Custom, Excise & Service Tax Tribunal
M/S Kuber Tobacco Products Ltd vs C.C.E. Delhi on 8 April, 2011
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
West Block No.2, R.K.Puram, New Delhi
COURT-I
Date of hearing: 27.10.2010
Date of Pronouncement: 08.04.2011
For Approval and Signature:
Honble Shri Justice R.M.S. Khandeparkar, President
Honble Shri Rakesh Kumar, Technical Member
1
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether their Lordships wish to see the fair copy of the Order?
Seen
4
Whether Order is to be circulated to the Departmental authorities?
Yes
Excise Appeal No. 560 of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
M/s Kuber Tobacco Products Ltd. Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 561of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
Mool Chand Malu Appellants
Vs.
C.C.E. Delhi. .Respondent
AND
Excise Appeal No. 562of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Vikas Malu Appellants
Vs.
C.C.E. Delhi. .Respondent
AND
Excise Appeal No. 563 of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. S.K. Bothra Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 564 of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Gouri Shankar Khattar Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 565 of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Harmit singh Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 566 of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Harpal Singh Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 567 of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Jarnail Singh Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 568 of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Pawan Kumar Karnani, Prop. Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 569 of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Bhim Karan Jain, Director Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 570 of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Akhay chand Kothari, Prop. Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 571 of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Mukesh Kapoor Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 572 of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Dev Ji Bhai Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 573 of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Dilip Ram Vallabh Sarda Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 574 of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. C.S. Baid Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 902 of 2006
[Arising out of order in original No. 159/2005 dated 30.12.2005 passed by the Commissioner of Central Excise, New Delhi].
M/s Chaudhary Sales Corporation Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 2039 of 2006
[Arising out of order in original No. 03/2006 dated 30.01.2005 passed by the Commissioner of Central Excise, Delhi].
M/s Kuber (International) Ltd. Appellants
(Now M/s Kuber Khaini Pvt. Ltd.)
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 2040 of 2006
[Arising out of order in original No. 03/2006 dated 30.01.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Vikas Malu Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 2041 of 2006
[Arising out of order in original No. 03/2006 dated 30.01.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. S. K. Bothra Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 2042 of 2006
[Arising out of order in original No. 03/2006 dated 30.01.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Mool Chand Malu Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 2043 of 2006
[Arising out of order in original No. 03/2006 dated 30.01.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Mukesh Kapoor Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 2044 of 2006
[Arising out of order in original No. 03/2006 dated 30.01.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Gouri Shankar Khattar Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 2045 of 2006
[Arising out of order in original No. 03/2006 dated 30.01.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Akhay Chand Kothari, Prop. Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 2046 of 2006
[Arising out of order in original No. 03/2006 dated 30.01.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Jarnail Singh Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 2047 of 2006
[Arising out of order in original No. 03/2006 dated 30.01.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Harmit Singh Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 2048 of 2006
[Arising out of order in original No. 03/2006 dated 30.01.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Harpal Singh Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 2049 of 2006
[Arising out of order in original No. 03/2006 dated 30.01.2005 passed by the Commissioner of Central Excise, New Delhi].
Sh. Devji Bhai Appellants
Vs.
C.C.E. Delhi .Respondent
AND
Excise Appeal No. 2050 of 2006
[Arising out of order in original No. 3/2006 dated 30.01.2006 passed by the Commissioner of Central Excise, Delhi]
Sh. C.S. Baid Appellants
Vs.
CCE, Delhi-I Respondent
Appearance:
Shri A. Hidayatullla, Senior Advocate with Shri Kamal Jeet Singh and Shri Pushkarna, Advocates for the appellants.
Shri B.K. Singh with Shri R.K. Verma, Authorized Departmental Representative (Jt.CDR & DR) for the Revenue.
Order No.__________________________
Per Shri Justice R.M.S. Khandeparkar:
I have the privilege of perusing the draft of the order prepared by my colleague. With utmost respect, I must say that I am unable to persuade myself to agree to the same. I, therefore, record my reasons separately.
2. Heard at length the learned Counsel for the appellants and Joint CDR and DR for the respondent. Also perused the written submissions filed on behalf of the appellants.
3. Suffice to summarize the case against the appellants as under:-
M/s. Kuber Tobacco Products (P) Ltd. were engaged in manufacture of Gutka/Pan Masala bearing brand name KUBER, MOOLCHAND etc. classifiable under Tariff Heading 2106.00, and are hereinafter called as KTPPL. M/s. Kuber International (India), now known as M/s. Kuber Khaini Pvt. Ltd., were engaged in manufacture of Chewing Tobacco and Jet brand Khaini classifiable under Tariff Heading No. 2404.00, and hereinafter called as KI. Pursuant to information received that the appellants were indulging in clandestine removal of goods and evasion of duty, the investigating agency of the revenue department conducted search on 9.10.1998 at six different places, namely, 30 & 31-K, Siraspur, Delhi, Office premises of the appellants, 4130, Gali Barna, Sadar Bazar, Delhi, 6041-42, 2nd Floor, Basti Harphool Singh, Delhi, 5987, Plot No. 83, South Nawab Road, Basti Harphool Singh, Delhi, and 463, Pocket A (GF), Sarita Vihar, Delhi. The impugned orders also disclose that as a result of the said search, various materials were seized and the same included 57 Bags of Moolchand brand Gutka weighing 877.800 kgs. valued at Rs. 3,76,000/- being excess in stock of the balance recorded in statutory record at 31-K, Siraspur, Delhi; cash of Rs. 1.80 lakhs at 3909, Gali Barna, Sadar Bazar, Delhi; duplicate note books, Kacha challans, Hisaba book, photocopies of pass-books at 4103, Gali Barna, Sadar Bazar, Delhi; some kachcha documents and cash of Rs. 7.36 lakhs from Gangu Foods (P) Ltd., a sister concern of KTPPL at 6041-42, 2nd Floor, Basti Harphool Singh, Delhi; blank invoices/bill books of four firms namely, M/s. Rishi Trading Co., Gali Pahar, Sadar Bazar, Delhi-6, M/s. Swastik Trading Co., 1464, Kutub Road, Delhi-6, M/s. Shyam Toabacco Co., 6468-B, Basti Harphool Singh, Sadar Bazar, Delhi-6 and M/s. Shukla Enterprises, 2861, Bagichi Raghunath, Sadar Bazar, Delhi-6 and 5987, Plot No. 83, South Nawab Road, Basti Harphool Singh, Delhi. In the course of investigation, sum of the products were also seized. On 15.10.98, 8 bags of Moolchand Super Gutka bearing batch No. 012 manufactured in September, 1998 valued at Rs. 52,000/- were seized along with some documents from Mahamaya Trade Agencies, C/o. Pawan Kumar, Narbadapara, Gudiari Road, Raipur, On 16.10.98, 31 packets of Kuber brand Gutka bearing batch No. 013 manufactured in October, 1998 valued at Rs. 2,015/- along with certain records were seized from M/s. Dalip Traders at shop No. 23, Soot Market, Gandhi Bagh, Nagpur. On 27.10.98, 30 bags of Moolchand Super Gutka bearing batch No. 012 manufactured in September, 1998 valued at Rs. 1,58,000/- along with certain records were seized from Bikaner Assam Roadlines, Gauhati. On 17.11.98, 5200 pouches of Moolchand brand Gutka valued at Rs. 3380/- as well as 49230 pouches of Gutka brand Khaini valued at Rs. 52,184/- along with certain documents were seized from Mukambika Agencies, shop No. 14, Bandi Madhu, Avenue Cross Road, Bangalore.
4. The Commissioner in the impugned orders has answered the charge of clandestine removal of goods against the appellants on the basis of capacity of machines installed by the appellants in their factory, the electricity generated by gensets, number of labourers employed by the appellants in the factory and raw materials consumed during the relevant period. All the findings in these regards have been arrived at essentially on the basis of statements of the deponents read with contents of hisaba book, kachcha challans, loose sheets and GRs of the transporters stated to have been recovered in the course of investigation.
5. The findings arrived at by the Commissioner in the impugned orders can be preciously summarized as below. The total number of machines installed were 137 and as per the letter of Chairman of the Board each machine could manufacture 200 pouches per minute and therefore 137 machines could manufacture 27,74,25,000 pouches per month, and all the machines having utilized in three shifts for 25 days in a month, the total production would be 832275000 pouches per month. Therefore, as regards KTPPL is concerned, for the period of 14 months from 07.05.1997 to 30.06.98, the total production ought to have been 1165 crores of pouches i.e. 882575 bags, whereas in fact, the accusation of clandestine removal has been restricted to 21413 bags for the said period. For the period of three months from 1st July 1998 to 5th August 1998 considering the capacity of production, it would be 525523 crores pouches i.e. 193356 bags while the accusation has been restricted to 69,551 bags. As regards the electricity consumed, the loose sheets disclose that for the period of twenty days from 11th June 1998m to 30th June 1998, the appellants had purchased 29600 ltrs. diesel. The D.G. set consumed 55 litres per hour. Therefore, there was sufficient diesel to manufacture the huge quantity of the goods by the appellants. Since atleast two labourers were required to operate each machine, besides other labour would also be required for packing, crushing of supari, katha, mixing of compound and other ingredients, the appellants ought to have employed sufficient number of employees. The balance sheets of the appellants during the relevant years disclose employment of fifty to sixty labourers but the same could not be believed to be true as the number of employees must have been shown less to avoid provident fund liability and other connected complications and therefore, the records in that regard must have been manipulated. Though the suppliers have disputed the supply of raw materials to the appellants, the same stands established from the contents of the loose sheet. Esha Plastics have denied supply of bags as described in the loose sheet but in the absence of details of supply being submitted by them and as they were regular suppliers of bags to the appellants they must have supplied the required number of bags. Though Sh. Raghubir Gulati of M/s Alliance Overseas has denied the supply of liquid paraffin sorbital and glycerin, but six invoices clearly disclosed sale of liquid paraffin which was admittedly arranged by him through a dealer for supply thereof to the appellants. As regards tobacco, the loose sheets refer to 37330 Kg. tobacco which was sufficient to manufacture lakhs of pouches of gutka. The entries in hisaba book, kachcha challans and loose sheets tally with other documents belonging to the appellants and hence the charge stands proved.
6. The Commissioner has placed heavy reliance upon the contents of the kachha challans, hisaba book and loose papers stated to have been seized in the course of investigation to hold the charge of clandestine removal having been established against the appellants. All the contentions which were sought to be raised against the said documents including contention regarding illegality of the panchnama and seizure proceedings have been rejected by the Commissioner. While rejecting the said contentions, it has been observed by the Commissioner that it is not the job of the department to prove that the panchas were respectable or not. It has also been stated that it is surprising that the tax evaders are challenging the responsibility of the common person who witnesses the search proceedings. Failure to record the time of commencement and conclusion of search has been held to be a technical lapse. Non seizure of the key of the premises has been held to be not relevant for the decision in the matter. It has also been held that Shri Shubh Karan Bothra was present at the premises at the time of search. It has been held that the keys of the premises were brought by Shri Bothra and the documents were recovered in the presence of Shri Bothra and independent witnesses. It has also been observed that Shri Bothra had stated in the course of panchnama that the premises were used as the guest house by the appellants. The contention of the appellants that documents were fraudulently prepared by their dismissed employee Shri Umed Chandelia has been rejected on the ground that none of the persons have stated that the said documents were written by Shri Umed Chandelia.
7. It cannot be disputed that the charge of clandestine removal of goods is a serious charge and needs to be established with cogent evidence in support thereto. In that regard, certainly heavy burden lies upon the department to prove the same by placing on record proper evidence in support of such charge. In Durga Trading Company vs. CCE, Lucknow reported in 2002 (148) ELT 967 it was held that it is well settled that the charge of clandestine manufacture of dutiable goods and removal thereof without discharging duty liability by the assessee cannot be established on assumption and presumption and such charge has to be based on concrete and tangible evidence. Reference in that regard was made to the decision of the Apex Court in the matter of Oudh Sugar Mills Ltd. vs. UOI reported in 1978 (2) ELT J 172 wherein the Apex Court had observed that the demand of duty cannot be raised on the strength of assumption and presumption.
8. At the same time, it cannot be forgotten that to establish a charge of clandestine removal, it is not always possible for the investigating agency to get 100% evidence in support of charge. The Apex Court in D. Bhoormulls case had clearly held that it cannot be disputed that in the proceedings for imposing penalty, the burden of proving the accusation against the assessee is always upon the department but in appreciating its scope and the nature of the onus cast, we must pay due regard to the principle, not less then a fundamental one, that the department is not required to prove the case with mathematical precision to the demonstrable degree and all that it is required to be done is that a prudent man may, on its basis, believe in the existence of the fact in issue. It is prudent mans estimate as to the probabilities of the case. In adjudication proceedings, the charge of clandestine removal is definitely to be established on the basis of preponderance of probabilities. However, the conclusions to be arrived at are necessarily to be logical and must be borne out from the records and not pigments of imagination. It cannot be merely on the basis of presumptions and assumptions.
9. In Bute Cosmetics vs. CCE, Trichy reported in 2001 (135) ELT 886, the Tribunal had observed that in modus operandi concerning suppressed production and clandestine clearances, the persons concerned may not keep any record of receipt of raw materials purchased normally through cash payments. Therefore, absence of any evidence alone on this point, ipso facto, cannot rule out clandestine removal. The Department, therefore, has to establish by preponderance of probability that the goods were clandestinely removed.
10. The challenge to the impugned orders essentially relates to absence of cogent evidence in support of the charge against the appellants relating to clandestine removal of the goods, failure on the part of the Department to adduce satisfactory evidence in support of such charge and the findings having been arrived at by the authority in the absence of evidence in support thereto. The main grievance is that the findings are not borne out from the records but are merely presumptions and assumptions sought to be drawn even in the absence of materials on record remotely suggesting such findings.
11. It can hardly be disputed that the case against the appellants is essentially based on the materials in the form of kachha challans, loose sheets and Hisaba Book stated to have been recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi, read with the of seizure proceedings relating to those materials and the statements of Shri Mool Chand Maloo and Vikas Maloo. The conclusion regarding clandestine removal of the goods has been drawn on the basis of various entries in Hisaba Book and kachcha challans which are stated to be tallying with the entries in some of the invoices as well as the cheque amounts disclosed from bank passbook entries. Apart from these materials, other evidence on record is in form of statements by the parties recorded in the course of investigation.
12. The credibility of the documentary evidence which is relied upon to hold that the appellants were involved in clandestine removal of the products is sought to be disputed on various grounds. Firstly, the seizure proceedings are themselves contended to be illegal, secondly, the author of those documents has not been identified and has neither been examined nor produced for cross examination, thirdly, the documents are merely duplicate copies, fourthly, the contents of those documents are not proved to be true and in any case, the said documents were not seized from the factory premises of the appellants, or from the premises in possession of the appellants.
13. It is well settled law that the seizure of documents from any premises in support of any serious charge must be established to have been done by following the procedure known to law, minor lapses being condonable. However, the mandatory rules of procedure to ensure the authenticity of such seizure and of the seized materials must be established to have been complied with. It requires to take proper care to ensure that the documents seized in the course of such proceedings are properly kept in an envelop or cover and duly sealed and due care is taken to protect the same from any third party interference. Panchanama should disclose the steps taken by the seizing authority to ensure the absence of any opportunity to any stranger to interfere with such documents. The panchanama should also disclose proper description of the documents. When such document is very vital in nature, it should refer to the important aspects of the documents so that there can be no room to doubt about the genuineness of the document or about the genuineness of the contents of such document, and of course, the seizure thereof.
14. In the matter in hand, the seizure of the documents was under panchnama dated 9.10.1998. The said panchnama and the annexure thereto read as under:-
Panchnama dated 9.10.98
Pancha No. 1 Shri Devindra Kumar Bajaj
S/o Chaman Lal Bajaj
R/o B-54, Vijay Nagar
Delhi-9
Pancha No. 2 Sh. Dev Raj Baweja
S/o Shri Ramasra Baweja
R/o E-13, Mansarovar Garden
New Delhi.
