Custom, Excise & Service Tax Tribunal
M/S.P & J Auromatics vs Cce, Delhi-Ii on 19 February, 2016
IN THE CUSPTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing:3.2.2016
Date of Decision:19.02.2016
Excise Appeals Nos.1767, 1814 and 1815 of 2007-EX(DB)
(Arising out of Order-in-Original No.34/2006-2007 dated 31.03.2007 passed by the Commissioner of Central Excise, New Delhi)
M/s.P & J Auromatics .Appellants
Shri Sandeep Kumar Mishra
Shri Rajesh Aggarwal @ Rajesh Goyal
Vs.
CCE, Delhi-II Respondent
Appearance:
Rep. by Shri K.K. Anand, Advocate for the appellant.
Rep. by Shri R.K. Grover, DR for the respondent.
For approval and signature:
Honble Shri S. K. Mohanty, Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3 Whether Their Lordships wish to see the fair copy of the Order? 4 Whether Order is to be circulated to the Departmental authorities? Coram: Honble Shri S.K. Mohanty, Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) Final Order Nos.50236-50238/2016 dated:19/02/2016 Per B. Ravichandran:
These three appeals which are filed against order dated 31.03.2007 of Commissioner of Central Excise, Delhi-II.
2. The brief facts of the case relevant to the present appeals are that the appellants are engaged in the manufacture of gutka liable to central excise duty. Based on the certain intelligence, the central excise officers intercepted a vehicle on 10.10.2002 and thereupon conducted detailed investigation regarding the unaccounted non-duty paid clearance of gutka by the main appellant. (M/s. PNG Auromatics). On conclusion of the investigation, show cause notice dated 28.05.2004 was issued to demand central excise duty of Rs.1,31,51,268/-. Penalties under various provisions of Central Excise Act were proposed on various persons. After due process, the impugned order was passed. The ld. Commissioner confirmed the duty demand, imposed equal amount of penalty and further penalties on various individuals. He also ordered confiscation of seized gutka and the motor vehicle and allowed them to be redeemed on payment of fines. Aggrieved by this order, the appellants filed these appeals.
3. Ld. Counsel for the appellants submitted that the whole case was based on summary assumption without any corroborative evidence. His main argument can be summarized as below:-
(i) There is no evidence on record to show that the appellants had procured raw materials to be capable of manufacturing 12,00,000 pouches of gutka. There is absolutely no evidence on record to indicate that the appellant had manufactured such huge quantities of gutka.
No buyers were at all identified. The demand as well as its confirmation is based on the certain fictional calculation shown as most reasonable estimate. There is no authority in law to have any demand raised or confirmed without a proper quantification.
(ii) The reasoning followed by the Original Authority is that the appellants failed to provide details of clandestine removal and hence, a reasonable estimate is being made to confirm the demand. When there is no evidence to clandestine removal, there is no question of reasonable estimate.
(iii) The allegation of clandestine removal of gutka is sought to be supported by the invoices of M/s. S.R. Packers. Apparently, this is based on statement and proprietor of M/s. S.R. Packers.
No cross examination of the persons, whose statements were relied upon were conducted as requested by the appellants. There is a factual error in the observation of the Original Authority that two of the employees are not available for cross-examination as the letters sent to them have returned un-delivered. However, it is seen that two of the three witnesses, whose cross-examination could not be held on 24.01.2007 have participated in the adjudication proceedings.
(iv) The retractions made by the persons, who gave earlier statements have not been considered and analysed by the Adjudicating Authority.
(v) Regarding procurement of packing materials from M/s. Sandeep Laminators, it is clear that the Director of the Company categorically stated in the cross-examination on 24.01.2004 that they have never supplied any laminations to the appellant without payment of duty. Further, the evidence regarding other raw materials such as tobacco, katha, lime, perfume, etc., which are essential for the manufacture of gutka, is not at all adduced. The entire case is based on the allegations that the goods were being cleared clandestinely on the invoices of M/s. S.R. Packers through transport companies viz. Harsh Transport Company and G.G. Transport Company, but no documents of such transport could be recovered or produced. Thus, the whole case is based on the statement and no evidence of corroboration. The clearance of 100 consignments without payment of duty is pure assumption with no evidence.
