Customs, Excise and Gold Tribunal - Mumbai
R.K. Patel And Co. And Ors. vs Commissioner Of Customs And Central ... on 8 July, 2005
Equivalent citations: 2005(102)ECC193
ORDER T. Anjaneyulu (Member), J.
1. All these appeals are filed against an Order-in-Original No. 13/CEX/2004 dated 16.4.2004 passed by the Commissioner of Customs & Central Excise, Nashik, as such they are being disposed of by a common order.
2. M/s. R.K. Patel & Co., Tobacco Manufacturers, Amalner, are the main appellant. The other appellants are partners, employees and dealers of the main appellant, who have been aggrieved by the confirmation of the demand of duty and imposition of penalty in the impugned order. Some of the appellants are cleaners and drivers concerned in transporting excisable goods on whom penalties have been imposed under Rule 209A of the Central Excise Rules, 1944.
3. M/s. R.K. Patel & Co., Tobacco Manufacturers, (RKPTM), (main appellant), are the manufactures of branded chewing tobacco, commonly known as Jarda, falling under sub-heading No. 2404.41 of the Central Excise Tariff Act, 1985.
4. The case of Revenue is that on specific information that M/s. RKPTM are engaged in the clandestine removal of branded chewing tobacco and to camouflage this illicit activity, firms under fictitious names have been floated, therefore, the officers of Central Excise, Special Preventive Cell, stationed at Nashik kept surveillance at Dhule from 5.9.97 onwards. On 6.9.97, the officers spotted vehicle No. MH-19-5159, which was regularly used for removal of Jarda, plying towards Malegaon. The officers intercepted the vehicle near Zodge village on Dhule-Malegaon Road. On checking, the vehicle was found carrying 90 cartons of "Gai Chhap Patel Jarda" covered by a bill bearing No 24 dated 6.9.97 of M/s. Ganesh Trading Co., Malegaon, Navalnagar Branch. Shri Ratilal Raghunath Bhawsar, a Salesman of M/s R.K. Patel Tobacco Manufacturers, was accompanying the vehicle and Shri Dilip Devidas Patel and Shri Sanjay Bhimrao Patel were driver and cleaner, respectively.
5. Preliminary enquiries with the salesman, driver and cleaner revealed that the said consignment of chewing tobacco (Jarda) was removed from the factory premises of M/s RKPTM without cover of Central Excise invoice. The salesman produced a copy of bill No. 24 dated 6.9.97 and informed the officers that to cover the consignment in transit and to show its genuineness, he had prepared the said bill and signed himself as Shri Bharat Bhavsar, who is the proprietor of M/s. Ganesh Trading Co. As the said consignment of Jarda was found cleared without payment of duty from the factory, the officers seized 90 cartons of branded chewing tobacco alongwith vehicle carrying non-duty paid goods under Panchnama dated 6.9.97. Thereafter, the officers further investigated the case from all possible angles and during this course, enquiries were made at different places with the suppliers of raw tobacco, suppliers of corrugated boxes, suppliers of paper, commission agents, who had provided vehicles to carry raw tobacco and the banks from where the suppliers of raw tobacco converted cash into demand draft with the help to staff members of M/s. RKPTM.
6. After discreet enquiries, the officers came to conclusion that M/s. RKPTM had received 23,60,921 kg. of raw tobacco from various suppliers and did not account for in the statutory records. Similarly, substantial quantity of corrugated boxes used for packing purpose had been found not accounted for in their records and for such transactions, payments were made in cash. The branded chewing tobacco manufactured out of such unaccounted stocks of raw tobacco purchased from various suppliers had been cleared without account for in RG-1 and removed without cover of Central Excise invoices and without discharging Central Excise duty due on such consignments.
7. Therefore, a Notice to show cause bearing Sr. No. 132/CEX/98 was issued to M/s. RKPTM by the Commissioner of Central Excise & Customs, Aurangabad, demanding duty on 18,23,575 kg. of branded chewing tobacco, after taking into account manufacturing loss @ 22.76% and the value of goods on comparable basis of similar goods, under the provisions of Section 11A of the Central Excise Act, 1944, covering the period between 1994-95 to 1997-98. Penalty and recovery of interest was also proposed on partners of M/s. RKPTM and other persons, including suppliers of raw materials, dealers of Jarda, drivers, cleaners and other employees, who had abetted M/s. RKPTM and its partners to remove excisable goods without payment of Central Excise duty.
8. The Commissioner, Central Excise & Customs, Aurangabad, decided the issue vide Order-in-Original No. 49/CEX/2000, confirming the duty demand up to February 1997 on the quantity of Jarda removed clandestinely of Rs. 3,76,49.018 and imposed equal penalty under Section 11AC on the assessee and ordered recovery of interest on total demand under Section 11AB of the Act. The seized goods of 90 cartons containing Jarda and the vehicle were confiscated, but allowed release of the same on payment of redemption fine of Rs. 16,000 and Rs. 50,000 respectively. Personal penalties were also imposed on other Noticees.
