Customs, Excise and Gold Tribunal - Delhi
Rawalwasia Ispat Udyog Ltd. vs Cce on 19 January, 2005
Equivalent citations: 2005(99)ECC429, 2005(186)ELT465(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. In these three appeals, M/s. Rawalwasia Ispat Udyog Ltd. and their two Directors, are challenging the demand of Central Excise duty and penalty imposed by the Commissioner under the impugned Order-in-Original No. 38/2001 dated 28.9.2001.
2. Shri R. Santhanam, learned Advocate, mentioned that M/s. Rawalwasia Ispat Udyog Ltd. Appellant No. 1, manufacture galvanized M.S. Pipes and avail of Modvat Credit of the duty paid on inputs and capital goods Under Rules 57A and 57Q of the Central Excise Rules, 1944; that the Central Excise Officers visited their premises on 9.9.1998 and found (i) finished goods valued at Rs. 13,80,703 in excess of the recorded balance in RG I Register; and (ii) shortage of raw-material involving duty Rs. 91,119; that after recording the statements of Directors and other employees of the Appellant Company, a show cause notice dated 8.3.1999 was issued for demanding Central Excise duty Rs. 55,37,403 on the goods cleared by them clandestinely, for confiscating of seized finished goods found in excess, for confiscating finished goods valued at Rs. 19.64,750 found lying in an outside godown and for demanding duty Rs. 2,94,712, for demanding duty of Rs. 91,119 on shortage of inputs as Modvat Credit had been taken by them on those inputs, and for imposing penalties on all the Appellants; that the Commissioner passed the Adjudication Order dated 24.5.2000 confirming the demand of duty and imposing penalty which was remanded by the Tribunal vide Final Order Nos. A/855-57/2000 NB (DB) dated 28.9.2002 as personal hearing was not afforded to them; that the Commissioner, after hearing them, has passed the present impugned Order.
3.1 The learned Advocate submitted that the goods found in outside godowns were purchased from markets and the invoices were produced before the Department; that the goods were fully accounted for in the books of accounts and payments were made through crossed cheques to the sellers; that the Adjudicating Authority has totally disregarded these evidences and has confirmed the demand of Rs. 2,94,713 on the basis of statements dated 9.9.1998 of Shri L. R. Verma and Shri S. K. Sharma and statement dated 21.9.98 of Shri R.K. Agarwal which were dictated by the Excise Officers; that cross-examination has been denied without any valid reason; that thus this demand of duty is not sustainable and confiscation of the seized goods has to be vacated.
3.2 He mentioned that as the Central Excise Officers visited Appellants' factory on 9.9.98 in the early morning, the production on 8.9.98 and 9.9.98 was not allowed to be recorded in R.G.I. Register and it has been alleged that excess quantity was meant for clandestine removal; that in the earlier Adjudication Order dated 24.5.2000, the then Commissioner had directed the goods to be entered in R.G. I and to be removed on payment of duty thereafter; that in the present impugned Order, the Commissioner has confiscated the goods and imposed redemption fine besides confirming duty amount to Rs. 2,06,650 which is illegal; that since there was no removal of goods, no duty liability is attracted on the goods lying in stock.
3.3 Regarding shortage of inputs, the learned Advocate mentioned that the shortage has been alleged by taking the opening balance in R.G. 23A on 8.9.98 ignoring the fact that the inputs had been issued for production on 8th and 9th September, 1998 and the inputs so issued were part of the work-in-progress; that thus the demand is unsustainable as no reconciliation between the inputs and output as well as work-in-process has been made.
4.1 He mentioned that duty amounting to Rs. 47,45,174 has been confirmed in respect of photo copies of the 143 invoices on the basis of statements of various persons dictated by the Excise Officers; that the Excise Officers had shown photo copies of some of the invoices to these persons and made them to write whatever was dictated by threatening them with arrest and dire consequences; that each person had immediately retracted the statements by filing an affidavit before the Executive Magistrate as no one in the Department was ready to stop the coercion, intimidation and high handed action of the Officers. He relied upon the decision in the case of CC, Bombay v. East Punjab Traders, 2002 (79) ECC 469 (SC) wherein the Supreme Court has upheld the Tribunal's decision in not placing reliance on the photo copies of the documents.