We the above named Panchas on being called by the officers of Anti Evasion Branch, Central Excise Commissionerate Delhi-I, New Delhi presented ourselves at 4130, Gali Barua, Sadar Bazar Delhi to witness the Central Excise proceedings on 9.10.98. The visiting officers called Sh. Shubh Karan Bothra, authorised signatory of M/s Kuber Tobacco Products Pvt. Ltd. Siraspur Delhi. Sh. Shubh Karan Bothra reached at the above said premises and informed the officers that they are using three rooms of the above said premises as their and opened the locks of the rooms in our presence. Suraj Prakash Inspector, Central Excise (A.E.) Delhi-I showed the search warrant dated 9.10.98 issued by the Assistant Commissioner, Central Excise (A.E.), Delhi-I to us and Sh. Shubh Karan Bothra and we all put our dated signature on it in token of having seen the same. The Officers offered themselves for the search which was declined by Shri Shubh Karan Bothra and conducted the search proceeding. As a result thereof the officers found certain records in the said rooms details of which is given in the Annexure A to this Panchnama. The officers resumed the records mentioned in Annexure A to this Panchnama for further enquiry in the case. After completion of such proceedings the officers again offered themselves for their personal search which was declined by Sh. Shubh Karan Bothra.
The Panchnama was drawn on the spot and we and Sh. Shubh Karan Bothra were remain present during the whole Central Excise proceedings. All Central Excise proceedings were conducted in a peaceful manner. Nothing untowart happened during the proceedings and no harm was caused to any person or property. The Panchnama was read over to us in vernacular and we all put our signature on it in token of having been correctly drawn,
Annexure-A to the Panchnama dated 9.10.98. Details of the record found at 4130, Gali Barua, Sadar Bazar, Delhi
Sl. No.
Description
Pages
1
Photocopies of Bank Pass books
1 to 51
2
One folder containing loose bahi papers
1 to 113
3
Attendance Register
1 to 19 (Written pages)
4
Bahi of Addresses
1 to 124
5
One loose paper file
1 to 65
6
One Neel Gagan Bank Pass book
1 to 7
(Written pages)
7
One Maruti Exercise Book
1 to 6
(Written pages)
8
One Ashoka Note Book
1 to 34
(Written pages)
9
One Neelgagan Duplicate Book
1 to 100
10
do..
101 to 200
11
do..
1 to 42 (written pages)
12
One Sarswati Duplicate Book
1 to 43
13
One Neelgagan Duplicate Book
1 to 79
14
do..
1 to 121
15
One Saraswati Duplicate Book
1 to 32
16
Neelgagan Duplicate Book
1 to 100
17
do..
128 to 173
(Written pages)
(.044)
18
Neelgagan Duplicate Book
204 to 300
19
do..
1 to 65
(Written pages)
20
do..
1 to 97
15. The panchnama undoubtedly states that the locks of the premises were opened by Shri Shubh Karan Bothra. However, it discloses that many of the vital aspects were either ignored to be noticed or recorded for the reasons best known to the investigating officer, or were not disclosed intentionally or otherwise. The panchnama does not describe the premises or the location of the premises with reference to the neighboring surroundings. The panchnama does not describe the interior of the premises nor it specifies the location of the three rooms viz-a-viz the entire building as well as that of the documents alleged to have been found in the premises. The panchanama does not disclose the number of accesses available to the premises and whether the premises were accessible or not from any of those accesses before unlocking the rooms. There is no description of the entire building in which the three rooms, which were allegedly used as the guest house, were situated. The description merely states three rooms of the said premises. In other words, the premises bearing No. 4130 are not only having three rooms but there are more rooms to the said premises. The panchnama has to be specific and clear about the location and the description of the premises irrespective of the fact whether it is in the course of criminal investigation or tax evasion investigation.
16. The panchnama also does not disclose as to who had found the documents in question and where exactly those documents were located in the said premises. It does not state that those documents were seized by concerned officers. It only speaks of an act of resumption of the documents. The exact word used is resumed for the records mentioned in Annexure A. Nothing about seizure of the documents has been stated in the panchnama. Even assuming that the expression resumption of records refers to the seizure of the documents, the panchnama does not disclose whether the officers seizing the documents had taken any care to ensure that the documents were properly enclosed in an envelop or some other packing material, so as to avoid the possibility of access to or interference with those documents by any stranger. The panchnama also does not disclose the time period during which it was conducted.
17. The panchnama also does not disclose as to from where the keys of the rooms were brought. Whether it was only one key or there were more keys. It does not disclose whether keys were brought by Shri Bothra or by any other person. The panchnama also does not disclose as to whether after the conclusion of the panchnama proceedings, the premises were closed or possessed by Shri Bothra. The panchnama does not mention whether there was any person or persons in the premises before entering the premises or after completion of the panchnama proceedings. It does not describe the number and names of the officers who had allegedly conducted the search in the premises. It does not describe whether the search was conducted in the presence of the panchas and/or Shri Bothra.
18. The panchnama does not disclose the nature of the use to which the premises were put to; whether it disclosed any sign of the premises having been used as guest house or not; whether the premises were used as residential premises or otherwise? Admittedly, the investigating agency could not lay their hands on any materials, apart from the alleged documents, which could establish the link between the said premises and the occupants thereof being the appellants. The panchnama also does not disclose as to whether the premises were at all being used for any purpose or not. It was absolutely necessary to find out and record all these aspects precisely which could have certainly helped to verify the truthfulness of the case put forth by the department and the defence sought to be raised by the appellants.
19. The panchnama merely records that the officers on search found certain records. It does not give the description of the so-called records except saying that the same are described in Annexure A. All this information was absolutely necessary to give credibility to the panchanam, particularly when the entire proceedings in that regard are sought to be challenged and disputed.
20. Undoubtedly, there is a Annexure A stated to be giving details of the record found. However, bare perusal of the said annexure would disclose that the same does not give any sort of details of the documents stated to have been found in the premises. One Saraswat duplicate book or attendance register cannot be said to disclose the details of the identity of the document. It does not disclose what sorts of the book it is. It does not disclose whose attendance register it was. The photocopies of bank passbook are stated to be 51 in numbers. However, whose account books were they, what was the account number, by which bank they were issued, for what period they related to? Nothing has been stated.
21. A panchanama is a record of the things visually perceived or actually experience by the panchas in the course of investigation. If it is a search panchanama, obviously, it should record everything that takes place in the course of search. Mere recording that the search officers offered for search of their person is not sufficient. In relation to the seizure of documents, it was necessary not only to record that the documents were recovered from the premises but was also necessary to record a brief description of the exact place where the documents were located in the premises and from where they were seized by the seizing officer. It was necessary to record as to what steps the seizing officer had taken so as to refrain himself and persons accompanying him from causing any damage to the documents as also to avoid any interpolation or inference in any manner with such documents and contents thereof. It was also necessary to record as to what steps were taken to safeguard the documents and to avoid possibility of any strangers interference with the seized materials. In other words, when any document is seized, it necessary to enclose the same in a cover and to seal such cover so that no other person gets opportunity to interfere with such document. All these things can of course be recorded briefly, but precisely. This aspect gains more importance once there is objection regarding veracity of the panchanama and the contents of the documents stated to have been seized in the course of such panchnama.
22. As rightly pointed out by the learned Advocate for the appellants, a panchnama should disclose proper description of the premises and the things found in the premises. The information in this regard assumes more importance when there is serious dispute about the articles alleged to have been recovered and seized from such premises and such articles are sought to be linked with the activities of the concerned party. The panchnama and the proceedings in relation thereto should not leave any room to entertain any doubt as such and for the possibility of planting any article and/ or document by third person or of the scope for interference by strangers with the documents or contents thereof. Obviously, therefore, any article or document seized from any premises is required to be properly sealed after being packed with necessary wrapper or envelop or covering, as the case may be, so as to avoid any possibility of third party interference with such article or document. In the absence of such steps being taken in the course of seizure of the articles or documents, certainly the credibility of not only of the seizure and recovery but of the material seized and recovered can also be doubted. It is also necessary to record not only the description of the premises but also the movement of the officers and the panchas searching the premises and every relevant action of every such person has to be precisely recorded in the panchnama to avoid any doubt about the seizure proceedings. None of such precautions were taken in the cases in hand.
23. In the above circumstances, it is the contention on behalf of the appellants that since the seizure itself was illegal, the recovery stands vitiated and, therefore, nothing recovered can be considered as relevant material to substantiate the charge against them. However, this contention to be canvassed cannot be accepted. It is well settled that the rules of evidence as they are in force in this country do not exclude relevant material on the ground that it was obtained by illegal search and seizure. The evidentiary value of such material is to be ascertained and assessed irrespective of illegality in the search and seizure. Inspite of search and seizure being illegal, if the recovery is of relevant material and the department is able to establish the link between such material and the charge against the assessee, certainly such material cannot be discarded for having found in the course of illegal search and seizure. The decision on this aspect, if any required, one can safely rely upon the decision in the Apex Court in the matter of State represented by Inspector of Police and Others vs. N.M. T. Roy Imakulate reported in 2004 (5) SCC 729.
24. In M.P. Sharma vs. Satish AIR reported in 1954 SC 300, it was held by the Apex Court that the test to be applied, both in civil and in criminal cases, for considering whether evidence is admissible, is whether it is relevant to the matter in issue. If it is admissible, then Court is not concerned about how it was obtained. So also in Pooranmal vs. Director of Inspection reported in 1974 (1) SCC 345 it was ruled that if the Evidence Act, 1872 points relevancy as the only test of admissibility of evidence and secondly that the act or any other similar law in force does not exclude relevant evidence on the ground that it was obtained under illegal search or seizure, it will be wrong to invoke the supposed spirit of our constitution for excluding such evidence.
25. In Khet Singh vs. Union of India reported in 2002 (142) ELT 13, the Apex Court while reiterating its earlier view in Pooran Mals case had held that Court has consistently refused to exclude relevant fact merely on the ground that it was obtained by illegal search or seizure. It was further ruled that even if there is any sort of procedural illegality in conducting the search and seizure, the evidence collected thereby would not become inadmissible and the Court would consider all the circumstances and find out whether any serious prejudice has been caused to be accused. If the search and seizure was in complete defiance of the law and procedure and there was any possibility of the evidence collected likely to have been tampered with or interpolated during the course of such search or seizure, then it could be said that the evidence is not liable to be admissible in evidence. But mere irregularity, and even illegality in the course of search and seizure cannot by itself render the documents seized in the course of such search or seizure to be inadmissible in evidence. Albeit, the relevancy thereof can be certainly questioned.
26. As already pointed out above, it should not be forgotten that the charge of clandestine removal of goods connotes accusation of serious nature and, therefore, requires to be established with cogent evidence. If proved, it can have drastic consequences. Besides, a fair proceedings, with no opportunity to the prosecuting agency to gain advantage of its own wrong or lapse, is the corner stone of our justice system. At the same time, the other side of the coin is that the white colour offenders particularly those defrauding the public exchequer cannot be allowed to enjoy the booty collected by them by taking undue advantage of their own failure or perhaps mischief. It is, therefore, necessary to strike proper balance and that is why the Apex Court in State of Himachal Pradesh vs. Priti Chand and Another reported in 1996 (2) SCC 37, Radha Kishan vs. State of U.P. reported in AIR 1963 (SC 823 and State of Maharashtra vs. Natwar Lal Damodar Das Soni reported in 1980 (4) SCC 669, has ruled that the evidence obtained even by illegal search and seizure should not be discarded totally but should be scrutinized and examined carefully and what weight should be attached to such material should be decided depending upon the facts of each case.
27. The point therefore needs to be considered is what is the relevancy of the documents seized in the course of the panchnama in the case in hand. In that regard, it would be necessary to ascertain as to what were the documents those were seized by the investigation machinery, what is the relevancy of those documents to bring home the charge against the appellants and to what extent?
28. Before dealing with the aspect of documentary evidence, it is necessary to deal with one more important issue which is sought to be raised on the basis of statement said to have been made by Shri Bothra in the course of panchnama proceedings and admitted by Shri Moolchand Maloo. Reference is made to a statement recorded in the panchnama that Shri Bothra in the course of the panchnama had stated that three rooms in the premises at 4130, Gali Barna, Sadar Bazar, Delhi were being used as their guest house. Apart from the fact that it is not clear from the panchnama, as to whom the expression their belongs to. It is settled law that any statement made in a panchnama cannot be used in evidence except for the purpose of contradicting witness whose statement is contained in the panchanama as has been held by the Apex Court in Kanu Amba Vishu vs. The State of Maharashtra reported in 1971 (1) SCC 503. It is well settled law that the panchnama is always a description of the premises or of the situation as noticed by the Panchas in the course of recording of panchanama. Naturally a panchanama does not include statements by third party and even if such statement forms part of the panchnama, the same cannot be relied upon by any party to the proceedings unless established by following the procedure known to law. Being so, the statement stated to have been made by Shri Bothra to the officer before opening of the lock and recorded in the panchnama, in the absence of corroboration thereof, cannot be of any help to the department. It is to be noted that Shri Bothra was not the assessee and according to other records he was incharge of the office at 3909, Gali Barna, Sadar Bazar, Delhi and he was called at the premises No. 4130 by the visiting officers. The identity of those visiting officers is not clear from the panchnama. In fact, the panchnama is totally silent in that regard. Besides, the statement does not clarify the expression their In the circumstances the said statement by itself cannot be of any help to the department to establish link between the appellants and the said premises. It is also contended that the premises 4130 belong to the appellants has been admitted by Shri Moolchand Maloo in his statement. About the alleged admission and the statement of Shri Moolchand Maloo is concerned, it would be dealt with separately herein below.
29. Reverting to the point relating to the documents stated to have been seized in the course of panchnama, admittedly, the author or authors thereof has/have not been identified, nor examined. Once it is not in dispute that the documents were recovered and seized from the premises other than the appellants factory premises, it was absolutely necessary for the department to establish that the premises in question were in possession of the appellants at the relevant time. As pointed out above, undoubtedly, the panchanama discloses that the locks of the premises were opened by Shri Bothra, the employee of the appellants. However, it has not been established that the keys of the premises were in possession of Shri Bothra before unlocking the premises. In fact, it has not been established as to from where and who had brought the keys of the premises and how and when the keys came in possession of Shri Bothra to unlock the door. Admittedly, Shri Bothra was not present in or near the premises but he was required to be called to the premises. It is nowhere on record and even in the panchanama that Shri Bothra accompanied the officer and panchas inside the premises. The panchnama nowhere states that Shri Bothra had ever entered the premises alongwith the panchas and officer. As already stated above, the panchanama nowhere states that there was no other access available to the premises and there is nothing on record to show that any care was taken by the seizing officer to ensure that the seized documents were either enclosed in an envelop or in any sealed cover to avoid third party interference. In those circumstances, the appellants are justified in doubting the veracity of the seized documents.
30. The Commissioner has held that some of the entries in the recovered documents match with those in the statutory records of the appellants. Though, such efforts to match has been made while holding that the quantum of amount recorded in the statutory books was required to be reduced by two digits while referring to the entries in the recovered documents, however, the impugned order neither discloses any basis for the same nor any corroboration thereof by cogent materials on record for adopting such procedure for arriving at the conclusions arrived at.
31. Undisputedly, the documents which are recovered from the said premises have been disowned by the appellants. As already pointed out above, neither the author of the documents has been identified nor examined. It is also not in dispute that the documents are carbon copies and not in the form of original documents. In any case, they being the private documents, unless the link being established between the said documents and the activities of the appellants in their factory, no credibility can be given to the said documents.
