Custom, Excise & Service Tax Tribunal
Sarin & Sarin vs C.C.E Kanpur on 3 March, 2026
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Excise Appeal No.721 of 2007
(Arising out of Order-in-Appeal No.466-470-CE/APPL/KNP/2006 dated
14.09.2006 passed by Commissioner (Appeals) Customs, CGST & Central
Excise, Kanpur)
M/s Sarin & Sarin, .....Appellant
(17/195, Chhili Int. Road, Agra)
VERSUS
Commissioner of Central Excise &
CGST, Kanpur ....Respondent
(117/7, Sarvodaya Nagar, Kanpur)
WITH
Excise Appeal No.722 of 2007
(Arising out of Order-in-Appeal No.466-470-CE/APPL/KNP/2006 dated
14.09.2006 passed by Commissioner (Appeals) Customs, CGST & Central
Excise, Kanpur)
Shri Deepak Mehra, Authorized Signatory .....Appellant
(17/195, Chhili Int. Road, Agra)
VERSUS
Commissioner of Central Excise &
CGST, Kanpur ....Respondent
(117/7, Sarvodaya Nagar, Kanpur)
AND
Excise Appeal No.724 of 2007
(Arising out of Order-in-Appeal No.466-470-CE/APPL/KNP/2006 dated
14.09.2006 passed by Commissioner (Appeals) Customs, CGST & Central
Excise, Kanpur)
M/s Basudeo Prasad & Sons (Tobacconist), .....Appellant
(Shyam Market,
Johri Bazar, Agra)
VERSUS
Commissioner of Central Excise &
CGST, Kanpur ....Respondent
(117/7, Sarvodaya Nagar, Kanpur)
APPEARANCE:
Shri Rahul Agarwal, Advocate, Shri Tafseer Aftab, Advocate & Ms.
Ishita Farsaiya, Advocate
Shri Santosh Kumar, Authorized Representative for the Respondent
Excise Appeal No.721 of 2007
2 Excise Appeal No.722 of 2007
Excise Appeal No.724 of 2007
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
FINAL ORDER NOs.- 70062-70064/2026
DATE OF HEARING : 18.11.2025
DATE OF PRONOUNCEMENT : 03.03.2026
This is the second round of litigation before the Tribunal.
The Tribunal vide Final Order Nos.51005-51007/2014 dated
13.03.2014 had allowed the appeals filed by the Appellants. The
Revenue had filed an appeal being Excise Appeal No.209 of 2014
before the Hon'ble Allahabad High Court assailing the order
dated 13.03.2014 passed by the Tribunal. The Hon'ble Allahabad
High Court vide its judgement dated 03.11.2014 passed in the
said Central Excise Appeal No.209 of 2014, remanded the matter
back to the Tribunal for fresh consideration on merits and
evidence on the issue of levy of penalties on the assessee. The
relevant portion of the order is as below:-
"In our view, the Tribunal has erred in ignoring material
evidence and has not recorded any findings for setting
aside the penalty imposed by the Adjudicating Officer. No
reason has been recorded for setting aside the penalties.
After careful consideration of the matter, we are of
the view that the finding of the Tribunal, setting aside the
penalties imposed by the Adjudicating Officer needs to be
interfered with. Accordingly, it is set aside. The matter is
remitted to the Tribunal to reconsider the matter on the
question of penalties afresh.
The appeal is, accordingly, disposed of. There shall
be no order as to costs."
2. The assessee had thereafter preferred a review
application before the Hon'ble Allahabad High Court, being
Review Application No.14877 of 2015, for review of aforesaid
order dated 03.11.2014 passed by it. The Hon'ble Allahabad
Excise Appeal No.721 of 2007
3 Excise Appeal No.722 of 2007
Excise Appeal No.724 of 2007
High Court disposed of the aforesaid review application vide its
order dated 21.08.2025, passing the following order:-
"1. Heard learned counsel appearing on behalf of the
parties.
2. Upon perusal of the order under review and the
submissions made by Sri Rahul Agarwal, learned counsel
appearing on behalf of review applicant, we are of the view
that the finding in the appeal should be treated as
tentative and not binding on the Tribunal.
3. In light of the same, we dispose of this review
application simplicitor with a direction that the Tribunal
shall act on the order dated November 3, 2014 without
taking into consideration the observation made in the said
order.
4. We make it clear that the finding in appeal before the
High Court was only to decide the substantial questions of
law and the findings there are tentative in nature.
5. With the above observations, the review application is
disposed of."
3. The facts of the case in brief are that the Appellant, a
partnership firm, was engaged in the manufacture of Pan Masala
and Gutkha under the brand name of 'Gold Mohar' and was
registered under the Central Excise Act, 1944. The Appellant
duly supplied goods to dealers and other persons. The
Appellant's premises and the premises of one Basudeo Prasad &
Sons (Tobacconist) and another M/s Jain General Stores were
searched on 20.01.2003 by the officers of DGCEI, New Delhi and
Regional Unit, Kanpur. The factory premises of the Appellant was
searched in the presence of Shri Anil Sarin, Partner,
Rs.3,46,000/- was seized under Section 121 of the Customs Act,
1962 as made applicable to Central Excise vide Section 12 of the
Central Excise Act, 1944 on basis of the unsubstantiated
allegation that the said sum was from the sale proceeds of
unaccounted goods removed clandestinely by the Appellant.
Furthermore, the residential premises of the partners, Shri Davi
Excise Appeal No.721 of 2007
4 Excise Appeal No.722 of 2007
Excise Appeal No.724 of 2007
Sarin and Shri Anil Sarin were searched in the presence of Shri
Davi Sarin. The residential premises were occupied by the
parents of Shri Anil Sarin and Davi Sarin as also their spouses.
At the residence of the partners, cash amounting to
Rs.15,97,000/- was recovered and seized under Section 121 of
the Customs Act on basis of the unsubstantiated allegation that
the said sum was from the sale proceeds of unaccounted goods
removed clandestinely by the Appellant. The total cash seized
amounted to Rs.19,43,000/- (OIO at pp 60 and 61 of PB 1). The
Department also physically verified the stock of raw material and
allegedly found shortage in the stocks of cut supari, katha and
laminated packing material (O1O at pp 63 of PB 1) and alleged
that the same was used to manufacture unaccounted goods
which were removed clandestinely. During the search, the
Appellant was made to deposit Rs.1,81,006/- vide PLA Entry
No.1683 dated 20.01.2003. At the premises of Basudeo Prasad &
Sons, the following seizures were made:-
a. 170 bags of Gold Mohar Zarda valued at Rs.11,60,159/-
b. 16 bags of Gold Mohar Pan Masala Sada valued at
Rs.1,98,263/-
c. 420 small tin boxes of 100 gm each of Gold Mohar Pan
Masala valued at Rs.18,920/-
d. Thus, a total of goods worth Rs.13,77,342/- were seized
e. During the search, the books and stock registers of
Basudeo Prasad & Sons were also examined.
4. Later on, the partner of Basudeo Prasad & Sons filed a
letter explaining its books and stock registers. The premises of
M/s Jain General Stores were also searched but the facts of the
same are not discussed as they are no longer a subject of the
present appeal.
5. Details of Show Cause Notice1 dated 16.07.2003 (at
p. 58 of PB 2)
1
SCN
Excise Appeal No.721 of 2007
5 Excise Appeal No.722 of 2007
Excise Appeal No.724 of 2007
The Appellants were issued SCN dated 16.07.2003 (SCN-1) for
confiscation of the seized goods and recovered currency. The
Appellant and Basudeo Prasad & Sons were asked to show cause
as to why (SCN at p. 69 of PB 2):-
a. the total cash seized amounting to Rs.19,43,000/- not
be confiscated under Section 121 of the Customs Act.
b. Basudeo Prasad & Sons were asked to show cause as to
why the total of goods worth Rs.13,77,342/- should not be
confiscated under Rule 25 of the CER 2002.