(vi) Various case laws are relied upon to reiterate that the present case of clandestine manufacture and clearance could not be sustained in the absence of any tangible corroborative evidence.
4. Ld. AR supported the findings of the Original Authority. He submitted that the vehicle intercepted by the officers had 25 bags of gutka and a cash/credit memo No.51 dated 10.10.2002 was recovered. On follow-up, it was found another cash memo with the same serial number but dated 9.10.2002 mentioning 40 bags of gutka was recovered. Both these cash memos were issued by M/s. S.R. Packers. The statements of the Proprietor and the Supervisor indicated that they had manufactured and cleared the goods without payment of duty. There were 24 workers and 9 machines. It has also been admitted that they are using the name of M/s.S.R. Packers for clearing the goods. They destroyed these bills after clearance. It is admitted by the proprietor that the same number is used in two bills and they used 100 such bills to effect clearance without payment of duty. The statements of Proprietor and Manager of the appellant company will clearly establish that the appellants were engaged in clandestine manufacture and clearance. Regarding the quantum of duty demand, ld. AR submitted that the details are given by the Original Authority in page 37 at para 37 (iv) of the impugned order. The calculation of duty demand has been shown in Annexure A to the show cause notice. Ld. AR submitted that since the whole operation is done clandestinely, precise evidence with documents may not be available in such cases. Hence, he supported the reasonable estimate made by the Original Authority in demanding and confirming duty against the appellant.
7. We have heard both the sides and examined the appeal records.
8. The point for decision is the sustainability of duty demand against the main appellant on the charge of clandestine manufacture and clearance of dutiable gutka. It will be proper to start the analysis from the method of quantification of the duty presently confirmed by the impugned order. We have perused Annexure-A to the show cause notice, which is a chart showing duty calculation for the period July, 2002 to 10.10.2002 payable by the main appellant. It is seen that the value and duty of two brands JEET and ANDAZ were calculated in two categories viz. 25 bags and 40 bags each. These four types of duty liability were considered as duty liability in respect of the four bills. Thereafter , the duty liability on one bill was arrived at by dividing the total by 4. The average so arrived is considered as duty liability for one bill of purported clandestine clearance and the same is multiplied by 100 bills. Thus, a clandestine removal without payment of duty amounting to Rs.1,29,78,225/- has been arrived at. To this, the duty liability on Bill No.51 dated 9.10.2002 and Bill No.51 dated 10.10.2002 (seized goods) were added to arrive at the total demand of Rs.1,31,51,268/-. The said amount has been confirmed against the appellant. Without going into any detailed analysis of other aspects of the case, a preliminary look at the contents of the above Annexure-A will make it clear that the whole demand is simply made on fictitious, presumptive calculation. It is not clear as to how based on an average of various bills which themselves are presumed in nature, a duty calculation can be arrived at for demand. Further, it is seen that goods under 100 such bills were presumed to have been cleared clandestinely and accordingly, the average amount is multiplied by 100. We are unable to appreciate that such summary, arbitrary calculation without any supportive evidence, reason or logic or legal principle can stand scrutiny as per law.
9. The reason followed for above mentioned summary calculation of duty demand is indicated by the Adjudicating Authority as the party had failed to provide the details of goods clandestinely removed by them. Hence, he observed that the only option left with the Department is to calculate the duty evaded on the basis of admissible statements coupled with the most reasonable estimate techniques. The reasoning adopted as above by the Original Authority is strange, to say the least. It is not clear as to how the appellants shall provide the details of goods cleared clandestinely. The observation that the admissible statements coupled with most reasonable estimate has been adopted by the Revenue to arrive at the duty demand is itself totally mis-conceived. The contents of the statements were contested by the appellants. They were retracted and the persons, who gave statements were not put to cross examination. Hence, the question of using admissible statements to arrive at most reasonable estimate of duty demand is itself not sustainable. There is no details of procurement of raw materials (except statement of the Director of Sandeep Laminators) or details of clearance to various buyers, money payment, etc. Even the statement of one of the suppliers of raw materials, which was later retracted, and the quantity mentioned in the earlier statement is no way attributable to such a huge clandestine clearance. We find that the whole case against the appellant started with recovery of one cash/credit memo no.51 dated 10.10.2002 along with 25 bags of gutka in a vehicle. On a follow-up, another cash memo with the same no. but with a different date (9.10.2002) covering 40 bags of gutka was found. Thereafter, various statements were recorded Based on the admission that the appellants used to issue bills with the same no. twice; 25 bags to 40 bags of gutka were sent through these bills; 100 such bills would have been used for clearance without payment of duty, the whole calculation of duty demand has been made.
