Custom, Excise & Service Tax Tribunal
M/S Aswani & Co vs C.C.E. Delhi-I on 10 July, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. III
Appeal No. E/1243 & 1244/2005, E/1630, 1666-1668/2005 & E/884/2011-Ex[DB]
[Arising out of Order-In-Original No. CCF (Adj.) 1-15/2005 dated 27.1.2005 passed by Commissioner (Adj.) Central Excise, New Delhi]
For approval and signature:
Hon'ble Ms. Archana Wadhwa, Member (Judicial)
Hon'ble Mr. Rakesh Kumar, 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?
No
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3
Whether Their Lordships wish to see the fair copy of the Order?
Seen
4
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s Aswani & Co. ] Appellant
M/s Aswani & Co. ]
M/s Kranti Road Transport Pvt. Ltd. ]
Shri Gundu Shanta Ram ]
M/s Verma Roadways ]
Shri Ramesh Kumar Verma, Partner of ]
M/s Verma Roadways ]
Vs.
C.C.E. Delhi-I Respondent
Appearance:
Sh. K. K. Anand, Rupendra Singh, S.C. Kamra, Ms. Surabhi Sinha, Balbir Singh, Pawan Sri Agarawal, Dinesh Prakash, Anil Malhotra (Advocates) for the Appellants Shri Pramod Kumar Jt. CDR, for the Respondent CORAM:
Hon'ble Ms. Archana Wadhwa, Member (Judicial) Hon'ble Mr. Rakesh Kumar, Member (Technical Date of Hearing: 10.07.2014 Date of decision: 02.12.2014 Final ORDER NO. 54559-54565/2014 Per Archana Wadhwa (for the Bench):
All the appeals are being disposed of by a common order as they arise out of the same impugned order passed by the Commissioner, Central Excise, Kanpur, vide which he has confirmed demands of duty of Rs. 5,41,59,691.20/- {Rs. Five Crore forty one lakh fifty nine thousand six hundred ninety one and twenty paise} against M/s Ashwini & Company on the allegations and findings of the clandestine manufacture and removal of their final product during the period 1995-96 and 1996-97, along with confirmation of interest. In addition, penalty of Rs. 6 crores stands imposed on the said appellant in terms of Rule 173(Q) of the Central Excise Rules for the clearances effected prior to 28/09/1996 and mandatory penalty of Rs. 84,75,070/- stands imposed under Section 11 AC of Central Excise Act for the clearances effected after 28/09/1996. Further, penalty of Rs. 1.50 Crores stands imposed on Shri Anoop Kumar Sahoo under Rule 209 A of the Central Excise Rules. In addition penalty of varying amounts stands imposed upon other appellants in terms of Rule 209 A of the Excise Act.
2. After hearing both the sides duly represented by Sh. K. K. Anand, Rupendra Singh, S.C. Kamra, Ms. Surabhi Sinha, Balbir Singh, Pawan Sri Agarawal, Dinesh Prakash, Anil Malhotra (Advocates) from the Appellants side and Pramod Kumar Jain, JCDR from the Respondents Side for a considerable period of time, we find that M/s Ashwini & Co. is a partnership unit of 4 brothers: Shri Anoop Kumar Sahu, Sjri Ashok Kumar Sahu, Shri Avdhesh Kumar Sahu & Shri Akhilesh Kumar Sahu. The said partnership firm has two units i.e. unit No. 1 manufacturing Gutkha under the brand names of Madhu, Shalimar, Yogi & Madhu Kheni as also Madhu Sweet Supari. Unit No. 2 was manufacturing Branded Chewing Tobacco, Madhu Brand Sweet Supari and Loose Paan Masala Gutkha. The Loose Pan Masala gutkha manufactured by unit No. 2 was being transferred to unit No. 1 for further manufacturing of Gutkha at their end.
3. The Officers of Directorate General of Anti even (DGAE) searched the business premises of the said appellant on 20/11/1996. The Premises of the appellants dealers, traders etc., were also put to search and the goods found therein as also in the appellants factory were put under seizure by drawing various panchnamas. Some seizures also took place at Kanpur Railway Station as also at Guwahati Railway Station and the premises of the appellants transporters or the residential premises of the transporters representatives. During the course of post seizure investigations, statements of various persons including the partner of the appellant firm and the representatives of the transport agencies were recorded.
4. Based upon the evidences collected during the course of investigations, the Revenue entertained a view that the said appellant was manufacturing and clearing their final product, without payment of duty to their dealers by using the services of various transporters and by consigning the goods under the fictitious names of the consigners as also the consignee and by misdeclaring the goods as manufactured Tobacco/ Zarda and seeds etc. The evidences recovered from the Railways led the Revenue Officers to believe that the appellant was making dispatches through the Railways in the fake names and addresses of the consigners and consignees as also by misdeclaring the contents of such consignments. Large number of consignments were found to have been booked by one D. Kumar or Shiva under the fictitious address of 170 T.P. Nagar, Kanpur. Lot of correspondence was also exchanged between the appellant and the Revenue as regards the various RRs issued by the Railway Authority. Statement of Chief Parcel Supervisor of the Railways was also recorded. Investigations were also made at the end of the other Gutkha Manufacturers located in that area manufacturing goods under different Brand Names of Vimal, and Sagar etc. Elaborated investigations were made at the end of the appellants dealers M/s Vijaya Agencies located at Warangal. Further, investigations were conducted at the end of the supplier of the lamination i.e. M/s Classic Products Private Ltd. and the other suppliers in support of the Revenues stand that they were procuring the packaging materials in a clandestine manner. Investigations were also made with the various transporters and the statements of their representatives were recorded. Revenue also seized Indian Currency of Rs. 1,71,28,195/- from the premises of one Verma Roadways on the belief that they were collecting the sale proceeds of clandestinely removed goods of the appellant.
5. Prior to the issuance of the present Show Cause Notice, the appellant was served with a Show Cause Notice dated 13.05.1997 proposing confiscation of the goods seized from various places as also proposing seizure of Indian Currency of Rs. 2,63,000/- from the premises of the appellant. The said proceedings resulted in passing of an order by the Commissioner being order No. 58-63-04 dated 25/10/2004, confiscating the goods seized from various places, confirming the duty and imposing penalties, apart from confiscating the Indian Currency. The said order of the Commissioner was challenged before the Tribunal, and vide their Final Order No. A/1114-1116/2005 dated 30.06.2005, the same was set aside by observing that there is no sufficient evidence on record to indicate any clandestine clearance of the final products.
6. Subsequently, based upon the same investigations, proceedings were initiated against the said appellant as also against other appellants for confirmation of demand of duties for the past period 94-95 to 97-98, on the allegations of clandestine manufacture and removal of their final product, along with proposition of imposition of penalties upon various notices. The said proceedings resulted in passing of the present impugned order by Commissioner of Central Excise, Kanpur, which stands impugned before us.
7. Ld. Advocate, Shri K.K. Anand appearing for the appellant has challenged the said order on various grounds by referring to the various evidences, including the statements of various persons recorded during the course of investigation. We shall be dealing with the contents of various statements and the evidences at the appropriate places.