6. Details of SCN dated 02.05.2005 (at p 134 pf PB 2)
The Appellant was also issued SCN dated 02.05.2005 (SCN-2)
pertaining to allegation arising on account of unaccounted
manufacture of goods basis the discovery of wastage. Prior to
issuing the SCN, the Department during the investigation,
sought from the Appellants, the composition formula of Pan
Masala and Gutkha. The Appellant vide letter dated 24.02.2004
submitted the composition formula (RUD-6 of SCN dated
16.07.2003) of Pan Masala & Gutkha. The formula supplied by
the Appellant was compared by the officers from the register of
un-cut Supari and Form-IV Register. Comparing the formula with
the above said register, the officers came to the conclusion that
the Appellant suppressed the figures of the cut supari issued for
manufacture of Sada Pan Masala and Gutkha. Statement of Shri
Deepak Mehra, Authorized Signatory of the firm (RUD-8 of the
SCN) was obtained on 18.01.2005. Shri Deepak Mehra also
submitted the documents related to sale and purchase of raw
materials. No separate statement was recorded by the Officers
from Davi Sarin, partner of Appellant firm but his dated
signature was obtained on the statement of Shri Deepak Mehra.
The Appellant deposited Rs.25,00,000/- under protest. SCN-2
contained the following assumptions and allegations:-
Excise Appeal No.721 of 2007
6 Excise Appeal No.722 of 2007
Excise Appeal No.724 of 2007
a. The total quantity of Cut Supari received in Form-IV
Register was actually used in the manufacture of final
product and no further wastage at any point occurred
during the filling of pouches of Sada Pan Masala & Gutkha.
The same was assumed basis the statement of Deepak
Mehra's statement and Form-IV Register (RUD-5 of SCN
dated 16.07.2003).
b. The Appellant consumed more raw material instead of
the raw material shown in the documents.
c. The proportion of cut Supari in the manufacture of Pan
Masala & Gutkha was more than 77% as such, the
quantity of un-accounted for finished goods manufactured
from the un-accounted for raw material has been
calculated on the basis of the cut supari consumption.
d. The Appellant was paying over-time to their workers
and on the basis of the availability of the machines, their
normal working hours and capacity of the machines, it was
concluded that the Appellant manufactured and cleared
Pan Masala, Gurkha without payment of Central Excise
duty.
e. Two separate Chart Annexures-A&B of the SCN were
prepared to conclude that the Appellant consumed more
raw material in comparison to the formula submitted by
Shri Deepak Mehra.
f. On the basis of the above Chart, it was concluded that
the Appellant manufactured and cleared un-accounted for
Pan Masala Gutkha valued at Rs.54,80,131/- As such the
Appellant evaded duty of Rs.32,88,080/-.
7. Thus, the Appellant was asked to show cause against the,
inter alia, following proposed levy of duty and penalty:-
a. Central Excise duty amounting to Rs.1,81,006/-
involved on the shortage found on 20.01.2003 of 603350
Excise Appeal No.721 of 2007
7 Excise Appeal No.722 of 2007
Excise Appeal No.724 of 2007
number of pouches of Gold Mohar Brand Gutkha valued at
Rs.3,01,6751/- and voluntarily debited by them
through P.L.A. Entry No.1683 dated 20.01.2003.
b. Central Excise duty amounting to Rs.1,71,149/-
involved on the un-accounted manufacture of Gold Mohar
Sada Pan Masala with the help of cut Supari which was not
explained and reflected in their stock register, clearances.
c. Central Excise duty amounting to Rs.32,88,080/-
involved on the un-accounted manufacture of Gold Mohar
Gutkha valued at Rs.54,80,131/- with the help of cut
Supari which was not explained and reflected in their stock
register, clearances of 1,09,60,262 number of pouches of
Gold Mohar Brand Gutkha.
d. Penalty under Section 11AC and Rule 25 not be
imposed.
e. Appropriation of Rs.25 lakhs towards duty demanded
above.
8. Details of Replies to SCN dated 25.09.2003 (at p. 157 of
PB 2) and 27.07.2005 (at p. 382 pf PB 2)
Detailed replies were submitted by the Appellant and Basudeo
Prasad & Sons along with documents. The case of the Appellant
as indicated in the replies is as under:-
a. That no proper opportunity was given to the Appellants
to explain the currency at the premises. No statement of
Anil Sarin in the RUD to show that he could not explain the
cash of Rs.3.5 lakhs.
b. That cash of Rs.3.46 lakhs received as proceeds from
sale of car to Rajeev Agarwal and same is supported by
Affidavits.
c. The Department has no material/documentary evidence
to establish that Rs.15.9 lakhs were proceeds of goods
clandestinely removed or that any material was in fact
clandestinely removed.
Excise Appeal No.721 of 2007
8 Excise Appeal No.722 of 2007
Excise Appeal No.724 of 2007
d. The currency of Rs.15.9 lakhs belonged to the Sarin
family and had arisen from sale of Gold Bullion. To
establish the same, income tax certificates were duly
shared as evidence.
e. With regards the goods at Basudeo Prasad & Sons, all
14 invoices along with Pappu long books were submitted to
establish that the goods seized were duty paid. During the
investigation, a detailed letter dated 31.01.2003 was filed
but the same was not considered.
9. Order-in-Original dated 17.11.2005 (at p. 58 of the PB
1)
The AO went ahead and confirmed the demands proposed in the
SCN without considering the detailed replies furnished by the
Appellant (Findings from p. 101 of the PB). Aggrieved by the
Order-in-Original the Appellant filed an appeal before the
Commissioner Appeals (at p 500 of the PB 2). However, the
detailed grounds and submissions of the Appellant were not
considered, and the Commissioner (Appeals) confirmed the
Order-in-Original. The followings findings were arrived at in the
OIA (findings from p. 42 of the PB 1) Order-in-Appeal No.466-
70-CE/APPL/KNP/06 dated 14.09.2006 (at p. 31 of the PB 1).:-
a. OIA confirmed the confiscation of goods of Basudeo
Prasad & Sons basis the following findings:-
i. As per the Department a business is required
to keep some books of accounts, and they
don't alter or re-write them. The fact that
Basudeo Prasad & Sons kept the records in
pencil to be able to re-write the books
indicated connivance.
Excise Appeal No.721 of 2007
9 Excise Appeal No.722 of 2007
Excise Appeal No.724 of 2007
ii. That the stock maintained in pencil did not
tally with the actual stock found during
physical verification.
iii. The above indicated connivance.
b. OIA confirmed the confiscation of cash seized at the
premises of the Appellant and rendered the following
finding (at p. 43 and 44 of the PB 1):-
i. The explanation furnished for cash at home is
not probable as income. The reason for
keeping the huge amount of cash and not
depositing the same is unexplained.
ii. The reasons furnished later by the Appellant
are an afterthought as they were not given at
first instance.
iii. The explanation of Rs.3.46 lakhs recovered
being the sale of motor vehicle to Rajeev
Agarwal for Rs.3.5 lakhs is not satisfactory as
Rs.4000/- was not accounted for/vanished is
not explained.
c. OIA also confirmed the levy of duty demand of
Rs.1,71,149/- and Rs.32,88,080/- and gave the following
findings:-
i. Appellants were accounting for the wastage in raw
material in their Form-IV register. In their
statements, Shri Deepak Mehra & Shri Davi Sarin
have agreed that total quantity of Cut Supari shown
as issued for manufacture of excisable goods is
wholly converted into final finished goods i.e.