4.2 He, further, mentioned that the Department had verified from the consignees that no goods had been received by them in relation to these 143 invoices and statements had been taken from all the consignees which had been suppressed by the Department from the Appellants; that they had specifically asked the Commissioner to make available copies of the verification reports as well as statements of the consignees which had been rejected without any justification. He also contended that the originals of these invoices had not been shown to the makers of statements; that the original invoices had also not been shown to the Appellants even at the time of personal hearing nor the Commissioner appears to have himself seen the original invoices; that it is a settled law that a mere photocopy of a document does not constitute valid piece of evidence and unless the originals are produced, there cannot be any demand against the Appellants; that the failure of the Revenue to disclose the names of person from whose custody the original invoices and alleged G.R. had been obtained, has deprived the Appellants of an opportunity to cross-examine those persons to elicit the truth. The learned Advocate submitted that the onus is squarely on the Revenue to discharge the burden of proving clandestine removal; that merely on the basis of statements taken under coercion, the Revenue cannot justify the demand. He also mentioned that the Appellants do not have in their factory the capacity of production which could be achieved to produce the alleged quantity said to have been clandestinely removed by them; that the Revenue has not gone into the question of alleged excess production having come from alleged excess inputs, power consumption, etc.; that their electricity consumption has remained more or less uniform during the last several years which is evident from the electricity bills produced by them; that the finding of the Commissioner that persons indulging in clandestine manufacture indulges in theft of electricity and otherwise use unaccounted diesel is based entirely on surmises and conjectures.
4.3 The learned Advocate also mentioned that the invoice book had been signed by the Director, Shri R.P. Agarwal for the purpose of pre-authentication and subsequently the Despatch Clerk, Shri Dharampal had misused the same to blackmail the Appellants. He emphasised that since no cross-examination of any of the persons alleged to have been involved with the preparation of the invoices and/or alleged clandestine removal of goods had been granted, the alleged statement cannot at all be the basis for confirming demand of duty. He relied upon the judgment in the case of Shalimar Rubber Industries v. CCE, Cochin, 2002 (84) ECC 718 (SC) : 2002 (146) ELT 248 (Sc) wherein the Supreme Court has held that no reliance can be placed on the oral statement of a person who has not been subjected to cross-examination during adjudication. He has also relied upon the decision in the case of Tulsyan NEC Ltd. v. CCE, 2003 (157) ELT 627 (Mad) wherein the Madras High Court has held that "any material, even if it be expert evidence, it is to be relied upon by the respondents, then such statements shall be made available for cross-examination....... it is but proper that expert evidence shall be made available for cross-examination by the petitioners in the interest of compliance of principles of natural justice .... Any material to be used against the party has to be put to the aggrieved persons and the aggrieved persons should also have the freedom to cross-examine the witnesses who have given their expert opinion."
5.1 Regarding demands of duty of Rs. 52,500 and Rs. 63,253 in respect of goods clandestinely removed after having been sent for weighment, the learned Advocate mentioned that there is no evidence as to how this charge is sustainable as there is no material to show as to where the goods were sent; that the statements of Rajbir and Ishwar, drivers of the Appellants, without giving an opportunity of cross-examining them cannot be relied upon; that it is also impossible even to imagine that the quantity of 625 MT in one truck and 1400 MT in the second truck could even be loaded or transported.
5.2 Regarding demand of duty of Rs. 36,888, he mentioned that the pipes belonging to M/s. Swastik Trading Co. were receiving for job work which is evident from Challan No. 01 received from Swastik Trading Co.; that they were to do job of 'end facing' only on which no duty liability is attracted; that the Department has conducted verification from Swastik Trading Company which has not been brought on record to create fictitious demand of duty against the Appellants.
5.3 Regarding demand of Rs. 1,38,225 on the basis of two loose slips mentioned quantities of 12 and 36.5 MT, the learned Advocate mentioned that neither of the slips shows any evidence of goods having been physically removed clandestinely; that the slip dated 9.9.98 for 36.5 M.T. indicates the proposal for despatch to three parties which could not be implemented as the Officers who were in factory on that day did not allow any clearance of goods from the factory; that the other slip dated 5.9.98 does not show any evidence of goods being removed nor has the alleged consignee confirmed the receipt of goods from the Appellants as per the said slip; that in absence of any positive evidence brought on record, the loose slips cannot be the basis for alleging clandestine removal only on the basis of statement of Shri S.K. Sharma.