8. First of all, it is the contention of the appellant that the reliance on the various statement, without offering the deponents of the said statements for cross examination is not in accordance with the judicial principle and no reliance can be placed on the same. By elaborating on his arguments it stands contended that the appellant had requested for cross examination of 27 persons including the transporters, dealers and others. The Adjudicating authority allowed cross examination of only 4 persons, out of which 2 persons did not appear and only 2 persons caused appearance. The Commissioner has referred to the provision of Section 9 D of the Central Excise Act for disallowing the cross examination of the others. It stands argued before us that while the adjudicating authority has allowed cross examination of 4 persons, the denial of cross examination of the balance deponents by referring to the provision of Section 9 D was a self contradictory order and such pick and choose method on the part of the Commissioner cannot be accepted. It stands submitted that provisions of Section 9 D are not applicable inasmuch as the same relate to a situation where the witnesses could not be produced on account of impossibility. Ld Advocate submits that any statement recorded under Section 14 is subject to the limitation as enshrined under Section 9 D. The Sub Section of the said section relates to the admissibility of the statement when the person who made the statement is dead or cannot be found or is incapable of giving evidence. Otherwise, the admissibility of the statement is subject to examination of the witness before the court. By drawing our attention to the provisions of Section 9 D (1) (b) it stands contended that the statement recorded under Section 14 of the Central Excise Act will be admissible as evidence only when the adjudicating authority calls the said witness and examines him and gives a finding that the statement is worthy of acceptance in evidence. Reference stands made to the Honble Delhi High Court decision in the case of J&K Cigarettes Ltd vs. CCE 2011 (22) STR 225.
9. The reliance is also placed upon the another decision of the Honble Delhi High Court in the case of Vasudev Garg CC 2013 (294) ELT 353 Delhi. In their further written submissions, our attention stands drawn to the Honble Supreme Court decision in the case of Kishan Chellaram vs CIT Bombay 1980 SUPP SCC 660 wherein it has been held as that no reliance can be placed on any adverse evidence against the assessee unless the said assessee is afforded the opportunity of cross examination so that he could controvert the statement/evidence which is being relied upon against him. Ld Advocate has further submitted that no reliance could be placed upon the two statement of Shri Anoop Kumar Sahu recorded on 20/11/1996 and 21/11/1996 inasmuch as the said Deponent was never confronted with any evidence of record. In his subsequent representations made on various dates, it has been clearly brought on record the evidences in favour of the appellant which clearly negate any wrong doing on the part of the assessee. Shri Anoop Kumar Sahu, was never subsequently called upon to seek his clarifications on the various disclosures made in the said five representations. The said two statements nowhere admit clandestine removal of such a huge quantum of their final product and as such the reliance on the same was not appropriate and justified.
10. As against the above contentions of the Ld. Advocate, Ld. JC DR Shri Pramod Kumar appearing for the Revenue, has drawn our attention to the impugned order of the Commissioner and has submitted that there are statements of various persons, recorded by the Revenue, which are inculpatory in nature and admit to the clandestine activities of the manufacturing unit. As such it is his contention that even though the deponents of the said statements have not been produced for cross examination, the contents of the same would support the Revenues stand of clandestine activities of M/s Ashwini and Company. It is also his contention that cross examination is not necessary in each and every case when the statements recorded are clearly pointing out to the clandestine activities of the assessee.
11. After appreciating the submission made by both the sides we find that the Revenues allegations and findings are mainly based upon the statements recorded during the course of investigation, some of which are inculpatory, some neutral and some stand retracted. We may here make a short reference to the statement.
11.1 Shri Akhilesh Kumar Sahu partner of M/s Ashwini and Company, in his statement recorded on 20.11.1996 detailed about the number of grinding machines, driers mixtures and packing machines installed in their unit and clarified that the loose Gutkha bags manufactured by them were being sent to their unit No. 1. Statement of Shri Anoop Kumar Sahu, another partner, recorded on 20.11.1996 deposed that they were manufacturing Madhu Brand Gutkha as also Shalimar and Yogi Brands etc. The dispatch of Gutkha was undertaken through Rail as also by Road transporters, namely, M/s Pawan Carrying Corporation and M/s Verma Roadways of Kanpur. Another statement of Shri Anoop Kumar Sahu was recorded on 21.11.1996 wherein, he deposed that they were not paying any excise duty on loose Pan Masala removed from their factory to other unit for further manufacture of the final product. He also disclosed the name of the laminate manufacturer i.e. M/s Classic Pouch Pvt. Ltd from whom they were procuring the laminates. He stated that they were mainly procuring the laminates on bills and payments were being made through checks but some quantity was also being purchased on cash and used in the packing of Gutkha for clandestine removal. Statement of Shri Krishankant Tripathy, Manager of Pawan Carrying Corporation was to the effect that they were using two different serial number books one for cotton katran and the other for other goods and whenever Cotton Katran consignments were entered in the dispatch register, private marks were used for identification. To the some effect was the statement of Shri Shailender Kumar Awasthy dispatch clerk of M/s Pawan carrying Corporation, Statement of Shri Uma Shankar Awasthi of M/s Pawan Carrying Corporation was also recorded clarifying that they were usually describing the goods as Cotton Katran. As regards use of the words like Bihari, Dilbagh, Sir, Ham, Sikka, Leader it was clarified that there are many manufacturing units in Kanpur engaged in the manufacture of Pan Masala under the said Brand names. Further, statements of the dealing assistant of M/s Pawan Carrying Corporation Shri Naveen Kumar Mishra as also of proprietor of M/s Pawan Carrying Corporation, Shri Vinod Vajpeyi, were recorded, admitting maintenance of two sets of builty books as also use of the description (Cotton Katran).
Statements of the appellants dealers were also recorded wherein they stated that they were receiving the goods under the fictitious names of the consignees by misdeclaring the goods as Tobacco in the RRs. Statements of the Manager of Verma Roadways was also recorded on 05.02.1997 indicating that consignments of Gutkha were being booked at Kanpur in the guise of seeds and transported to Hyderabad in different names. Such consignments are being delivered by them to the employees of M/s Vijay agency, Warangal. On being shown a chart with serial No., CR No., Dates etc., he confirmed that the same was in relation to Madhu Brand Gutkha and delivered to Vijay Agency. The statements of other employees of M.s Verma Roadways was also recorded indicating that along with Madhu Gutkha they were also transporting other brands like Aasiki, Sagar, Vimal etc. The goods transported to Hyderabad under fictitious names were brought to Warangal by local transport. Similarly statements of the various representatives of Vijay Agency, Warangal, also stated that the goods were being sent to them under fictitious names of the consigners. However, they also clarified that apart from Madhu Brand they were also dealing in other Brands of Pan Masala. The investigations made at the end of the classic pouch were to the effect that most of their production is sold to Ashwini and Company who purchased some quantity against bills for which payments were made by check but major part of the goods were being sent against cash in the names of the Third parties and the invoices were being accordingly issued. To the same effect were the statements of the representatives of M/s R.K. Products.
12. We note that most of the statements recorded by the department from the various ends are to the effect that most of the times, it was M/s Ashwini and Company who were getting their goods booked under the name of fictitious consigners along with a fictitious name of the consignee. Similarly, the investigations made from the Railways led the Revenue to arrive at a finding of clandestine booking of the consignments under the fictitious names.
13. First of all, dealing with the appellants stand that such statements cannot be made the sole basis of the clandestine findings, without first offering the said deponent for cross examination, we find that admittedly the Adjudicating Authority has not produced the said deponent for cross examination, by taking recourse to the provisions of Section 9D of Central Excise act, 1944.
Section 9D of the Central Excise Act, 1944 reads as under:-
Section 9D. Relevancy of statements under certain circumstances.- (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains,-
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice.