Gutkha/ Pan Masala and there will be no
loss/wastage during packing also. These statements
Excise Appeal No.721 of 2007
10 Excise Appeal No.722 of 2007
Excise Appeal No.724 of 2007
were recorded later and not at time of search. An
extract is hereunder:
"The Appellants have consumed cut supari as per
their records and, therefore, in accordance with their
own composition formula and their being no wastage
after issuance of raw material, it is unbelievable that
there is any further wastage. Further, the Appellants
have given an example of showing figures of
wastages in quantitative tally register for the month
of March 2004, while I observe that the raid was
conducted in Januaгу, 2003.
Had the Appellants shown the wastage earlier also,
they would have given example for the said period
before the raid. This clearly shows that they were
not showing any wastage in quantitative tally
register before Jan 2003 and later showing the
wastage is a clear afterthought."
d. Penalty was confirmed in case of Sarin and Sarin and
set aside in case of the Partners (at p. 46 para 5).
10. Aggrieved by the above order, appeal was filed before the
Tribunal. The Tribunal vide Final Order Nos.51005-51007/2014
dated 13.03.2014 allowed the appeals filed by the Appellants.
Being aggrieved, the Revenue filed an appeal being Central
Excise Appeal No.209 of 2014 before the Hon'ble Allahabad High
Court assailing the Final Order Nos.51005-51007/2014 dated
13.03.2014 passed by the Tribunal. The Hon'ble High Court
remanded the matter to the Tribunal.
11. The learned Advocate appearing on behalf of the
Appellants made the following submissions:-
Submissions against seizure of cash amounting to
Rs.19,43,000/- (Rs.3,46,000/- and Rs.15,97,000/-):-
Excise Appeal No.721 of 2007
11 Excise Appeal No.722 of 2007
Excise Appeal No.724 of 2007
a. The cash seized was not received against any goods
clandestinely removed. The said allegation of the
Department is without any basis and not supported by any
cogent evidence.
b. The cash of Rs.15.97 lakhs found at the residence of the
Sarin family belonged to the family and the same arose
from various sources which include sale of gold bullion and
bars by Rani Sarin (mother of Anil and Davi Sarin), Nitin
Sarin (S/o of Davi Sarin), Rishi Sarin (S/o Davi Sarin),
Bela Sarin (w/o of Davi Sarin), Davi Sarin, Anil Sarin and
Abha Sarin (w/o of Anil Sarin), agricultural receipts of Davi
Sarin and Anil Sarin and some consideration for property
received by Anil Sarin ( page 160 to 163 of PB 2). All
supporting evidences were also supplied (at p. 178 of the
PB 2)
C. The details of the supporting evidence furnished by the
Appellant are as under:-
Sr. Particulars Amount Page in Details and Affidavit
No. to whom (Rs.) Reply to Page No. of s in
the cash SCN relevant Support
belonged dated annexure
25.09.20
03 (p.
157
onwards)
1. Rani Sarin 2,17,894 160 A at p. 180 H at p.
W/o of (Certificate 222
R.N.S. of ACIT for
Sarin Opening Cash
Balance
Rs.2,09,800)
A1 at p. 181
(sale
voucher of
Bullion
Rs.8,094)
2. Davi Sarin 3,82,659 160 B at p. 182 I at p.
(Certificate 225
of ACIT for
Opening Cash
Balance
Rs.72,000)
Excise Appeal No.721 of 2007
12 Excise Appeal No.722 of 2007
Excise Appeal No.724 of 2007
B1 at p. 183
(Sale
proceeds
from
agriculture
operations
-
Rs.3,00,000) B2 at p. 184 (sale voucher of Bullion Rs.10,659)
3. Nitin Sarin 11,231 161 C at p. 185 S/o of Davi (Certificate Sarin of ACIT for Opening Cash Balance Rs.3,545) C1 at p. 187 (sale voucher of Bullion Rs.7,686)
4. Nitin Sarin 7,629 161 D at p. 188 S/o of Davi (sale Sarin voucher of Bullion)
5. Bela Sarin 83,206 161 E at p. 189 J at p.
W/o of Davi (Certificate 256
Sarin of ACIT for
Opening Cash
Balance
Rs.72,340)
E1 at p. 190
(sale
voucher of
Bullion
Rs.10,866)
6. Anil Sarin 8,50,163 162 F at p. 191 K at p.
(Certificate 260
of ACIT for
Opening Cash
Balance
Rs.47,500)
F1 at p. 192
(Sale
proceeds
from
agriculture
operations
-
Excise Appeal No.721 of 2007
13 Excise Appeal No.722 of 2007
Excise Appeal No.724 of 2007
Rs.1,00,000)
F2 at p. 183
(sale
voucher of
Bullion
Rs.6,863)
F3 at p. 194
(sale of
salvage of
building
material -
Rs.2,95,800)
F4 at p. 215
(Part Sales
Considerati
on of shop -
Rs.4,00,000)
7. Abha Sarin 47,800 162 G at p. 221 L at p.
W/o Anil (Certificate 249
Sarin of ACIT for
Opening Cash
Balance
Rs.47,800)
d. It cannot be argued by the Department that replies of the Appellant are an afterthought, considering that the Appellant has relied on certificates issued by the Assistant Commissioner of Income Tax, Circle-1, Agra. It must be noted that the Appellant was unable to explain the source of cash at the time of search as all the documents were with the Department. Furthermore, at the time of search, no proper opportunity was given to Davi Sarin and Anil Sarin to explain the source of cash by going through their records. The Department has rejected the explanations and supporting documents furnished by the Appellant without any specific finding and without any document disproving the Appellant's submissions. e. It is submitted that cash of Rs.3.5 lakhs was received from Rajeev Agarwal towards sale of the Appellant's Toyota Qualis Car. The said fact has been supported by an affidavit from Rajeev Agarwal. Mr. Anil Sarin had taken Rs.4000/- out of the cash received for day to day Excise Appeal No.721 of 2007 14 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 expenses. Details of the relevant documents and submissions are as under:-
Particulars Details in Reply Annexure
Affidavit of Shri p. 164 Annexure M at p.
Rajeev Agarwal 273
affirming the
particulars of sale
of Qualis Car
Affidavit of Shri P. 164 Annexure N at p.
R.N.S. Sarin 276
f. No statement of Anil Sarin was taken at the time of search. Mere non-recovery of Rs.4,000/- cannot be any basis for treating the cash of Rs.3.46 lakhs as cash from sale of clandestinely removed goods, especially considering that the OIA and OIO have not been to controvert the submissions of the Appellant with any substantial finding or document.
g. The allegation that cash was from sale of clandestinely removed goods is not supported by any documentary evidence and cannot be sustained in law.
Submissions against the confiscation of goods found at the premises of Basudeo Prasad & Sons:-
I. The findings in the OIA and OIO have been returned without considering the submissions of the Appellant and Basudeo Prasad & Sons and are based on surmises and conjectures.
II. Basudeo Prasad & Sons were not required to maintain any books of accounts (in law). Merely because they kept records in pencil so as to finalize them after verification, cannot be any basis to hold that they were manipulating their books. In fact, the very allegation that books did not tally with stock in godown is the reason why records first in pencil are made so that after due reference with Pappu Long Books, the stock register could be maintained. III. The Department failed to appreciate that all 14 invoices for the goods seized were entered in the Excise Appeal No.721 of 2007 15 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 PLA Register and duly entered in the Pappu Long Books of Basudeo Prasad & Sons (see p. 173 of the PB 2 for details of invoice). These details were part of reply dated 25.09.2003. But same has not been considered. Pappu Long Books were the basic document, basis which stock reference book was maintained in pencil.
