in addition to the sent. He contended that the mere fact that the laminates clandestinely cleared by Sharp Industries carried the brand name of the appellants does not lead to the conclusion that such laminates were used by them; that the Commissioner has not at all considered their plea that the spurious industry was thriving and Sharp Industries were supplying laminates to spurious manufacturers. The learned Advocate finally contended that the charges in the show cause notice have not been established. He relied upon the following decisions:
(i) Gujarat Rubber Indusries v. CCB Note book maintained by a casual worker containing entries of production not to be relied upon to establish clandestine removal unless supported by other evidence such as installed capacity, raw material utilization, labour employed, etc.
(ii) Rhino Rubbers Pvt. Ltd. v. CCB, Bangalore wherein it has been held by the Tribunal that "it is not safe to rely on the third party's evidence, when no direct link has been established between the appellants and M/s. Chemtech Industries through cash transactions or any person.
(iii) Padmanabh Dyeing & Finishing Work v. CCB, Vadodara wherein it has been held that electricity consumption to work out the probable production is not by itself sufficient to assess the production.
(iv) Hans Castings Pvt. Ltd. v. CCB, Kanpur .
6. Countering the arguments, Shri Kumar Santosh, learned SDR, reiterated the findings as contained in the impugned Order and submitted that during the search of the factory premises of the appellants on 2.8.1994 excess stock of laminates worth Rs. 25.84 lakhs was found; that Shri V.K. Singhal, Director, was not in a position to explain the stock vis-a-vis RG23A, Part-I; that he stated that he would prepare a reconciliation statement and furnish the same to the officers; that he, however, has never submitted the same; that again in his subsequent statement dated 9.8.1994, Shri V.K. Singhal could not explain the stock of laminates. He emphasized that the seizure of unaccounted quantity of packing material itself indicates that the appellants were purchasing non-duty paid raw materials for cleandestine manufacture of finished goods to evade payment of duty. He, further, mentioned that unaccounted cash of Rs. 7.22 lakhs was seized from the Regional Office of Sharp Industries Ltd., at Delhi on 2.8.1994; that Shri Siddharth Rattan, Regional Manager of Sharp Industries at Delhi, has deposed in his statement that Shyam Sunder & Co., Delhi Zarda Co., R.K. Trading etc. used to make the cash payments for which he did not maintain any documents and that no document regarding the seized cash was available; that Shri Anil Ram Patel, Managing Director of Sharp Industries, has admitted in his statement dt. 3.8.1994 that they were receiving the amount in cash for the clearance effected without payment of duty and that two days back he had received Rs. 10 lakhs from Jagat Pal Group of Companies through angadia which was seized from his residence on 2.8.1994 and that the appellants had also paid Rs. 7 laksh approx. to their Delhi office; that Shri Patel in his further statement dated 19.9.1994 has deposed that Delhi Zarda, Ramlal Shyamlal and Shaym Sunder & Sons were front companies of the appellants and the decision of creating purchase orders and bills in the name of these front companies was taken as per the advice of the appellants; that Shri Patel has confirmed his statements in cross-examination. The learned SDR further mentioned that as per the statement dated 4.8.1994 of Siddharth Rattan, their major clients included the appellants and sales in cash to the appellants were made by invoices under different names and in such cases orders were verbally placed and that in regard to despatches made to front companies, the orders were placed for the brand names of the appellants and the material was sent by Bombay factory directly to the appellants; that Siddharth Rattan admitted in the statement that the front firms and their addresses were bogus and were not in existence at all; that Mr. Mathur, Manager of the appellants used to make the cash payment for the purchases made by the front companies. The learned SDR also emphasized that after seeing two files seized from his Delhi office containing invoices in respect of Ramlal Shyamlal and Delhi Zarda Siddharth Rattan has confirmed that all the material despatched through these invoices was delivered to the appellants against cash payment.