(2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they alloy in relation to a proceeding before a Court. As is seen from the above, a statement made by a person during the course of investigation has to be held as relevant as regards the truth of facts contained therein without his cross examination only when the deponent of the statement is dead or is missing or is covered by any of the other situation and circumstances prescribed in clause (a) of sub section (1) of the said rules. The second part of the said Sec. 9 D (1) refers to the person who stands examined as a witness before the court and court is of the opinion that having regard to the circumstances of the case the statement should be admitted in evidence in the interest of justice. One thing becomes clear from the provisions of the said section 9D that a deponent of the statement has to be allowed for cross examination, during the course of adjudication, unless it is impossible to produce that person on account of circumstances enumerated in Clause (a) of Section 9 D (I). The commissioner, while denying the cross examination of the deponents of the statements has referred to the said section 9D, without recording any finding that such deponents are not available for cross examination on account of the circumstances mentioned in the said section. Neither, after examination, he has arrived at an opinion that the statement has to be admitted. As such we are of the view that the denial of cross examination by the commissioner by referring to the provisions of section 9D is not appropriate. Reference can be made to the Honble Delhi High Courts decision in the case of J&K Cigarettes Ltd. vs CCE, 2011 (22) STR 225 Delhi. While upholding the constitutional validity of the said section, the court observed as under:
(i) That, provisions under section 9D provides for relevancy of statements recorded under section 14 of the Act, under certain circumstances, in criminal as well as quasi judicial proceedings, to meet the ends of justice.
(ii) That, the quasi judicial authority can rely on the statement of such a person only when the stated grounds is proved.
(iii) That, the opinion or order of the quasi judicial authority is subject to judicial review by the Appellant Authority.
14. As such denial of the cross examination by the commissioner except in a case falling under the provisions of Section 9 (1) (a) is not on sound principles and makes the reliance on the said statements a shaky and weak evidence.
15. It is well settled law that though the statements carry good persuasive value but such untested statements of Third parties cannot be made stand-alone basis for arriving at an adverse conclusion against the assessee. Though an admission or a statement is extremely important piece of evidence but the same has to bear the test of veracity through the tool of cross examination. Reference in this regard can be made to the Honble Supreme Court decision in the case of the Pullangoda Rubber Produce Company Ltd. vs State of Kerala, 1972 (4)SCC 683. Such statements are required to be corroborated by independent evidences.
Having said so, we would be examine the evidential value of the said statements independently, wherever needed.
16. Shri Anoop Kumar Sahu is a partner of the appellant company and by his representations dated 13.05.1998 and 12.03.1999 has retracted from the statements by submitting that the earlier statements dated 20.11.1996 and 21.11.1996 were not voluntary. Certain allegations were also made against the officers. Details of pouch making machines were given and it was stated that they do not have capacity to manufacture such huge quantity of Pan masala/gutkha with limited electricity consumption. As regards, the statement of Raju who was the person getting the consignment booked through Railways, it was clarified some of the railway receipts admittedly referred to the Brand Name of Vimal & Sagar which were also booked by D. Kumar/ Shiva showing the address of the consigner as 170 TP Nagar, Kanpur. Further, some of the railway receipts were produced where the description of the goods was shown as decorative and destination was Warangal. Specific denials were made in respect of clearances through Verma Roadways. Though, Shri Anoop Kumar Sahu retracted from the statements as also produced evidences to support his case and rebut the allegations made by the Revenue, he was never sub-sequentially called and confronted with the various evidences collected by the officers or with the statements recorded by them during the course of the examination. His clarification was never sought, though the investigations continued for a long period, till April 1999.
17. The major part of the demand (almost more than 50%) stands confirmed in terms of Annexure A-11(a) to the Show Cause Notice, which is based upon the railway receipts procured by the Revenue for the period 15-04.1994-19.11.1996. The Revenues cases that all the consignments booked through the railways by one Shri Rajiv @ Raju under the code of Shiva and D. Kumar, showing the address of the consigner as 170 TP Nagar, Kanpur, were actually the clearances of the Madhu Brand Gutkha and Sweet Supari manufactured by the Appellant. The Revenue has procured a chart from the Railways showing the details of the RRs issued by them wherein the goods shown to have been booked were described as manufactured tobacco/ zarda. The reliance stands placed upon the statement of Raju, who had deposed that he was the booing agent and was consigned the code Shiva for booking the consignments. However, on going through the statement of the said Shri Raju, it is noticed that he has nowhere clarified that all the consignments booked by him under the name of Shiva and showing the consigners address as 170 TP Nagar, Kanpur, were in respect of the goods manufactured by M/s Ashwini and Company. Shri Anoop Kumar Sahu in his statements has categorically denied any connection with the address 170 TP Nagar, Kanpur. Apart from admitting that Raju was their booking agent, he has nowhere accepted that the consignments booked under the name of Shiva/ D. Kumar were clandestine clearances of Madhu Brand Gutkha or Sweet Supari.
17.1 It may be noted here that Gutkha and Sweet Supari, manufactured by the appellant fall under two different headings and carried different rates of duties. Gutkha is classifiable under heading 2106, attracting 50% rate of duty whereas Sweet Supari attracts 15% rate of duty and is also entitled to the small scale examination notifications benefit whereas no such exemption was available to Gutkha manufactured under a brand name. The Revenues case is that the appellant was clearing Madhu Brand Gutkha as also Sweet Supari through the railways under the guise of manufactured Tobacco/ Zarda. The Revenue has taken the entire consignment booked through the railways by Raju, under the name of Shiva or D. Kumar as that of Madhu Brand Gutkha cleared by the Appellant clandestinely and has confirmed the duty, based upon the same, without arriving at quantum of alleged clandestine clearance.
18. Shri Raju in his statement dated 21.11.1997 has deposed that he was booking all the consignments under the name of Shiva, which were received from the appellant as also form the other manufacturers of Gutkha/ Supari etc., located in or around Kanpur. If that be so, it was the onus of the Revenue to show as to which of the consignments books by Shri Raju were relatable to the appellant, by production of independent evidence. Not only the Revenue has failed to discharge this onus, they have also treated the consignments booked under the name of D. Kumar as belonging to the appellant. Shri Raju has never deposed that the consignments booked under the name of D. Kumar also pertained to the present appellant. In the absence of any efforts made by the Revenue to produce evidence so to connect the consignments booked under the name of Shiva and D. Kumar and showing the consigners address as 170 TP Nagar, Kanpur, and further showing the said address to be belonging to the appellant, it has to be held that the entire case of the Revenue is based upon the assumption and presumption. All the consignments booked, showing description manufactured Tobacco/ Zarda from the Kanpur Railway Station, cannot be held to be the consignments of Gutkha of Madhu Brand, without any evidence to the contrary. If the Revenue is alleging that the appellant were removing the goods clandestinely from Kanpur Railway Station by using fictitious name and address of the consigners and consignee and by misdeclaring the description of the goods, they are under a legal obligation to prove so by production of independent corroborative evidence and no assumptions and presumptions can be made that all the railway bookings by Shri Raju where the consigners address was shown is 170 TP Nagar, Kanpur, were that of the appellants products.
