Custom, Excise & Service Tax Tribunal
Laxmi Kant Agrawal, Managing Dorector vs C.C.E. Kanpur on 20 September, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
REGIONAL BENCH : ALLAHABAD
COURT No. I
APPEAL Nos.E/2237-2240, 2256, 2257, 2307, 2530-2532/2008-EX[DB]
(Arising out of Order-in-Original No. 06/Commissioner/2008 dated
30/07/2008 passed by Commissioner of Central Excise & Customs,
Kanpur)
Shri Laxmi Kant Agrawal, Managing Director,
Shri Nikhil Agarwal, Director,
Shri Vikash Bansal,
Shri Anil Agrawal, Proprietor of Anil Steel,
Premier Ispat Ltd.,
M/s Ram Shiv Industries,
Shri Ajay Sultania, Proprietor of D.C. Marketing,
M/s L. Kant Paper Mills Ltd.,
Shri Sanjay Agarwal, Proprietor of Om Textile &
Shri Suresh Chhabria Proprietor of Sagar Trading Co. Appellants
Vs.
Commissioner of Central Excise, Kanpur Respondent
Appearance:
Shri Ashish Kumar Shukla, Advocate (in Appeal No.2530 & 2237/2008) for Appellants Shri Rajeev Ranjan, Joint Commissioner (AR), for Respondent CORAM:
Hon'ble Mr. Anil Choudhary, Member (Judicial) Hon'ble Mr. Anil G. Shakkarwar, Member (Technical) Date of Hearing : 13/12/2017 Date of Pronouncement : 20/09/2018 FINAL ORDER NOs-72265-72274 / 2018 Per: Anil Choudhary These appeals are arising out of Order-in-Original No. 06/Commissioner/2008 dated 30/07/2008 passed by Commissioner of Central Excise & Customs, Kanpur. 2 APPEAL Nos.E/2237-2240, 2256, 2257, 2307,
2530-2532/2008-EX[DB]
2. The brief facts of the case are that appellant-L.Kant Paper Mills Ltd. were engaged in the manufacture of different excisable goods. The appellants were registered with Central Excise Department for manufacture of MS Ingots falling under Chapter Sub-heading No.7206.10 & 7206.90, Poster Paper & Media Paper falling under Chapter Sub-Heading 4805.00 of the First Schedule to the Central Excise Tariff Act, 1985. The appellants were also having separate registration with the Department to undertake processing of Man Made Fabrics falling under Sub-Heading No.5406.10 & 5406.22 of the Act. The entire unit situated in the same campus, was controlled by the same set of Directors as well as persons looking after the receipt of raw material, production and dispatch of finished Goods. On the basis of intelligence, the officers of DGCEI conducted the search operation at the appellants premises on 25.09.2003 and the statements of various persons were recorded under Section 14 of Central Excise Act, 1944. The residential premises of the director (Laxmi Kant Agarwal, Nikhil Agarwal) and after persons/associates were also searched and the details of the proceedings including resumption of documents were recorded under the Panchnama dated 25.09.2003 and other dates, also detected the discrepancy in the stocks of raw materials and finished goods. The trading premises of M/s D.C. Marketing, Pili Kothi, Kamla Tower, Kanpur and premises of M/s Sagar Trading Corporation, Raja Market, 3 APPEAL Nos.E/2237-2240, 2256, 2257, 2307, 2530-2532/2008-EX[DB] Kahu Kothi, Kanpur was also searched under the panchnama dated 25.09.2003. The godown premises of M/s Om Textile, Generalganj, Kanpur, residential premises of Shri Sanjay Agarwa, Proprietor of M/s Om Textile-Kurshawan, Kanpur, residential premises of Shri Suresh Chhabaria, Prop. M/s Sagar Trading Co., Swaroop Nagar, Kanpur, residential premises of Shri Anil Agarwal, Prop. M/s Anil Steel, Swaroop Nagar, Kanpur, residential premises of Shri Rajiv Kumar Singh, Dyeing Master of the appellant, Shyam Nagar, Kanpur, the residential premises of Shri Mukul jain, Kingsway Camp, Delhi, residential premises of Shri Arun Ranka, Prop. M/s Arun Enterprises, Adarash Nagar, Jaipur, The trading premises of M/s Arun Enterprises, Bank Chaura Rasta, Jaipur, the trading premises of M/s Anil Steels, Fazalganj, Kanpur, The Office cum Godown premises of M/s Calcutta Express Transport Service situated at Transport Nagar, Kanpur, The office cum godown premises of M/s Kataria Transport Corporation, Transport Nagar, Kanpur, The office cum Godown premises of M/s Narain Carriers (India) Transport Nagar, Kanpur, The office cum godown premises of M/s New Economic Freight Carrier, G.T. Road, Kanpur, The office cum godown premises