7. The learned SDR submitted that Shri Vineet Dinesh Sharma of M/s VIP Enterprises (Transporters), has deposed in his statement dated 2.8.1994 that materials of Tasty Gutkha and Superfit brands used to go in the name of the appellants, Ramlal Shyamlal, Shyam Sunder & Sons and Delhi Zarda; that he was informed by Shir Parab of Sharp Industries that such materials were to be delivered at the appellants premises; that Shri S.S. Parav, Partner of M/s Bhagwati Roadways in his statements has deposed that particulars in the consignment note were filled on the basis of delivery challans, gate passes and invoices given by Sharp Industries at the time of loading of goods. He also mentioned that some of the lorry receipts show that goods were received by the employees of the appellants; that three RRs were signed by Mr. Raj Dev of the appellants, that similarly one LR of Bhagwati Roadways shows that material despatched for Prakash Zarda was received by the appellants and another lorry receipt of Bhagwati Roadways show that despatch of material to Shyam Sundar & Sons was received by Sharp Industries Delhi for further delivery to the appellants. The learned SDR contended that the plea of spurious market of Pan Masala being in existence is nothing but an after thought; that had there been any spurious market being in existence, the appellants would have gone to Police and/or made their own enquiries in this regard; that all the evidence in the form of lorry receipts, railway receipts, statements go to show that the laminates removed by Sharp Industries Ltd., clandestinely without payment of duty in the names of front companies were received by the appellants and used in the manufacture of their finished products which in turn had been cleared without payment of duty; that the statements have not been retracted and as such are admissible in law. He relied upon the decision in the case of Surjeet Singh Chhabra v. Union of India wherein it has been held by the Supreme Court that cross-examination of witness regarding the place at which recovery was made has to be allowed but where petitioners has confessed the recovery, non allowing of cross-examination is not violative of principles of natural justice even if confession was retracted. Reliance has also been placed on the decision in Bhana Khalpa Bhai Patel v. Assistant Collector of Cus., Bulsar wherein it has been held that statements recorded under Section 108 of the Customs Act, when found to be voluntary and not vitiated in any manner, are admissible in evidence. The learned SDR also mentioned that the statements made by other persons can also be relied upon for penalizing as held by the Bombay High Court in the case of Blue Star Ltd. v. UOI . He has also relied upon the decision of the Supreme Court in the case of Triveni Rubber & Plastics v. CCE, Cochin wherein the Supreme Court has upheld the demand arrived at by assessing normal production on the basis of electricity consumed. Finally the learned SDR submitted that in a case of clandestine manufacture and clearance of excisable goods, there can not be any direct evidence; that as held by the Supreme Court in the case of Collector of Customer v. D. Bhoormull , the department is not required to prove its case with mathematical precision, but what is required is the establishment of such a degree of probability that a prudent man may on its basis believe in the existence of the facts in issue. He contended that the Departmental has established its case on the basis of circumstantial evidence. Reliance has also been placed on the decision in the case of Shah Guman Mai v. State of Andhra Pradesh 1983 (13) ELT 1031 (SC).
8. In reply, the learned Advocate submitted that the Revenue has not established it case at all what to talk of mathematical precision; that Akhil Jain, Managing Director of the Appellant company has nowhere in the statement dated 28.1.1994 admitted the signature of the company's employee on Lorry Receipt/Railway Receipt in the name of other firms alleged to be front companies, that Shri Jain has only stated that apparently the signature of Rajdev Maurya is the same; that no expert opinion had been obtained by the Department in this respect; that he has expressly deposed that the goods meant for Ramlal Shyamlal had not come to their factory and the appellants has no connection whatsoever with M/s Ramlal Shyamlal, Shyam Sunder & Sons, Delhi Zarda or Prakash Zarda.
9. We have considered the submissions of both the sides. The entire case of the Revenue is that M/s. Sharp Industries Ltd., removed laminates without payment of duty to the front companies of the appellants who used such laminates for manufacture of their finished products which in turn were cleared by them without payment of duty. The main reliance has been placed to establish the charges on the statements of the various personnel of M/s Sharp Industries Ltd., and documents seized from there and the premises of M/s. VIP Enterprises and M/s. Bhagwati Roadways. The learned Advocate has vehemently contended that except the cross examination of Shri Anil R. Patel, Managing Director and Shri Rajesh Mahajan, Executive Director of Sharp Industries, no other persons whose statements have been relied upon by the Revenue, have not come forward for cross examination and as such no reliance can be placed on their statements. It is well settled law that the duty liability cannot be imposed on an assessee on the basis of statements of persons without cross examining them. The Supreme Court has held in Swadeshi Politex Ltd. v. CCB 2000 (122) ELT 641 (SC) that the contention is well founded that the appellants should be given an opportunity of cross examining the witnesses if the Collector intends to rely upon their statements. It has also been held by this Tribunal in the case of Takshila Spinners v. CCB that "legally the statements of those witnesses could not be accepted or taken into evidence, for having failed to submit themselves for cross-examination, by the appellants". The Tribunal has further held that the Commissioner "could not legally use the uncross-examined statements of the witnesses against the appellants for holding that they cleared worsted woollen yarn in excess in the guise of plain (straight) reel hanks". The Supreme Court has held in State of Kerala v. K.T. Shaduli Yusuff (1977) 35 CR 233 that "it can hardly be disputed that cross examination in one of the most efficacious methods of estasblishing truth and exposing falsehood". The learned Advocate has relied upon many decisions in support of his contention that the statement of the witnesses who had not appeared for cross-examination cannot be relied upon and the same have to be disregarded. In the case of Arsh Castings Put. Ltd., the Tribunal has held that "failure of a witness to appear for cross-examination will not be a ground to penalize the appellants in law when the appellant is entitled to an opportunity of cross-examination of third party on whose statements reliance is placed". The finding of the Commissioner that Shri Siddharth Rattan and Amit Shah had appeared on 9.3.1999 and as Advocate for appellants did not appear on that day, and as such full opportunity had been extended to the appellants for cross-examination is without any substance. The Advocate for the appellant has sought adjournment as he had to appear before the Appellate Tribunal in a number of cases. There is no rebuttal of the factual position by the Revenue. Moreover the Adjudicating Authority himself has called the witnesses again for cross examination on 5.10.2000 which is evidence from the letter dated 11.9.2000 intimating the date of personal hearing to the appellants. Further only two persons had appeared on 9.3.1999 and not all the persons whose statements have been relied upon by the Department. In view of these facts and circumstances, the Revenue cannot claim that the appellants have been given full opportunity to cross-examine the witnesses. Accordingly, the statements of these persons cannot be relied upon against the appellants.