19. It is seen that the Revenue has procured from the Railways a list of 2287 consignments for the period 15.04.1994 to 19.11.1996, showing the consignments booked under the consigners address 170 TP Nagar, Kanpur. However, the demand stands raised and confirmed only for the period 04.09.1995 onwards in respect of 1311 consignments either booked under the consigners name as D. Kumar and addressed as 170 TP Nagar, Kanpur. Out of 1311 consignments only 293 consignments are under the name of Shiva. Further, in some of the consignments the consigner name of Shiva was replaced by the name D. Kumar by crossing the original name by hand. In some of the consignments the name of the consigner was completely erased/ deleted. It is not understood as to how the railways could certify that where in the railway receipts, the goods has been described as manufactured Tobacco/ Sweet Supari, the same were that of Madhu Brand Gutkha. Railways are under no obligation to find out the correct contents of the consignments and have no authority or jurisdiction to open the consignments, which are booked based upon the description of the goods given in the forwarding notes. It is not the job of the railways to certify that the goods booked under the consigners name Shiva or D. Kumar were actually consignments of Madhu Brand Gutkha/ Sweet Supari manufactured by M/s Ashwini & Company. Infact it is seen that railways subsequently filed an affidavit in the court of additional Civil Magistrate Kanpur on 08.10.2001 stating that Ashwini & Co. is neither consigner nor consignee of goods. In such circumstances a copy is not to be issued to Ashwini & Company. As the entire case of Revenue is based upon the chart given by the Railways from which they have themselves deviated subsequently, the appellants are right in contending that no adverse conclusion can be arrived at, based upon the said list of RRs given by the Revenues.
20. At this stage, we may take note of a Supreme Courts decision in the case of Kishan Chand Chellaram vs. Commissioner of Income Tax, 1980 (SUPP) SCC 660 wherein, while dealing with an Income Tax case involving remittance of an amount of Rs. 1 lakh from Madras to Bombay which according to the Income Tax department represented the concealed income, the Honble Supreme Court observed that:
the burden was on the Revenue to show that the amount of Rs. 1,07,350/- said to have been remitted from Madras to Bombay belonged to the assessee and it was not enough for the Revenue to show that the amount was remitted by Tilokchand, an employee of the assessee, to Nathirmal, another employee of the assessee. It is quite possible that Tilokchand had resources of his own from which he could remit the amount of Rs. 1,07,350/- to Nathirmal. It was for the Revenue to rule out this possibility by bringing proper evidence on record, for the burden of showing that the amount was remitted by the assessee was on the Revenue. Unfortunately for the Revenue, neither Tilokchand nor Nathirmal was in the service of the assessee at the time when the assessment was reopened and the assessee could not therefore be expected to call them in evidence for the purpose of helping the Revenue to discharge the burden which lay upon it. We must therefore hold that there was no material evidence at all before the Tribunal on the basis of which the Tribunal could come to the finding that the amount of Rs. 1,07,350/- was remitted by the assessee from Madras and that it represented the concealed income of the assessee.
21. Tribunal in a number of cases has observed that the transport documents cannot be made the sole basis for upholding the allegation of clandestine removal. Reference can be made to the Tribunals Decision in the case of Charriot Cement Company vs. Commissioner of Customs 2003 (161) ETL 598 Tribunal (Trib. Kolkata) wherein while dealing with an identical situation it was observed as under:
That the entire case of the Revenue rests upon the railway receipts recovered the Railway Authorities. The Railway has not, surprisingly, contacted the concerned person at Dimapur who had taken the delivery, to arrive at the correct factual position. No officers of the Railways have been examined so as to find out as to who was the person who booked the consignment under the railway receipts. The appellants have an arrangement with the Railways for booking the rack on Credit Note Facility System, in which the case there should be a evidence in the shape of the Credit Notes relatable to the railway receipts. The trucks used for carrying the goods have not been traced out. In the absence of all these evidences coupled with the fact that the appellants records were always found to be correct at the time of surprise checks by the Audit team of the Revenue and no discrepancy has been found, is sufficient to give credibility to the appellants defence that the railway receipts do not belong to them. The impugned order also confirms demand of duty on the ground that the appellant had cleared the goods to four other parties. The appellants have explained that as per the practice, they used to get a complete rack consisting of forty wagons from the Railways and non some of the occasions , all the forty wagons were not being loaded by them for want of orders, etc. The space left in wagons was being utilized by other cement manufacturers. All the three companies have admitted having loaded the goods in the spare wagons. The demand of duty is respect of clearance by three parties is neither justified not warranted.
22. As is noticed, the entire case of the Revenue is based upon the list of RRs provided by the railways and the statement of Shri Raju, from where the Revenue seeks to draw some support. However on going through the said statement of Shri Raju, it stands clearly deposed by him that he was booking 10-20 bags everyday and besides Madhu Brand of goods he was also doing bookings of other brands of Pan Masala also. Further in the said statement he has nowhere clarified that the code Shiva, under which he was booking the consignments belonged solely to Madhu Brand. He was never confronted with the railway receipts or the forwarding notes so as to seek his comments on the consignments booked under those RRs. We also find that though Shri Raju has nowhere accepted that the symbol D. Kumar was also being used by him and was relatable to the production of the present appellant, the Revenue has even included those clearances for the purpose of demand of duty, further who prepared the forwarding notes on the basis of which railway receipts were being prepared by the railways nowhere stands clarified by any person.
23. We also note that the Revenue has referred to the statement dated 21.11.1996 of Shri Suraj Prakash Tripathy senior parcel clerk Northern Railway, Kanpur wherein he deposed that one person was recognized as Madhuwala who was doing the business of booking the consignments of Madhu Brand Gutkha, though, the description of the goods was being shown as manufactured Tobacco and the symbol as Shiva. This statement also does not further the Revenues case inasmuch as even as per the Revenue the consignments were being booked by Raju and not by any other person identifiable as Madhuwala. No efforts stands made by the Revenue to find out the identity of the said person called Madhuwala or to confront Raju with Shri Suraj Prakash Tripathy to find out as to whether it is Raju only who was recognized by the railways as Madhuwala.
24. Apart from the above, we also find that the Revenue has also procured forwarding notes which contained brand names such as Laxmi, Vimal, Sagar etc. Which were also shown to have been consigned to Vijaya Agency Warangal. Though, the Revenue has tried to seek the opinion of the hand writing experts in respect of some of the forwarding notes, but no conclusive evidence stands arrived at. These RRs have been strongly denied by Shri Anoop Kumar Sahu. The opinion of the Hand Writing Expert Shri V. C. Mishra was in respect of the signatures appearing on the photocopies of the forwarding notes. As rightly contested by the Ld. Advocate the examination of the documents in respect of Photocopies and giving opinion on the basis of the photocopies cannot throw a clear light as to who has actually written the said documents and whether such opinion would be applicable, is a doubtful proposition in law. On the other hand the appellant has also referred to a contrary opinion of another hand writing expert.
25. The Revenue has also referred to the evidences procured from one M/s Vijaya Agencies located at Warangal and the statements of their representatives, in support of their contention that the Madhu Brand Gutkha was being sent to them by the appellant without payment of duties, under the cover of Shiva consignments. However it stands established on record that Vijaya Agencies were also dealing, apart from Madhu Brand Gutkha, in other Brands of Gutkha like Vimal & Sagar etc. As such we find that the Revenues endeavor to corroborate the RRs from the documentary evidences recovered from Vijaya Agencies, does not advance their case.
26. Having said so and having discussed the entire evidences on record in respect of confirmation of demand of duty on the basis of railway receipts, we conclude that the Revenue has not been able to substantiate its allegations with production of any reliable and tangible evidence. Even the Revenue case does not fall under the category of preponderance of probabilities. To hold that the entire consignments booked under the railway receipts by one Shri Raju under the code of Shiva or D. Kumar were in respect of Madhu Brand Gutkha manufactured by the appellant, which stands clandestinely cleared by them, without any reference to the evidence connecting such RRs to the appellant or without any deposition to that effect by Shri Raju or by referring to any independent corroborative evidence, is too assumptive and presumptive in nature. Such findings defy the basic principles of evidence as enunciated by various decisions of the higher courts that there should be clear direct positive evidence to pronounce the accused guilty. We shall be referring to all such decisions in the succeeding paragraphs.