9. The assessee had filed an appeal before CEGAT, Mumbai, against the Order of the Commissioner and mainly contended that they were denied opportunity to cross examine all the material witnesses as listed in their letter dated 29.5.2000. Considering the contentions raised by the assessee among others, the Tribunal, vide its Order C-II/102/143/WZB/02 dated 10.1.2002, remanded back the matter with a direction to make genuine efforts to enforce attendance of other 14 witnesses for cross examination and providing reasonable opportunity to the representatives of the Noticees to make their submissions on the merit of the issue before passing order. Accordingly, the Commissioner, Central Excise and Customs, had taken up the case for de novo adjudication and summons were issued to the witnesses. Subsequently, the case was transferred to Nashik Commissionerate on the point of jurisdiction.
10. After following the direction made in the remand order and considering the material on record, the Commissioner, Central Excise & Customs, Nashik, once again adjudicated the matter by his Order dated 16.4.2004, confirming the demand and penalties on the assessee and others as held earlier.
11. The Ld. Commissioner under the heading of discussion and findings in the impugned order at para 169 has observed as follows:
I have gone through the records of the case, show cause notice, replies thereto filed by the assessee and other co-noticees, the submissions made at the time of personal hearings and records of cross examination conducted before me and before the then Commissioner of Central Excise, Aurangabad. In respect of six witnesses, the assessee did not request for cross examination of these witnesses before me, however, vide letter dated 23.8.2003 requested to take into consideration the observations made on the cross examination in their letter dated 28.11.2000.
12. At para 173, it is observed--
"The case records perused by me during the course of proceedings give to my mind vivid picture of the case which is as follows. On 6.9.97 the Headquarters Preventive Party, Aurangabad Commissionerate, has intercepted vehicle No. MH-19-5159 near Zodge Village on Dhule-Malegaon Road containing 90 Nos. of cartons of 'Gai Chaap Patel Jarda' affixed with printed labels, showing factory's name and address as M/s. R.K. Patel & Co., Tobacco Manufacturers, Amalner, supported by a bill No. 24 dt. 6.9.97 of M/s. Ganesh Trading Co., Navalnagar. The persons namely Shri Dilip Devidas Patil, Driver, Shri Sanjay Bhimrao Patel, Cleaner and Shri Ratilal Bhavsar, Salesman, were found in the said tempo carrying the branded Jarda manufactured by M/s. RKPTM. Statements of all these persons were immediately recorded on 6.9.97, wherein they have admitted that the consignment of Jarda has been cleared from the factory premises of M/s. R.K. Patel & Co. Tobacco Manufacturers, Amalner, Unit No. 1 at 15.30 Hrs., without cover of Central Excise Invoice and without payment of Central Excise duty".
13. In para 199, the Ld. Commissioner observed the modus operandi adopted by M/s. RKPTM, Amalner, for suppression of production of Jarda and its disposal/sale without payment of duty has come to the notice on 6.9.97, when vehicle No. MH-19-5159 was intercepted with 90 cartons of Gai Chaap Patel Jarda. It was found that Jarda cartons were removed clandestinely without payment of duty from the factory of M/s. RKPTM, Amalner, and cleared from the trading firm, M/s. Ganesh Trading Co., Navalnagar. Therefore, the same were seized alongwith vehicle No. MH-19-5189.
14. Lastly, in the concluding para, it is observed as follows:
"On careful consideration the issue can be summarized as follows. After interception of vehicle No. MH-19-5159 on 6.9.97 which was found loaded with 90 cartons of 'Gai Chaap Patel Jarda', the officers on the basis of the disclosures made by Salesman, Shri Ratilal Raghunath Bhavsar, recovered documents of fictitious firms from his residence as well as from the residence of Shri Vilas Chatur Patel, Peon of M/s. RKPTM. The available evidence and statement of Shri Ratilal R. Bhavsar and Shri Dyneshwar S. Bhavsar indicate evasion of duty on large scale under the cover of bills of fictitious firms. Therefore, the officers visited certain places in Gujarat State to collect the evidence from the transporters located at Borsad and tobacco suppliers of nearby area to Borsaad. The officers collected evidences in the form of commission book, bill book, goods transport book, which were having details of consignors and consignee. The officers also recovered from the suppliers, the bills/challans showing supply of raw tobacco to M/s. RKPTM and receipt of payments in cash. Evidence was collected from raw tobacco suppliers, their employees and mandi samithi at Kayamganj and Aliganj. The officers also collected photocopies of requisition slips from the bank in respect of demand drafts purchased by suppliers of raw tobacco from UP with the help of employees of M/s. RKPTM".
15. (i) In order to reach the so-called findings and conclusion, the Ld. Commissioner mainly relied upon the statements of various persons recorded by the Central Excise Officers under Section 14 of the Act.
(ii) The documents obtained from the Urban Co-operative Bank Ltd., Amalner, and Bank of Baroda, Amalner, to establish the fact that the main appellant has flouted fictitious firms with the connivance of relatives to evade Central Excise duty on Jarda.
(iii) Goods Challan Book, Order Receipt Book, Truck Guidance Book, Commission Book, etc., maintained by the transporters and Transport Receipt Book and Sales Bills maintained by the suppliers of raw tobacco and Purchase Bill File of the appellants, 7Rs, 9Rs and Gate Passes showing payment of agricultural produces to Krishi Utpadan Mandi Samithi, Kayamganj and Aliganj in UP for purchase of raw tobacco and demand draft requisition slips from various bankers.