5.4. Finally, the learned Advocate submitted that the penalty imposed is illegal as the same has been enhanced on remand by the Tribunal; that in fact no penalty is imposable on the Appellant Company as No goods have been removed by them clandestinely; that penalty both Under Section 11AC of the Central Excise Act and Rule 173Q(1) of the Central Excise Rules, 1944 cannot be imposed simultaneously; that no penalty is imposable on other two Appellants Directors as the finding against them in the impugned Order is vague inasmuch as it does not spell out as to with reference to which goods, they were concerned with in any manner; that in any case penalty cannot be enhanced on the Appellants from Rs. one lakh to Rs. 5 lakh in readjudication proceedings; that they cannot be placed in a position worse than what they were in at the time of first appeal before the Tribunal. He relied upon the decision in the case of Western India Paints & Colour Co. (P) Ltd. v. CCE, 2002 (142) ELT 402 (T).
5.5 The learned Advocate has also relied upon on number of decisions including the following decisions --
(i) K. Rajgopal v. CCE, Madurai, 2002 (81) ECC 182 (T) : 2002 (142) ELT 128 (T). wherein it has been held by the Tribunal that "It has been now well laid down that the crux of the issue in respect of clandestine removal is that Revenue cannot proceed solely on the basis of a seized private notebook maintained by a worker unless the entries are corroborated by various other pieces of evidences inasmuch as that the Revenue has to show that appellants have purchased the inputs from markets and utilised the same and that the same has been sold to particular persons through invoices or otherwise and the money has flowed back as capital." The Tribunal has also held that non-examination of the Accountant who maintained the seized diary "has rendered the document inadmissible in evidence."
(ii) M.M. Dyeing & Finishing v. CCE, Chandigarh, 2002 (139) ELT 143 (T).
The Tribunal did not uphold the charge of clandestine removal based upon entries in worker/dyeing master's diary and register in absence of corroborative evidence as to receipt of extra /excess raw-material, statements of persons who supplied raw-material, etc.
(iii) Poly Printers v. CCE, Delhi-1, 2002 (139) ELT 295 (T) Tribunal has held that mere recovery of certain invoices addressed to the fictitious firms, recovered from the residence of Appellants is not sufficient to establish the charge of clandestine removal in absence of "statement of any buyer to establish the clandestine sales of the final product by the Appellants without payment of duty." The Tribunal also took note of the fact that no unaccounted raw-material was found lying in the factory premises,
(iv) Laxmi Engg. Works v. CCE, Delhi 2002 (139) ELT 573 (T) 6.1 Countering the arguments, Shri D.N. Choudhary, learned SDR, submitted that 143 invoices on the basis of which demand of Central Excise duty has been confirmed were given by the informers to the Department; that invoices were pre-authenticated by Shri Pawan Aggarwal, Director-in-charge of the Appellant Company and some invoices were pre-authenticated by Shri S.K. Sharma, General Manager; that both of them have admitted the fact of pre-authenticating the invoices; that Shri Pawan Aggarwal has admitted in his statement that the said invoices were signed by S/Shri Mahavir Aggarwal, Lajpat Verma and S.K. Sharma; that the Appellants' contention that the invoice books were got signed from the Director by one Shri Dharampal, a disgruntled ex-employee is not tenable as the Director, Shri Pawan Aggarwal had signed these invoices over a period of time; that this assertion of signature being taken by Dharmpal was not mentioned at the time of recording the statement and as such it is nothing but an after thought; that moreover S/Shri S.K. Sharma, Lajpat Rai Verma and Mahavir Aggarwal who signed these invoices as authorized signatory admitted the clearance of the goods mentioned therein; that their contention that the consignees had not been confronted by them is also not tenable in view of clear cut admission by the employees of the Appellants' Company; that the contention about the person from whose possession the said invoices were recovered is irrelevant when the Director and the employees admitted the fact of signing these invoices and having prepared and issued them. The learned SDR relied upon the judgment in the case of Magraj Patodia v. R.K, Birla, AIR 1971 SC 1295 wherein it has been held that a document was procured by improper or even illegal means will not be a bar to its admissibility if it is relevant and its genuineness is proved. He also relied upon the decision in the case of R.M. Malkani v. State of Maharashtra, AIR 1973 SC 157 wherein it has been held by the Supreme Court "there is warrant for proposition that even if evidence is illegally obtained it is admissible." Reliance has also been placed on the decision in the case of State of Maharashtra v. Natwarlal Damodardas Soni, 1983 ELT 1620 (SC) wherein the Supreme Court has held that "assuming arguendo, that the search was illegal, then also, it will not affect the validity of the seizure and further investigation by the Customs Authorities or the validity of the trial which followed......"