32. Undisputedly, the three types of documents which are relied upon to establish the charge are stated to have been seized from the premises No. 4130 under panchnama dated 09.10.98. This is also confirmed by the DR to the specific query in that regard. Documents are described as the hisaba book, kachha challan and loose sheet. Perusal of the Annexure A to the said panchnama however discloses no reference to any hisaba book or kachha challan. The said annexure does not enlist any hisaba book or kachha challan therein. The description of the materials stated to have been seized from the said premises under the said panchnama and described in the Annexure A to the said panchnama do not include any hisaba book or kachha challan. Being so, one wonders whether these were the very documents which were seized from the said premises? If not, how and from where these documents were recovered? We have no clue either from the records before us or from the impugned order in that regard. In the absence of this vital information, we fail to understand as to how these documents can be of any help to establish the charge of clandestine removal of the goods by the appellants, and that to by applying the curious methodology of two digit reduction theory applied by the department without disclosing any basis for such theory.
33. As regards the loose sheets, undoubtedly, the Annexure A to the said panchnama makes reference to one folder containing loose bahi papers and one loose paper file. In the corresponding third column of the Annexure A, the entries thereunder read as 1 to 113 and 1 to 65 respectively. We presume the said entries mean that the folder or the file in the corresponding entry under column 2 contained the 113 and 65 loose papers respectively. But it is pertinent to note that there is nothing in the panchnama or the annexure which could reveal that the said loose papers contained anything having been written thereon. The annexure makes specific reference to certain documents which contained writings thereon. In relation to such documents, there is specific entry in the bracket under third column stating written pages. Such recording is found to have been made with reference to six items but no such recording is made with reference to the loose papers. Obviously, it means that the loose papers were without any written pages. If those loose papers did not contain any writing thereon, wherefrom the department produced loose sheets with various writings about production, supply etc. of various goods? We find no answer either from the records before us or from the impugned order. Annexure to the panchanama relating to the so-called documents stated to have been recovered from the premises do not disclose necessary description of the documents so as to ascertain whether the documents which were sought to be relied upon as having been recovered from the premises in question were really the same documents. Undisputedly, none of the documents stated to have been signed by the panchas and the authorized signatory of the appellants at the relevant time. The panchanama does not disclose the same.
34. In the above noted circumstances, can it be said that any credibility can be given to the so-called documentary evidence sought to be relied upon to support the charge of clandestine removal of the goods by the appellants? Neither the panchnama satisfies the minimum requirement of rules of procedure nor any credibility can be given to the materials allegedly seized in the course of such panchnama nor to the documents sought to be relied upon in the matter. The appellants are justified in making grievance of prejudice having been suffered by them on account of uncorroborative documentary evidence relied upon by the department.
35. If however, defiance of law and procedure leaves scope for tempering with the material seized, then certainly such material cannot be of any relevancy. In the case in hand, on account of various legal and procedural infirmities in the panchnama proceedings noted above, it is apparent that the entire proceedings have lost their credibility and serious doubt arises even about the credibility of the materials stated to have been collected in the course of such proceedings.
36. It is, however, stated that documentary evidence stand corroborated by admission on the part of Moolchand and Vikas in their statements which were recorded on 17.11.1998. The impugned order further discloses that the said statements were sought to be retracted on 04.12.1998, however, the Commissioner has rejected the retraction on the ground of delay.
37 In Shiv Shakti Steel Tubes vs. CCE reported in 2008 (221) ELT 166 it was held by the Honble Punjab & Haryana High Court that the statement to a custom officer can be relied upon and can be used against the makers of the statement as long as it is not hit by any of the defects envisaged by Section 24 of Evidence Act, 1872. A statement containing self exculpatory matter cannot amount to a confession of any wrong doing because of an exculpatory material is of the same fact which if true then it would negative the wrong doing alleged against such person. Therefore, if the statement as inculpatory portion or admission of wrong doing which is corroborated by independent evidence, certainly such portion can be relied upon but not otherwise.
38. The decision of the Madras High Court in Deputy director of Enforcement vs. A.M. Ceaser reported in 1999 (113) ELT 804 is based upon the law laid down by the Apex Court in K.I. Pavunny vs. Asst. Collector, Central Excise Collectorate reported in 1997 (90) ELT 241 and Bagwan Singh vs. State of Punjab reported in AIR 1952 S.C. 214. The law laid down in those decisions on the subject was to the effect that if the Court is required to rely upon any statement of the party to the proceedings said to have admitted certain facts, and thereafter statement stated to have been retracted, the Court has to examine whether the statement was voluntary, whether it was not obtained by threat, duress or promise and on satisfaction in that regard from the evidence on record that it was voluntary then it is required to examine whether the statement is true. In case of disputed or retracted admission in the form of statement recorded by such authorities, therefore, it is invariably necessary to ascertain whether there was any threat duress or promise in relation to such statement being made by the party and the same is to be ascertained on the basis of evidence on record and on satisfactory answer in that regard Court thereafter has to ascertain whether the statement is a true one or not. Obviously, for that purpose also the authority will have to analyse the evidence on record.
39. In the CCE, Madras vs. Systems & Components Pvt. Ltd. reported in 2004 (165) ELT 136, the Apex Court had referred to the finding by the Tribunal that the details supplied by the assessee and their letter dated 30.11.93 giving details of how the concerned parts were used in the Chilling Plant were sufficient to show that they were specifically designed for the purpose of assembling the Chilling Plant. In that respect it was observed that once it is admitted position by the party itself, that those parts were of a Chilling Plant and the concerned party did not even dispute that those parts have no independent use, there was no further need for the department to prove the same. It was in that context it was ruled that what is admitted need not be proved.
40. In the case in hand, not only that the statements were sought to be retracted by the parties, as already observed above, the contents of such alleged admission do not relate to any of the documents stated to have been recovered under the panchnama. In the absence of link between the documents which are sought to be relied upon in support of the accusation of clandestine removal of goods and those documents which are stated to have been recovered in the course of panchnama, the accusation does not stand proved, equally so in relation to alleged admission in the said statements.
41. There is yet another peculiar aspect of the said statements. Perusal of the statements of Sh. Moolchand disclose that the same was stated to have been written by his son Sh. Vikas Maloo at the request of his father. In other words, it is in the handwriting of said Sh. Vikas Maloo. Prior to the signature of the party at the end of the statement, it has been recorded therein that the statement is given by deponent voluntary without any duress, force or enducement and that the statement is that of the deponent and it is correct statement given by him. Similar is the recording at the end of the statement of Sh. Vikas Maloo. However, perusal of whole the statements discloses recording of certain questions and answers. In other words, the statements partly are in the narration form and partly in the question and answer form. Certainly, questions cannot be stated to have been forming part of statement of the deponent. But the fact remains that the endorsement at the end of the statement is to the effect that the entire statement is by the deponent. Added to this, there was retraction specifying that the statements were obtained under duress and force. Certainly, it was necessary for the Commissioner therefore, to deal with the aspect regarding the genuineness of the statement and truthfulness of the contents thereof and not to discard the retraction simply because it was sent after about 17 days after recording the statement. The Commissioner not only failed to do so, but also did not comply with the law laid down in the above decisions in that regard.
42. As already stated above, the truthfulness of the contents of the statements in question certainly cannot be accepted without pinch of salt. As observed above, the recovery of the documents as per the panchnama did not include hisaba book or kachha challan or loose sheets with written pages. The statement of Sh. Vikas Maloo refers to kachha invoices, kachha account stated to have been found at premises No. 4130. We do not find any such document having been described or identified in the annexure to the panchnama which enlists the documents stated to have been recovered from the said premises.
43. The statement of Shri Moolchand Maloo refers to note books having kachha invoices (carbon copy) whereas no such reference to the documents mentioned in the Annexure A to the said panchnama. Being so, the alleged admissions in the statements of Shri Moolchand Maloo and Sh. Vikas Maloo do not lend any support to the documentary evidence sought to be relied upon by the department in support of charge against the appellants.
44. As regards the statement of Shri Bothra, the same does not lend any support to the departments case and rather creates further doubt in the entire case with reference to premises No. 4130 and the documents alleged to have been recovered therefrom. While the panchnama states that Shri Bothra opened the locks of the premises, the statement by Shri Bothra speaks of opening of a lock of the premises by him. The statement nowhere states that the key of the premises was with the deponent. On the contrary, the statements specifically states that the custom officers were already present at the premises. It is pertinent to note that the statement was recorded on the very day on which the panchnama was conducted. The statement also does not disclose the description of the such documents stated to have been recovered and /or seized by the department from the said premises. The statement speaks of use of premises for residence of certain persons on the line of guest house but does not disclose the premises having been used by the appellants or their company as its guest house. Obviously, therefore, the statement of Shri Bothra also can not lend any support to the case of the department.
45. Any statement before being accepted as admission of a fact has to be examined to ascertain what is its imports and then to determine what weight it should be attached to the same. The Apex Court in Nagubai Ammal and Others vs. B. Shama Rao & Other reported in AIR 1956 SC 593 had ruled that an admission is not conclusive as to the truth of the matters stated therein. It is only a piece of evidence, the weight to be attached to which matters depend on the circumstances under which it is made. It was further held that it must be shown that there is a clear and unambiguous statement such as will be conclusive, unless explained.
46. The charge of clandestine removal is also sought to be challenged while contending that there was no scope for allegation of clandestine removal of goods by the appellants even without establishing clandestine manufacture of the necessary quantity of goods and for that purpose procurement of raw materials in necessary quantity, and prior to that the capacity of the appellants to produce such voluminous quantity. The department having not established any of those things, according to the appellants, the accusation of clandestine removal of the goods ought to have been rejected.
47. The Commissioner while rejecting the said contention has referred to three things. One D.O. letter dated 11.08.1997 by the Chairman of the Board to all Commissioners, secondly, panchnamas of production capacity drawn at the premises of M/s Amarjyoti Packers and M/s Raj Laxmi Products Private Limited, and thirdly the number of machines available in the premises of the appellants.
48. The D.O. letter dated 11.08.1997 by the Chairman of the Board was to the effect that the duty for pan masala of MRP upto Rs. 1 per pouch was at 1 lakh during rainy season and 1,20,000/- per month in rainy season and 1,00,000 during other seasons whereas in respect of MRP less than 75 paise it was 50,000 per month during rainy season and 60,000 per month in other season per machine. Considering, the panchnamas regarding production capacity of M/s Amarjyoti Packers and M/s Raj Laxmi Products Private Limited, it has been held that each pouch machine is capable of manufacturing 200 pouches per minute. Since there is no evidence that the appellants were not working for more than one shift and assuming that they were working for three shifts, it has been held that appellants were capable of manufacturing 83,22,75,000 pouches per month.
49. As regards the contention regarding the raw material, it can hardly be disputed that there cannot be any clandestine removal of the goods unless the assessee manufactures the same clandestinely and for that purpose procures raw materials clandestinely or utilizes the raw materials without disclosing its utilization. Learned Commissioner has clearly observed in the impugned order that there is no evidence of purchase of major raw materials like supari, tobacco etc even in the loose sheets. In other words, the department could not bring any evidence about procurement of raw materials sufficient to manufacture the final product of the quantity which is alleged to have been clandestinely removed.
50. Similar is the case in relation to the sale of the clandestinely removed goods. Admittedly, there is no material on record which could establish sale of the clandestinely removed goods. Neither the transporters have supported any such claim nor the suppliers have established the said allegation.
51. Undisputedly, the working of the machines in the appellants factory was not tested or certified to ascertain the production capacity of the said machines. There is no panchnama drawn to ascertain how many machines in the factory of the appellants were in working condition or where actually working and what was the production capacity of each of those machines. No records were available to hold that the appellants were working in three shifts. It was for the department to ascertain the same and to establish the same. The burden was not upon the appellants but burden in this regard was squarely upon the department to prove the allegation with cogent materials on record. Indeed, considering the approach of the learned Commissioner in deciding the most relevant issue which was sought to be raised by the assessee, it is apparent that the finding in that regard has been arrived at not on the basis of the cogent materials on record but essentially on assumptions and without any basis. Certainly, panchanama regarding the production capacity of the machines at totally different factory of a stranger could not have been applied to decide the production capacity of the machines in the appellants factory. There is absolutely no explanation on record as to what prevented the department from ascertaining the production capacity of the appellants machines by conducting necessary test in that regard. The letter of the Chairman about normal rule of production cannot be the proof of the actual production capacity of the machine in the appellants factory. Being so, as rightly contended on behalf of the appellants, the Commissioner totally erred in deciding the said issue in the manner it has been decided. Besides, in the absence of any evidence on record, the Commissioner could not have held that the factory was being operated in three shifts. The finding in this regard is totally perverse.
52. Even assuming that the documents disclosed certain entries that by itself is not sufficient to contend that the same necessarily relate to the clandestine removal of the goods. As rightly pointed out by the Senior Advocate for the appellants that Hisaba Book makes reference to various firms and persons as the buyers of the quantity mentioned therein. However, there was no attempt to record any statement of any such person at all. Contention was sought to be raised that the names were fictitious and attempt to locate did not yield fruitful result. In fact, there is no material to support this contention. Besides, the statement recorded of the appellants Director discloses the disclosure of the names of their suppliers and buyers and yet there is no recording of statement of those persons. It is pertinent to note that the statement on behalf of the appellants not only disclose the names but even that telephone numbers. It was, therefore, necessary to collect proper evidence to establish the said fact by collecting cogent evidence regarding the actual production in the appellants factory.
53. The appellants are also justified in making grievance about the failure on the part of the respondent to collect any evidence in relation to either procurement of raw materials by the appellants or sale of final goods so as to justify the allegation against the appellants about clandestine removal of huge quantity of the final product within a short span of time. Admittedly, there was no verification of the capacity of the machines to produce the total quantity per day. Calculation in that regard has been arrived at merely on the basis of some assumption and not on actual verification of the machines. Inspite of repeated contention sought to be raised by the Advocate for the appellants in that regard, the respondent could not point out anything from the records which could convince us to reject the said contention on behalf of the appellants.
54. As regards the entries made regarding raw materials in the loose sheets, it has been stated that the complete addresses of raw material suppliers were not given, however, the names thereof were given and the addressees were sought to be verified and ascertained from the records and enquiries were caused by the officers of the Department. However, none of the so-called officers were ever examined in the matter, nor there is any statement of any such suppliers. On the contrary, statement of Shri Rajiv Gulati discloses specific statement to the fact that the goods were sold on invoices to the appellants. The same statement was reiterated by him on 30.5.2000. He has also stated that the payments were received only through cheques and never in cash. Similar is the statement regarding payments under cheques of Shri Krishna Gopal recorded on 8.5.2000. Likewise is the statement of Shri S.K. Jain dated 15.5.2000 to the effect that the goods were never supplied to Kuber Tobacco Product but they were supplied to Kuber International and the payments were received by cheques only and no cash payment was ever received. It was also stated that they were not having any business since April, 1999 and that they had never supplied the goods without invoice. Similar is the statement of Shri Chetan recorded on 1.6.2000.
55. The Commissioner however, solely on the basis of the entries in the loose sheets has held that the appellants had purchased huge quantity of raw materials and did not enter the same in the statutory records with intention to clandestine manufacture of gutkha. It is pertinent to note that Shri C.S. Vaid, factory in-charge had given the names of the suppliers and in particular of supari and tobacco and raw materials yet neither the impugned order nor the records disclose any inquiry having been made with those suppliers. The records also do not disclose the reasons for absence of such investigation. As regards the Hisaba Book, kachcha challan and loose sheets, it is contended that the said documents were of carbon copies, there was interpolation and striking of some writing. The Department did not make any efforts to lay their hands on the originals of those documents. In such circumstances, no evidentiary value could be given to those documents.
56. Undisputedly, there has been no attempt on the part of the investigating agency to ascertain whether entries in the loose papers, hisaba book and kachcha challans were in the hand writing of the authorized signatory of the appellants or any of the employees or the officers of the appellants. Neither there was hand writing examination done nor the necessary evidence to establish the link between the said hand writing and that of any of the employees of the appellants has been placed on record.