IV. Basudeo Prasad & Sons filed letter dated 31.01.2003 (see p. 164 of the reply and Annexure O at p. 277) stating that goods seized were duty paid and invoices were issued. The said letter was not considered, but Department on a half-baked information and basis has confirmed the confiscation of the goods.
V. The finding of alteration of record and connivance between Basudeo and Appellant as contained in the OIA are not maintainable as all 14 invoices basis which goods were cleared have been entered in the Pappu Long Book which was not considered by the OIO and OIA thereafter. The documents filed i.e. the Pappu Long Books and details of invoices referring to the goods prove that goods valued at Rs.13.77 lakhs are duty paid and cannot be confiscated.
VI. The details of the above mentioned supporting documents/ evidences submitted by the Appellant are as under:-
Sr. Particulars Details in Annexure
No. Reply dated to the
25.09.2003 Reply
1. Letter dated 31.03.2003 p. 165 para 18 O at p.
contained the 14 invoices issued 277
by M/s Sarin and Sarin for the
duty paid goods which were
confiscated. The details of the
Excise Appeal No.721 of 2007
16 Excise Appeal No.722 of 2007
Excise Appeal No.724 of 2007
invoices are shared in the next
table.
2. Extract of the Ledger of the p. 166 at para P at p.
Appellant reflecting the four 22 296
invoices
3. Extract of PLA showing payment p. 165 para 22 Q at p.
of duty and 23 297
4. Pappu Long Book of Basudeo p. 172 at para R at p.
Prasad & Sons 40 298
5. Protest Letter dated 07.04.2003 p. 175 at para S at 370 against confiscation 49 Details of the Invoices Filed INVOICE DATE BAGS VALUE PAGE NO.
NO.
Submissions regarding the invoice of Pan Masala Gutkha are made from p. 173 para 41 onwards and their details are as under:
1637 18.01.2003 30 Rs.2,04,734.00 289 1635 18.01.2003 30 Rs.2,04,734.00 282 1632 17.01.2003 40 Rs.2,72,979.00 283 1622 16.01.2003 40 Rs.2,72,979.00 284 1621 16.01.2003 30 Rs.2,04,734.00 285 1616 15.01.2003 20 Rs.1,36,490.00 286 1615 15.01.2003 30 Rs.2,04,734.00 287A TOTAL 220 Rs.15,01,384.00 Submissions regarding the invoices of Sada Pan Masala are made from p. 174 para 45 onwards and their details are as under:
1611 14.01.2003 9 Rs.1,17,306.00 288 1574 08.01.2003 9 Rs.1,17,306.00 372 1525 31.12.2002 4 Rs.58,653.00 290 1457 20.12.2002 9 Rs.1,16,975.60 291 Excise Appeal No.721 of 2007 17 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007B TOTAL 31 Rs.4,10,240.60 Submissions regarding the invoices of Sada Pan Masala in Tins are made from p. 175 para 46 onwards and their details are as under:
1636 18.01.2003 310 Rs.13,965.00 292 1595 11.01.2003 310 Rs.13,965.00 293 1552 04.01.2003 310 Rs.13,965.00 294 C TOTAL 930 Rs.41,985.00
TOTAL of Rs.19,53,609.00
A+B+C
VII. The above documents have not been controverted by the Department and therefore ought to be relied upon.
VIII. It is submitted that if Basudeo Prasad & Sons failed to maintain its books, then Appellant cannot be blamed for clandestine removal of goods.
Submissions against the levy of duty of Rs.1,81,006/-, Rs.1,71,149/- and Rs.32,88,080/- basis the allegation of unaccounted manufactured goods with raw materials not reflected in the stock register and clandestinely removed:-
I. The duty of Rs.1.8 lakhs has been wrongly confirmed. The panchnama at the time of search itself shows that shortages found in stock was used in the manufacture of goods lying on the floor and the same was not adjusted or taken into account. II. Thus, the basis of the OIA is illogical and not sustainable in law and fact. This lapse in the proceedings is further augmented by the fact that no documentary evidence brought on record by the Department to prove that Appellant cleared the Pan Excise Appeal No.721 of 2007 18 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 Masala and the Gutkha without payment of Excise Duty.
III. The Appellant was forced to deposit the duty during the search and the fact that duty was paid without any SCN and reasonable cause, indicates the high handedness of the Departmental Officers at the time of search and proceedings thereafter. IV. The levy of duty of Rs.32 lakhs and Rs.1.7 lakhs on basis of allegation that no wastage occurred beyond the first stage of manufacture without considering the quantitative stock register ('QTR') is again a half-position taken by the document in the absence of documentary evidence to prove that Appellant cleared goods without payment. Demand raised has been based on a formula duly entered in the QTR. However, the QTR has not been considered, which would clearly establish that no demand was leviable.
V. The basis of the formula furnished by the Appellant for which wastage has been shown is a composite formula taking into account wastage of Supari and other raw materials. The demand has been rasied basis the wastages accounted in the individual raw material account and ignoring the QTR data. VI. The Department despite having the onus of proof has not produced or relied on any corroborative evidence is to prove clandestine removal and instead has incorrectly relied on a pure theoretical line of argument to levy a high-pitched duty and a statement of Deepak Mehra which was obtained under pressure.
VII. The OIO and OIA suffers from non-application of mind and demand of duty is clearly not sustainable in law fact. Furthermore, the allegations of suppression of records and willful suppression do Excise Appeal No.721 of 2007 19 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 not survive considering that the Appellant has duly maintained registers and furnished the same.
12. The learned Departmental Authorized Representative appearing for the Revenue supported the findings recorded in the impugned order and prayed that the appeal filed by the Appellant, being devoid of any merits, may be dismissed.
13. Heard both the sides and perused the appeal records.
14. I find that the cash seized was not received against any goods clandestinely removed. The said allegation of the Department is without any basis and not supported by any cogent evidence. It is submitted that the cash of Rs.15.97 lakhs found at the residence of the Sarin family belonged to the family and the same arose from various sources which include sale of gold bullion and bars by Rani Sarin (mother of Anil and Davi Sarin), Nitin Sarin (S/o of Davi Sarin), Rishi Sarin (S/o Davi Sarin), Bela Sarin (w/o of Davi Sarin), Davi Sarin, Anil Sarin and Abha Sarin (W/o of Anil Sarin), agricultural receipts of Davi Sarin and Anil Sarin and some consideration for property by Anil Sarin.
All supporting evidences have been filed. The Department has rejected the explanations and supporting documents furnished by the Appellant without any specific finding and without any document disproving the Appellant's submissions. I find that cash of Rs.3.5 lakhs was received from Rajeev Agarwal towards sale of the Appellant's Toyota Qualis Car. The said fact has been supported by an affidavit from Rajeev Agarwal. Mr. Anil Sarin had taken Rs.4000 out of the cash received for day to day expenses. No statement of Anil Sarin was taken at the time of search. Mere non-recovery of Rs.4000 cannot be any basis for treating the cash of Rs.3.46 lakhs as cash from sale of clandestine removed goods, especially considering that the OIA and OIO have not controverted the submissions of the Appellant with any substantial finding or document. The allegation that cash was from sale of clandestinely removed goods is not supported by any documentary evidence and cannot be sustained in law. I find that the Tribunal in the case of S. Excise Appeal No.721 of 2007 20 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 Kotteswaran vs. Collector of Central Excise (Customs), Madras 1997 (91) E.L.T. 435 (Tri.-Mad.). The above case is of currency seized under the Customs Act and it has been held that the burden to proof is on the Department that the money seized represented the sale proceeds of smuggled goods. Mere non- accountal as to receipts of money is not sufficient to hold it as sale proceeds of the smuggled goods. The relevant paragraphs are reproduced as under:-
"5. The next ground which is relied on in the impugned order is that this amount is not properly accounted by the above three appellants. But the appellants had clearly mentioned that this amount was brought to the notice of the Income Tax Department. They have also received Assessment Orders in this regard. The learned adjudicating officer held that the appellants have not maintained accounts with respect to these amounts and those particulars are not produced. But in this case, Indian Currency is not a notified item. The burden is on the Department to prove that this amount represents the sale proceeds of smuggled goods. There is no statement from any person that this amount represented the sale proceeds of smuggled goods. In all such cases, the Department must putforth some reliable evidence in order to discharge their initial burden.