27. A part of the demand to the extent of Rs. 95,92,200/- stands confirmed in respect of 3571 bags of Gutkha allegedly cleared by the appellant and transported to M/s Vijaya Agencies through Verma Roadways during the period 95-96 and 96-97. During the course of investigations, Revenue has recorded the statement of one Shri Babu Ram Verma, General Manager of Verma Roadways, Hyderabad. Two statements of Shri Babu Ram Verma were recorded, one on 05.02.1997 and another on 15.05.1997. In his first statement dated 05.02.1997, he had deposed that the description of the goods was given as Seeds in the L.R.s but the goods actually transported were Madhu Brand Gutkha. In his subsequent statement recorded on 15.05.1997, he has deviated from his first statement which was a computer typed statement and has clarified that he was not aware of the fact of transportation of Gutkha under the Garb of seeds. No further statement of said Shri Babu Ram Verma was recorded. Neither at the time of recording of the said second statement on 15.05.1997, he was confronted with his first statement dated 05.02.1997 and no question was put to him as to why there is apparent contradiction in the two statements made by him.
28. It may not be out of place to mention here that no statement of any responsible person like the owner of Verma Roadways was ever recorded nor the records maintained by M/s Verma Roadways in the shape of LRs or booking register or ledger register etc., was put under seizure. There is further no corroboration coming from any side as regards the allegation that the Madhu Brand Gutkha was being transported through Verma Roadways by misdeclaring the same as seeds. The Revenue has sought some support from the statements of partners or employees of Vijaya Agencies Warangal. According to the Revenue, M/s Vijaya Agencies Warangal was dealing only with Madhu Brand Gutkha and as such all the consignments received by them were that of Madhu Brand Gutkha. Revenue has referred to the statements of the partners or the employees of Vijaya Agencies as also a document recovered from their premises where an abbreviation MG was written which has been considered as abbreviation of Madhu Brand Gutkha. However, we find that apart from one of the pages of the relied upon documents where MG has been written, there is no such description or indication of any brand on the other documents. Revenue has also not established, by production of any independent evidence, except some inculpatory statements of M/s Vijaya Agencies representatives that MG stands for Madhu Brand Gutkha. Further, the said representatives of Vijaya Agencies have also deposed that they have always received goods from the appellant without bills. The said statement is contrary to the documentary evidence wherein the appellants have produced several bills showing clearance of Gutkha to M/s Vijaya Agencies on payment of duty. Otherwise also we find that the documents seized from the premises of Vijaya Agencies are third party documents and cannot be made the sole basis for concluding against the appellant unless, the same stands corroborative by way of independent evidences. As such we agree with the appellant that no reliance can be placed on such uncorroborated evidences procured from the premises of the third party who is the alleged recipient of the goods.
29. Further the Revenue whole seeking to confirm the huge demand of duty has quantified the same by deriving the number of bags transported to Vijaya Agencies up to Hyderabad from the freight allegedly paid by M/s Vijaya Agencies to Verma Roadways. M/s Vijaya Agencies is located at Warangal and there is absolutely no evidence for movement of the goods from Hyderabad to Warangal. It is also seen that the premises of Verma Roadways, when searched, resulted in recovery of Indian Currency of Rs. 1.72 Crores which the Revenue has alleged to be the sale proceeds of Madhu Brand Gutkha collected by M/s Verma Roadways. The Ld. Advocate has drawn our attention to the fact that after DGAE officers left the premises of Verma Roadways, the officers of Income Tax Department stepped in and seized Indian currency of Rs. 13,05,180/-. Though the Revenue in the present case is holding that the said Indian Currency is the sale proceeds of the clandestinely cleared Madhu Brand Gutkha, the Income Tax Authorities have treated the same as the undeclared income of Shri Jagadmaba Prasad of M/s Verma Roadways. If that be so, the Indian Currency cannot be attributed to the sale proceeds of Madhu Brand Gutkha and the Revenues efforts to draw support from the said fact cannot be appreciated.
30. There are number of decisions laying down that confirmation of demand and allegations and findings of clandestine removal cannot be upheld on the basis of the documents recovered from the transporters. The same may be starting point of investigations as they create some doubt but in the absence of any other evidences collected by the Revenue, cannot be made the sole basis for concluding against the assessee. As such we agree with the appellant that confirmation of demand based upon the evidences collected from M/s Verma Roadways read with the statements of representatives of M/s Verma Agencies do not constitute sufficient evidences, in the eyes of law, so as to uphold the demand in question.
31. Further demand of duty of Rs. 41 lakhs approximately stands confirmed on the allegations and findings of transportation of clandestinely removed Gutkha through M/s Kranti Transport Pvt. Ltd. and demand of around one crore stands confirmed on the same allegation of alleged clandestine transportation through Pawan Carrying Corporation. M/s Kranti Transport Pvt. Ltd. has, according to the Revenue, transported the goods from Hyderabad to Warangal up to which place M/s Verma Roadways have transported, from Hyderabad to Warangal. The Goods have been declared as Plastic/ Pesticides instead of Gutkha, according to the Revenue, who have relied upon 33 LRs showing clearance of 1669 bags. Similarly in respect of transportation through Pawan Carrying Corporation, Revenue has arrived at a finding that all the goods described as Cotton Katran in the various transportation documents, amplified by the symbols as M, TT, T, S are dispatches of Madhu Brand Gutkha. However, we find that there is no warrant or justification for concluding so inasmuch as there is no independent evidence on record. Though, the truck numbers were mentioned in the various transportation documents, Revenue has not bothered to record the statement of either the owners of the trucks or the drivers of the trucks. In the dispatch registers of these transporters, only Cotton Katran stands mentioned with various different names of the consigners and no person stands identified by the Revenue for booking of the said consignments and there is no evidence on record to show that said Cotton Katrans were infact Madhu Brand Gutkha. There is further no identification of the buyers of the goods. There is also no evidence as to whether the appellant had paid any extra freight to Pawan Carrying Corporation for transportation of the clandestinely removed goods. Further, no investigation stand made from the other manufacturers whose names were shown in the transporters register. We fully agree with the appellant that confirmation of demand of duty on the allegation of clandestine removal based upon the third party documents i.e. the transporters, that too not clearly supporting the Revenues case is neither in accordance with law nor warranted. The representatives of Pawan Carriers have stated that Gutkha of various brands which were being manufactured at Kanpur by the other manufacturers were being dispatched as Cotton katran. No inquiry, except from the owners of Sagar Brand, stands made by the Revenue. In such a scenario it is neither possible nor legal to conclude that all the goods sent as Cotton Katran by the said transporters were that of Madhu Brand Gutkha manufactured by the appellant.