57. As rightly pointed out by the Advocate for the appellants, any kachcha records to be made a part of the evidence, the same need to be corroborated by cogent evidence and in the absence thereof, the private records by themselves do not transform into reliable evidence. There is absolutely no corroboration in any manner of the entries in Hisaba Book or loose sheets or kachcha challans.
58. The efforts on the part of the Commissioner to link the said entries to the production of clearance of the goods from the appellants factory as rightly submitted are based on purely presumptions and assumptions without any tangible evidence to support the conclusions sought to be arrived at in that regard.
59. There is no evidence collected as regards the number of shifts the machine might have been used in the factory of the appellants. The conclusion in that regard has been sought to be made merely on assumption. It was to the knowledge of the Commissioner that it was dealing on serious charge of clandestine removal of the goods against the appellants. It was in such case the heavy burden lies upon the Department to establish the charge and the same cannot be established merely on the basis of assumption and presumption.
60. As rightly pointed by the Advocate for the appellants that there is absolutely no evidence of additional employees having been employed to enhance the production nor there is any evidence of excess wages having been paid to the existing employees. Added to this, there was no discrepancy found in the raw materials stock in comparison with the statutory records in respect thereof. As already pointed out above, there was no evidence of additional clandestine purchase of raw materials and particularly like supari, tobacco etc. Even the loose sheets in that regard do not lend any support to the contrary findings arrived at by the authorities below.
61. The findings regarding the supply of raw materials are purely on imagination of the adjudicating authority as rightly submitted by the Advocate for the appellants. In fact, the findings in respect thereof have been arrived at solely on the basis that the regular suppliers must have supplied the required quantity. The supply of raw material is not a matter of presumption and that too without any supporting material. It has to be established on the basis of proof and cogent evidence being placed on record.
62. Advocate for the appellants has further contended that the finding based on alleged consumption of diesel by the appellants is also totally incorrect. It is submitted that the respondent has alleged that the appellants purchased 29,600 Ltrs of diesel valued at Rs.2,92,152/- during the period from 11th June to 30th June, 1998 i.e. during the period for 99 days and the same is revealed from the loose sheets. Apart from the fact that loose sheets are thoroughly unreliable even assuming the said documents can be relied upon it is the contention on behalf of the appellants that the appellants could not have used such a huge quantity of diesel within short span of 20 days. The records nowhere disclose that the appellants factory was running for more than one shift. Considering the same and taking into consideration the generator set of 380 KVA and that 200 KVA was installed in the premises, the Department has failed to establish that for one shift, the generator could have consumed such a large quantity of diesel within 20 days. In relation to 380 KVA for normal shift of 8 hours a day, the consumption of diesel would be 280L. Considering the same for 20 days, it cannot exceed 5,600 L. As regards 200 KVA for normal shift of 8 hours, it would consume 180 L and accordingly for 20 days it cannot exceed the consumption of 3,200 L. Being so, by no stretch of imagination, the appellants could have consumed 29,600 L of diesel within 20 days. The contention of the appellants in this regard is certainly well founded in the facts and circumstances of the case.
63. If however, defiance of law and procedure leaves scope for tempering with the material seized, then certainly such material cannot be of any relevancy. In the case in hand, on account of various legal and procedural infirmities in the panchnama proceedings noted above, it is apparent that the entire proceedings have lost their credibility and serious doubt arises about the credibility of the materials stated to have been collected in the coruse of such proceedings.
64. In Ganga Rubber Industries vs. CCE reported in 1989 (39) ELT 650, it was held that it is for the Department to establish that the entries in books recovered in the course of investigation were genuine and the fact that such verification was done has to be established by the Department. In the absence of proof about entries in the books to be representing actual clandestine removal, it cannot be said that the Revenue has discharged its burden.
65. In Emmtex Synthetics Ltd. vs. CCE, New Delhi reported in 2003 (157) ELT 120, it was held that in the course of tangible evidence, no presumption on the basis of uncorroborated, uncross-examined testimony of the witnesses or entries in private diaries or loose sheets or charts can be drawn to support the charge of clandestine removal of the goods.
66. If we scan through the decisions which are sought to be relied upon on behalf of the department, the same are clearly distinguishable on facts and the circumstances in which the same were delivered. On the contrary, the decision relied upon on behalf of the assessees clearly lend support to the view that can be taken in the matter.
67. In P. K. Ravindran vs. CCE, Cochin reported in 2003 (156) ELT 182, it was held by the Madras High Court that the clandestine consumption of electricity by the industries could go unmetered either on account of the misuse of the facility by the consumer, or on account of the clandestine activity of such consumer in collusion with the officials of the concerned Electricity Boards. But these things are to be alleged and established by the department. Undisputedly, that is not the case in the matter in hand.
68. In Columbia Electronics Ltd. vs. CCE, Indor reported in 2002 (143) ELT 635, the Tribunal held that in case when the clandestine removal of goods is established from the existence of double sets of invoices, which were not denied by the assessees, mere non examination of the officer who made entries in a diary relied upon by the department would not vitiate the proceedings. In the facts and circumstances of the case, the charge of clandestine removal of goods was clearly established, and thereupon absence of cross examination of any of the officers was not fatal to the case of revenue.
69. In M.R. Tobacco P. Ltd. vs. CCE, Delhi reported in 2006 (202) ELT 64, the Honble Delhi High Court held that author of loose sheets was not identified is of no consequence in view of admission made by Director of firm. It was recorded that the Director had clearly admitted that loose sheets reflected removal of goods from the factory in a clandestine manner. As a matter of fact, there were three godowns of the assessee which were identified during search of the premises and it was found that several machines manufacturing gutkha and pouches were actually not in use.
70. In CCE, Hyderabad vs. Vanifab Engineers Pvt. Ltd. reported in 2006 (206) ELT 893, the Tribunal held that in the absence of any statement from any person from the factory to prove that there has been excess production and clearance of the goods without payment of duty and in the absence of any other evidence , the proceedings on charge of clandestine removal of the goods are liable to be quashed.
71. In Laxmi Engg. Works vs. CCE, Delhi & Anr. reported in 2001 (98) ECR 273, it was held that in the absence of cross-examination of witnesses and the recovery of slip pads, loose papers and register from the factory premises having not proved by the independent witnesses, the charge of clandestine removal was not established.
72. In CCE, Bangalore vs. Jindal Aluminium Ltd. reported in 1998 (29) RLT 183 (CEGAT) it was held that the allegation of clandestine removal based on transporters challans without any corroborative evidence was not sustainable.
73. In Kothari Pouches Ltd. & Anr. vs. CCE, New Delhi reported in 2000 (41) RLT 209 (CEGAT), the Tribunal disbelieved the charge of clandestine removal which was sought to be established on the basis of transporters records showing booking of the goods allegedly removed clandestinely without any other evidence.
74. In CCE, Mumbai-III vs. Mira Silk Mills reported in 1999 (32) RLT 871 (CEGAT), the Tribunal refused to rely upon the entries in the private note book in the absence of corroboration of such entries to sustain the charge of clandestine removal.
75. In Winners Rubber Private Limited vs CCE, Kanpur reported in 1998 (25) RLT 507 (CEGAT) in view of the failure on the part of the department to collect proper evidence and the finding based merely on application of formula given in the draft project report, it was held that the department failed to discharge the burden and proving clandestine removal.
76. In A.S. Periasamy, Proprietor, M/s Glass Beedi Factory vs. Collector of Central Excise, Madras reported in 1988 (35) ELT 664 (Tribunal) in the course of checking the records by the department one account-book containing details of actual quantity of biris supplied to M/s Glass Beedi Factory was recovered on 31.12.1985. On the very day, the officers visited the Glass Beedi Factory and verified the stock and accounts and noted shortage of 36,000 lebelled biris. Perusal of two private accounts books and out workers passbook of Sivalingam and his sons Saravanan disclosed difference of 1,50,38,920 biris, when compared with the appellants accounts-book. On one hand, there was statement of Sivalingam supported by documentary evidence besides, there was statement of the assessee himself supported by documentary evidence. In those circumstances the confessional statements were held as reliable. That is not the case in the matter in hand. We have no documentary evidence supporting any of the statements.
77. In S.B. Steel Industries Limited vs. Commissioner of Central Excise reported in 1999 (107) ELT 713 (Tribunal) the case of the department was sought to be established on the basis of entries made in the private note book by the labour contractor regarding the quantity bundled and loaded during the relevant period. It was held to have been established as the entries in the book were corroborated by the statement of the labour contractor and his partner as also considering the volume of power consumption. On facts, the case is clearly distinguishable.
78. In Sharma Chemicals vs. Commissioner of C. Ex. Calcutta-II reported in 2001 (130) ELT 271 (Tri. Kolkata) the note book entries of production and removal of products recovered from a person whose name was appearing in the list of the workers in statutory records cannot be of any relevancy to establish the charge of clandestine manufacture and removal. Such a charge cannot be sustained on presumption that the persons entrusted with such job are not usually shown as employees. The entries in private note book of record of production at the most may raise a doubt but can not be a proof of the charge in the absence of other corroborative evidence like installed capacity of factory, raw materials utilization, labour employed, power consumed, goods actually manufactured and packed etc.
79. In T.M. Industries vs. Collector of Central Excise reported in 1993 (68) ELT 807 (Tribunal) it was held that in cases where charge of clandestine removal is to be established on private records genuineness thereof is disputed and authenticity of such record is not established by the department cannot be said to have been proved against the assessee.
80. In M.T.K. Gurusamy vs. Commissioner of Central Excise, Madurai reported in 2001 (130) ELT 344 (Tri. Chennai) it was held that private note book maintained by part time employee containing unauthenticated entries and over-writings cannot be relied upon for establishing clandestine removal in the absence of any corroboration from the seizure of the goods or invoice or purchase of raw materials etc.
81. In Ambika Chemicals vs. Commissioner of Central Excise, Chennai reported in 2002 (148) ELT 101 (Tri. Chennai) it was held that the note books maintained by chemist of the assessee with regard to production of various leather chemicals cannot be relied upon to establish clandestine removal in the absence of supporting evidence with regard to purchase of inputs, production, source of funds, sale and receipt of consideration.
82. In Rama Shyama Papers Ltd. vs. Commissioner of C. Ex. Lucknow reported in 2004 (168) ELT 494 (Tri. Del.) it was held that in the absence of any evidence to show that the movement of the goods from the premises of the assessee to other party and no enquiry having been made as to who had ultimately received the goods, mere fact that the assessee had not denied business relationship with such third party, it would not mean that they were liable for each and every entry made by that party in its books of accounts. It was also held that when only one transporter out of five stated to have been responsible for two out of 19 consignments was produced for cross-examination and none of the labourers working in the factory whose statements were recorded were produced for cross-examination, it was held that there was no corroborative piece of evidence and hence the charge was no established.
83. In Raza Textiles Limited vs. Collector of C. Ex. reported in 1999 (44) ELT 233 (Tribunal) it was held that the clandestine removal of goods cannot be established merely on the basis of rough note book of employee when the entries of production in such note book were less then the entries of the production in RG-I on the relevant dates.
84. In Ruby Chlorates (P) Ltd. vs. Collector of C. Ex. Trichy reported in 2006 (204) ELT 607 (Tri. Chennai) held that it is settled legal position that when several raw materials are involved, when a case of clandestine production and clearance is built on clandestine use of raw materials the same should be proven with reference to unaccounted use of such major raw materials. In a case of clandestine removal the department should produce positive evidence to establish the same. In the absence of corroborative evidence, a finding cannot be based on the contents of loose sheets of uncertain authorship. Failure on the part of the department to produce evidence of use of inputs to prove that there was manufacture of unaccounted finished product, absence of statements disclosing the source of procurement of the raw materials, absence of evidence regarding use of electricity or receipt of sale consideration by the assessee would establish failure on the part of department to bring home the charge of clandestine removal by the manufacturer.
85. In Opel Alloys (P) Ltd., vs. Commissioner of Central Excise, Ghaziabad reported in 2005 (182) ELT 64 (Tri. Del.) the department had not identified the person or persons who had maintained the records seized by the department, there was no statement of any employee in support of any of the allegations against the assessee, statements recorded of the assessee were retracted and there was no corroboration of the retracted statements and in those circumstances it was held that the charge of clandestine removal was not established.
86. Only evidence on record which can be said to be reliable is the evidence regarding seizure of 57 bags weighing 87.8 kgs. valued at Rs.376200/- (MRP) from the premises of KTPPL during the visit of the officers to the factory premises and which was in excess of recorded balance in the RG register. However, as rightly submitted by the learned Advocate for the appellants it was during the working hours of the days and the same could have been recorded in the course of day and before their clearance. Even assuming that the said submission is to be discarded, the fact remains that from the seizure of 57 bags by itself cannot be a substitute for the proof of clandestine removal of the goods.
87. In Sai Chemicals Pvt. Ltd vs. CCE, Raipur (Tri. Delhi) reported in 2010 (257) ELT 457 there was no disputed about the entries in the private record maintained by the assessee. That is not the case in the matter in hand. Hence, the basic fact not being established in the case in hand, whereas in Sai Chemicals the basic facts were clearly established.
88. There can hardly be any dispute that to prove the charge of clandestine removal, it is not the quantity, but the qualitative evidence that is necessary. For the reasons stated herein above I do not find qualitative evidence in the matter in hand to support of the said charge. Seizure of some quantity of goods pursuant to non recording thereof in the statutory records immediately after the manufactured thereof by itself does not establish the allegation of clandestine removal; more so particularly in the circumstances described elaborately hereinabove and, therefore, are not sufficient to establish the allegations against the appellants.
89. The entire evidence sought to be relied upon in support of the allegations against the appellants, being unreliable and uncorroborated, and unsustainable to establish the charge of clandestine removal of goods, it is not necessary to deal with other grounds of challenge in the matter. Suffice to observe that in the absence of cogent evidence on record, the charge of clandestine removal against the appellants cannot be said to have been proved and hence the appeals are liable to be allowed.
90. In the result, the appeals are bound to succeed. The impugned orders are liable to be set aside with consequential relief. Accordingly, I allow the appeals and set aside the impugned orders.
Per: Shri Rakesh Kumar:
Since common questions of law and facts arise in all these appeals, the same were heard together and are being disposed of by a common order. The facts leading to filing of these appeals are, in brief, as under:-
1.1 M/s. Kuber Tobacco Products Pvt. Ltd. (hereinafter referred to as KTPPL) having its registered office at 3909, Gali Barna, Sazar Bazaar, Delhi, is a Private Limited Company, whose Directors are Shri Mool Chand Malu and his son, Shri Vikas Malu. M/s. Kuber International Ltd. (hereinafter referred to as KI and now called as Kuber International Pvt. Ltd.) having its registered office at 3909, Gali Barna, Sadar Bazar, Delhi is also a Private Limited Company, whose Directors are Shri Moolchand Malu and his son, Vikash Malu. While KTPPL have manufacturing units at 31K, Siraspur, Delhi ( Unit I), 34 K, Siraspur, Delhi (now closed) and 173, 174K Siraspur (Unit-II), Delhi, where Gutka/Pan of Moolchand brand is manufactured, KI have manufacturing unit at 32 K, Siraspur, Delhi where branded chewing tobacco i.e. Khaini of Kuber and Jet Brand is manufactured. While Gutka was chargeable to central excise duty under sub-heading no.2106.00 of Central Excise Tariff, Branded chewing tobacco was chargeable to duty under sub-heading No.2404.00 of the Central Excise Tariff. On 9.10.98, the officers of Central Excise Commissionerate, Delhi-I, on receipt of specific intelligence that KI and KTPPL have been indulging in duty evasion by clandestine removal of the goods and had acquired undisclosed premises where the records regarding un-declared production are kept, searched the following premises:-
(1) 30 & 31-K, Siraspur, Delhi.
(2) 3909, Gali Barna, Sadar Bazar, Delhi.