6. It is no doubt proved that the Department is not expected to prove all their cases with mathematical precison but all the more it is necessary that they should produce some evidence in order to discharge the initial burden cast on the Department. Once if the initial burden is discharged by the Department, then the onus shifts on to the appellants. The Department cannot start with the evidence produced by the appellants. They must have some evidence on their side to discharge their burden. Hence it will not be correct to hold that in view of the fact that the appellants have not produced accounts it should be held as something obtained by the sale of smuggled silver. The relevant observation of the adjudicating authority is found at Paras 127 to 130 of the impugned order:
"127. On the perusal of the statement of Shri V. Somasundaram, it is found that while explaining the Excise Appeal No.721 of 2007 21 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 documents seized he stated that the document Sl. No. 33 relates to the amount of sale proceeds of the smuggled silver bars. As per the said document Shri Somasundaram had written as having received Rs. 10,10,000/- on 15-11-1990. A perusal of the said document, I find that he has written on "Yuvaraja" 5 + 5 = 10 Rs. 15,00,000/- when this particular document was shown to Shri V. Somasundaram on 11-1-1991 by the Investigating Officers, when he appeared as per Court directions, he not only refused to explain about the receipt of Rs. 10,10,000/- being the realisation of sale proceeds of the smuggled silver bars but also refused to divulge any information. Shri Somasundaram also refused to give any statement on the above aspect and walked away. These details were available in the reply telegram dated 14-1-1991 and 17-1-1991 sent by the Assistant Collector (Preventive) and Superintendent (Preventive) in response to the telegram No. 661 dated 12-1-1991; 662 dated 12-1- 1991 received from Shri Somasundaram.
128. The documents seized from Shri V. Somasundaram bearing Sl. No. 33 as detailed supra clearly indicates that an amount of Rs. 15,00,000/- was received by Shri S. Yuvaraj from his father Shri V. Somasundaram on 15-11-1990. Therefore, the contention of the claimants that they are no way concerned with the activities of Shri Somasundaram, and that the amount does not belong to Shri V. Somasundaram is not correct.
129. Therefore, it is clearly noticed that the claimants have not substantiated their claim by giving the names of the persons and their addresses from whom they have received the said money for examining them as his witnesses. Therefore, I am not inclined to attach any importance or give credance to their plea in this regard.
130. In this circumstances, on consideration of all material evidences available on record, I am inclined to hold that the sum of Rs. 10,75,000/- recovered from the residence of Shri V. Somasundaram on 11- 12-1990 represents the sale proceeds of contraband silver within the meaning of Section 121 of the Excise Appeal No.721 of 2007 22 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 Cusoms Act, 1962 and as such the money liable for confiscation."
A perusal of this order goes to show that the adjudicating officer has stated that the claimants have not substantiated their claim by giving the names of the persons and their addresses from whom they have received the said money for examining them as witnesses. These appellants are the sons of Shri V. Somasundaram. The non-accountal of this amount by Shri Somasundaram or by the appellants is not sufficient to hold that this is the sale proceeds of smuggled goods. All that relied on by the learned adjudicating authority is the mention Yuwaraja 5 + 5 = (10) Rs. 15,00,000. This entry has no connection with the amount in question. In the statement of Shri V. Somasundaram, he has stated that this amount of Rs. 15,00,000/- represents the partial amount from the devotees of Lord Ayyappa. There is no nexus established between this amount of Rs. 15,00,000/- and the amount of Rs. 10,75,000/- seized in this case. Except these three appellants none else claimed the same. These three appellants admittedly are residing in the same premises from where the amounts are seized. Since there are no claimants for this amount there is no reason to dis-believe their version that they are the owners. The mere non- accountal as to the receipt of this amount by them is not sufficient to hold that these are sale proceeds of smuggled silver. The reason is that the burden is on the Department to prove the same. The mere non-accountal of the amount and as to how they received the same is not sufficient evidence to hold that these are sale proceeds of smuggled silver. The Income Tax Department may have some cause of action against the appellants in this matter. But as far as the Customs authorities are concerned, this piece of evidence i.e. non-explanation of its acquisition by these appellants is not sufficient to prove that these represent the sale proceeds of smuggled goods. The Department should have produced some initial evidence to discharge their onus and if they have done so, then in that case the non-explanation of these appellants taken together may have constituted the case against them. But the Department cannot throw the burden on the appellant to prove their acquisition of this amount and in the absence of that proof it cannot be held that this amount represents the sale proceeds of smuggled goods. In this view of the matter, we hold that the confiscation of the above said Excise Appeal No.721 of 2007 23 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 amount are not in accordance with the law and we set aside the same and order that these amounts be returned to the appellants. The appeals are accordingly allowed."
15. Further, in the case of Pandit D.P. Sharma vs. CCE, Calcutta-II 2001 (137) E.L.T. 692 (Tri.-Cal.) the Tribunal held that onus to proof that the sale proceeds is of clandestinely removed goods lies on the Revenue, which is to be discharged by production of an affirmation, tangible and positive evidence. The relevant paragraph is reproduced as under:-
"12. We find force in the above submissions of the learned Advocate. It has been laid down time and again in various judgments that the onus to prove that the Indian Currency in question is the sale proceeds of the clandestinely removed goods is upon the Revenue, which is required to be discharged by production of an affirmative tangible and positive evidence. In the instant case, we find that the Cash was recovered from different places and from the possession of different persons. Nothing has been placed on record to show that the same is the sale proceeds of the goods removed clandestinely during February, 1994 to August, 1994, when the same were recovered in the month of October, 1995. As such, we fully agree with the submissions of Dr. Chakraborty, learned Advocate for the appellants, that it is highly improbable that the Cash seized would represent the sale-value of the goods made during February, 1994 to August, 1994. Accordingly, we hold that the condition precedent for confiscation of Indian Currency does not stand satisfied in the instant case. We accordingly set aside the portion of the Order confiscating the Indian Currency and order its release to the appellants."
16. Further, in the case of Patidar Products vs. CCE & ST, Bhavnagar (2023) 9 Centax 231 (Tri.-Ahmd.) it was held that confessional statements of various persons such as proprietor of assessee firm, raw material suppliers, transporters and various buyers, recovery of kachcha chits and huge amount of Indian currency from residential premises of proprietor of assessee firm and seizure of finished goods in factory premises found loaded in truck without any documents could not be grounds to uphold Excise Appeal No.721 of 2007 24 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 charge of clandestine removal in absence of any other corroborative evidences in form of receipt and utilization of raw materials, excess consumption of electricity, transporter's documents, receipt of consideration etc., especially when persons giving statements were not offered for cross- examination before Adjudicating Authority. Indian currency seized during investigation from residential premises of assessee could not be confiscated in absence of any evidence to show that same was sale proceeds of excisable goods cleared clandestinely without payment of duty and onus of proof lies on the Department. The relevant paragraphs are reproduced as under:-
"1.3 During the search proceeding at factory premises of M/s Patidar it was observed that one Mini Truck was lying loaded with finished goods. No documents/records of the above said finished goods were found in the said factory premises or were produced by Shri Rajubhai Panchambhai Vikali , Supervisor-cum-watchmen of M/s Patidar. Hence, the said finished goods as well as the said Mini Truck were placed under seizure. During the search operation on 13-7- 2011 at the residential premises of Shri Anil Govindbhai Metaliya, Proprietor of M/s Patidar, Cash amounting to Rs. 17,50,000/- was recovered. On being asked, Smt. Gitaben Anil Metaliya could not give any satisfactory reply in all the matters. Accordingly the said cash was placed under seizure under. panchanama dated 13-7-2011.