10. The statement of Shri A.R. Patel and Shri R.K. Mahajan are admissible in evidence as these two persons had subjected themselves to cross-examination. But the version of these two persons after cross examination does not advance the case of the Department against the Revenue. Shri A.R. Patel has clearly deposed in his cross-examination that he had not met any person on behalf of the alleged front firms of the appellants nor he has receiving payments directly from any customer in Delhi as the same was received through Delhi office. Shri Patel has referred to one Mr. Mathur of the appellants who used to telephone him about remitting of cash. It appears that said Mr. Mathur has not been questioned as his statement has not been brought on record. We also observe that Shri Patel did not have direct knowledge about the alleged transactions as it is mentioned in the show cause notice itself that he had deposed in his statement that they used to receive instructions about placing of orders from the appellants from Shri Siddharth Rattan of Delhi office. Again in his cross examination in reply to question "do you have any proof that goods cleared to those three Cos., Ramlal Shamlal and Shyam Sunder & Sons were delivered to Jagatpal Prem Chand? Shri Patel has answered that "only Siddharth Rattan can say". When he was asked as to whether he has any proof to show that these companies were front companies of the appellants, Shri Patel told that "we had no time to go into these questions and relied on our Manager". Thus the statements of Shri A.R. Patel do not prove that the firms like Rmlal Shamlal, etc were the front companies of the appellants, Similarly Shri Rajesh Mahajan, Executive Director of Sharp Industries, was not directly dealing with the appellants as he had deposed in his cross examination that he was not concerned with any dealings with the appellants as he just knew that they were existing as customers and he had never met any person who represented Ram Lai Shamlal, Delhi Zarda and Shyam Sunder & Sons. The learned Advocate has emphasized that documentary evidence is in the form of only 3 RRs and 2 LRs and on the basis of these five receipts it cannot be alleged that clandestine supply of laminates were made to the appellants during 1991 to 1994. The contention of the Revenue is that these receipts bore the signature of the employees of the appellants. We, however, find force in the submissions of the learned Advocate that neither any statement of these persons was recorded by the Department nor any opinion of the hand writing expert had been obtained in support of the contention that the signature on those receipts were the signature of the employees of the appellants. There is also substantial force in the submission of the learned Advocate that Shri Akhil Jain, Managing Director of the appellant company, has in his statement dated 28.11.1994, only mentioned that "apparently the signature of the photocopy of the LR and that of the bill do tally" but he was never admitted the receipt of the material, that he has deposed that "but the consignment which belong to Prakash Zarda could not have come to us at all"; that he had also mentioned that the person who had signed was not known to him; that similarly Shri Akhil Jain has categorically denied that the goods meant for Ramlal Shamlal covered by RRs had come to the appellants factory. In Kothart Pouches Ltd. v. CCB, New Delhi 2001 (135) ELT 531 (T) : 2001 (94) ECR 13 (T) when the Revenue relied upon the documents of transporters to prove clandestine removal of goods by the appellants without any independent corroborative evidence and no evidence was found during search of the appellants' premises, and the authorised signatory of the company had not admitted the charge of clandestine removal, it has been held by the Tribunal that demand of duty is not sustainable. The Tribunal has held that the statement of the authorized signatory "was recorded in question and answer form; nowhere he had admitted that there has been clandestine removal; on looking at the transporters documents shown to him, he has stated that no GP-Is were issued in respect of two consignments but this does not tantamount to admission of clandestine clearance of two consignments". We also observe that Shri Akhil Jain has emphatically denied any connections whatsoever with the so called any of the front companies. On the other hand Revenue has also not brought any evidence other than the statements of persons who had not come forward for cross examination, to show that the appellants had created the entities namely Ramlal Shamlal, Shyam Sunder & Sons, Prakash Zarda or Delhi Zarda.