(3) 4130, Gali Barna, Sadar Bazar, Delhi.
(4) 6041-42, 2nd Floor, Basti Harphool Singh, Delhi.
(5) 5987, Plot No.83, South Nawab Road, Basti Harphool Singh
Delhi.
(6) 463, Pocket A(GF), Sarita Vihar, New Delhi.
1.2 In course of search of factory premises of KTPPL at 31-K, Siraspur, Delhi, 57 bags of Mool Chand brand Gutka, weighing 877.800 Kgs. valued at Rs.3,76,200 (MRP) were found to be in excess of the balance recorded in RG-I Register and the same were placed under seizure. In the course of search of the office at 3909, Gali Barna, Sadar Bazar, Delhi, which is common office of KI and KTPPL and some other firms/companies owned by Shri Mool Chand Malu and his family members, some documents related to Kuber Group of Companies, relevant to the inquiry, were found and the same were resumed under Panchnama dated 09.10.1998 and besides this, an amount of Rs.1.8 Lakh were recovered which was seized on reasonable belief that the same was sale proceeds of goods cleared without payment of duty.
1.3 From the search of 4130, Gali Barna, Sadar Bazar, Delhi, which was conducted in presence of Shri Shubh Karna Bothra, an employee of Shri Mool Chand Malu, a number of documents were recovered, which are listed in Annexure-A to the search Panchbnama.
1.4 The premises at 6041-42, 2nd Floor was found to be used by M/s. Gangaur Foods Pvt. Ltd., (GFPL), a sister concern of KI and KTPPL of which Shri Bajrang Lal Malu was one of the Directors and the company was found to be engaged in the manufacture of Dandia brand Gutka. The search of the premises resulted in the recovery of katcha documents pertaining to M/s. GFPL, cash of Rs.7.36 Lakhs which were placed under seizure.
1.5 As regards search of premises at 5987, Plot No.83, South Nawab Road, Basti Harphool Singh, Delhi, blank invoice/bill books of four companies were recovered:-
(1) M/s. Rishi Trading Co., Gali Pahad Wali, Sadar Bazar, Delhi-6.
(2) M/s.Swastik Trading Co., 1464, Qutab Road, Sadar Bazar, Delhi-6.
(3) M/s.Shyam Tobacco Co., 6468-B, Basti Harphool Singh, Sadar Bazar, Delhi-6.
(4) M/s. Shukla Enterprises, 2861, Bagichi Raghunath, Sadar Bazar,
Delhi-6.
At these premises, one Shri Ravi Kumar Duggar, Accountant of KTC was present.
1.6 From 463, G.F. Pocket-A, Sarita Vihar, New Delhi, no incriminating documents were recovered.
1.7 Shri Subh Karan Bothra of M/s. KTPPL was present at the time of search of the premises of KTPPL at 3909, Gali Barna, Sadar Bazar, Delhi. Subsequently, when the officers team reached at the premises at 4130, Gali Barna, Sadar Bazar, Delhi for search of the premises, it was found locked and Shri Subh Karan Bothra was called at this premises. He came to this premises and in presence of two panch witnesses, he opened the lock and was present thorough out the search of the premises. At that time, he stated that this premises is used as their guest house. After completion of the search of the premises at 4130, Gali Barna, Sadar Bazar, Delhi, statement of Shri Subh Karan Bothra was recorded on 9.10.98 under Section 14 of the Central Excise Act, 1944, wherein he stated that he is the authorised signatory of the KTPPL for the last 3 years, that the search and seizure proceedings at the registered office of KTPPL at 3909, Gali Barna, Sadar Bazar, Delhi had been conducted in his presence and after completion of the search proceedings, he had proceeded to the premises at 4130, Gali Barna, Sadar Bazar, Delhi and he was present throughout the search of this premises, that the premises at 4130, Gali Barna, Sadar Bazar, Delhi was being used as guest house of the company, that the documents/records recovered at the time of search of the premises pertain to KTPPL and KI and they are kachcha records and that these records had been kept in that premises due to paucity of space. Shri Bothra in his further statement recorded on 9.2.99 stated that he had been continuously working with M/s. Kusum Trading Co. (KTC) since 1993, that M/s. KTC is a proprietory concern of Shri Mool Chand Malu, that he knew Shri Mool Chand Malu because both of them belong to the same city, that the KTC has its office at 3909, Gali Barna, Sadar Bazar, Delhi also, that he was in charge of the office at 3909, Gali Barna, Delhi and that for his work and duties, he reported directly to Shri Mool Chand Malu. However, Shri Subh Karan Bothra in his subsequent statement dated 24.4.2000 retracted his earlier statement stating that he was not in charge of the office at 3909, Gali Barna, Sadar Bazar, Delhi and was an employee of the KTC only. However, when he was shown page no.11 of the attendance register at S.No.3 of Panchnama dated 9.10.2008 drawn of the search of office at 3909, Gali Barna, Sadar Bazar, Delhi in which GM Sadar Office was written against his name, he stated that he did not understand as to what had been written.
1.8. Summons were served on Shri Mool Chand Malu and Shri Vikas Maloo, Directors of KTPPL and of KI and they appeared before the investigating officers on 17.11.98. Shri Mool Chand Malu in his statement dated 17.11.98 recorded under Section 14 of the Central Excise Act, 1944 stated that he was the Director of KTPPL, that he was also the proprietor of M/s. Kusum Trading Company (KTC), M/s. Kuber Aqua Minerals Ltd. M/s. Kuber Grains & Spices Pvt. Ltd., M/s. Green Valley Resorts Ltd., M/s. Blooming Dale Pvt. Ltd., and M/s. Kuber Globals Pvt. Ltd., that M/s. KTPPL were having their factories for manufacture of Gutka and chewing tobaco of Mool Chand brand and kuber brand, that Shri C.S. Baid was of his employee, who was in charge of purchase of raw materials and manufacture of finished goods and their despatch; that the payments for the purchase of the raw materials were being made by him or Shri Vikas Malu, that Shri C.S. Baid reported directly to the Directors i.e. himself or in his absence to his son, that for the purpose of marketing of the finished goods, Shri Mukesh Kapoor was the incharge, who received the purchase orders from the buyers and conveyed them to Shri C.S. Baid for despatching the finished goods, that Shri Baid reported directly to Shri Mool Chand Malu and his son, that in the absence of Shri Mukesh Kapoor, the purchase orders were also received by Shri C.S. Baid, that Shri R.P. Sharma assists Shri Baid and central excise invoices are prepared and signed by Shri Sharma, that Shri Sharma was also responsible for depositing the duty on the goods cleared, that Shri Subh Karan Bothra was in-charge of Sadar Office at 3909, Gali Barna and he looked after the general administration and coordination work of the factory, for which he directly reported to him or his son, Vikas Malu, that in respect of the consignments going out of Delhi, the transporters for each destination were fixed e.g. RKRT Transport Company for dispatches to Mumbai, M/s. Diamond Transport for Ahmedabad, Nagpur Golden Transport Company for dispatches to Nagpur, etc. that the goods meant for local sales were sent directly from the factory to M/s. Delhi Marketing Company (DMC) and M/s New Delhi Marketing Company (NDMC) that for sales to Punjab & Haryana and U.P., the goods were sold through M/s. Ganpati Trading Company (GTC) and that he had areawise distributors, the details of which are as under:-
(a) M/s. Astha Marketing Co., M/s. Karnavati Trade Links and M/s. New Kraj Sales Corpn./Kraj Distributors for Ahmedabad .
(b) M/s. Indian Trade Agencies and M/s. Coral Mktg. Corpn.for Mumbai.
(c) M/s.Mahamaya Trade Agencies for in Nagpur region.
(d) M/s. Kraj Distributors for Patna regions;
(e) M/s. Kothari Agencies for Jaipur area;
(f) M/s.Dehati Ghee Bhandar for Vanswara region;
(g) M/s. Mahamaya Trading Company for the Raipur region;
(h) M/s. S.R. Marketing and Vellam Enterprises for Chennai region;
(i) M/s. Bhagwati General Mills for Jammu region;
(j) M/s. Maruti Enterprises for Bangalore region, etc.
Shri Mool Chand Malu further stated that some consignments of Kuber and Jet Brand Khaini and Mool Chand Brand and Kuber Brand Gutkha were cleared without payment of duty and this was being done due to increasing competition, that about 50% of the quantities manufactured were being cleared without payment of duty, that in order to maintain and keep the accounting of the goods cleared without payment of duty, entries were first made on loose sheets on daily basis, that subsequently on the basis of entries in loose daily sheets, kachcha challans were prepared in duplicate in the name of the respective distributors, the original copy of which was sent to distributors by courier, that on the basis of kachcha challan, kachcha accounts containing partywise details of sales and receipt of payments were prepared and that payments for non-duty paid were received in cash or through bearer demand drafts. Shri Mool Chand Malu was shown the documents recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi and stating that the same pertained to KTPPL and KI, he further stated that the books at sl.no.8, 9, 10, 12, 16, 17, 18, 19 and 20 were the carbon copies of the kachcha challans in respect of the goods sold to various distributors, that these kachcha challans have been mainly prepared / written by his employee Shri Kishan Sharma, that the books against sl.no.11, 13, 14 and 15 were the kachcha accounts and at sl. nos. 14 and 15 (Hisaba books) contain partywise accounts of sales and receipt of the payments, that these books had also mostly been written by Shri Kishan Sharma, and in some cases by Shri Umed that most of the consignments covered under kachcha challans and mentioned in the hisaba books had been cleared without payment of duty, and that he was ready to make the payment of duty on the goods, which were cleared without payment of duty. Shri Vikas Malu in his statement dated 17.11.98 recorded under Section 14 of the Act, accepting that the documents recovered from premises at 4130, Gali Barna, Sadar Bazar, Delhi pertained to KTPPL and KI corroborated the statement of Shri Mool Chand Malu. Shri Vikas Malu in his statement also accepted that about 50% of the consignments were cleared without payment of duty. However, subsequently, both Shri Mool Chand Malu and Shri Vikas Malu retracted their statement dated 17.11.98 and for this purpose, sent letters which were received by the investigating officers on 4.12.98.
1.9 Statement of Shri C.S. Baid was recorded on 1.12.98 under Section 14 of the Central Excise Act, 1944, wherein he stated that he had started working with Shri Mool Chand Malu as factory supervisor in the factory premises in KTPPL, that he directly reported to him or his Son, Shri Vikas Malu, who were directors of the company, that he had complete control from the stage of purchase of raw materials to the manufacture and dispatch of the goods and occasionally, was also looking after marketing; and that he was performing these functions in respect of KTPPL and KI. His further statements were recorded on 13.04.2000, 17.4.2000 and 18.04.2000, wherein he gave explanation in respect of questions asked from him regarding certain kachcha challans.
1.10 Inquiry was made with Shri R.P. Sharma, Authorized Signatory of KTPPL and his statement recorded on 17.4.2000 wherein he stated that he was looking after all the excise work of KTPPL as well as KI, that he was authorized signatory of the company, that though he was looking after the excise work, the production figures in the RG-I Register were entered as per the information given to him by Shri C.S. Baid, and that he had never checked as to whether the production or sales figures to be entered in the RG-I Register, as informed by Shri C.S. Baid, were correct or not.
1.11 Statement of Shri Umed Chandalia, an employee of KTPPL, was recorded on 8.2.99, wherein he stated that since November, 1998, he was working with KTPPL, that he was doing the job of dispatching the letters, handling bank transactions and various other work of KTPPL and KI and other firms of Mool Chand Malu, Vikas Malu and their family members, that the entire work relating to production of Gutka and Khaini and the work of marketing of the finished goods and purchase of raw materials was being looked after Shri C.S. Baid, that for local sales within Delhi, Shri Mukesh Kapoor and Shri Gowri Shankar Khattar were responsible, that Shri Gowri Shankar Khattar and his wife were the owner of two firms, M/s.DMC and M/s. NDMC, that Shri Mukesh Kapoor and his wife Mrs. Saroj Kapoor were owning two firms M/s. Ganpati Agencies (GA) and M/s. Ganpati Marketing Co. (GMC), and that Shri Subh Karan Bothra was looking general administration of the office at 3909, Gali Barna, Sadar Bazar, Delhi and he was also looking after the receipt of payments from the buyers.
1.12 The statements of Shri Mukesh Kapoor, his wife, Smt. Saroj Kapoor, and Shri Gowri Shankar Khattar were also recorded wherein they accepted that they were marketing the Gutka and Khaini manufactured by KTPPL and KI .
1.13 On study of kachcha challans, it was found that each kachcha challan contained the details like the name of the buyer (Distributor), the total quantity sold, quantity sold under the invoice, value, mode of the transport and the name of the transport company, if the transportation by road and along with GR/RR nos. All the sales in respect of which kachcha challans had been issued were found reflected in kachcha accounts called Hisaba books (Book No.14 and 15 of the Annexure to the Panchnama of the search of the premises at 4130, Gali Barna, Sadar Bazar, Delhi).
1.14 Inquiries were made with the transport companies mentioned in the kachcha challans and it was found that the consignments bearing GR nos. mentioned in the challans had indeed been booked mentioning their contents as tobacco. However, the consignors name mentioned on those GRs were found to be fictitious. Similarly in respect of the consignment sent by rail, inquiry was made with the railways and the copies of the RRs, mentioned in the kachcha challsn were obtained which showed that the consignments under the RRs as mentioned in the kachcha challans had, indeed, been booked, but there also the consignors name and address were found to be fictitious. In respect of the consignees, as mentioned in the kachcha challans, inquiry was through the central excise authorities of the respective comissionerates and it was found that those persons were, indeed, purchasing the Gutka and Khaini from KTPPL and KI without payment of duty.
1.15 It, therefore, appeared that kachcha challan books mentioned at Sl. Nos. 8, 9, 10, 12, 16, 17, 18, 19 & 20 of the Annexure to the Panchnama dated 9.10.98 of the search of premises at 4130, Gali Barna, Sadar Bazar, Delhi, contained the kachcha challans under which the consignments of Gutka and tobacco had been dispatched to various distributors of KTPPL and KI and the account books called hisaba books at S.No. 14 and 15 of the Panchnama contained partywise accounts of the sales made to various distributors and payments received from them. On comparison of the kachcha challans with the central excise invoices issued, it was found that in respect of a number of kachcha challans there were no invoices and in some cases, where the invoices had been issued, the value of the goods as mentioned in the central excise invoices were much lower than the value mentioned in the kachcha challans. The loose sheets in the folder mentioned at S.No.2 of the Annexure to Panchnama dated 9.10.98 of the search of premises at 4130, Gali Barna, Sadar Bazar, Delhi consisted of daily sheets containing details of clearances of Gutka and Khaini, and records of purchase of raw materials/ inputs like plastic lamination, tobacco, and diesel for running of generators. It, therefore, appeared that M/s.KTPPL and KI were clearing Gutka and Khaini without payment of duty in clandestine manner and even in the cases where the central excise invoices had been issued and the duty had been paid, the duty had been evaded by undeclaring the value. Looking to the number of machines and capacity of the machines, it appeared that KTPPL and KI had capacity to manufacture the quantity of the Gutka and Khaini which had been sold under the kachcha challans. It is on this basis that the following two show cause notices were issued to KTPPL and KI and other noticees.