1.4 During the scrutiny of the 64 Kaccha Chits (Bill Book), recovered & seized from the residence premises of Shri Kirtibhai Finava, Supervisor of M/s Patidar and 01 Kaccha chits (Bills Book) recovered and seized from the residential premises of Shri Anil Metaliya, proprietor of M/s Patidar it appeared that these books contained the details of the clearance of the goods manufactured by M/s Patidar to its various dealers. During the scrutiny of the 24 coupon books, recovered & seized from the residential premises of Shri Kirti Bachubhai Finava, Supervisor of M/s Patidar, it appeared that these books contain details such as number of free coupons, name & place of the retailer/dealer of M/s Patidar and number of each and every coupon, so given to the retailer/dealer of M/s. Patidar. The officers recorded the statements of various persons in this matter. From the circumstantial/corroborative evidences in the form of Excise Appeal No.721 of 2007 25 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 documents/records/books seized and confessional statements it appeared that M/s Patidar had been indulging in large scale evasion of Central Excise Duty for last five years. Shri Sanjay Patel, Director of M/s Yesh Lamiprint Pvt. Ltd., Ahmedabad, in his statement dated 17-10-2011, has admitted to have sold roughly 5500 kg. of Flexible packing materials for Patidar Gutka to M/s Patidar during January 2009 and 10,000 pieces of outer plastic bags during the February 2009. He also explained that the quantity of pouches per Kg. could be 1200 pieces approximately. Similarly Shri Mahendra Patel, Partner of M/s. Micro Seal Packaging in his statement dated 11-10- 2011 agreed to have sold 700 kgs of Flexible Packing Materials of Patidar Zafrani Zarda & Patidar Gutka. The same facts were also admitted by Shri Dipakkumar Ganpatbhai Patel, partner of M/s Multi Color Flexi Pack, in his statement dtd, 14-7-2011, wherein he admitted to have sold 600 -700 kgs. of Flexible packing materials of Patidar Zafrani Zarda &Patidhar Gutka per month during the period from Sept. 2008 to Feb. 2011 to M/s Patidar. Shri Vasantbhai Makanjibhai Gadesha, Director of M/s. Rototon Poly Pack Pvt. Ltd., Rajkot, explained in his statement dated 21-7-2011 that as per the usual practice in his business, the quantity in kgs. was shown in the invoices by his company, however, the approximate weight of one empty pouch of Zafrani Zarda, sold to M/s Patidar, was 4.5 grams. Accordingly, 210 pouches (approx.) could be made in 1 Kg. of packing material.
Xxxxxxxxxx xxxxxxxxxx xxxxxxxxxxx 4.9 It is well settled law that clandestine removals cannot be arrived at based upon the confessional statement of persons only. The statements itself are not sufficient for holding so. There is catena of judgments laying down that the inculpatory statements alone cannot be made the basis for arriving at a finding of clandestine removal. In a nutshell, it has been the constant stand of quasi-judicial and judicial appellate forums that for establishing the fact of clandestine removal, there need to be sufficient evidence on record leading to conclusive proof of production of goods, their removal from the factory by any mode of transportation and clandestine clearance to the buyers. Mere doubts, howsoever strong cannot take the place of evidence required to be produced by the Revenue.Excise Appeal No.721 of 2007 26 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007
The onus to establish such clandestine activities, resulting in confirmation of demand is placed heavily on the Revenue and is required to be discharged by production of sufficient evidences. Further a case of clandestine removal cannot be upheld on the basis of certain statements alone as held in the case of Commissioner of Central Excise v. Saakeen Alloys Pvt. Ltd. [2014 (308) E.L.T. 655 (Guj.)/2014] 46 taxmann.com 42 (Guj.)/[2014] 45 GST 723 (Guj.)] wherein Gujarat High Court rejected the appeal of the Revenue by making following observations in Para 10.
"10. All the appeals are based predominantly and essentially on factual matrix. The Tribunal elaborately and very correctly dealt with the details furnished by both the sides and rightly not sustained the demand of Rs. 1.85 crores, which had no evidences to bank upon. Confessional statements solely in absence of any cogent evidences cannot make the foundation for levying the Excise duty on the ground of evasion of tax, much less the retracted statements. To the extent there existed substantiating material, Tribunal has sustained the levy. No perversity could be pointed out in the approach and treatment to the facts."
17. Thus, it is my considered view that the cash of Rs.15,97,000/- found at the residence of the Sarin family cannot be treated as cash from goods clandestinely removed. Regarding confiscation of goods found at the premises of Basudeo Prasad & Sons (Tobacconist) I find that they were not required to maintain any books of accounts (in law). Merely because they kept records in pencil so as to finalize them after verification, cannot be any basis to hold that they were manipulating their books. In fact, the very allegation that books did not tally with stock in godown is the reason why records first in pencil are made so that after due reference with Pappu Long Books, the stock register could be maintained. I find that the Department failed to appreciate that all 14 invoices for the goods seized were entered in the PLA Register and duly entered in the Pappu Long Book of Basudeo Prasad & Sons. These details were part of reply dated 25.09.2003. But same has not been considered. Pappu Long Excise Appeal No.721 of 2007 27 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 Books were the basic document, basis which stock reference book was maintained in pencil. I find that Basudeo Prasad & Sons filed letter dated 31.01.2003 stating that goods seized were duty paid and invoices were issued. The said letter was not considered, but Department on a half-baked information and basis has confirmed the confiscation of the goods. The finding of alteration of record and connivance between Basudeo Prasad and Appellant as contained in the OIA are not maintainable as all 14 invoices basis which goods were cleared have been entered in the Pappu Long Book which was not considered by the OIO and the OIA thereafter. The documents filed i.e. the Pappu Long Books and details of invoices referring to the goods prove that goods valued at Rs.13.77 lakhs are duty paid and cannot be confiscated. I find that Basudeo Prasad & Sons failed to maintain its books, then Appellant cannot be blamed for clandestine removal of goods.
18. Regarding levy of duty of Rs.1,81,006/-, Rs.1,71,149/- and Rs.32,88,080/- basis the allegation of unaccounted manufactured goods with raw materials not reflected in the stock register and clandestinely removed. I find that the duty of Rs.1.8 lakhs has been wrongly confirmed. The panchanama at the time of search itself shows that shortages found in stock was used in the manufacture of goods lying on the floor and the same was not adjusted or taken into account. Thus, the basis of the OIA is illogical and nor sustainable in law and fact. This lapse in the proceedings is further augmented by the fact that no documentary evidence brought on record by the Department to prove that Appellant cleared the Pan Masala and the Gutkha without payment of Excise Duty. The Appellant was forced to deposit the duty during the search and the fact that duty was paid without any SCN and reasonable cause, indicates the high handedness of the Departmental Officers at the time of search and proceedings thereafter. I find that the levy of duty of Rs.32 lakhs and Rs.1.7 lakhs on basis of allegation that no wastage occurred beyond the first stage of manufacture without Excise Appeal No.721 of 2007 28 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 considering the quantitative stock register (QTR) is again a half- position taken by the document in the absence of documentary evidence to prove that Appellant cleared goods without payment. Demand raised has been based on a formula duly entered in the QTR. However, the QTR has not been considered, which would clearly establish that no demand was leviable. The basis of the formula furnished by the Appellant for which wastage has been shown is a composite formula taking into account wastage of Supari and other raw materials. The demand has been raised basis the wastages accounted in the individual raw material account and ignoring the QTR data. I find that the Department despite having the onus of proof has not produced or relied on any corroborative evidence is to prove clandestine removal and instead has incorrectly relied on a pure theoretical line of argument to levy a high-pitched duty and a statement of Deepak Mehra which was obtained under pressure. The OIO and OIA suffers from non-application of mind and demand of duty is clearly not sustainable in law fact. Furthermore, the allegations of suppression of records and willful suppression do not survive considering that the Appellant has duly maintained registers and furnished the same.