32. We further find that a part of the demand stands confirmed in respect of clearances made to M/s Mandal Enterprises, Calcutta. The said demand is based upon the seizure of a diary containing details of bags of MG Brand and statement of Shri Arun Kumar deposing that one Shri Alok Kumar used to supply him the goods. However, it is seen that there is no reference in the said statement of Shri Arun Kumar to M/s Ashwani and Co. Shri Alok Kumar could not be traced and no evidence has been produced that he was working for M/s Ashwani and Co. and was supplying clandestinely cleared goods to said M/s Mandal Enterprises. Shri Mondal Further deposed that Shri Alok Kumar used to collect the sale proceeds of the goods and was transporting the goods through M/s Fatehpur Asam road lines and Pragati transport organization. However, neither Shri Alok Kumar nor transport companies could be located by the Revenue. Infact, our attention is drawn to the various bills and invoices raised by M/s Ashwani & Co. showing clearance of certain consignments to Mandal Enterprises on payment of duty. Such bills were seized from the premises of Mandal and Co. only. The allegedly incriminating documents recovered from the said person were never shown to the appellants representatives and his statements were never recorded in respect of the said documents. The reliance on the private records seized from M/s Mandal Enterprises, without confronting the appellant with the same and without even establishing any link with the said documents, and without any corroborative evidence, confirmation of demand of duty is neither justified nor warranted.
33. We find that the allegations of clandestine removal are serious allegations and are required to be proved by producing on record independent, tangible and positive evidence. The same cannot be upheld on the basis of the doubts raised or on the basis of surmises and conjectures. The Revenue to prove the clandestine removal, must refer to the evidences, which may not be absolute but must be sufficient to even adopt the theory of preponderance of probabilities. Such evidences could be in the shape of procurement of raw materials, the establishing of actual manufacture of the goods and the clearance of the same as also by identifying the buyers. The same cannot be upheld on the basis of third party documents recovered from either the transporters or railways or from the dealers premises. We find that in the present case the entire case of the Revenue is based upon the uncorroborated documents seized from the third party premises where there is no evidence to establish even the link between the said documents and the appellant.
34. The manufacturer of Gutkha and Pan Masala requires number of raw materials, the major being Supari. Further Katha, Tobacco, cardamom, lime, menthol and perfume are also required to the varying degrees. Except for making allegation of receipt of unaccounted lamination packing material form M/s Classic Pouches Pvt. Ltd, there is neither any allegation much less any evidence to procurement of other raw materials. Shri Anoop Kumar Sahu was never questioned about the procurement of the raw materials except the laminations. In his statement dated 21.11.1996, he deposed that the laminations was being procured from M/s Classic Pouch Pvt. Ltd. as also from others manufacturers,M/s Balaji traders, Puja packaging etc., and the said procurement was always on the strength of bills, which were duly entered into the books of accounts. The appellant have strongly contested that the evidence in respect of alleged unaccounted purchase of lamination from Classic Pouches cannot be relied upon inasmuch as the same is solely based upon the documents recovered from their premises and the statement of Shri S.K. Saxena and the proprietor Shri Kapil Dhawan and one of the employees Shri Jagadish Kumar. The said persons were not produced for cross examination and as such reliance on their statements cannot be appreciated. He has also drawn our attention to the bank account which were opened by the owner of Classic Pouches Pvt Ltd., which have been treated to the bank account of the appellant. Though, Shri Kapil Dhawan has referred to bank account in Punjab National Bank where drafts in the fictitious name of Shiva and Co. were being deposited but Revenue has not made any inquiry in respect of the said bank account. The distinguishing mark O, said to have been made on the invoices where the sales were to the parties other than Ashwani & Co. was not examined by the officers so as to establish that all the bills other than marked as O were sales to Ashwani and Co. without bills. In the absence of any independent evidence we find that reliance on such evidence, which remained uncorroborated and without testing the veracity of the statements, cannot be justified and upheld. In any case, in the absence of any allegation and evidence of unaccounted procurement of raw materials, which are required for production of such a huge quantum of final product, the conclusions arrived at by the Revenue in respect of clandestine activities cannot be upheld.
35. The appellants have also taken categorical stands during the course of investigations that do not have enough capacity of production to manufacture such a huge quantity of their final product alleged to have been cleared without payment of duty. When the appellants have specifically raised the issue of their insufficient production capacity, the investigating officers should have verified their stand. In the absence of any verification, the plea of the appellant remains unrebutted. As already noticed in the absence of any link between the documents seized from the third parties premises with the appellant and more so with their manufacturing activity and clearances, the Revenues confirmation of demand based upon the same cannot be upheld. The same, on a premilinary basis, may lead to some doubts but the said doubts have to be converted to least to preponderance of probabilities so as to establish an adverse case against the assessee, on the basis of the evidence on record.
36. The Ld. Advocate appearing for the appellant has also drawn our attention to the fact that another show cause notice dated 13.05.1997 issued to the appellant in respect of the goods seized at various places as also in respect of the final products and the raw materials seized from the appellants premises was concluded against them by the Adjudicating Authority by relying upon the same set of investigations and the evidences as also the statements recorded during investigation. The order of the Commissioner, being order No. 58-63/04 dated 25/10/04 confirming the demands of duties and ordering confiscation of the currency etc., based upon the same set of the relied upon documents, as has been relied upon in the present case was set aside by the Tribunal vide its Final Order No. A/1114-1116/05 SM dated 13.06.2005. By setting aside the demand, the Tribunal observed as under:-
The confiscation of the goods seized from the premises of M/s Ashwani & Co. at Kanpur and Ahirwan as well as from other premises including Kanpur and Guwahati railway stations on the ground that these were removed in a clandestine manner by Ashwani & Co., Kanpur (Appellant) cannot be sustained for want of any duty demand in respect of those goods which was allegedly removed by the manufacturer without payment of duty. No discrepancy in the raw material and finished goods was found in the statutory record of the appellant M/s Ashwani & Co. The seizures of the goods from the factory premises of this company had been made on account of non-entries in the statutory record. But at the spot it was explained by the Company to the officers that the goods had not attained the finished stage and were lying unpackaged. If there was clandestine removal of the goods by the appellants as suggested in the SCN during the period in dispute detailed therein, based on the oral statement of the witnesses, the demand of duty must have been raised. But it has not been done. Even witnesses whose statement has been relied upon regarding clandestine removal of goods by M/s Ashwani & Co., Kanpur, were not permitted to be cross-examined by the appellants in order to test the correctness of their statement. Therefore, those statements could not be legally used against the appellants.
In the light of the discussions made above, the impugned order cannot be sustained and is set aside against the appellants. The appeals of the appellants are allowed with consequential relied, as per law.
As such it is the contention of the appellant that inasmuch as the same set of evidences stands already appreciated and found to be not sufficient so as to confirm the demands against the appellant, and the Revenue having accepted the said order of the Tribunal, the findings arrived at by the Tribunal in the earlier order would be equally applicable to the fact of the present case. As such they have contended that once the demand in respect of the seized goods already stands quashed, there would be no justification for sustaining the demand in the present case inasmuch as the present demand is also based upon the same set of evidences collected during the investigation, with the only difference that the present case relates to past clearances.
37. We find merits in the above contention. Having already expressed our view that the evidences produced by the Revenue are not sufficient only so as to uphold the allegation of clandestine removal of the goods, our view gets further strengthened by the earlier order of the Tribunal passed in the same appellants case and based upon the same set of evidences, being final order No. A/1114-1116/05 SM dated 13.06.2005.