6.2 The learned SDR, further, contended that all the statements were in the handwriting of the persons making the statements; that the retraction/affidavits were never filed with the Investigating Officers of the Department or the Adjudicating Authority as the affidavits are stated to have been filed before the Executive Magistrate and were furnished to the Department only alongwith reply to the show cause notice; that even in the first round of adjudication, the Appellants had not mentioned anything about the statement being retracted; that as such these retractions are of no significance. He referred to the statement dated 18.12.98 of Ishwar Singh, Driver who had deposed that he used to go to Punjab and Delhi to deliver iron pipes to the address told by the employer and in respect of the photo copy of invoices which had been shown to him, he had delivered the goods at the address told by his employers. He also referred to the statement dated 28.9.98 of Shri S.K. Sharma, General Manager, in which he had admitted that he authenticated the invoices and on being shown the invoices authenticated by him he admitted that clearances of goods were made under the cover of invoices of some serial numbers on different dates to different consignees. He relied upon the decision in the case of Marcelin Sabestain Carvello v. State of Maharashtra, 1991 (52) ELT 484 (Bom) wherein it has been held that statements of accused in their own handwriting with various differences and dis-similarities cannot be said to be dictated by Customs Officers and the statements are to be considered voluntary and to be relied upon.
6.3 Finally, he relied upon the decision in the case of CCE, Madras v. Madras Chemicals, 1986 (24) ELT 308 (T) wherein the Tribunal has held that "It is therefore the duty of court to sift and scrutinise the evidence carefully and in terms of the felicitons metaphor, separate the grain from the chaff. As the Supreme Court has observed Eldorado of absolute proof being unattainable, the law accepts for its, probability as a working substitute in this work-a-day world. In fine legal proof is not necessarily a perfect proof but only a prudent man's estimate as to the probabilities of the case." The learned SDR thus contended that the 143 invoices coupled with the statements of Director, General Manager and other employees clearly prove that the excisable goods manufactured by the Appellants were cleared without payment of duty.
7.1 Regarding goods found in outside godown, the learned SDR mentioned that Lajpat Verma, Despatch Incharge, in his statement dated 9.9.98, has deposed clearly that word "T" mentioned in print out means goods stored in Troier Ground Godown which is being used by them for storage of goods which are being clandestinely removed without payment of duty from their manufacturing unit and these goods are cleared on the invoices of M/s. Swastik Trading Company, being issued by their office; that Shri S.K. Sharma has also deposed in his statement dated 9.9.98 that the pipes found in the godown were cleared from their factory without payment of duty.
7.2 In respect of stocks taking conducted by the Officers which revealed unaccounting of finished goods in statutory records and shortage of inputs, the learned SDR submitted that the stock taking was conducted in the presence of witnesses, Lajpat Verma, Satyavir Sharma, Accounts Officer and J.B. Garg; that Lajpat Verma had admitted the non-accountal of the finished goods and shortage of the inputs in his statement dated 9.9.98; that the weight of the goods was recorded upto 3 decimals which shows the correctness of weighment. Regarding other charges and confirmation of demands of duty, the learned SDR reiterated the findings as contained in the impugned Order.