(iv) Confirmation of the statement made on 24.6.98 by Shri Bhagwant Singh Shakya.
(v) Letter dated 16.5.2003 of Shri Brijesh Kumar Gupta, Partner of M/s. Baldeoprasad & Badriprasad of Kayamganj, explaining the events that took place and demand made against the appellants on 23.8.2003.
(vi) The verification of counter-foils for purchase of demand drafts from the banks concerned by Shri Himmat Patel.
(vii) The modus operandi adopted by the appellants to evade Central Excise duty as per the statement given by Shri Madhukar Hari Patil.
(viii) The statement of Shri Ravjibhai Ashabhai Patel with regard to the consignments made to the appellants.
(ix) Handing over documents by Shri Birjeshkumar Gupta and Shri Sunilkumar Gupta.
(x) The details of clearance of clandestine removal of Jarda were not available and, therefore, demand was calculated on the basis of unaccounted raw tobacco received by the appellants and lastly the deviation from the original stand by the appellants in respect of duty liability on their part and admission of liability to the extent of 59 trucks of Jarda manufactured out of the consignment of raw tobacco received by them.
16. We have heard both sides in detail and at length. We have also considered the written submissions filed by both sides at the time of hearing of the case and gone through the oral and documentary evidence of record. As this case mainly based on oral statements of the witnesses concerned, including that of the assessee and his employees, together with the available record of the suppliers of raw tobacco and transporters, the matter essentially involves appreciation of the direct and circumstantial evidence governing the case.
17. As per the submissions made by the appellants, the factory of the appellants is situated at Amalner where two more factories of relatives of the appellants are situate and they too manufacture Jarda using raw tobacco as raw material. All of them were doing business earlier under one banner in the name and style of M/s. R.K. Patel & Co. Subsequently, dispute arose in the family and the brothers ventured out into three separate businesses. The appellants are running their business under the name and style of M/s. R.K. Patel & Co. Tobacco Manufacturers, Amalner, and their relatives are doing business in the name of M/s. R.K. Patel and Co. Tobacco Processors and M/s. R.K. Patel Tobacco Trading Co., Amalner.
18. It is significant to note that due to persistent rivalry among the family members and business competition, there used to be complaints against the appellants. Consequently, there were regular raids and searches in the factory premises of the appellants by the Anti Evasion Central Excise (Preventive) and other Division (Preventive) during relevant time. It is pertinent to note that the factory of the appellants was raided 17 times. During all searches and verification, nothing incriminating was found in the stock account or regarding unaccounted production or clandestine clearances. In this regard, the appellants have also made representation to the Members of CBEC, New Delhi, including its Chairman. In all the searches and raids carried out, including on the date of interception of the tempo containing 90 cartons of Gai Chhap Jarda, nothing incriminatory is found in the factory premises of the appellants. These searches carried out by the Officers concerned (in the factory premises of the appellants) and representations sent by the appellants are borne out by the record. On the date of interception of the tempo, the appellant's factory was immediately sealed, searched and stocks were verified, but no discrepancy was found. This is also found from the statement of Shri S.K. Patel, Partner of the appellants, recorded on 7.9.97. The factory premises was under physical control up to 30.4.94 and nothing irregularity and illegal activities noticed.
19. In the light of the aforesaid background that the circumstances, the case on hand is to be adjudged as there is serious charge of clandestine removal of the goods by the appellants, the Department is required to prove the same by positive and cogent evidence. Equally it has to prove in satisfactory manner, the receipt of raw materials and unaccounted production. The Ld. Commissioner appears to have mainly relied upon the statements recorded from the transporters and suppliers of raw materials and others. As seen from the record, many of them have retracted their submissions immediately. The raw material suppliers from Gujarat have given their statements first to the Gujarat Central Excise Officers in Gujarathi not known to them. Their statements were also recorded on second time. Again after long gap, the Central Excise Officers of Nashik have recorded their statements in English language. These statements are the improved version than the earlier statements and the same have been relied upon by the Ld. Commissioner. Such variations, inconsistency and improved version can be found from the following personnel.
(a) Shri Shahikantbhai Bhailalbhai Patel, Raw material supplier from Gujarat.
His first statement was recorded on 6.2.98 at Anand by local Central Excise Officers. It is stated by him that 816 monnes (approx. 2 trucks) supplied to the appellants in 1995. In the second statement recorded on 25.5.98, it is stated that he has supplied 2 trucks to the appellants and others also at Amalner i.e. M/s. R.K. Patel Tobacco Trading Co. In the third statement recorded on 20.7.98 at Nashik, it is stated that 10 trucks were supplied through M/s. Ambika Roadways. During the cross examination, it is stated that the third statement was recorded at Nashik in English and he does not know what is written.
(b) Shri Kantibhai Maganbhai Patel, Raw Tobacco Supplier from Gujarat.
His statement was recorded on 16.1.98 in Gujarathi by local Central Excise Officers. He has stated that he has supplied 13 trucks of raw tobacco to the appellants. On his second statement recorded at Anand on 19.5.98, he confirms the earlier statement. On third occasion, which is recorded in English at Nashik, he says that totally 19 trucks were supplied to the appellants. During the cross examination on 31.7.2003, it is stated that had he disclosed the entire transaction, he would not have been paid the balance. Further, it is elicited that he was not paid his dues even by July 98. On one occasion, it is stated that he does not remember anything since many years have lapsed and he handed over all the documents of sales and purchases to the Officers at the time of seizure.