38. After having observed as above, we may now refer to various decisions, relevant on the issue. The Tribunal has already, in the earlier order passed in the case of M/s Ashwani & Co., based upon the same set of investigations has granted them relief on the ground that the evidence adduced by the Revenue was not sufficient enough to conclude against the assessee as regards the clandestine activities. The said order has not been shown to have been appealed against by the Revenue. The same having attained finality, would be of a binding nature. Apart from that, we also note that there are plethora of judgments laying down that duty cannot be confirmed merely on the basis of railway receipts unless there is independent evidence to corroborate the allegations of clandestine removal, especially when such railway receipts do not get recovered from the assesses factory in which case the onus may get shifted to him for explaining the presence of RRs in his premises. We have already referred to the Tribunal decision in the case of Charriot Cement Co., on the sad issue. Further, reference can be made to the Honble Supreme Courts decision in the case of Collector of Customs Bombay vs. East Punjab Traders 1997 (89) ELT 11 Supreme Court. It is to be seen that RRs relied upon the Revenue are not in the name of the appellant in which case, the onus to establish a link between the appellant and the RRs is heavily placed upon the Revenue. We have already observed that the RRs in question are neither reflecting he appellants name as consignee not their advess, and in the absence of any positive evidence to connect the same with M/s Ashwani & Co., the allegation of clandestine removal cannot be upheld against them.
39. Further, as per various decisions, it is well settled law that no reliance can be placed on the deponents statements unless he is allowed to be cross examined for testing the correctness of his statement. Reference in this regard can be made to the Honble Supreme Courts Decision in the case of Godrej Pacific Tech Ltd. vs Computer Joint India Ltd. 2008 (228) ELT, 507 Supreme Court; Shalimar Rubber Industries vs. Collector of Central Excise, Kochin 2002 (146) ELT, 248 Supreme Court; Aryan Abushan Bhandar vs. UOI 2002 (148) ELT 25 and Laxman Export Ltd. vs. Collector of Central Excise 2002, 143 ELT (21) Supreme Court. In all these decisions, it stands specifically observed by the Honble Apex Court that the oral statements of third party implicating the assessee for clandestine purchase of raw material, with the subsequent written denial, cannot be relied upon for establishing the charge of clandestine manufacture unless such person is either examined or cross examined. Infact, the Honble Supreme Court in the case of Arya Abhushan Bhandar has held that non production of the witness for cross examination results in breach of natural justice and can not be accepted on the ground that no prejudice would be caused to the appellant for reason of non production. In the case of Laxman Exports Ltd., the Honble Supreme Court observed that denial of cross examination of raw material supplier results in denial of the appellants right to contest the veracity of the statement made by the other person and accordingly the Honble Supreme Court set aside the majority order of the Tribunal vide which the denial of cross examination was held to be not suffering from any infirmity.
39.1 It is well settled law that clandestine removals cannot be arrived at based upon the confessional statement of other persons or the documents recovered from the third party premises, without corroboration of the said documents. The statements itself are not sufficient for holding so. No presumptions are available in respect of such documents unless they come from the proper custody and such documents raise serious doubts about their genuineness. For the above proposition reference can be made to Bombay High Court decision in the case of Commissioner of Customs Mumbai vs. Foto Centre Trading Co. 2008 (225) ELT 193 Bombay; Radhey Shyam Kanoria 2006 (197) ELT, 130 Tribunal Mumbai; Pioneer Industries 2006 (193) ELT 506 Tribunal Mumbai & Rutwi Steel and alloys 2009 (243) ELT 145 [Tri. Ahmadabad]. Infact the list is never ending and reference to all the decisions cannot be made.
39.2 As regards the onus and production of sufficient evidence, reference can be made to the Tribunals decision in the case of Harsinghar Gutkha Pvt. Ltd. vs Commissioner 2005 (186) ELT 369. It stands held in the said decision that the non-accounted procurement of all the raw materials is required to be proved by various evidences. The Honble Delhi High Court in the case of Commissioner of Central Excise Raipur vs. CM re-rollers and fabricators 2004 (168) ELT 506 [Tri. Delhi] has held that the Revenues endeavor to prove clandestine removal based upon the private records seized from the assessee himself cannot be appreciated without corroborative evidence of corresponding raw material or excess disposal.
40. The Tribunal in the case of Charminar Bottling Co. Pvt Ltd Vs. Commissioner of Central Excise, Hyderabad, 2005 (192) ELT, 1057 [Tri. Delhi] held that the charges of clandestine removal based upon the evidences accounts and records of third party cannot be sustained when there is no evidence on record as regards extra procurement of raw materials, clandestine manufacture of the goods as also the movement of the Final Products and the absence of identification of the buyers. The Tribunal further, observed that when the earlier order of the Tribunal has arrived at a particular finding in favour of the assessee, in the absence of any appeal against that finding, it was not open to the Commissioner to arrive at a different finding, in a subsequent matter. It may not be out of place to observe here that findings in the present impugned order are against the findings arrived at the Tribunal in the appellants own earlier order, which stand accepted by the Revenue. Inasmuch as the same set of investigations and the evidences collected by the Revenue have been held to be not sufficient to uphold the charge of clandestine removal, the demand in the present case cannot be sustained, based upon the same set of evidences collected during the investigation period.
40.1 Further the Tribunal in the case of Mohan Steels vs. Commissioner of Central Excise Kanpur has held that charges of clandestine removal cannot be upheld based upon the consumption of one of the raw materials in the absence of evidences showing procurement of all the raw materials required for the manufacture of goods alleged to have been clandestinely manufactured and removed. In the present case Revenue has not even alleged procurement of the other raw materials, required for manufactured of such a high quantum of their final product.
40.2 In the case of NU Trend Business Machine Pvt Ltd vs. Commissioner of Central Excise Chennai, 2002 (141) ELT 119 [Tribunal Chennai]. It was held that the demand based on the statements of persons who have not turned up for cross examination, is unsustainable. Such inculpatory statements lose their evidentially value when the same are not corroborated by Revenue. To the same effect is another decision of the Tribunal in the case of Rawalwasia Ispat Udyog Ltd. 2005 (186) ELT 465 [Tribunal Delhi], laying down that allegations of clandestine removal based upon the statement as also the invoices issued by the informer, cannot be upheld in the absence of cross examination of the deponents of the statements.
41. In fact there are plethora of decisions laying down that the allegations of clandestine removal cannot be based upon the uncorroborated statements and evidences and when there are several raw materials involved, the Revenue is required to prove beyond doubt with reference to unaccounted use of all such major raw materials. Such charges of clandestine activities cannot be upheld on the basis of assumptions and presumptions. The list of such decisions is never ending and though the appellant have relied on most of them, we do not find it practical to deal with or to refer to all such decisions. Suffice it to say that though the allegations and findings of clandestine activities are to be decided based upon the evidences available in a particular case, which may vary from case to case but the general principles enunciated by various courts are to the fact that the onus to prove is on the Revenue and such onus must be discharged by production of sufficient evidence, which inspires confidence in the Revenues case.
42. It is also noticed that the appellants, during the initial stage of investigations, took a categorical stand that they do not have capacity to manufacture the alleged quantity of the goods cleared clandestinely but the Revenue, neither dealt with the said plea of the appellant nor undertook any exercise to find out the correctness of the said plea raised by the assessee. Tribunal in the case of Jindal Nical and alloyance Ltd. Final Order No. 904-908/2011-Ex[DB] dated 11.10.2011as also in the case of Shri Nathji Industries Pvt. Ltd. Vs. Commissioner of Central Excise Surat 2011 (267) ELT 241 [Tribunal Ahmadabad] as also in the case of Galaxy Indo Feb Ltd vs Commissioner of Central Excise Lucknow 2010, (258) ELT, 254 (Tribunal Delhi) has observed that non-rebuttal of the said claim of the assessee as regards the capacity of production during the material period leads to weaken the Revenues Case.