11. The learned Advocate has contended that when the officers visited the appellants' premises by surprise, they had not found any excess stock of finished goods; there was no evidence of any transporters and/or buyers of the appellants to show that they had received any non-duty finished goods from the appellants; there is no evidence to show there was any unaccounted cash at their premises/depot; no evidence that there was any excess stock of main raw materials for manufacture of their finished products. The main raw materials are supari, katha, lime, tobacco, perfumes and scents. It is settled law that whenever the charge of clandestine removal is made, the Revenue has to prove that the assessee has procured all the raw materials required for the manufacture of final product. In the present matter Revenue has not adduced any evidence to show that the appellants had procured any raw materials in excess of the quantities mentioned in their records. On the other hand, it has been contended by the appellants that the officers did cause investigations from supari suppliers and supari transporters, but they found nothing. There is no rebuttal also by the Revenue of the said contention. There is also no allegation from the Revenue side that when the officers visited the factory premises of the appellants on 2.8.1994, there was any excess stock of supari/katha/tobacco etc. Coupled with this is the fact that no excess stock of final product manufactured by the appellants was found by the visiting officers. This is evident from the show cause notice itself wherein it is mentioned in para 2 that "the officers verified the stock of finished goods however, no variation was noticed". The charge of clandestine removal of the goods has to be established by Department by adducing tangible, acceptable, cogent and convincing evidence as' held by the Tribunal in the case of Emmtex Synthetics Ltd. v. CCB, New Delhi . In this case the Tribunal has held that "no presumption on the basis of uncorroborated, uncross-examined evidence of B.M. Gupta and the alleged entries made by him in the private diary, loose sheets/charts, packing slips could be drawn about the receipt of the polyester yarn by the appellants from the company, M/s. HPL, in a clandestine manner during the period in question. Similarly, no inference could be legally drawn against the appellants of having manufactured textured yarn out of the said polyester yarn and the clearance thereof in a clandestine manner without the payment of duty. The surmise and conjectures cannot take place of legal proof.
12. The learned SDR has emphasized that when the officers visited the factory premises of the appellants, they had found laminates in excess which indicates that they were purchasing non duty paid raw materials for clandestine manufacture of their finished goods. The appellants on the other hand has submitted that it has been the practice of the appellants to show as issued the whole quantity of laminates as soon as it was received by them. In support of this contention the learned Advocate has shown the extract of RG-23A Part-I register which has not been controverted by the Revenue. The learned Advocate has also referred in this connection the search of the appellants' factory on 4.6.1991 when also the Central Excise Officers found that as per RG23A Part-I stock of laminated aluminium foil was nil whereas a quantity of 13173 Kgs. of the same was found on shop floor. As per Panchnama dated 4.6.1991, the appellants had even then explained that as per practice, they issued entire quantity of laminates received to the shop. Subsequently the Department issued a show case notice not with regard to excess quantity of laminates found but in respect of shortage and the Adjudication order confirming the demand was set aside by the Tribunal vide Final Order No. A/2007/96-NB dated 31.7.1996. In the present case also, Shri V.K. Singhal, Director has in his statement recorded on the day of search (i.e. 2.8.1994) itself, explained the reasons for removing the entire quantity as issued on the same day by deposing that on account of paucity of space, they issue the total material for filling. In view of this, finding of laminates on floor of the shop though RG23A Part-I products manufactured clandestinely by them. As no investigation has been conducted by the Revenue in respect of main raw materials essential for the production of their final products, mere fact that the laminates clandestinely cleared by M/s Sharp Industries Ltd. bore their brand name is not sufficient to establish that the appellants had manufactured their final products clandestinely and removed the same without payment of duty. We also observe that no evidence regarding the removal of the final products said to have been manufactured clandestinely has been brought on record. The decision in the case of Triveni Rubber & Plastics relied upon by the learned SDR, is not applicable as facts are different. In the said matter, the officers found that a substantial quantity of tread rubber was removed from the factory without making an entry and the Managing Partner had admitted not only removing of goods without any entry but doctoring their accounts so as to show that their annual production was below the exemption limit. The appellants their could also not explain the consumption of the electricity during the relevant period. The ratio of the judgments of the Supreme Court in the case of D. Bhoormull and Shah Guman Mai is not applicable as the Department has no succeeded in even establishing such a degree of probability that a prudent man may on its basis believe in the existence of the facts in issue. The Supreme Court has held in renowned case of Oudh Sugar Mills Ltd., supra that a finding based only on inferences involving unwarranted assumptions is vitiated by an error of law. The Tribunal has also held in many decisions that it is well settled that the charge of clandestine removal has to be established by the Department against a manufacture by adducing cogent and tangible evidence which are not forthcoming in the present matters. We, therefore, set aside the impugned order and allow both the appeals.
(Pronounced on 1.10.2004).