1.15.1 A show cause notice dated 31.07.2000 was issued to KTPPL and others for
(a) recovery of allegedly short paid central excise duty amounting to Rs.11,99,33,571/- from M/s.KTPPL chargeable on the goods valued at Rs.29,95,79,744/- cleared clandestinely without payment of duty during the period from 1.8.95 to 28.02.97 under Rule 9(2) of the Central Excise Rules read with proviso to Section 11 A (1) of the Central Excise Act, 1944 along with interest on this duty at the applicable rate as per the provisions of Section 11 AB ibid and for appropriation of an amount of Rs.2 Crore already paid by them voluntarily;
(b) revision and enhancement of the assessable value of the goods cleared during the period from 1.8.1995 to 5.10.98, as detailed in the show cause notice and recovery of differential duty amounting to Rs.45,45,084/- in respect of these clearances under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Section 11 A(1) of Central Excise Act, 1944 along with interest on the duty at the applicable rate under Section 11 AB ibid;
(c ) confiscation of land and building, plant and machinery of M/s. KTPPL used in connection with manufacture of branded goods under Rule 173Q(2) of the Central Excise Act, 1944;
(d) imposition of penalty on M/s. KTPPL under Rule 9(2), 52A, 173Q, 226 of the Central Excise Act, 1944 read with Section 11 AC of the Central Excise Act, 1944;
(e) imposition of penalty under Rule 209 A of the Central Excise Act, 1944 on Shri Mool Chand Malu, Shri Vikas Malu, C.S. Baid, Shri Subh Karan Bothra, Shri Mukesh Kapoor of M/s. Ganpati Agencies and M/s. Ganpati Mktg., Shri Gowri Shannkar Khattar of M/s. Delhi Marketing Co. & M/s. New Delhi Mkgt. Co., Shri Jarnail Singh of M/s. RKRT Goods Carrier, Shri Harmit Singh of M/s. RKRT Goods Carrier, Shri Harpal Singh of M/s. RKRT Goods Carrier, Shri Devji Bhai of M/s. Diamond Transport Company, Shri Pawan Kumar Karnani of M/s. Mahamaya Trade Agencies, Shri Dilip Ram Vallabh Sarda of M/s. Dilip Traders, Shri Bhim Karan Jain of M/s.Snow View Exports Pvt. Ltd., Shri Akhay Chand Kothari of M/s. Kothari Agencies and Shri Ashok Chaudhary of M/s. Chaudhary Sales Corporation.
1.15.2 Show cause notice dated 23.11.2000 was issued to KI and others for
(a) recovery of central excise duty allegedly short paid central excise duty amounting to Rs.3,47,22,118/- from M/s. KI in respect of the clearances of branded Khaini valued at Rs.6,94,44,235/- during the period 11.12.95 to 5.10.98 under Rule 9(2) of the Central Excise Act read with proviso to Section 11 A(1) of the Central Excise Act, 1944 along with interest on this duty at the applicable rate under Section 11 A ibid;
(b) recovery of differential duty amounting to Rs.1,06,61,306/- in respect of the consignments of branded Khaini cleared during 1.12.1996 to 31.3.1999 period, which was allegedly short paid under Rule 9(2) of such Central Excise Rules, 1944 read with proviso to Section 11 A(1) of the Central Excise Act, 1944 along with interest on it at the applicable rate under Section 11 AB ibid;
(c) Confiscation of land and building and plant and machinery of M/s. KI used in the manufacture of goods under Rule 173 Q(2) of the Central Excise Rules;
(d) Imposition of penalty on M/s. KI under Rule 9(2) read with Section 11 AC and Rule 173 Q of Rules, 1944 and also under Rule 226 of the Central Excise Act read with Section 11 AC of the Central Excise Act, 1944; and;
(e) Imposition of penalty under Rule 209 A of the Central Excise Act, 1944 on Shri Vikas Malu, Mool Chand Malu, Shri C.S. Baid, Shri Subh Karan Bothr,.Shri Mukesh Kapoor of M/s. Ganparti Agencies and M/s. Ganpati Mktg. Co. Shri Gowri Shankar Khattar of Delhi Mktg. Co. and M/s. New Delhi Mktg. Co., Shri P. Vishwanath of M/s. Mookambica Agencies, Shri Akhay Chand Kothari of M/s. Kothari Agencies and Shri Jarnail Singh, Shri Harmit Singh, Shri Harpal Singh of M/s. RKRT Goods Carriers
1.16 Show cause notice dated 31.07.2000 issued to M/s. KTPPL was adjudicated by the Commissioner of Central Excise, Delhi vide order-in-original no.59/05 dated 30.12.2005 by which
(a) total duty demand of Rs.12,05,40,439/- on account of clandestine removal and undervaluation was confirmed against M/s. KTPPL under proviso to Section 11 A(1) of the Central Excise Act, along with interest on this duty at the applicable rate under Section 11 AB ibid, and an amount of Rs. 2 Crores already paid during investigation was appropriated towards this demand;
(b) penalty of Rs.12,05,40,439/- was imposed on KTPPL under Section 11 AC ibid;
(c) plant and machinery used by KTPPL, whose book value was Rs.86,07,501/-, was ordered to be confiscated under Rule 173Q (2) to Central Excise Rules, 1944 with option to be redeemed on payment of redemption fine of Rs.10 Lakh and;
(d) penalty under Rule 209 A of Central Excise Rules, 1944 was imposed on various noticees as under:
(i) Shri Mool Chand Malu Rs.4 Crores
(ii) Shri Vikas Malu Rs.4 Crores
(iii) Shri C.S. Baid Rs.50 Lakhs
(iv) Shri Subh Karan Bothra Rs.30 Lakhs
(v) Shri Mukesh Kapoor Rs.20 Lakhs
(vi) Shri G.S.Khattar Rs.20 lakhs
(vii) Shri Jarnail Singh. Rs.10 Lakhs
Harmit Singh & on each
Sh. Harpal Singh of
M/s.RTRK Good Carriers.
(ix) Shri Devji Bhai Rs.20 Lakhs
M/s.Diamond Transport Co.
(x) Shri Pawan Kumar Karnani Rs.30 Lakhs
of M/s.Mahamaya Trade Agencies
(xi) Shri Vijay Singh Daga no penalty
of M/s. Bikaner Assam
Roadlines.
(xii) Sh.Dilip Ram Vallabh Sarda Rs.5 Lakh
of M/s.Dilip Traders, Nagpur
(xiii) Shri Bhim Karan Jain of Rs.20 Lakhs
M/s.Snow View Exports
Pvt. Ltd.
(xiv) Shri A.C. Kothari of Rs.5 Lakhs
M/s.Kothari Agencies,
Delhi.
(xv) Shri Ashok Chaudhary Rs.3 Lakhs
Proprietor of M/s.Chaudhary
Sales Corporation, Guwahati.
Against this order of the Commissioner, Appeals Nos.E/560-574/2006 and E/902/2006 have been filed.
1.17 Show cause notice dated 23.11.2000 was adjudicated by the Commissioner of Central Excise, Delhi vide order-in-original no.30/06 dated 3.1.2006 by which
(a) total central excise duty demand of Rs.4,18,29,655/- (Rs.3,47,22,118 + Rs.71,07,737/-) on account of clandestine removal and undervaluation of goods was confirmed against KI under proviso to Section 11 A (1) of the Central Excise Act, 1944 along with interest on this duty at the applicable rate as per the provisions of Rule 11 AB ibid;
(b) land, building and plant and machinery, etc. of the KI was ordered to be confiscated under Rule 173Q (2) of the Rules, 1944 with option to be redeemed on payment of redemption fine in lieu of confiscation of Rs.3 Lakh;
(c) Penalty of Rs.4,18,29,655/- was imposed on KI under Rule 173 Q read with Section 11 AC; and
(d) Penalty under Rule 209 A of Central Excise Act, 1944 was imposed on various noticees as under :-
(i) Sh. Mool Chand Malu Rs.4 Crores
(ii) Shri C.S. Baid Rs.50 lakhs
(iii) Shri S.K. Bothra Rs.40 Lakhs
(iv) Shri Mukesh Kapoor Rs.50 lakhs
(v) Shri G.S. Khattar Rs.50 Lakhs
(vi) Shri Akhay Chand Kothari Rs.20 Lakhs
(vii) Shri Jarnail Singh Rs.2 Lakh
Shri Harmit Singh, Shri Harpal each
Singh of M/s. RKRT Road Carriers
(viii) Shri Devjee Bhai Rs.20 Lakhs
(ix) Shri P. Vishwanath no penalty
M.K. Agencies.
Against the above order of the Commissioner, the appeal NO.E/2039 to 2050/2006 have been filed.
2. Heard both the sides.
2.1 Shri A. Hidayatullah, Advocate, ld. Senior Counsel appearing for the appellants, pleaded that the adjudicating authority has not complied with the basic principles of natural justice inasmuch as the cross examination of the persons, whose statements were recorded and relied upon was denied, that the decision in the matter against the appellants inspite of failure on the part of the department to discharge the burden of proof has clearly rendered the orders bad in law, that conjectures and surmises cannot take the place of the proof, that both the orders under challenge are based on assumptions and presumptions without ascertaining as to whether the department has discharged its burden to prove the case against the appellants, that the findings regarding alleged undeclared production and clandestine clearance of the goods have been arrived at without any facts regarding the annual capacity of the machines relating to production, number of persons employed, quantity of raw materials like Supari, Tobacco, etc purchased; that neither the statements of the dealers were recorded nor the statements of those dealers who had disclosed the truth have been considered, that the entire case of the department is based on the loose sheets, kachcha challan books and hisaba book recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi, that the duty demands have been raised against KTPPL and KI on the basis of kachcha challan books read with hisaba books recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi, that recovery of these records is totally unbelievable and carries no weight as the mandatory requirements of procedure while seizing and/ or recovery of offending materials have not been complied with, that the panchnama of seizure of the documents in respect of the premises at 4130, Gali Barna, Sadar Bazar, Delhi does not mention the time when the search was started and the time when the same was completed, that it does not mention as to who brought the keys to the premises, that neither the exact description of the premises is there in the Panchnama nor does it mention as to from which room these documents have been recovered, that there was enough scope for tampering of the documents and in fact, there are interpolations in the documents alleged to have been seized by the department, that there is no proof that hisaba books and kachcha challans pertain to the factories of the KTPPL and KI, that it was not permissible to the adjudicating authority to place reliance on such private records in absence of corroboration by cogent evidence on records, that even the entries of the hisaba books do not disclose that the same relate to the production of goods in the factories of the appellants, that no attempt has been made to locate the writer of the documents and kachcha challan books and hisaba books without which no reliance can be placed on the same, that neither the machines installed in the factory premises of KTPPL and KI were capable of manufacturing of Gutka and Khaini which are alleged to have been sold nor the generators installed in the factories were capable of running the machines for the period which the department alleges, that Shri Mool Chand Malu and Shri Vikas Malu had retracted their statements and hence their statements are of no evidentiary value, that as stated by Shri Subh Karan Bothra at the time of cross examination, he was not present at the time of search of the premises at 4130, Gali Barna, Sadar Bazar, Delh, that in view of these circumstances, without any corroborative evidence on record, merely on the basis of kachcha challans, loose sheets and hisaba books recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi, the duty demands against the appellants and penalty on KTPPL and KI and other firms and persons is not sustainable, that in this regard, reliance is placed on the judgement of the Tribunal in the case of CCE, Hyderabad-V Vs. Vani Fab. Engg. Reported in 2006 (205) ELT 893, that the Tribunal in the case of Durga Trading Company Vs. CCE, Lucknow reported in 2002 (148) ELT 967 has held that charge of clandestine removal and manufacture of dutiable goods and removal thereof without discharging duty liability can not be established on assumptions and presumptions and such charge has to be based on concrete and tangible evidence on record and that the same view has been expressed by the Apex Court in case of Oudh Sugar Mills Vs. Union of India reported in 1978 (2) ELT J-172. The senior Ld. Counsel citing the judgements of the Tribunal in the cases of Jagatpal Prem Chand Ltd. Vs. CCE, Delhi-I reported in 2004 (178) ELT 792 , Ganga Rubber Industries Vs. CCE reported in 1989 (39) ELT 650, Emmtex Synthetics Ltd. Vs. CCE, New Delhi reported in 2003 (151)ELT 170, again emphasized that the adjudicating authority can not dispose of some proceedings without following basic principles of natural justice and that the cross examination of the persons whose statements have been relied upon amounts to denial of principles of natural justice and would vitiate the proceedings.
2.2 Shri B.K. Singh, ld. Jt. CDR, on the other hand, pleaded that the documents recovered in the course of investigation, movement of goods as revealed from the transporters statements, seizure of unaccounted materials at different places and admission made by Shri Mool Chand Malu and Shri Vikas Malu, Directors of KTPPL and KI, clearly establish the case of clandestine removal of the goods, that the admissions made by Shri Mool Chand Malu and Shri Vikas Malu were never retracted in accordance with law, that even if one of the three aspects of the manufacturing - procurement of raw materials, unaccounted production, or removal of goods on completion of manufacturing process, is established, it is sufficient to prove the case of clandestine removal and it is not necessary to prove all the three aspects, as many a times, it is impossible to get the evidence of all the three aspects, that the evidence on record stands corroborated by the statements of deponents, which includes the parties to the proceedings and no value can be attached to the retraction of statement by Shri Mool Chand Malu and Shri Vikas Malu, as the same was done as late as 17 days after recording the statement, that the findings have been arrived at by the adjudicating authority on analysis of the materials on record which includes the documents as well as the statements including the statements of transporters, that the contents of the documents - loose sheets, kachcha challan books and hisaba books had admittedly been written by the persons of the appellants Shri Kishan Sharma and Shri Umed Jain, that as regards cash flow is concerned, there is clear admission in this regard by the appellants, that there is no materials brought on record to show that any part of the seized documents were tampered with or there was any interpolations, that the admitted facts need not be proved and in this regard, reliance is placed on the decisions in the matters of P.K.Ravindran reported in 2003 (156) ELT 182 (Madras High Court), Khet Singh Vs. Union of India reported in 2002 (142) ELT 13 (SC), CCE, Madras Vs. Systems & Communications Pvt. Ltd. reported in 2004 (165) ELT 136, Bute Cosmetics Vs. CCE, Trichy reported in 2001 (135) ELT 886, Columbia Electronics Vs. CCE, Trichy reported in 2002 (143) ELT 635, Dy. Director of Enforcement Vs. AM Cease reported in 1999 (113) ELT 804, Shiv Shakti Steel Tubes Vs. CCE reported in 2008 (221) ELT 166, M.R. Tobacco Pvt. Ltd. Vs. CC, Delhi reported in 2006 (202) ELT 64 and Radhe Shyam Kanoria Vs. CC, Thane-II reported in 2006 (197) ELT 130 (Mum.), that order-in-original no.159/05 dated 30.12.2005 and order-in-original no.3/06 dated 30.01.2006 describe detail of the modus operandi adopted by KTPPL and KI for evasion of duty and the same is clearly confirmed from the perusal of the loose sheets, kachcha challans and hisaba books seized from the premises of the appellants at 4130, Gali Barna, Sadar Bazar, Delhi, that not only Shri Subh Karan Bothra but also Shri Mool Chand Malu and Shri Vikas Malu have accepted that the premises at 4130, Gali Barna, Sadar Bazar, Delhi were being used as their guest house and it is from this premises, a number of records pertaining to KTPPL and KI which included loose sheets, kachcha challans and hisaba books have been recovered, that looking to the capacity of the production of the machines
installed and the number of shifts in which the same were worked and also the capacity of generators and records of purchase of diesel for running those generators, it is clear that these machines were capable of production of the quantity of Gutka and Khaini pouches which are alleged to have been manufactured and cleared during the period of dispute, that it is settled law that while seizure of the documents from any premises in support of any serious charges must be established, minor lapses are condonable, that when the locks of the premises had been opened by Shri S.K. Bothra in the presence of the panch witnesses and not only Shri Bothra but also Shri M.C. Malu and Shri Vikas Malu have admitted that the premises at 4130, Gali Barna, Sadar Bazar, Delhi was being used as their guest house, the minor lapses like as to who brought the keys, non-mention of time of starting of the search and time of completion of the search, etc. do not vitiate the search itself, that as mentioned by the adjudicating authority in para 56.6 to 56.18 of the order-in-original no.159/2005 dated 30.12.2005 and para 51.7 to 51.14 of order-in-original no.3/06 dated 30.01.2006 retraction of the statement of Shri Mool Chand Malu and Vikas Malu is purely an afterthought and not genuine retraction, that authenticity of the loose sheets, kachcha challans books and hisaba books recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi stands established by the evidence unearthed on the inquiry with the transport companies and railways and also with the consignees and that FIR by Shri Vikas Malu on 19.08.2000 against Shri Umesh Chandalia regarding mis-appropriation of the money from the company does not help the appellant in any manner as this had been done only to discredit the evidence of Shri Umesh Chandalia and that at the time of search of the appellants premises, the appellant had no grievances against Shri Umesh Chandalia. Summarising his arguments, Shri B.K. Singh, ld. Departmental Representative pleaded that (a) the plea that the departments case is based on assumptions and presumptions is not tenable, as the entire case is based on documentary evidence in form of loose sheets, kachcha challan books and partywise kachcha accounts (Hisaba books) recovered from the appellants premises at 4130, Gali Barna, Sadar Bazar, Delhi and also the documents recovered from the transport companies; and inquiry with the consignees, (b) Besides this, the seizure of the huge unaccounted stock of Mool Chand brand Gutka at the premises of KTPPL on 9.10.98 is a clear evidence of unaccounted production and clandestine clearance by the appellant; (c) all the documents recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi pertain to KTPPL and KI and these documents are a clear evidence of large scale duty evasion by KTPPL and KI and these documents cannot be discarded even if the search of the premises is held to be illegal and in this regard, reliance is placed on Honble Supreme Courts judgement in the case of Khet Singh Vs. Union of India reported in 2002 (142) ELT 13 (SC), wherein the Honble Supreme Court held that the documents recovered in course of search of the premises can be considered even if the search is not legal, unless there is evidence that the documents themselves have been tampered with, (d) though the appellants plea that there are interpolations in the kachcha challan books mentioned above, the documents are carbon copies and the cuttings/corrections are only in the challan number and that too only in a few cases and as such there are no cuttings/interpolations/corrections in number of packages, value or description of the goods; (e) Electricity consumption and diesel consumption for running generator is not relevant as the departments case is based on the kachcha challan books, loose sheets and Hisaba books whose authenticity is clear from the documents recovered from the railways and transport companies and the inquiry from the buyers/distributors mentioned in the kachcha challans; (f) the fact that the premises at 4130 Gali Barna, Sadar Bazar, Delhi was under the control of Shri Mool Chand Malu and Shri Vikash Malu and the loose sheets, kachcha challan books and hisaba books alongwith other documents recovered from these premises pertained to the KTPPL and KI, has been admitted by Shri Mool Chand Malu and Shri Vikash Malu and just because these statements had been retracted, the same cannot be disregarded as the retractions of these statements by Shri Mool Chand Malu and Shri Vikas Malu are belated retractions made after 17 days and as held by the Tribunal in the case of Colmbia Electronics reported in 2002 (143) ELT 635 (para 6), belated retractions have no meaning; (g) Honble Madras High Court in the case of Dy. Director Enforcement Vs. A.M. Ceaser reported in 1999 (113) ELT 804 (para-9) and Honble Punjab & Haryana High Court in the case of Shiv Shakti Steel Tubes Vs. CCE reported in 2008 (221) ELT 166 (P&H) have held that statements recorded under Section 14 of the Act, 1944 are of the nature of admission and are admissible as evidence unless the same are hit by Section 24 of the Evidence Act and in this case, no evidence has been produced by the appellant that the department has used any threat, coercion or inducement in course of recording of the statements of Shri Mool Chand Malu and Shri Vikas Malu. Shri B.K. Singh, ld. DR, therefore, pleaded that there is no infirmity in the impugned order.