43. At this stage we may also took note of the Tribunal majority order where the difference of opinion between two members was resolved. In the case of Kuber Tobacco Products Pvt. Ltd 2013 (290) ELT 545 Tribunal Delhi, the third member has taken into consideration the entire case law on the subject including the Tribunals decision in the case of RA casting which stands upheld by the Honble Allahabad High Court as also by the Honble Supreme Court and observed that the documentary evidences, even if recovered from the appellants premises, cannot be made the sole basis for confirmation of demand on the clandestine activities and the same are required to be substantiated in material particulars by independent evidences and not on the basis of assumptions and presumptions. The Honble Delhi High Court in the case of Commissioner of Income Tax vs Dhingra works vide their order dated 04.10.10 has observed that although an admission is extremely important piece of evidence, it cannot be said to be conclusive. The Honble Supreme Court in the case of Tukaram S. Dighole has held that the standard of proof required in clandestine allegations is not preponderance of probabilities as in a civil suit but proof beyond reasonable doubt, as required in criminal trial is desired.
44. In view of the foregoing discussions, we held that the Revenue has failed to discharge its burden, so as to come to a finding of clandestine removal. We, accordingly, are of the view that the impugned orders are required to be set aside and appeals allowed.
45. Having independently come to the above finding, we also, at this stage take note of the notesheet orders on the file, which stands produced before us. For better appreciation of the same, we like to reproduce the relevant notesheets observations made by the ADG on 18.10.1999.
Your reply dated 16.9.99 on my observations dated 1.1.99 has been noted. The replies to my observations dt. 1.1.99, however, are not satisfactory. I could not attend to this matter earlier as I was pre-occupied with election duty. In the meanwhile, another representation dated 29th September, 99 from Shri Anoop sahu of Ashwani & Co. addressed to the D.G. with a copy endorsed to me has been received in my office. While going through the draft show cause notice, statement of facts and the various representations including the most recent one, there are some very obvious incongruities in the entire investigation. From the overall reading of all the representations read in the light of statement of facts, there definitely appears to be certain amount of overzealousness in hurriedly concluding investigations which are helpful to some whilst being prejudicial to the interest of some others. The points that have been raised in the representations dated 29th September are intriguing and need to be investigated personally by the JD(DZU). The following aspects need particular attention.
a) PAWAN CARRYING CORPORATION: The owner and the employees have stated that the Ghutkha of the brand TI, TS, SIR, SIL, SSS, KPHM, COMMANDER, SIKKA, DIL, DILBAG, KP, KAMLA PASAND, SIR etc. were manufactured at Kanpur and were being sent to various destinations as Katrans. No meaningful enquiry has been made from the owners of any of these brands as to find out what was their modus operandi. A very simple enquiry from the owner of Sagar brand is all that is on record.
b) Mandal Enterprises Calcutta: No statement has been recorded from one Shri Alok Kumar nor from Fatehpur Assam Roading and Pragati Transport.
c) M/s Vijaya Agencies Wrangal: Shri Rajat Mishra and Shri Dinesh Mishra have appeared to play a big role in executing deals at Warangal but no statement has been obtained from them which could corroborate the statements given by the owners of M/s Vijaya agencies. Furthermore, it appears that they have been making payments for Gutkha to Shri Anoop Shau through Verma Transport Co. It is not known whether payments of freight are reflected in the accounts books. The show cause notice is also silent whether any payments which were received were the sale proceed of Gutkha.
d) The role of Shri Kapil Dhawan of M/s Classic Pouches Ltd. There appears to be some truth in the partys representation that an attempt is being made to minimize the role played by Shri Kapil Dhawan in assisting. M/s Ashwani & Co. in their attempt to evade duty. This appears to have been brought out even in the note sheet of the DD at page 10/ns. Shri Surendra Kumar Saxena and Shri Jagdish Kumar alias Ashok Kumar employee of Shri Kapil Dhawan stated that the two accounts were operated and opened at the behest of Shri Kapil Dhawan. Investigations need to be made from the banks as to who had issued the drafts in their favour. It was also to be important to find out whether all the drafts issued were in the name of Shri Surinder Kumar and then were endorsed in favour of this Co. there is a statement allegedly taken by the than AD, Anti Evasion, Kanpur of Shri Rajiv Jain dated 14.7.97 which, apparently not on record though a copy of it has been enclosed by Shri Anoop Sahu in his representation dated 29.09.99 (refer para 31 page 12 of his representation). I would like JD(DZU)s comments on this aspect.
e) Despatch by Rail: Certain attested photo copies have been discharges on the basis of an opinion taken by a local hand-writing expert. There would be some difficulty in sustaining such a piece of investigation, as firstly, the examination of documents should be confined to original documents and that too by the Examiner of Questioned documents a Govt. body the office of which I understand is located in Simla. Giving handwriting opinion on the basis of a photocopy would hardly be sustainable. Furthermore, it is not clear whether the person who had originally written the documents had been contacted and his statement obtained.
2. The above are merely a few illustrative incongruities in the show cause. I would also like JD(DZU) to conmment upon the role, if any, played by one Shri Shashi Kant Chaturvedi who has mentioned so often in the representation. I would like para-wise comments on the representation dated 29.9.99 of the JD(DZU) after personally satisfying himself.
3. The SCN in its present form appear unsustainable and the demand grossly inflated. As is seen from the above notings on the Revenues file it is clear that the ADG is referring to various lacunas/ loop holes in the investigation proceedings and is himself expressing doubt about the admissibility of the evidences produced by them. This shows the Revenues themselves were not sure of the success of their case. Tribunal in the case of Tejwal Dystuff Industries Pvt. Ltd vs. Commissioner of Central Excise Ahmadabad, while deciding the issue, as a third member by the then Honble President of the Tribunal has observed in Para 4 as under:
It appears that, having obtained confessional statements the Revenue Officers did not carry out the detailed investigation into the relevant aspects of the case, particularly, the Bank accounts of Bhimanis and the working of the assessees factory. Recording of the confessional statement would not put an end to the investigation and the Revenue Officers should be careful to ensure that they are not tricked out of a regular and detailed investigation by making strategic confessions which are retracted by preparing affidavits soon after they are made and which affidavits are again strategically withheld from the Revenue Officers, so that they become complacent and do not carry out a fuller victim to this type of strategic confessional statements which have been retracted soon after they were made in the affidavits which were withheld by the deponents till the proceedings came up before the Commissioner, by which time the damage of not making fuller investigation, thinking that the confessional statements are made and not retracted, was already done. The Revenue Officers have not even cared to investigate into the types of final products manufactured by the appellants despite detailed declarations.
46. As is seen from the above, the statements recorded by the Revenue during the course of investigations, without procuring other evidences, so as to substantiate the investigations, cannot be held to be sufficient evidences to uphold the clandestine removal findings and no adverse opinion can be arrived at, on the basis of the same. The purpose of reproducing the above notesheet notings, on the file of the Revenue, is recorded by the ADG, is only to show that the Revenue was aware of the loop holes in their own case and the ultimate success or failure of the same. The said lapses in the investigation, do not stand removed by the officers, by further doing the investigations and a huge demand of duty cannot be based upon the surmises and conjunctures or on the basis of doubts entertained by the officers.
47. In view of the foregoing discussions, we find no reasons to uphold the impugned order by confirming demand of duty against M/s Ahswani & Co. and by imposing penalties on various other appellants. Accordingly, the impugned order is set aside and the appeals are allowed with consequential relief to the appellants.
(Dictated and Pronounced on 02.12.2014) (ArchanaWadhwa) Member(Judicial) ( Rakesh Kumar) Member(Technical) NSB* [1]