of M/s Golden Road Transport Corporation, Kidwai Nagar, Kanpur were searched under the Panchnama dated 25.09.2003. On the basis of search and panchnama, a separate show cause notice dated 22.03.2004 was issued for the seizure portion. Apart from the detection of 4 APPEAL Nos.E/2237-2240, 2256, 2257, 2307, 2530-2532/2008-EX[DB] discrepancy of the stock of raw material and finished goods during the search at the factory premises of M/s L. Kant Paper Mills Ltd. at Bisayakpur, Rania on 25.09.2003, the search also resulted in the recovery of several incriminating documents, privately prepared by the factory employees showing actual details of production, clearance of excisable goods for onward sale, were resumed by the officers under the panchnama proceedings. The said documents contained the details of dispatch, receipt of accounted & unaccounted raw material, GRs, weighment slips, production and dispatch details. These documents were commonly known as 'Monthly Despatch Summary Details' (MDSD for short). On being enquired about the MDSD, it was gathered that the said documents were prepared by Shri Ramu Yadav, authorized signatory and dispatch clerk of the factory. Accordingly, the officers on spot recorded the statement of Shri Ramu Yadav on 25.09.2003 wherein he inter-alia stated that all the above papers were prepared by him and some entries in the said pages were written by Shri R.K. Singh. These pages contained the details of all depatches of M.S. Ingots, Paper and processed fabric from the factory. Most of the depatches in these papers were not supported by any Central Excise invoices and the goods, which were cleared from the factory without payment of duty, were sent under the cover of duplicate/unaccounted invoices prepared by him and such duplicate invoices were destroyed when the goods under such 5 APPEAL Nos.E/2237-2240, 2256, 2257, 2307, 2530-2532/2008-EX[DB] invoices reached its destination successfully. Further, he stated that he was preparing such duplicate invoices on the directions of Shri Laxmi Kant Agarwal, Director and on his direction the details of the transactions were prepared and safely stored. At the time of panchnama dated 25.09.2003 Shri Nikhil Agarwal introduced himself as the Director of L. Kant Paper Mills Ltd. and stated that in the Division of Paper Manufacturing, poster paper and Kraft papers were manufactured. In the M.S. Ingots Division, scrap of iron & steels is melted along with other additives and then this molten metal was poured in moulds to cast ingots. In Fabric Processing Division the grey fabric was usually processed either on outright purchase or on job work basis. Further, Shri Nikhil Agarwal was confronted with the statement of Shri Ramu Yadav. On the basis of the said panchnama and the statements, show cause notice dated 31.08.2006 was issued, proposing to demand Central Excise duty of Rs.4,45,65,988/- under proviso to Sub-section (1) of Section 11A of the Act. Further, the amount of Rs.28,00,000/- deposited during investigation by LKP under TR-6 challans was proposed to be adjusted towards the aforesaid duty liability and proposing imposition of penalty under Section 11AC and Rule 25of the Central Excise Rules, 2001/2002. Further, there was a proposal for recovery of interest on delayed payment of duty under Section 11 AB of the Central Excise Act, 1944. SCN also proposed penalties on several individuals under Rule 26 6 APPEAL Nos.E/2237-2240, 2256, 2257, 2307, 2530-2532/2008-EX[DB] of Central Excise Rules, 2001/2002. The said show cause notice was adjudicated through the Order-in-Original dated 30.07.2008 wherein learned Commissioner confirmed the proposed demand and ordered to appropriate the deposited amount of M/s L. Kant Paper Mills Ltd., and further imposed equal amount of penalty on M/s L. Kant Paper Mills Ltd. The adjudicating authority further ordered recovery of interest. He also imposed penalty of Rs.20,00,000/- on Shri Laxmi Kant Agarwal and Shri Nikhil Agrawal and further penalties were imposed on various other persons under Rule 26 of Central Excise Rules, 2001/2002. Aggrieved by the said order, appellants have preferred appeal (s) before this Tribunal.