8. In reply, the learned Advocate emphasised the fact that not a single person had been produced by the Department for cross-examination; that the Supreme Court has set aside the Order of the High Court in Arya Abhushan Bhandar v. UOI, 2002 (143) ELT 25 (SC) for not producing of witnesses to Panchnama for cross-examination discarding the plea that no prejudice has been caused to the appellants by reason of the non-production of the Panchas. In this regard, reliance has also been placed on Lakshman Exports Ltd, v. CCE, 2002 (143) ELT 21 (SC). He also said that the actual removal of goods from the Appellants' factory without payment of duty has not been proved at all for lack of evidence. He mentioned that during the period from 1995-96 to 1998-99 their electricity consumption has remained more or less constant and thus it cannot be alleged that they had manufactured the quantity of pipes alleged to have been removed by them without accounting and without payment of duty.
9. We have considered the submissions of both the sides. The main allegation against the Appellants for evasion of duty is based on 143 invoices, given to the Revenue by the informer, and various statements recorded by the Revenue. A perusal of the said invoices reveal that the addresses of the first whom the excisable goods are supposed to have been despatched to Under the cover of these invoices, are given therein. No effort seems to have been made by Revenue to enquire from any of these firms as to whether the goods were received by them since no statement of any buyer had been brought on record. For want of such an enquiry, the Revenue has not brought on record an important factor regarding the receipt of goods by the persons/firms whom the same were said to have been despatched from the factory of the Appellants without payment of duty. If the excisable goods were removed by the Appellants, the same must have been received by some persons who, in turn, must have paid the cash also to the Appellants about which also there is no proof on record as to how the payments were received. Ishwar Singh, driver, has also not given the names of any of the persons whom he used to deliver the goods nor had he given the names of any of the transporters situated at Mundka and Ghaziabad. No investigation from any of the transporters seems to have also been made as there is nothing on record. Ishwar Singh had not also maintained any log book of the truck. Shri Ishwar Singh has also mentioned in his statement dated 18.12.98 that he used to hand over the receipt to Dharmpal and Vermaji as proof. However, no corroboration of receiving those receipts by Shri Verma is forthcoming as No such question has been put to Shri Verma when his statement was recorded on 24.12.98. There is no statement of said Dharmpal. Similarly, Rajbir Singh, another driver of the Appellants, has also not named any person to whom the goods were delivered nor has he named the place where the goods were delivered by him. We also observe that both these drivers have been put questions in respect of only a very few GRs which do not cover all the 143 invoices. No other statement of any transporter has been referred to by the Revenue to prove the despatch and delivery of the goods. The learned Advocate has also submitted that though the Appellants had sought cross-examination of these two drivers, the same has not been done and as such these statements cannot be relied upon. Thus, the statements of both the drivers have remained uncorroborated and also suffer from the shortcoming of not being cross-examined by the Appellants.
10. The learned Advocate has also vehementally contended that the Revenue has not adduced any evidence regarding purchase of raw-materials required to manufacture the alleged quantity of pipes nor any material has been produced regarding consumption of electricity. We find substantial force in these submissions of the learned Advocate as there is nothing on record to show whom the various raw-materials were purchased from. It has been held by the Tribunal in the case of Kashmir Vanaspati P. Ltd. v. CCE, 1989 (39) ELT 655 (T) that charge of clandestine removal cannot be proved only on the basis of entries in the notebook maintained by the labourers unless the same is supported by other evidence such as raw-material consumed, goods actually manufactured and cleared without payment of duty. Regarding the use of electricity the Revenue has not controverted the submission of the learned Advocate that during the material period, their consumption of electricity has remained more or less the same. It is also not the case of Revenue that the Appellants were showing excess consumption of electricity than required. There is also no material/evidence on the record to even suggest theft of the electricity by the Appellants. The Adjudicating Authority's finding that it is a matter of common knowledge that the persons who indulge in clandestine manufacture and removal of goods, also indulge in clandestine purchasing of raw-materials and indulge in theft of electricity and otherwise also they can use unaccounted diesel to hide the production, by using their generator is based on surmises and conjectures. The charge of clandestine removal has to be proved by the Revenue by bringing positive evidence on record and not by presumptions and assumptions.