(c) Shri Ravjibhai Ashabhai Patel:
His first statement was recorded in Gujarathi at Anand on 6.1.98, wherein he has stated that he supplied 7,200 monnes (8 trucks) during September 93. In second statement recorded on 18.5.98 in English language, it is stated that he had supplied 13 trucks totally. In his third statement recorded on 4.8.98 at Nashik, he states that he supplied 43 trucks. In his cross examination, it is stated that on an overage, he has supplied 3 to 5 truck-loads per year. It is also submitted that he has supplied raw materials to M/s. Manish Tobacco, who in turn supplied to M/s. R.K. Patel Tobacco Processors, who is other manufacturer than the appellants in Amalner. He was shown goods challan No. 332 [relied upon document in Annexure B(2), Sr.No. 1] against which demand has been raised on the appellants, but the witness states that such challan does not pertain to his transaction.
(d) Shri Brishkumar Gupta, Partner of M/s. Baldeoprasad & Badriprasad.
His first statement was recorded on 10.3.98 at Farukhabad in Hindi. He stated that he has sent 26 consignments. In his second statement recorded on 24.6.98 by Nashik Preventive at Dhulia, he stated that he has supplied 35 to 40 trucks. During the cross examination held on 18.6.2003, it is stated that he has supplied raw tobacco to three firms in Amalner. Further he confirmed that during the search, the Central Excise Officers took photocopies of the relevant documents and that he was detained by them for 72 hours continuously and he had sent a police complaint by registered post at Amalner and also to the Commissioner of Central Excise, Aurangabad and Additional Commissioner of Central Excise, Nashik. Further it is stated that his signature was obtained on the statement without reading and explaining the same to him.
20. These are some examples, which could be extracted for ready appraisal. The record on hand shows that most of the witnesses have retracted their statements and further complain that under duress and coercion their statements were recorded by the authorities concerned and the same is not voluntary one.
21. The Ld. Commissioner appears to have relied upon the improved version of the witnesses concerned, while ignoring the earlier statement. In this context, the Ld. counsel for the appellants relied upon the following decisions:
(1) 1998 (42) ELT 179 (Mum) - State of Maharashtra v. Abdul Sattar Mohammedbhai.
(2) 1984 (17) ELT 294 (Guj) - Motilal Lalchand Shah v. L.M. Kaul and Anr.
The ratio of these judgments is that when the authorities have recorded more than one statement of the person indicated of an offence or witnesses, there shall be consistency in between them. If they are at variance or there is improved version over the first one, the same cannot be relied upon since it cannot be called as legal or cogent evidence.
22. The Ld. Commissioner has also relied upon the other statements of dealers, which were retracted subsequently, but the Commissioner held that more details are found in them and that they are voluntary one. To quote some of them--
Shri Dyneshwar S. Bhavsar, Proprietor of M/s. Parashram Totaram Bhavsar & Co., Shri Dinesh S. Bhavsar, Proprietor of M/s. Bhavesh Traders, Shri Bharat H. Chavan, Proprietor of M/s. Ganesh Trading Co., Shri Pramod Pandit Raundal, Proprietor of M/s. Pramod Pandit Raundal.
All these traders have purchased Jarda on payment of duty from the appellants and in turn sold to other dealers such as M/s. Vinesh Traders, Jalgaon, M/s. New Sanjay Tea Co., Jalgaon. In their retracted statement, they state that they were buying chewing tobacco from M/s. Bhavesh Traders & M/s. Ganesh Trading Co. and M/s. Ravi Tobacco, but they did not have any direct dealings with the appellants. The authorities concerned have not investigated as to the quantities sold by the dealers, traders or any excess of what was purchased on payment of excise duty from the appellants by the various dealers. This appears one of the lacuna in the investigation.
23. On the day of seizure of Jarda of 90 cartons (on 6.9.97), the authorities concerned have not carried out any investigation as to whether M/s. Ganesh Trading Co. has sold excess material than what has been cleared to them by the appellants on payment of duty. M/s. Ganesh Trading Co. has accounted for 90 cartons of Jarda against supplies made by the appellants on payment of excise duty. On the contrary, the appellants and M/s. Ganesh Trading Co. had given a detailed account about the duty paid clearances of chewing tobacco to M/s. Ganesh Trading Co., including identification marks indicated on the cartons. It is pointed out by the Ld. Jt. CDR that there was a gap of six months during the clearance under the invoice and the subsequent dispatch by M/s. Ganesh Trading Co. However, he admits that no exercise was done during the course of investigation with regard to the goods cleared from the appellants' factory on payment of duty to M/s. Ganesh Trading Co. and the quantum of sale by M/s. Ganesh Trading Co., to establish any excess sale by it. In this context, it is to be observed that the reliance placed by the Commissioner on some statements, which have been retracted subsequently, without there being any corroborative evidence, is not proper and it cannot establish clandestine removal of the goods.