10. As already mentioned, such admission even taken as true reflection of the events does not throw light on whether 25 bags or 40 bags of gutka covered by each bill; whether JEET or ANDAZ brand was cleared and with what price; how many such unaccounted bills were cleared on various dates. Even if these details were available, they require at least minimum corroboration by other evidences. We are unable to appreciate the most reasonable estimate techniques adopted by the Adjudicating Authority as per the calculation in Annexure A to the show cause notice. The nature of calculation adopted is explained earlier in this order. It is clear that what is sought to be justified as most reasonable is actually arbitrary and presumptive without any legal basis whatsoever. Further, the Original Authority relied on the Honble Supreme Courts decision in the case of CC Vs. D. Bhoormull - 1983 (13) ELT 1546 (SC) to the effect that the Department need not prove the case with mathematical precision. He further added that what is required is to accept a degree of probability and there is no need to produce threadbare evidences in all cases. We find that this reasoning is mis-conceived and without any legal merit. The method adopted for calculating duty and the basis of such calculation will not fall under any reasonable basis. The question of preponderance of probability also does not arise in this case. The suspicion howsoever strong cannot substitute for evidence to support a demand for clandestine removal. We find in this case except for seizure of two invoices/bills, bearing no.51 dated 9.10.2002 and 10.10.2002, no other evidence has been resumed to corroborate the clandestine removal and thereby the demand for duty. As far as these two bills, the appellants have already accepted the liability and duty has been paid. We find that projecting the fact of these two bills to 100 such bills, without semblance of evidence will amount to arbitrary action not sustainable under law.
11. We have also perused the various case laws referred to by the appellants. In Kuber Tobacco Products Ltd. 2013 (290) ELT 545 (Tribunal-Delhi), the Tribunal held that the requirement is cogent evidence of unaccounted receipt and consumption of basic raw materials and packing materials required for manufacturing alleged quantity of unaccounted finished goods. The decision of the Tribunal was later upheld by the Honble Supreme Court in 2015 (317) ELT A-159 (SC). In Pan Parag India Ltd. Vs. CCE, Kanpur - 2013 (291) ELT 81 (Tribunal-Delhi), the Tribunal discussed the circumstances in which a clandestine removal can stand confirmed for duty purposes. There is a cantina of judgements laying down that the inculpatry statements alone cannot be made the basis for arriving at a finding of clandestine removal. As analysed from the facts presented in these cases under appeal, it is apparent that even the statements given are not giving any categorical details of the quantum of manufacture and clearance of non-duty paid items. Annexure-A to the show cause notice which stands confirmed in toto, cannot be considered as an admissible way of calculating duty liability under any provisions of law. We find that except for the seized quantity of gutka along with evidence of parallel clearance of further quantity of gutka using the bill of same number, other clandestine clearance cannot be established with any corroborative evidence. Accordingly, we hold that the impugned order is not sustainable except to a duty demand of Rs.1,73,043/-. Since these are clearances without payment of duty, with full knowledge of the violation of the law, penalty equal to the duty is also sustainable. In view of the above analysis and findings, the appeals filed by the main appellant and others are allowed except to an extent of duty liability of Rs.1,73,043/- and equal amount of penalty.
[Order pronounced on 19.02.2016.] ( S.K. Mohanty ) Member (Judicial) ( B. Ravichandran ) Member (Technical) Ckp.
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