2.3 Shri H. Hidayattullah, the ld. Sr. Counsel in rejoinder pleaded that to prove clandestine removal, receipt/purchase of the raw materials, unaccounted manufacture of finished goods and clandestine removal is required to be proved and if one of these links is missing, the charge of clandestine removal would not be sustainable, that in this case, no inquiry has been made with the workers of the factory regarding the actual production, that the Tribunal in the case of Radheshyam Kanoria Vs. CCE Para 17 reported in 2006 (197) ELT 130 (T) has held that for proving the clandestine removal, unaccounted production must be established and that in this case, there is no evidence of purchase of raw materials or production of unaccounted gutka and khaini. He once again emphasised that the search of the premises at 4130, Gali Barna, Sadar Bazar, Delhi is illegal, that the Annexures to the Panchanama have not been signed by Shri Bothra and that there are interpolations and corrections in the kachcha challans which shows that the same are not genuine documents and hence not reliable.
2.4 Shri B.K. Singh, ld. DR replying to the plea of the learned Sr. Advocate with regard to corrections and interpolations in the kachcha challans pleaded that this aspect has been dealt with in detail in para 57.17 of the order-in-original no.159/2005 dated 30.12.05 and para 52.16 & 52.17 of Order-in-Original No.3/06 dated 30.01.06 and as is clear from the Commissioners findings, the plea of kachcha challans having a number of corrections or interpolations by some other person is totally incorrect.
3. We have carefully considered the submissions from both the sides and perused the records. Undisputedly, the case of duty evasion against the KTPPL and KT is based on the documents loose sheets, kachcha challans and hisaba books recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi in the course of search of this premises on 9.10.98 coupled with the documents obtained from railways and the transport companies. From the premises at 4130, Gali Barna, Sadar Bazar, Delhi, in all, 20 folders, account books, note books and folders containing photocopies of bank pass books, etc. had been recovered, which are listed in the Annexure A to the search Panchnama dated 9.10.98. The Panchnama, besides listing the documents also mentions the numbers of pages and first and the last page of the document has been signed by Shri S.K. Bothra, who as per the panchnama was present throughout the duration of search. The documents mentioned at Sl.No.1 are photocopies of the bank pass books, which are pass books of various companies of Shri Mool Chand Malu and Shri Vikas Malu and their other family members. The main documents on which the departments case is based are -- (a) documents at Sl.No.2 a folder containing 113 loose papers; (b) documents listed against sl.No.8, 9, 10, 12, 16, 17, 18, 19 & 20 in the Annexures to Panchnama, which are kachcha challan books, also called Chalani by the appellant and (c) the documents listed at Sl.Nos.11,13, 14 & 15 which are kachcha accounts and the documents at S.No.14 & 15, called Hisaba books contain partywise accounts of the sale of gutka and khaini by KTPPL and KI during the period from 1.8.95 to 5.10.98. The kachcha challan books contain the carbon copies of the challans regarding sale of branded Gutka and Khaini and contain the details of the clearances and sales of the gutka and pan masala - consignees name and address, the quantity and value of the goods, mode of transport, RR nos. in case of dispatch by railways and GR nos. in case of dispatch by road, transport companys name etc. On the basis of kachcha challans, the partywise accounts in the hisaba books had been prepared, as all the sales in kachcha challans are reflected in hisaba books. The loose papers in folder at S.No.2 contain daily sheets regarding clearance of finished goods by KTPPL and KI, on the basis of which kachcha challans are prepared, and papers containing purchase of raw material like tobacco, plastic lamination and diesel for running generator during certain period. The main contention of the appellants is that these documents are invalid and cannot be considered as evidence, as the search of these premises is illegal in asmuch as
(a) the Panchnama does not mention the time when the search was started and when the search was completed, (b) it does not mention as to who brought the keys to the premises, (c) Panchnama does not mention the exact description of the premises, and exact place in the premises from where the documents were recovered, (d) the panchnama was written in English, and as per the panchnama, the same had been only read over and explained in vernacular to the panchas, which casts doubts about its authenticity; and (e) there are corrections and interpolations in the kachcha challans which cast doubt about their authenticity. It was also pleaded that this premises was under the control of Shri Umesh Chandaliya against whom the FIR for having committed fraud had been lodged by the appellant and that it is, Shri Chandalia, who have planted these documents.
4. On going through the records, we find that there is no dispute about the fact that premises had been searched in the presence of Shri Shubh Karan Bothra, who was also present at the time of search of registered office of the appellant company at 4909, Gali Barna, Sadar Bazar, Delhi. From the records, it is seen that first the premises at 4909 at Gali Barana had been searched and after completion of the search of that premises, Shri Subh Karan Bothra had been called to the premises at 4130 Gali Barna, Sadar Bazar, Delhi, which was locked and it is Shri Bothra, who had opened the lock of the premises in presence of panchas. There is nothing in the panchnama to show that at the time of search of the premises, Shri Bothra protested that the premises does not belong to KTPPL or KI. In fact, panchnama mentions that Shri Subh Karan Bothra on reaching the premises informed the officers and panchas that they are using three rooms of this premises as their guest house and thereafter he opened the locks in their presence. When the fact that the locks of the premises were opened by Shri Bothra is not in dispute and at that time, there was no protest from Shri S.K. Bothra that the premies does not belong to them, it is clear that keys of the premises had been brought by Shri Bothra only. Shri Bothra, as per the statement of Shri Mool Chand Malu and Shri Vikas Malu was the person in charge of General Administration and Coordination work of their office at 4909, Gali Barana, Sadar Bazar, Delhi and therefore it is expected that it is Shri Bothra who would have keys to the premises at 4130, Gali Barna, Sadar Bazar, Delhi which was being used as the Appellant companys guest house. Therefore, just because panchanama does not mention as to who brought the keys of the premises at 4130 Gali Barana, it cannot be concluded that the keys were in the possession of someone other than Shri Bothra. For the same reason, just because panchnama does not mention the time of search and completion of the search, it would not make the search invalid. Moreover, we also find that Shri Shubh Karan Bothra in his statement dated 9.10.98 had clearly admitted that the premises at 4130, Gali Barana, Sadar Bazar, Delhi is being used as guest house of the company and the documents recovered from these premises pertained to KTPPL and KI. Besides this, Shri Mool Chand Maloo and Shri Vikas Maloo in their statement dated 17.11.98 have not only clearly admitted that the premises at 4130, Gali Barna, Sadar Bazar, Delhi was being used as guest house and records recovered from these documents pertained to KTPPL and KI, they also explained about the nature of documents and also named the person who had prepared kachcha challans and Hisaba books. Though Shri Bothra subsequently retracted his statement dated 9.10.98 claiming that he was working for M/s. KTC only and had no concern with KTPPL or KI and at the time of his cross examination during adjudication proceeding, he claimed that he was not even present at the time of search of the premises at 4130, Gali Barna, Sadar Bazar, Delhi, his retraction, being bald and belated retraction, without any supporting evidence is of no value and has to be rejected as after-thought. The adjudicating authority in both the impugned orders has discussed the retraction of statement by Shri Bothra and has rightly rejected the same as after-thought.
4.1 The kachcha challan book contains the kachcha challans which, as mentioned above, contain all the details of the consignments of gutka and khaini sold to various distributors -- number of packages, consignees name, value, mode of transport, RR No. in case of transport by railways and GR No. in case of transport by road, the name of the transport company etc. The inquiry with the consignees mentioned in the kachcha challans revealed that those persons were indeed purchasing gutka and khaini from the appellants, KTPPL and KI, the bulk of which was without payment of duty. Not only this, most of the GR nos. and RR nos. mentioned in the kachcha challans were also obtained from the transport companies and railways respectively, which shows that the GR nos. and RR nos. written on the kachcha challans were genuine, though consignors names as mentioned in GRs and RRs were found to be fictitious, as during transit, the consignments were covered by invoices issued by fictitious persons. Besides this, in a number of cases, where the consignments mentioned in the katchcha challans had been cleared on payment of duty, the particulars of those consignments, as mentioned in the kachcha challans, tally with those mentioned in the invoices, though in some cases, in the invoices much lower value has been mentioned. Para 53.1 and 53.2 of the order-in-original no.3/06 dated 30.01.06 and para 58.1, 58.2 and 58.3 of the order-in-original No.59/05 dated 30.12.2005 give the details of such kachcha challans. In some cases invoices had been issued only for a part of the quantity mentioned in kachcha challans and in such cases, the kachcha challans themselves mention the break-up of total quantity into the quantity cleared under invoices and the quantity cleared without invoices. This is a clinching evidence that daily sheets, kachcha challan books and Hisaba books recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi pertained to KTPPL and KI only. The photocopies of bank pass books recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi are of the accounts of various companies of Shri Mool Chand Malu and Shri Vikas Malu and their family members and their presence at this premises clearly indicates that this premises was under their control. As mentioned above, Shri Mool Chand Malu and Shri Vikas Malu in their statement dated 17.11.2000 recorded under Section 14 of the Central Excise Act, 1944 have stated that the premises at 4130, Gali Barna, Sadar Bazar, Delhi was being used as their guest house and the records recovered from this premises pertain to KTPPL and KI. Though the statement dated 17.11.98 of Shri Mool Chand Maloo and Vikas Maloo have been retracted by them, we find that these retractions carry no weight at all for the reasons given below:-
(1) These retractions had been sent by post and had been received by the investigating officers after about 17 days and are mere bland retractions, without any evidence, in support of their claim, that the statement had been given by them under threat, coercion or inducement. As held by the Tribunal in the case of Colmbia Electronics (supra) belated retractions have no meanings.
(2) The Honble Supreme Court in the case of K.T.M.S. Mohd. Vs. Union of India reported in 1992 (3) SCC 178 (para 31) has held that if the officers of the Enforcement intend to take the action against the deponent of a statement on the basis of his inclulpatry statement which has subsequently been repudiated, the officer concerned must take both the statements together, give a finding about the nature of the repudiation and then act upon the earlier inculpatory one. If on the other hand, the officer concerned bisects the two statements and makes use of the inculpatory statement alone conveniently bypassing the other, such a stand cannot be legally permissible, because admissibility, reliability and the evidentiary value of the inculpatory statement depends on the bench-mark of the provisions of the Evidence Act and the general law. In this judgement, the Apex Court further observed that the core of all the decisions of the Apex Court is to the effect that voluntary nature of any statement made either before the Customs Authorities or the officers of Enforcement under the relevant provisions of the respective Acts is a sine qua non to act on it for any purpose and if the statement appears to have been obtained by any inducement, threat, coercion or by any improper means, that statement must be rejected and that at the same time, it is to be noted that merely because a statement is retracted, it cannot be regarded as involuntary or unlawfully obtained. It is only for the maker of the statement who alleges inducement, threat, promise, etc. to establish that such improper means have been adopted. The Honble Apex Court further observed that if the maker of the statement fails to establish his allegations of inducement, threat, etc. against the officer who recorded the statement, the authority while acting on the inculpatory statement of the maker is not completely relieved of his obligations in at least subjectively applying its mind to the subsequent retraction to hold that the inculpatory statement was not extorted and it thus boils down that the authority or any court intending to act upon the inculpatory statement as a voluntary one, should apply its mind to the retraction and reject the same in writing. The Honble Supreme Court in the case of State (NCT) of Delhi Vs. Navjot Sandhu reported in 2005 (11) SCC 600 has held that for invoking Section 24 of the Evidence Act, the allegation that a confessional statement was made under any inducement, threat or coercion provision need not be proved to the hilt, that if it appears to the court that the making of the confession was caused by any inducement, threat or promise proceeding from a person in authenticity, the confession is liable to be excluded from evidence, that the expression appears in Section 24 of the Evidence Act connotes that the court need not go to the extent of holding that the threat etc. has to be proved beyond doubt and that if the facts and circumstances emerging from the evidence adduced make it reasonably probable that the confession could be the result of threat, inducement or pressure, the court will refrain from acting on such confession, even if it be a confession made to a Magistrate or a person other than police officer. Relying upon the two judgements, the Honble Court in a recent judgement in the case of Vinod Solanki Vs. Union of India reported in 2009 (233) ELT 157 (SC) held that since the allegation of detention of the appellant for two days and two nights has not been denied by the department, the retraction by the appellant cannot be said to be a bald retraction and hence the statement of the appellant would not be admissible as evidence. Examining this case in the light of the above judgement of the Apex Court, we find that
(a) the retractions of Shri Mool Chand Malu and Shri Vikas Malu are not only belated retractions made after 17 days but are also just bald retractions without any evidence from which, it can be inferred that there was any threat, coercion or inducement used in recording of their statement and (b) in both the impugned orders, the adjudicating authority has considered their retractions applying its mind and has rejected the same. As discussed above, the same thing applies to the retraction of his statement by Shri S.K. Bothra.