The Supreme Court has held in the judgment in the case of Oudh Sugar Mills Ltd. v. UOI, 1978 (2) ELT (J 127) that no show cause notice or an order can be based on assumptions and presumptions. "The findings based on such presumptions and assumptions without any tangible evidence will be vitiated by an error of law." Similarly, in the case of Poly Printers v. CCE, Delhi-1, 2002 (139) ELT 295, the Tribunal did not find the charge of clandestine manufacture and clearances of the final product by the assessee sustainable as "no evidence has also been collected by recording the statement of any buyers to establish the clandestine sale of the fine product by the appellants without payment of duty ..... no unaccounted printing ink was found lying in the factory premises of the firm....." The Tribunal also in the case of Laxmi Engg. Works v. CCE, Delhi, 2002 (139) ELT 573 (T) wherein the charge of clandestine manufacture and removal was made on the basis of statements, which were retracted subsequently, has observed that "Even otherwise there is nothing on record to suggest if statements of suppliers of the raw-material i.e. sellica/ingots which were not accounted for in the statutory record by the appellants and of the buyers to whom the final product i.e. copper wire rods were allegedly supplied by them without the payment of duty, during the period in question, were recorded. No evidence regarding consumption of electricity during the period in question more than what it was consumed in the normal course by the appellants was collected during the investigation." The Tribunal has held that no capital out of the statements could be taken as the same had remained uncorroborated from any other reliable and concrete substantive evidence. In the present matters also, the statements and the invoices have remained uncorroborated by any independent unimpeachable evidence, such as purchase of raw-materials/consumption of electricity/purchase of goods by buyers, etc. In view of these facts and circumstances, the Revenue has not succeeded in proving the allegation of clandestine manufacture and clearance of pipes by the appellants on the basis of 143 invoices in question. We, therefore, set aside the demand of duty on this count.
11. Regarding other demands of duty confirmed in the impugned Order, our findings are as under :
11.1 Regarding goods found in Thoria godown, the demand again has been confirmed on the basis of statements only without verifying their truthfulness as the cross-examination has been denied. On the other hand, the appellants have claimed to have purchased those goods from market for which payment was made through crossed cheques. As the Adjudicating Authority has not even discussed the evidence furnished by the appellants what to talk of rebutting the same, demand of duty cannot be sustained. We, therefore, set aside the demand of Rs. 2,94,713.
11.2 The excess stock of finished goods lying in the factory is liable to confiscation as the same was not recorded in the statutory records. The contention of the appellants that excess goods were the production of 8.9.98 and 9.9.98 has not been substantiated by them. The redemption fine of Rs. 3,00,000 imposed by the Commissioner is on the higher side which is reduced to Rs. 1,50,000. The appellants are directed to enter the said stock in their R.G. I Register and pay the duty of excise while clearing the same.
11.3 Similarly, the appellants have not accounted for satisfactorily the shortage of raw-material and the duty of Rs. 91,119 is, therefore, upheld.
11.4 Regarding duty demand of Rs. 52,500 and Rs. 63,253, the allegation is that the goods were removed for weighment but these were not returned to the factory subsequently. The Appellants have contended that the weighing slips have not been recovered from them and do not mention about their names. They have also contended that quantity of 625 M.T. and 1400 M.T. had been removed by two trucks which is impossible. In absence of any corroboration, these demands are also not sustainable and, therefore, are set aside.
11.5 Demand of duty amounting to Rs. 36,888, is set aside as the Revenue has not brought on record any material to controvert the challan of Swastik Trading Company which had sent the goods for job work (end facing).
11.6 Regarding duty of Rs. 1,38,225 based on two slips dated 5.9.98 and 9.9.98, the contentions of the respondents are that these slips indicated proposal for despatch which could not be implemented. There is force in the submissions of the Appellants as one slip is dated 9.9.98 itself for the day the Officers visited the factory for search. If the goods had been removed the same day, the same should have been intercepted at the premises of the buyers. The Revenue has relied upon the statement dated 1.2.99 of Shri S.K. Sharma in which he has mentioned that the goods had been despatched. But he had not been asked the names of the customers and mode of transport, etc. No statement of any driver/transporter is also brought on record to show the despatch of these goods. We, therefore, set aside this demand also.
12. In view of above, we set aside all the demands of duty confirmed in the impugned Order except the demand of duty amounting to Rs. 91,119. We uphold the confiscation of finished goods found in the factory. The redemption fine is, however, reduced to Rs. 150 lakh. Accordingly, the penalty on the Appellant Company is reduced to Rs. one lakh only. Penalties imposed on other Appellants are set aside.
All the appeals are disposed of in above manner.