24. The impugned order points out the modus operandi adopted by the appellants for suppression of production and its disposal without payment of duty has come to the notice when the vehicle was intercepted on 6.9.97 carrying 90 carton of Jarda. This clearance has been satisfactorily explained under 3 invoices as under:--
Invoice No. 257 dated 31.3.97 Invoice No. 259 dated 31.3.97 Invoice No. 1 dated 10.4.97 Under these 3 invoices, cartons were cleared on payment of excise duty to M/s. Ganesh Trading Co., totalling to 265, out of which 90 cartons were supplied have been tallied with the identification marks with that of invoices. It is quite possible that the delay of six months gap in between the purchase and supply could be on the basis of the demand.
25. The documentary evidence relied upon by the Ld. Commissioner are in the nature of Transport Receipt, Goods Challan, Truck Guidance Book, Commission Book, Order Receipt Book 7R, 9R, Gate Pass and Purchase Bill Files of the appellants. We have carefully perused these documents. The most important fact is that none of these documents bear any acknowledgement of the appellants for having received the consignments of raw tobacco mentioned in these documents. The description of the consignee given on these documents is as follows:
(i) Amalner
(ii) Amalner, Maharashtra
(iii) R.K. Patel, Amalner
(iv) R.K. Patel & Co. Tobacco Manufacturers, Amalner
(v) R.K. Patel & Co., Amalner
(vi) S.K. Patil, Amalner
(vii) R.K. Patel & Manufacturer, Amalner
(viii) R.K. Patel, Maharashtra
(ix) Himmat Singh
(x) Anil Kumar Gupta
(xi) Brijeshkumar Gupta
(xii) Ram Singh, Amalner It is clear from the above documents that they do not mention appellants' name and all of them bear a vague description of the consignee. Where these documents show the name of these appellants, there is no signature of the concerned person acknowledging the receipt of such consignments. Certainly this kind of documentary evidence do not help the Department in establishing the fact of the receipt of unaccounted raw tobacco, unaccounted production and clandestine removal. It is significant to note that the suppliers of raw tobacco have changed their version subsequently. It is elicited from Shri Atulbhai Vallabhai Patel, Proprietor of M/s. Ambika Transports, that the transport receipt is handed over to the drivers by the suppliers of the goods at the destination point. However, no acknowledgement receipt is given for such transport receipt. The transport receipt is supposed to contain all the details of the consignee with regard to the quantum of material, name of the firm, address, etc. This is also admitted by him in his cross examination. Shri Ramanbhai Maganbhai Rajput, Manager of M/s. Amibka Roadways, Borsad, had also admitted these facts.
26. The cross examination of Shri Purshottamdas Rambhai Patel reveals that he had supplied 31 trucks of raw tobacco to the appellants after verifying the receipts prepared by him. Earlier, in his statement recorded by the Officials concerned, it is stated that he supplied 17 trucks. It is pertinent to note that the demand was raised basing on the entries in the diary allegedly maintained by him, but witness denied of having maintained such a diary. Therefore, demand was dropped ultimately. The effect is that it disproves the receipt of unaccounted raw tobacco.
27. Shri Sunil Kumar Varma in his cross examination said that he purchased six drafts and the material was sold the Shri Desale and Shri Pawar and that they could have sold 4 trucks to others for profit. He is the supplier of raw tobacco from Kayamganj. He also stated that he sent complaints to police to the effect that his signatures were obtained on the statements forcibly by detaining him in a Hotel for 3-4 days. Shri Bhagwant Singh Sakhya states that he used to supply the raw tobacco to three firms of M/s. R.K. Patel & Co. at Amalner. His statement was recorded after a gap of 36 hours and he does not know what was written. Similarly, the statements of Shri Brijesh Kumar Gupta and Shri Sunil Kumar Gupta after their cross examination do not substantiate the allegations leveled in the Show Cause Notice. They categorically state that their statements were recorded under duress after detention. They too state that they used to supply material to three manufacturers at Amalner.
28. No investigation is carried out to verify the supplies to two other manufacturers at Amalner. Therefore, it cannot be ruled out that there was no supply to other manufacturers at Amalner whose names are similar to that of the appellants. In this context, no reliance can be placed on 7R, 9R, Transport Receipt and Goods Challan, etc.
29. The appellants in their representation dated 7.4.97 sent to the Chairman of CBEC complained about continuous checking of their factory by various agencies, particularly visit of officers of DRI, Pune, on second time on 26.3.97 and checked the raw material receipts. The appellants could produce receipts of all the raw material in their statutory records, except two receipts. Later it was found that another manufacturer had procured raw material on those receipts. They have also mentioned that their competitors have started purchasing raw materials from the appellants' suppliers in U.P. and that there is every possibility of misuse the name of the appellants. Thus, if these instances are taken into account, the documents relied upon may not be able to prove satisfactorily that the consignments have been actually received by the appellants.
30. In the above context the Ld. counsel for the appellants has rightly relied upon the Judgment in the case of Saheli Synthetics Pvt. Ltd. v. Collector of Central Excise, Vadodara, 1999 (133) ELT 1000 (Tri.) wherein demand was raised on the basis of Municipal octroi permits obtained by the supplier of raw material. However, such demand was set aside with a finding that the octroi permits may raise a suspicion but cannot be an adequate proof for receiving raw materials and used for clandestine processing.