3. Heard the learned Counsel for appellants who has submitted as follows:-
i) The demand amounting to Rs.23,34,649/- (out of the total demand), as worked out, is mainly based on attested documents, supplied by Income Tax Department.
ii) That photocopy of these documents were resumed under Resumption memo No.44 (RUD 145) and detailed in Para-
51 and 52 of the Show Cause Notice, placed in Appeal Paper Book.
iii) That the appellants have enclosed the relevant documents, detailed hereunder, for perusal:-
Sr. Particular of Documents RUD No.
No.
1. Letter F. No. ACIT/CC-V/KNPL/L.Kant/04-05 146 dated 23.02.2005
2. MDSD provided by the Income Tax Department 145 7 APPEAL Nos.E/2237-2240, 2256, 2257, 2307, 2530-2532/2008-EX[DB]
3. Copy of Panchnama dated 27.11.2002 of Income Tax Department
4. Settlement Application dated 24.11.2004 filed by the Appellant before Hon'ble Settlement Commission (IT & WT) Principal Bench New Delhi.
5. Copy of Order dated 27.09.2006 passed by the Hon'ble Settlement Commission. (Income Tax) under Section 245D (1) of the Income Tax Act.
6. Copy of Order dated 31.03.2008 passed by the Hon'ble Settlement Commission. (Income Tax) under Section 245D (4) of the Income Tax Act.
7. Copy of Citation in the case of Ravi Foods Pvt.
Ltd. vs. Commissioner reported in 2011 (266) E.L.T. 399 (Tribunal).
iv) That letter dated 23.02.2005 of Income Tax Department, evidences service of documents only to the Deputy Director, Central Excise Intelligence, Kanpur Regional Unit, Kanpur.
v) That the letter dated 23.02.2005 issued by Assistant Commissioner, Income Tax, Central Circle - V, Kanpur do not give any suggestion of clandestine clearance of goods on the basis of seized documents.
vi) That the documents resumed by Income Tax Department under Panchnama dated 27.11.2002 were in the form of loose paper (s).
vii) That it is also not clear from the perusal of Panchnama that Loose Papers were hand written or in the form of photocopy or Original.
viii) That the Appellants in their Settlement Application, while making the offer of disclosure of additional undisclosed income have applied flat rate of approximately 8% to work out the gross profit.
8 APPEAL Nos.E/2237-2240, 2256, 2257, 2307,
2530-2532/2008-EX[DB]
ix) Accordingly, the appellants disclosed the income of Rs.2,14,00,000/- for assessment year(s) 1997-98 to 2003-04.
x) That the appellant's income has been finally settled at 2,64,00,000- by the Hon'ble Income Tax Settlement Commission.
xi) That there is no finding in the settlement order in respect of clandestine removal of goods from the factory of the appellant.
xii) That on the basis of the documents resumed by the Income Tax Department on 27.11.2002, the allegation has been made on the basis of unwarranted assumption and presumption, without making any independent investigation by the Central Excise Department, as such the demand on this count is not sustainable.