19. I find that the Hon'ble Allahabad High Court in the case of Commissioner of Customs, CCE & ST, Ghaziabad vs. Auto Gollon Industries Pvt. Ltd. 2018 (360) E.L.T. 29 (All.) arising from the allegation of clandestine removal of goods, quashed the levy of duty based on theoretical basis as the Department has failed to bring any evidence supporting the allegation of clandestine removal of goods. The relevant paragraphs are reproduced as under:-
"13.Upon examining the matter, the Tribunal has recorded a clear finding of fact that the revenue failed to establish the case of clandestine removal. The only thing, the revenue produced was a rough work progress register, which was admittedly not a statutory register.Excise Appeal No.721 of 2007 29 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007
14.The revenue failed to produce any cogent evidence in respect of raw-materials, which was required for production of Starter Motors. Also, the revenue did not allege anywhere that the assessee was buying any unaccounted for copper wire, yolk, bearings, brakes, slot insulators, laminations and commutators, which are also required for the manufacture of starter motors as in the absence of these essential raw-materials, it was thus not possible for the assessee to manufacture their final product with just Armature Assemblies.
15.The Tribunal records that I agree with the contentions of the Ld. Advocate that the allegations of clandestine removal are serious allegations and are required to be established beyond doubt by production of sufficient and positive evidence. The doubts, however, strong cannot be converted into evidence so as to confirm the demand. There is no inculpatory statement by any of the representative of the manufacturers; no enquiry as regards the buyers of the said starter motors so as to establish their identity; no enquiry as regards procurement of various raw-materials required for manufacture of final products; no enquiry as regards the transportation of the goods; no enquiry as regards the receipt of consideration of the said clandestinely removed final product. It is well- settled law that shortage of one of the raw-materials cannot lead to the inevitable conclusion of clandestine manufacture and removal. Further, it also stands held by various courts that the confirmation of demand of duty cannot be on theoretical basis of input output ratio. The appellants' 95% production is being sold to the manufacturers of three wheeled motors, who will admittedly not accept clandestinely removed goods as unaccounted for goods.
16.The Tribunal while examining the matter has also examined the law in respect of clandestine removal and has rightly come to the conclusion that in the absence of any allegation as regards receipt of other raw-materials no demand could have been confirmed on the basis of one of the inputs shown to have been sold for assembling of final product."
In the above case the officers relied on the comparison between the books and the stock found and mere statements of the officers of the assessee and not on corroborative evidence. The Excise Appeal No.721 of 2007 30 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 Hon'ble Allahabad High Court dismissed the case of the Department, inter alia on account of following lapses:-
a) no enquiry as regard the buyers of the unaccounted goods;
b) no enquiry as regards procurement of various raw materials required for manufacture of final products;
c) no enquiry as regards the transportation of the goods; and
d) no enquiry as regards the receipt of consideration of the said clandestinely removed final product.
20. Similarly, in the present case the Department without any corroborative evidence has only relied on the statement of Deepak Mehra where the AO has cherry picked parts convenient to the Department's case and relied on only the Form IV register and wastage allegedly discovered, without considering he QTR. The Department has not made any enquiry regarding the proceeds arising from sale of clandestinely removed goods, their buyers and the transportation of the goods to support its theory. The currency seized at time of search is also not commensurate to the duty being levied on the Appellant for unaccounted manufacture and removal goods.
21. Further, in the case of Nutech Polymers Ltd. vs. CCE, Jaipur-II 2004 (173) E.L.T. 385 (Tri.-Del.), the Tribunal did not uphold the duty based on a theoretical assumption. The relevant paragraphs are reproduced as under:-
"6.We have considered the submissions of both the sides. Regarding duty amounting to Rs. 1,44,572/- in respect of 11,854 number of HDPE/PP bags, we observe that Shri K.K. Mahajan, Works Manager, who looks after works relating to Excise and despatch, has deposed in his statements dated 20-3-2001 and 30-3-2001 that no invoice under Rule 52A (i.e. duty paying invoices) was issued in respect of the said bags. The Adjudicating Authority has specifically recorded his findings that he had not retracted his statements and in fact duty of excise involved in the removal of these bags had been deposited by them. The Adjudicating Authority has also considered Excise Appeal No.721 of 2007 31 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 the submissions made by the Appellant No. 1 in this regard subsequently and has recorded his specific finding that their contention is against the documentary evidence available on the record. The Appellant No. 1 has not succeeded in controverting the findings contained in the impugned order, in this regard. We, therefore, uphold the demand of duty of Rs. 1,44,572/- and hold that the Appellants are liable to penalty also under Section 11AC of the Central Excise Act as the excisable goods had been cleared without payment of duty and intent to evade payment of duty is apparent as no prescribed invoices were issued at the time of removal of goods.
7.Regarding charge of clearance of fabrics in the disguise of waste, we observe that no direct material or evidence has been brought on record by the Revenue in support of the charge. It is well settled law that duty cannot be demanded merely on the basis of assumptions and presumptions. It has been held by the Supreme Court in Oudh Sugar Mills that the findings on the strength of a show cause notice, issued on the basis of average production is "without any tangible evidence and is based on inference involving unwarranted assumptions." The Supreme Court has further held therein that "the finding is thus vitiated by an error of law." In the present matters the demand has been computed on the basis of wastage reflected in the Daily Production Reports available for a limited period i.e. November, 2000 to 18-3-2001, and the duty has been confirmed for the period from 1-4-97 to 18- 3-2001. The Appellants' contention that these reports did not reflect the waste which had arisen after tape/fabric production has not been rebutted by Revenue. Further no material has been brought on account as to whom the good quality goods, said to be removed in the disguise of waste, were cleared. Moreover, we find substantial force in the submissions of the learned Advocate that the duty cannot be demanded for the period the daily production reports are not available. The onus of proof regarding clandestine removal is on the Department and cannot be shifted to the Appellants without discharging its onus. We find no force in the finding of the Adjudicating Authority that "in the absence of said reports for the earlier period, the Department had been left with no other option but to calculate the quantity of wastage actually generated before November, 2000 on average basis arrived at from the Daily Production Reports Excise Appeal No.721 of 2007 32 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 resumed for the period of November, 2000 to 18-3-2001 when no other documents had been produced by the assessee relating to actual generation of wastage." It is for the Department to bring evidence to prove that the wastage reflected in statutory records is not the actual wastage and the burden is not cast upon the assessee to produce the documents relating to actual generation of wastage. The learned Advocate has also contended that the input-output norm as per EXIM Policy is 8% in respect of HDPE Woven Fabrics and 10% in respect of HDPE Woven sacks. This contention has also not been controverted by the Revenue. In a similar situation in the case of Rajasthan Petro Synthetics, supra, where the allegation was that the yarn had been removed clandestinely under the garb of waste which was shown higher, relying upon the sole evidence of entries in log books the Tribunal has held that "the entries in the log book did not provide any conclusive and tangible evidence regarding the clandestine manufacture and removal of the yarn. These entries at the most reflected excess wastage generated during the manufacture of the yarn." We, therefore, hold that the Revenue has not succeeded in establishing in the present matter that the Appellant No. 1 had removed good quality excisable goods in the disguise of wastage. We, therefore, set aside the demand of duty and penalty on this count. As observed by us earlier, penalty is imposable on M/s. Nutech Polymers Ltd. in respect of the duty demand upheld in this order. In the facts and circumstances of the case we are of the view that interest of justice will meet if they are ordered to pay a penalty of Rs. 25,000/-. We find no justification for imposing penalty on M/s. Mateshwari Enterprises as well as on Nirmal Karanpuria and K.K. Mahajan. Accordingly we set aside the penalty imposed on Appellant Nos. 2 to 4."