31. The Ld. Commissioner has heavily relied on the statement of Shri Madhukar H. Patil in providing information with regard to evading Central Excise duty by the appellants. But the Ld. Commissioner did not take note of his cross examination wherein it is revealed that he became hostile to the appellants. No credit can be attached to such a statement. At one stage, he reveals no personal knowledge about the evasion of duty by the appellants. Before Officials, he gave statement basing on his personal knowledge. His entry to the company was restricted from 1993 onwards. Shri S.K. Patil was suspecting that his other brothers were obtaining information from Shri Madhukar H. Patil and he was not taken into confidence by the appellants. Therefore, it is quite unsafe to rely on his version. His attending to excise work was very rare. After September 1996, he took employment with M/s. R.K. Patel & Co. Tobacco Processors the competitors of appellants.
32. The Ld. Commissioner has also relied upon the statement of Shri Premsingh R. Mahajan, Accountant of the appellant, and Shri N.D. Patel. Annexure C to the Show Cause Notice gives list of relied upon documents. Since many of the documents were not supplied alongwith the Show Cause Notice, the appellants made request for supply of these documents. Sr. No. 74 of Annexure-C is a residuary entry. The appellants repeatedly by letters dated 26.7.99, 4.8.99 and 15.9.99 requested the Ld. Commissioner to supply the documents under Sr. No. 74. In their final written submission dated 23.8.2003, the appellants stated that demand in Annexure B-3 was based on the statement of Shri N.D. Patel dated 9.7.98 and the same is not listed in Annexure-C as relied upon document and therefore cross examination of this witness was demanded by the appellants. Therefore, a request was made that the statement dated 9.8.99 may be ignored while passing the order. In spite of the same, the Ld. Commissioner has relied upon the statements of Shri N.D. Patel and Shri P.R. Mahajan and thus violated the principles of natural justice. The demand cannot be confirmed on the basis of such statements, which were not relied upon in the Show Cause Notice.
33. The Ld. Commissioner has held that the documents obtained from Amalner Urban Co-operative Bank Ltd., Amalner, etc. establish that Shri S.K. Patil and Shri Kalyan Patil in connivance with Shri Dyneshwar S. Bhaavsar etc. floated fictitious firms to evade payment of Central Excise duty. The real question that strikes to our mind is not that as to whether the firms were fictitious, but whether the clearances made in the name of the alleged fictitious firms were in excess of clearances of Jarda made by the appellants on payment of excise duty, as the fact is that the appellants have made clearances on payment of excise duty in the name of various dealers like M/s. Ravi Tobacco Co., M/s. Ganesh Trading Co., M/s. Bhavesh Traders and M/s. Shripati Tobacco Agencies. Further, though the Ld. Commissioner calls them fictitious firms, however, he has imposed penalty under Rule 209A on Shri Sanjay Bhaskar Patil, Proprietor of M/s. Shripati Tobacco, Dhule, Shri Dinesh S. Bhavsar, Proprietor of M/s. Bhavesh Traders, Malegaon and Shri Bharat Hiralal Chavan and M/s. Ganesh Trading Co. Therefore, the Ld. Commissioner is not correct in calling these firms as fictitious and further in any case, the demand of duty on such grounds cannot be justified when no investigation has been done to correlate the sales made by these firms with the purchase of Jarda from the appellants.
34. The Ld. Commissioner points out that there is deviation from the original stand of the appellants regarding the duty liability on their part as in the present proceedings they have agreed that their liability is restricted to Jarda manufactured out of the consignments of raw tobacco received in 59 trucks. However, we find that the appellants in their letter dated 20.6.2000 and written submission dated 23.8.2003 have unambiguously qualified their submission "Without prejudice" and thus the appellants plea to restrict the demand to only 59 trucks as the consignment in their name and the transport challans and the same is alternative argument. It is not a deviation from their stand.
35. The Ld. Commissioner has referred to a letter dated 23.8.2003 submitted by Shri Brijeshkumar Gupta after his cross examination which was over on 18.6.2003. It is strongly contended on behalf of the appellants that the Commissioner is not justified in relying this document, which was obtained from him subsequently, and the appellant had no opportunity to traverse the same.
36. Lastly, the Ld. Commissioner has referred to the bank drafts out of unaccounted amount paid towards unaccounted raw tobacco supplied by U.P. supplier was around Rs. 50,00,000 and concluded that the appellants were procuring raw tobacco and using for the manufacture of Jarda to be cleared without payment of duty. We find from Annexure B(a) the details about the bank drafts in the traders' names, which are given below:
(i) Nawabsingh Bajanlal
(ii) Bishnu Tobacco Co.
(iii) Ramnarayan Gupta
(iv) Surajpal Gupta
(v) Maheshchandra Gupta
(vi) Tulsi Tobacco Traders
(vii) Sovran
(viii) Samyak Tobacco
(ix) Harnam Singh
(x) Shivprasad Yadav
(xi)Ambika Tobacco Trading Co.
(xii) Prabhakar Nimba Borse
(xiii) Bhagwan Totaram Patil
(xiv) Shantibhai M. Patel
(xv) Ashalal K. Shah.