xiii) That there is no positive affirmative and cogent evidence for movement of alleged goods from the premises of M/s LKPM or investigation from the buyers.
xiv) That suspicion howsoever grave cannot take place of proof.
xv) That demand on this count is purely based on unwarranted assumption presumption, conjecture and surmises, and liable to be set aside.
xvi) That the information received from the Income Tax Department cannot be made the sole basis for 9 APPEAL Nos.E/2237-2240, 2256, 2257, 2307, 2530-2532/2008-EX[DB] confirmation of demand under the Central Excise provisions, when the Central Excise authorities, in their investigation, did not find any corroborative evidence of clandestine removal of the final products, as held by the Division Bench of This Tribunal in the case of Ravi Foods Pvt. Ltd. Vs. Commissioner, reported at 2011 (266) E.L.T. 399 (Tribunal). In view of the above facts, the Appeal of the Appellants may be allowed with consequential relief."
4. Other submission of Appellants:-
xvii) The major demand against the appellant is based on the documents i.e. MDSD recovered from the appellant's premises, is not sustainable, as the documents have been forged and implanted by Shri Ramu Yadav & Shri R.K. Singh. He submits that statements of Shri Ramu Yadav & Shri R.K. Singh is not reliable, as the department was not able to produce the said witnesses for cross-examination. He further submitted that they have clearly submitted in their affidavit that these are forged documents prepared on instigation by one shared. Hence, these documents are not reliable.
xviii) He submitted that there is no evidence of excess consumption of electricity.
xix) He submitted that merely on the basis of private records, demand cannot be sustained, for which he relied upon various case laws.10 APPEAL Nos.E/2237-2240, 2256, 2257, 2307,
2530-2532/2008-EX[DB] xx) He submitted that during cross examination, the witness has stated that they have not received or supplied unaccounted goods to or from the appellant company.
xxi) He submitted that private records are vague and unspecific & hence not reliable. Such forged records were not maintained at the instance of management. xxii) He further submitted that no reliance can be placed on the parallel invoices alleged to be recovered from the premises of Shri Mukul Jain. The statement of Shri Mukul Jain is not reliable, as he was not produced for cross examination. He further pointed out various infirmities in the said records. xxiii) He further placed reliance on the decision of Hon'ble High Court of Allahabad in the case of Continental Cement Company, to submit that demand on the allegation of clandestine removal cannot be sustained without sufficient corroborative evidence adduced by the Revenue.
xxiv) The statements recorded during investigation are not reliable evidence, as they are hit by Section 9D of the Act. Most of the persons have not been examined in the Adjudication proceedings. Further, none of the three witness examined have supported the allegations of Revenue.
11 APPEAL Nos.E/2237-2240, 2256, 2257, 2307,
2530-2532/2008-EX[DB]
5. Learned A.R. for revenue has relied on the impugned Order-in-Original and reiterated the findings of impugned order. He further submitted that there are enough evidences available on record, to sustain the allegation of clandestine removal of goods. He further submitted that if the witness did not turn up for cross examination, still their statement can be relied upon. Therefore, he submitted that statement of Shri Ramu Yadav, Shri R.K. Singh and Shri Mukul Jain can be relied upon. Further, he prays for dismissal of appeal.