22. Further, in the case of Shakshi Makfin Pvt. Ltd. vs. CCE, Panchkula 2016 (343) E.L.T. 972 (Tri.-Chan.) confirmed in CCE, Panchkula vs. Shakshi Makfin Pvt. Ltd., (2023) 10 Centax 333 (S.C.). In the above case the Tribunal quashed the levy of demand on the allegation of clandestine removal as the theoretical basis of the Department that there are non- accountable goods was not substantiated by any documentary evidence corroborative the same. Further, in the case of Mittal Pigment Pvt. Ltd. vs. CCE, Jaipur 2018 (360) E.L.T. 157 (Tri.-
Excise Appeal No.721 of 2007 33 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007Del.) confirmed in CCE & ST, Udaipur vs. Mittal Pigment Pvt. Ltd. 2018 (16) G.S.T.L. 41 (Raj.). In the above case the Tribunal held that the case of clandestine removal made solely on the basis of approximation production considering average yield of the products viz., Zinc Oxide out of raw material issued, which has been in the nature of different varieties like Zinc Dross, Zinc Ingots etc., and which are of different purities is not sustainable unless there are further corroborations in the form of documentary evidences. These evidences can be in the nature of despatch details for production, receipt details of said material, transaction of sale money, transportation details of such goods, details additional consumption of electricity for such suppressed production, the finding of suppressed production and clandestine removal not sustainable. It also flows the burden of proof was not satisfied. I find that the Department's case is only based on their own version of the formula which has been calculated on basis of incomplete information and material. The Department's case is totally theoretical and no document in the nature of dispatch details for production, receipt details of raw material, transaction of sale money has been brought forth. The OIA and OIO have no legs to stand upon in the absence of cogent corroborative documents. The vague dismissal of submissions of the Appellant without satisfying the burden of proof fastened on the Department cannot render the present demand based on surmises and conjectures sustainable. The relevant paragraphs are reproduced as under:-
"6.2The department has not gone beyond the approximation and the statement of Shri Agarwal. Any prudent person would not so conclude on extra production by approximation and by a mere statement of the Director of the company. Unless there are further corroborations in the form of documentary evidences, which could be like despatch details for the production, receipt details of the said material, transactions of the sale money, transportation details of such goods, details of additional consumption of electricity for such suppressed production a prudent individual would not agree with the present Excise Appeal No.721 of 2007 34 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 conclusions of the Revenue. There is nothing on record from the Revenue side to come to a reasonable conclusion to say that there has been preponderance of probability of such suppressed production on the part of the appellant. The evidences in the form of approximation and averaging production as 77.6% and one statement of Shri Agarwal, Director of the appellant company cannot be called a prudent conclusion of the production estimate.
6.3Consequently, we are of the considered view that the department has not discharged its burden of conclusively proving the case of suppressed production and clandestine clearance by the appellants. In this regard we seek support from Hon'ble Allahabad High Court's decision in the case of Continental Cement Company v. Union of India - 2014 (309) E.L.T. 411 (All.) and Supreme Court's decision in the case of Oudh Sugar Mills Ltd. v. Union of India - 1978 (2) E.L.T. (J172) (S.C.) and CESTAT's in the case of Punalur Paper Mills Ltd. v. CCE - Vide Final Order Nos. 996-
997/2008, dated 26-8-2008 [2009 (244) E.L.T. 204 (Tribunal)]. The Hon'ble High Court in the case of Continental Cement Company (supra) has inter alia observed as under :
13....................to prove the allegation of clandestine sale, further corroborative evidence is also required.
For this purpose no investigation was conducted by the Department.......
14. ......................
15..........................When there is no extra consumption of electricity, purchase of raw materials and transportation payment, then manufacturing of extra goods is not possible..."
23. I observe that no penalty is leviable on the Appellants as there is no willful suppression. All the documents have been duly filed by the Appellants and the case of the Department is based on wrong calculation. A case of willful suppression attracting penalty is not made out, especially considering that the Department's allegations have no legs of evidence to stand on. Reliance is placed on the decision of Ugam Chand Bhandari vs. Excise Appeal No.721 of 2007 35 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 CCE, Madras 2004 (167) E.L.T. 491 (S.C.). The relevant paragraph is reproduced as under:-
"9.In so far as the contention raised by the appellants whether the extended period of limitation under proviso to Section 11-A of the Central Excise Act could be invoked in the present cases is concerned, what is to be seen is whether there was no deliberate intention on the part of the appellants to have suppressed any material information. The plea taken by them is that under bona fide belief that the fabrics are classifiable under heading 52.07 they classified the same and the authorities had been visiting the appellants from 1986 onwards and they were aware of the process adopted in manufacturing the end product by them. The Tribunal rejected this contention. Apart from the fact that there was difference of opinion even in the Department, the fact remains that the department officials had been regularly visiting the factory of the appellants and were in the know of the process of manufacture adopted by the appellants and to state that the appellants had played fraud on the department is difficult to sustain. In the circumstances, we think, the application of the extended period of limitation as provided under Section 11A of the Act is not correct. Therefore, that part of the order where the Tribunal has rejected the prayer of the appellants not to invoke Section 11A is set aside and in other respects the order made by the Tribunal is maintained."
24. In view of the above discussion, I pass the following order:-
I. I set aside the seizure and confiscation of cash totaling Rs.15,97,000/- seized from the residential premises of the Sarin family which stands duly explained.
II. The seizure and confiscation of cash Rs.3,46,000/-
seized from the factory office is also set aside as the same is sale proceeds of the vehicle sold and which is duly accounted for in the books of account and there is no reason to belief that it represents unaccounted cash allegedly being sale proceeds of Excise Appeal No.721 of 2007 36 Excise Appeal No.722 of 2007 Excise Appeal No.724 of 2007 the unaccounted 'Gold Mohar' brand Gutkha/Pan Masala.
III. The Central Excise duty demands of Rs.1,81,006/-, Rs.1,71,149/-, Rs.32,88,080/- and Rs.4,92,525/- are set aside in view of the observations and discussions in the foregoing paragraphs. IV. I set aside the penalty of Rs.39,61,611/- imposed under Section 11AC of Central Excise Act, 1944 read with erstwhile Rule 173Q of Central Excise Rules, 1944, Rule 25 of Central Excise Rules (No.2) Rules, 2001 and Rule 25 of Central Excise Rules, 2002 imposed on the Appellant firm M/s Sarin & Sarin. V. Penalty of Rs.1 lakh imposed on Basudeo Prasad & Sons (Tobacconist) is set aside.
VI. Penalty of Rs.10,000/- imposed on Shri Deepak Mehra is also set aside.
VII. The seizure and confiscation of goods from the premises of Basudeo Prasad & Sons (Tobacconist) is set aside.
25. All the three appeals of the Appellants are allowed with consequential relief, as per law.
(Order pronounced in open court on - 03.03.2026) Sd/-
(P. K. CHOUDHARY) MEMBER (JUDICIAL) LKS