We further find that the receipt of the raw material by the appellants is alleged from the following persons as listed in Annexure B (18) to B(30) Annexure No. Details of raw tobacco supplied Referable document by B(18) Gupta Brijeshkumar Gupta Statement of Brijeshkumar B(19) Anilkumar Gupta Statement of Brijeshkumar Gupta B(20) Gupta Baldevprasad Badriprasad Statement of Brijeshkumar B(21) Sunilkumar Varma Statement of Sunilkumar Varma dt. 30.4.98 B(22) Utpad Nawabsingh Bajanlal Letter dt. 30.4.98 of Kirshi Mandi Samiti.
B(23) Vardhman Tobacco Co. Letter dt. 30.4.98 of Krishi Utpad
Mandi Samiti.
B(24) Utpad Yadav, Commission Agent Letter dt. 30.4.98 of Krishi Mandi
Samiti.
B(25) Utpad Vijay Brothers Letter dt. 30.4.98 of Krishi Mandi
Samiti, Kayamganj.
B(26) Surajpal Gupta Statement dt. 30.7.98
B(27) Himmatsingh Himmat Patel Letter dt. 3.4.98
B(28) Mukhtiyar Singh & Son Letter dt. 1.5.98 of Krishi Utpad
Mandi Samiti, Aliganj.
B(29) Utpad Samyak Tobacco Co. Letter dt. 1.5.98 of Krishi Mandi
Samiti, Aliganj.
B(30) Subhash Tobacco Co. Statement of Subhashchandra
Gupta dt. 24.6.98 and 1.5.98 of
Krishi Utpad Mandi Samiti,
Aliganj.
37. From the above, we find that in most the cases D/Ds are not in the names of the suppliers given in Annexure B(18) as it will be seen from the names in whose favour D/Ds were taken from Amalner as indicated above. We further find as per Annexure B(a) D/Ds in the name of Surajpal Gupta was taken during the period 5.3.94 to 9.9.95 are for Rs. 2,74,500 whereas as per Annexure B(26), the appellants are supposed to have received 10 vehicles of raw tobacco costing Rs. 12,97,500, which is based only on the statement of Shri Surajpal Gupta dated 30.7.98. Thus, we find that there is no correlation between the D/D amount indicated in Annexure B(a) and the value of tobacco, which is supposed to have been received by the appellants. Explanation for this major discrepancy is not forthcoming from the records. If the basis for issuing Show Cause Notice is that U.P. suppliers were converting cash into D/D at Amalner for raw tobacco supplied by the appellants, how can there be such a vast difference between value of raw tobacco supposed to have been supplied and the amount of D/Ds in those cases where names of the D/Ds and names of the suppliers of raw tobacco tallies. We have seen the statement of Shri Surajpal Gupta dt. 30.7.98 that he has supplied 10 trucks of raw tobacco and the D/Ds received are as under:
Rs. 5,68,000 D/D in the name of Purshottam Narayan Gupta and
Purshottam Kumar Gupta
Rs. 2,74,500 D/D in the name of Surajpal Gupta
Rs. 4,55,000 D/D in the name of Ramnarayan Gupta
Rs. 12,97,500
However, we find that the D/D taken in the name of Surajpal Gupta is only for Rs. 2,74,500. As per his statement, he came to Amalner only in May/June 1994 and thereafter he got his name registered with Krishi Mandi Utpadan Samiti in July-August, '94, however, the dates of D/D are as under:
28.1.94, 19.2.94, 15.3.94, 19.4.96 and 27.4.94 These D/Ds are in the name of Purshottam Narayan Gupta and Purshottam Kumar Gupta.
The dates of D/Ds in the name of Suraj Pal Gupta are as under:
5.3.94, 15.3.94, 18.4.94 and 16.5.94 Thus, when as per his own statements, they started business after July '94 and after visit to Amalner in May-June, 1994, how can D/Ds of earlier dates be correlated with raw tobacco supplies, which are alleged to have been made by him to the appellants. Further, no statements are recorded of Purshottom Narayan Gupta and Purshottam Kumar Gupta in whose names D/Ds are obtained. Thus, when the D/Ds cannot be correlated with even deposition in the statement and there are major contradictions and discrepancies as pointed out earlier, we cannot uphold the Commissioner's reliance on the evidence by way of D/Ds obtained in various names and referred in Annexure B(a) to the Show Cause Notice.
38. We further find that in Annexure B(18) - D/Ds are not considered by the Dept. as referable documents and thus not relied upon for raising the demand. In view of the above, we hold that placing reliance on the D/Ds drawn in various names and confirmation of demand on their basis is not correct.
39. The Ld. Commissioner has relied upon the following judgments in support of his conclusion.
(1) Asst. Collector of Central Excise, Rajamundry v. Duncan Agro India Ltd., 2000 (71) ECC 233 (SC) : 2000 (120) ELT 280 (SC) on the proposition that the statement recorded by a Customs Officer under Section 108 is a valid evidence. Further, the Hon'ble Supreme Court has observed as under (para 4) "Nonetheless the caution contained in law is that such a statement should be scrutinized by the Court in the same manner as confession made by an accused person to any non-police personnel. The Court has to be satisfied in such cases, that any inculpatory statement made by an accused person to a Gazetted Officer must also pass test prescribed in Section 24 of the Evidence Act. If such statement is impaired by any of the procedure enumerated in Section 24 that statement becomes useless in any criminal proceedings".