6. Having considered the rival contentions and on perusal of records, we are satisfied that the demand of Rs.23,34,649/- (out of the total demand impugned) is based on copy of some documents received by the Central Excise Department from the Income Tax Department which had earlier conduced search and seizer operation in the premises of the appellant. We have gone through the documents and also the order of the settlement commission. We note that the appellant have gone before the Income Tax Settlement Commission in order to settle certain unexplained cash credit by way of 'share application money' in the public issue activity they had done about four years before the search and seizer. Such unexplained credit and/or share application amount have been settled by the settlement commission of Income Tax Department, by its order dated 31st March, 2008, under Section 254 D (4) of the Income Tax Act. 12 APPEAL Nos.E/2237-2240, 2256, 2257, 2307,
2530-2532/2008-EX[DB]
7. We further find that the main demand against the appellant-company is based on the private document i.e. Monthly Dispatch Summary Details (MDSD) recovered from the factory premises of the appellant. The said private documents i.e. MDSD has been alleged to have prepared by Shri Ramu Yadav and Shri R.K. Singh on the direction of the directors of the appellant-company for which department have relied upon the statement of Shri Ramu Yadav & Shri R.K. Singh. We find that, request of cross-examination of Shri Ramu Yadav & Shri R.K. Singh was allowed by the learned Commissioner, but the Department was unable to produce their witness. We find that it is well settled law that if the Department is not able to produce their witness for cross- examination, then the statement of that witness cannot be relied upon, as held by Hon'ble Himachal Pradesh High Court In the case of Commissioner of Central Excise Vs Arsh Casting Pvt. Ltd. reported at 2010 (252) ELT 191 (H.P.). We further find that affidavits have been filed by both, Shri Ramu Yadav and Shri R.K. Singh, wherein they have stated that they have prepared & forged MDSD, as Shri Sharad Bhardwaj (Ex-employee) threatened them to prepare the forged documents, also promised them better job in some other firm. We find that, the said MDSD is not a genuine document as there is no corroborative or positive evidence available on record, showing clandestine removal of the goods. Therefore, demand on the basis of the said record-MDSD, is set aside. 13 APPEAL Nos.E/2237-2240, 2256, 2257, 2307,
2530-2532/2008-EX[DB]
8. Now, with respect to demand on the basis of parallel invoices issued by appellant-company and resumed from the premises of Shri Mukul Jain, Commission Agent of fabric, we find that the department is mainly relying upon the statements of Shri Mukul Jain, to establish that the goods have been cleared on parallel invoices. We find that the Department has not been able to produce Shri Mukul Jain for cross-examination during the adjudicating proceedings. Therefore, as stated above in preceding paragraphs, the said statement of Shri Mukul Jain cannot be relied upon as evidence. We find that there is no other concrete evidence available on record to prove that the appellant company has removed goods on the parallel invoices. In view of the above, the proportionate demand is also liable to be set aside. We also note that no unaccounted goods were found in the premises of Shri Mukul Jain.
9. We find that Hon'ble High Court of Allahabad in the case of Continental Cement Company Vs Union of India reported at 2014 (309) ELT 411 (All.) have held that the Department has to bring on record corroborative evidence in the form of procurement of raw material, transportation, sale proceeds, buyers of such goods, capacity to manufacture, etc. In the present case, there is no such positive or tangible evidence available. Since duty demand is set aside, penalties are liable to be set aside.
14 APPEAL Nos.E/2237-2240, 2256, 2257, 2307,
2530-2532/2008-EX[DB]
10. We further notice that all the persons who had initially admitted to clandestine activity have later on retracted or not supported the case of revenue at the time of cross- examination. Out of the 8 persons whose cross-examination was allowed only 3 persons were produced by revenue for cross-examination who also did not support the allegation of clandestine activity, as alleged.
11. In view of our aforementioned observations and findings, we hold that the whole demand of revenue is based on the assumptions and presumptions, there being no corroborative evidence to support the allegation of suppression of production and/or clandestine removal.
12. Accordingly, we set-aside the impugned order and allow all the appeals. We are not recording separate findings with respect to other appellant's on whom penalty is levied, as the demand on the main appellant does not survive. The appellant (s) shall be entitled to consequential benefits, if any, in accordance with law.
(Pronounced in Court on-20/09/2018)
SD/- SD/-
(Anil G. Shakkarwar) (Anil Choudhary)
Member (Technical) Member (Judicial)
akp