(2) Further, he relied upon the Judgment reported in 1996 (83) ELT 258 (S.C.) in the case of Shri Naresh J. Sukawani v. Union of India, to stress on the proposition that a statement before a Customs Officer is a material piece of evidence and certainly can be used as substantive evidence.
As stated supra, all the statements given by the witnesses have been retracted and there is no corroborative documentary evidence to substantiate such statements. Therefore, in the absence of any link document to establish a fact, it is not proper to rely upon such statements to come to conclusion in cases of this nature where clandestine removal is alleged. This view is supported by the Judgment of the Supreme Court in the case of State of Maharashtra v. Shri P.K. Pathak, 19S3 ELT 1628 (SC). The Ld. Commissioner relied upon this Judgment, but has not followed its implications underlying the ratio.
40. On the contrary, the Ld. counsel for the appellants has relied upon the following Judgments in support of their contention.
(i) Rajesh Casting Pvt. Ltd. v. Commissioner of Central Excise, Nagpur, 2004 (95) ECC 284 (T) : 2004 (178) ELT 698 (Tri.-Mumbai).
It is held in this case that clandestine removal of C.T.D. bars alleged on the basis of receipt of excess inputs from ingots suppliers and entries made in Receipt Register but there was no evidence on record for receiving and utilizing excess quantity of ingots. Such evidence may lead to doubts against the assessee but cannot take the place of legal evidence.
(ii) New India Dyeing & Finishing Mills v. Commissioner of Central Excise, Chandigarh, 2004 (165) ELT 598 (Tri.-Calcutta).
In this case, it is ruled that clandestine manufacture and clearance of processed fabrics would not establish when allegation is based on recovered sale bills and retracted statements from buyers and when excess of raw material or finished products are never found in the appellants premises despite several surprise checks by the Dept.
(iii) Shalimar Rubber Industries v. Collector of Central Excise, Cochin, 2002 (84) ECC 718 (SC) : 2002 (146) ELT 248 (SC) It is observed that the demand, penalty and confiscation cannot be upheld entirely based on oral statement of the raw material suppliers that certain inputs were supplied to the assessee under fictitious names and where the Dept. presumed clandestine production of finished products and that no reliance can be placed on the retracted statements.
41. Further, he relied upon the following:
(i) Chariot Cement Co. v. Commissioner of Customs & Central Excise, BBSR-II, 2003 (161) ELT 598 (Tri.-Calcutta).
(ii) Durga Trading Co. v. Commissioner of Central Excise, Lucknow, 2003 (162) ELT 245 (Tri.-Delhi).
(iii) Kothari Products Ltd. and Ors. v. Commissioner of Central Excise, Kanpur & Commissioner of C. Ex., Kanpur v. Kothari Products Ltd., 1999 (31) RLT 67 (CEGAT).
(iv) Saheli Synthetics Pvt. Ltd. v. Collector of C. Ex., Vadodara - 1999 (133) ELT 1000 (Tri.).
(v) Gurpreet Ruber Industries v. Collector of C. Ex., Cochin, 2002 (84) ECC 718 (SC) : 2002 (146) ELT 248 (SC).
In all the above cases, it is settled legal position that for establishing clandestine clearance, there has to be a very strong evidence. In the instant case, the evidence let in by the Dept. do not even raise suspicion particularly in the background of the circumstances that number of visits/checks made by the various agencies prior to booking of the present case, at no time the officials did not find any unaccounted raw tobacco or any unaccounted production or clandestine clearance. While these checks were going on, the appellants themselves have cautioned about the possible apprehension of misuse of their name by their competitors and create problems to them. In order to prove supply of raw materials, there shall be positive evidence such as acknowledgements of consignee and the records maintained by them showing receipt of the goods. Nothing has been found in the instant case. In normal course, driver's statements would be helpful in proving and fact as to the supply of raw tobacco at a particular destination. But the authorities concerned have not recorded any statement of any of the drivers sent by the raw tobacco suppliers of transporters. On the date of interception of 90 cartons of raw tobacco, on immediate verification of the stock in the appellants' factory, no shortage or excess was found and no evidence in respect of unaccounted production or clearance.
42. Thus, after thorough analysis of the evidence on record and the circumstances of the case facts and considering the submissions made by both sides, an irresistible inference is that the family disputes and the complaints made by the family members of the appellants landed them in trouble in facing these proceedings, as otherwise nothing incriminating was found in the factory premises of the appellants during previous raids at relevant time. The evidence gathered, during the course of this investigation, is found insufficient to establish unaccounted production and clandestine removal of Jarda as alleged. Thus, the Department has failed to establish its case in satisfactory manner as alleged in the. Show Cause Notice.
43. Therefore, we hold the impugned order confiscating of 90 cartons of Jarda, the vehicle and the demand of Central Excise duty on the main appellants; imposition of penalty and interest cannot be sustained. Consequently, the penalties imposed on the other appellants under Rule 209A is also not sustainable.
44. Since we are allowing the appeals on merits, we are not inclined to go into other alternative arguments regarding valuation and rate of duty raised by the Ld. counsel in the appeal and during the course of hearing.
45. Accordingly, we set aside the impugned order as far as these appellants are concerned and allow the appeals with consequential relief, if any.