4.2 In view of the above, we hold that the statements dated 17.11.2009 of Shri Mool Chand Malu and Shri Vikas Malu and the statement dated 9.10.98 of Shri S.K. Bothra are their true, correct and voluntary statements, supported by other independent evidence and the documents recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi pertain to KTPPL and KI. Therefore, even if the panchnama of the search of the premises at 4130, Gali Barna, Sadar Bazar, Delhi does not mention the time when the search was started and when the same was completed or also does not mention as to who was brought the keys to the premises or that the same is written in English, the documents recovered form this premises have to be held as pertaining to KTPPL and KI and admissible evidence against them. The Honble Supreme Court in the case of Khet Singh Vs. Union of India (supra) has held that the documents recovered during the search, even if the search was illegal, are to be considered as admissible evidence unless there is allegation that the same have to be tampered with. Though in this case it has been pleaded by the appellants counsel that some of the kachcha challans have corrections and interpolations on close examination, we find that as observed by the Commissioner in para 57.17 of the order-in-original No.59/05 dated 30.12.2005 and para 52.16 & 52.17 of the order-in-original no.3/06 dated 30.01.2006 the cutting and corrections are only in a few challans and that too in challan numbers and there are no correction or interpolations in quantity, value or description of the goods. Such corrections of challan nos. not make the documents unreliable.
4.2.1 It has been pleaded that the author of the seized kachcha challan books and hisaba books have not been identified and hence these documents cannot be relied upon. We do not agree with this plea, as both Shri Mool Chand Malu and Vikas Malu had stated that these documents had been mostly written by Shri Kishan Sharma and Shri Umed Jain. Though the investigating officer summoned both these persons, they have not appeared before the officers, may be under the pressure of the appellants. Therefore, just because the statements of Shri Kishan Sharma and Shri Umed Jain have could not be recorded, the authenticity of the loose sheets, kachcha challan books and the hisaba books cannot be doubted.
4.2.2 Another plea of the appellant is that the documents loose sheets, kachcha challan books and hisaba books seized from the premises at 4130, Gali Barna, Sadar Bazar, Delhi had been planted by one of their employee, Shri Umed Chandelia against whom an FIR has been lodged by Sh. Vikas Malu for mi-appropriation of the money. But this FIR had been lodged during 1999 while the search had taken placed in October, 1998. Therefore, the plea that Shri Umed Chandelia, on account of enmity with Shri Mool Chand Malu and Shri Vikas Malu had planted certain documents at 4130, Gali Barna, Sadar Bazar, Delhi is not tenable.
4.3 In view of the above discussions, we hold that
(a) the documents listed is annexure to panchnama dated 9.10.98 of the search of the premises at 4130, Gali Barna, Sadar Bazar, Delhi, pertain to KTPPL and KI; and the same are admissible evidence for proving the allegation of duty evasion against them, and
(b) the Commissioner in the impugned orders has rightly determined the duty liability of KTPPL and KI during the period of dispute by relying upon the daily sheets, kachha challan books and Hisaba books.
5. Another contention of the appellant is that, in any case, the departments case against the appellants is based on only assumptions and presumptions, as in absence of evidence regarding purchase of the raw materials required to manufacture the quantity of the goods, which are alleged to have been cleared and the evidence regarding production of unaccounted finished goods, the allegation of clandestine removal without payment of duty cannot be made just on the basis of kachcha challans, hisaba books and transport companies documents.
5.1 The main evidence in support of the allegation of clandestine removal without payment of duty against KTPPL and KI can be summarised as under:-
(1) Statement each dated 17.11.98 of Shri Mool Chand Malu and Shri Vikas Malu, wherein they had stated that about 50% of the production of branded Gutka and branded Khaini was being cleared without payment of duty, that this was being done on account of stiff competition and that the kachcha challan books and hisaba books recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi pertain to KI and KTPPL and contain the details of all the clearances including the clearances made without payment of duty.
(2) Seizure of 57 bags of Mool Chand brand Gutka totally weighing 877.8 Kgs valued at Rs.3,76,200/- (MRP) from the premises of KTPPL at the time of officers visit to the factory on 9.10.98 which was in excess to the recorded balance in RG-I Register, which as such represented unaccounted production.
(3) Statement dated 17.02.2000 of Shri R.P. Sharma, Authorised Signatory of KTPPL wherein he stated that he was in charge of maintaining the central excise records of KTPPL and KI, while Shri C.S. Baid was in charge of the purchase of raw materials, manufacture of khaini and gutka and their dispatch and that he was entering the figures regarding production and clearance in the RG-I register on the basis of information regarding production and clearances given to him by Shri C.S. Baid and that he never verified the figures given to him by Shri Baid to be entered in the RG-I Register.
(4) Loose sheets, kachcha challan books and hisaba books seized from the premises at 4130, Gali Barna, Delhi. While kachcha challan books contain the details of the each clearance, the hisaba books contain partywise accounts of the sale of the finished goods. In respect of a larger number of clearances for which kachcha challans have been issued, there are no central excise invoice while in respect of some kachcha challans, invoices have been issued. In some cases where kachcha challans mention invoice having been issued only for a part quantity, the invoices are found only for that quantity. In some cases where the invoices have been issued, the value of the goods shown is much lower than the value mentioned in the kachcha challan books which shows that in such cases deliberately low value was being shown in the invoices to evade the taxes. Loose papers contained the detail of clearances of gutka and khaini by M/s KTPPL and KI during 10.06.1998 to 30.06.1998 period and also the details of purchase of raw materials like tobacco (37330 Kgs.), Plastic Lamination (16383.1 kg. ), glycerine, liquid paraffin, and diesel for running of generators during this period.
(5) The GR nos. in case of transport by road and RR nos. in case of transport by railway, mentioned in the kachcha challans have been found to be genuine and as such, the records of the railways and the transport companies confirm the dispatch of the goods to the parties mentioned in the kachcha challans. Though the consignors name in each RR and GR have been found to be fictitious, the number of packages, GR/RR nos. as mentioned in the kachcha challans tally with the number of packages and GR/RR numbers in the GRs/RRs issued by the Transport Companies / Railways.
(6) Inquiry with the consignees indicates that the consignees mentioned in the kachcha challans had, indeed, been purchasing the branded Gutka and branded Khaini from KI and KTPPL.
As discussed above, the statements of Shri Mool Chand Malu and Shri Vikas Malu, notwithstanding their retractions, are their true, correct and voluntary statements and the same stand corroborated by kachcha challan books and hisaba books which are the evidence of huge clearances of finished goods in respect of which neither any duty had been paid nor any central excise invoices had been issued. Since these statements have been recorded under Section 14 of the Central Excise Act, 1944, which is in pari materia with Section 108 of the Customs Act, 1962, in view of the judgements of Honble Supreme Court in cases of (i)Naresh J. Sukhwani Vs. Union of India reported in 1996 (83) ELT 258 (SC), (ii) K I Pavunny Vs. Assistant Collector of Customs reported in 1997 (90) ELT 241 and (iii) Surjeet Singh Chhabra Vs. U.O.I. reported in 1997 (89) ELT-465 (SC) with regard to evidence value of inculpatory statement recorded under Section 108 of the Customs Act, 1962, the same have to be treated as substantive evidence. The seizure of 57 bags of Mool Chand Brand Gutka weighing 877.8 Kgs from the premises of KTPPL on 9.10.98 which had not been recorded in the RG-I Register is also clear evidence of unaccounted production, as this quantity of Gutka represents several days production which had not been recorded in the RG-I Register. The records of purchase of raw materials in loose papers within (Sl. No. 2 of the Annexure to the said panchnama dated 9.10.98 of the premises at 4130, Gali Barna, Sadar Bazar, Delhi) show unaccounted purchase of 16383.1 kgs. of plastic lamination, 37330 kgs. of tobacco during just 20 days period from 11.06.98 to 30.06.98 and while this quantity of lamination and tobacco is sufficient for making lakhs of pouches of gutka and khaini, the production of gutka and khaini recorded by KTPPL and KI during this period is a small fraction of this. The loose sheets also disclose purchase of 29600 ltrs. of diesel during 11.06.98 to 30.06.98. Since DG set consumed 55 ltrs. of diesel per hour there was sufficient diesel to manufacture huge quantity of goods by KTPPL & KI. In view of this, the appellants plea that the departments case is based on assumptions and presumptions is difficult to accept.
5.2 This Tribunal in case of Sai Chemicals Pvt. Ltd. Vs. CCE reported in 2010 (257) ELT 457 has, on the question of burden of proof of clandestine clearances of excisable goods, held as under:-
It is true that the respondent had not conducted any investigation in relation to buyers of such final product, nor in relation to the transporters, nor there is evidence collected in respect of electricity consumption as well as of any excess intake of raw materials. However, the fact remains that the entries in the private records maintained by the appellants themselves are neither disputed nor shown to be referring to any other material or having been made pertaining for any other purpose. It is settled law that to establish any charge or accusation, it is not the quantity of the evidence but it is the quality of the evidence, which is material. Beside, once the basic facts which are relevant to establish the clandestine manufacture and removal of the final product are not disputed by the manufacturer, the question relating to the absence of further corroborating evidence does not arise. Once it is the case of the appellants themselves that they had maintained detailed records pertaining to the production in the factory and such records having been produced, which apparently revealed certain quantity of production of goods having been suppressed and not disclosed in the statutory records, it certainly amounts to discharge of the initial burden of the department in establishing the case of the department about clandestine manufacture and removal of the goods by the manufacturer. The onus then shifts upon the manufacturer to establish that the entries in such private records do not relate to the production in the factory or that the entries do not relate to manufacture and removal of the goods. In the case in hand, the appellants have totally failed to discharge his onus. In such circumstances, the question of further evidence in the form of buyers records or transporters examination or electricity records or record pertaining to excessive raw material need not be referred to.
The Tribunal in case of K. Janardhan Pillai Vs. Collector of Customs reported in 1988 (38) ELT 647 (Tribunal) relying upon the Honble Supreme Courts judgement in the case of Collector of Customs Vs. Bhoormal reported in 1983 (13) ELT 1546 (SC) and Kanungo and Co. Vs. Collector of Customs, Calcutta reported in 1983 (13) ELT 1486 has held thus:-
So far as trial proceedings in the Criminal Court are concerned, it is the axiomatic proposition of law that circumstantial evidence should point only to the hyphothesis, viz., the guilt of the person and should be absolutely incompatible with the innocence of the persons accused of an offence. But the effect of the said decisions of the Supreme Court is that the standard of proof in criminal prosecution before a Criminal Court is different from the standard of proof before the adjudicating authority where pre-ponderance of probability would be guiding factor and proof beyond reasonable doubt relevant in criminal prosecution before a Criminal Court cannot be bodily lifted and transplanted in adjudication proceedings where consideration of probabilities would be the guiding factors. Be that as it may, on consideration of the entire evidence available on record, we are clearly satisfied that the Contract TCF 1086, in question, was a fictitious and also amended contract to suit the convenience of the appellants, there was a motive on the part of the appellants to earn the foreign exchange illegally by not declaring the full export value of the goods in question in the Shipping Bill and in the G.R.1 form as required under Section 18(1) of FERA
In fact, the adjudication proceedings for determining the duty liability and question of penalty for failure to discharge the duty liability are civil proceedings and not criminal proceedings and it is settled law that the standard of proof in civil proceedings is preponderance of probability. In this regard, the Honble Supreme Court in the case of Commissioner of Police, New Delhi Vs. Narender Singh reported in (2006) 4 SCC 265 has held thus:-
12. It is not in dispute that the standard of proof required in recording a finding of conviction in a criminal case and in a departmental proceeding are distinct and different. Whereas, in a criminal case, it is essential to prove a charge beyond all reasonable doubt, in a departmental proceeding preponderance of probability would serve the purpose. (see Kamaladevi Agarwal Vs. State of West Bengal)
13. It is now settled by reason of a catena of decisions of this Court that if an employee has been acquitted of a criminal charge, the same by itself would not be a ground not to initiate a departmental proceeding against him or to drop the same in the event an order of acquittal is passed.
Thus, for standard of proof required for proving the charge of clandestine removal is preponderance of probability and for establishing the preponderance of probability, it is not the quantity but it is the quality which is the quality of evidence which is relevant.
5.3 In the present case, the seizure of huge quantity of unaccounted production from the factory premises of KTPPL, the statements of Shri Mool Chand Malu and Vikas Malu clearly admitting that about 50% of the production was being cleared without payment of duty recovery of the kachcha challan books and hisaba books containing details of the clearances in respect of which neither any central excise duty nor invoices had been issued, from the premises at 4130, Gali Barna, Sadar Bazar, Delhi which was being used by Shri Moolchand Malu and Sh. Vikas Malu as their guest house, the documents recovered from the railways and transport companies showing that the consignments mentioned in the kachcha challans and hisaba books recovered from the premises of the appellants had, indeed, been transported to the consignees mentioned in the kachcha challans and inquiry with the consignees, clearly show that the KTPPL and KI were involved in large scale of evasion of duty by clandestine removals without payment of duty and just because there is no records of procurement of unaccounted raw materials for the entire period of dispute, it cannot be concluded that there was no unaccounted production and no clearance of finished goods, the details of which are mentioned in the kachcha challan books. Moreover, as discussed above, loose sheets recovered from the premises at 4130, Gali Barna, Sadar Bazar, Delhi show purchase, during just 20 days period from 11.6.98 to 30.06.98, 16383.1 Kgs. of plastic lamination, 37330 Kgs. of tobacco and 29600 ltr. of diesel for running of generators, which is sufficient for manufacture of huge quantity of Gutka and Khaini pouches. Moreover when, as discussed above, the premises at 4130, Gali Barna, Sadar Bazar, Delhi was under the control of Shri Mool Chand Malu and Shri Vikas Malu and from this premises, the loose sheets, kachcha challan books and hisaba books had been recovered which show huge clearances of finished goods without issue of central excise invoices and without payment of duty and the dispatch of the goods is also corroborated by the documents obtained from the transport companies and railways, in view of the judgement of the Tribunal in case of Sai Chemicals (supra) and also the judgement of the Honble Supreme Court in the case of Collector of Customs Vs. D. Bhoormal (supra), the initial burden of proof for establishing the allegation of removal of the goods without payment of duty can be said to have been discharged by the Department and the onus would, therefore, shift to the appellants KTPPL and KI to establish that the entries in the kachcha and hisaba books do not relate to the clearances from their factories. But other than disputing the authenticity of the hisaba books and kachcha challan books and raising technical objections about the seizure of these documents, they have not produced any cogent evidence showing that kachcha challans and entries in the hisaba books do not pertain to the sale and clearance of the goods manufactured in their factories. In such circumstances, the question of further evidence in form of records of unaccounted purchase of the raw materials or inquiry with the workers of the factory or electricity consumption etc. is of no relevance.
6. In view of the above discussion, we do not find any infirmity in the impugned orders confirming the duty demands against KTPPL and KI under proviso to Section 11 (1) of the Central Excise Act, 1944 along with interest under Section 11AB ibid, on this duty demand at the rate applicable and also imposition of penalty on KTPPL as well as KI under Section 11 AC ibid. However, since Section 11AB and 11AC had been introduced w.e.f. 28.9.96, interest under Section 11AB would be chargeable only in respect of clearances w.e.f. 28.9.96 and penalty under Section 11AC would be confined only to the duty demand on the clearances w.e.f. 28.09.1996. Since Shri Mool Chand Maloo and Shri Vikas Maloo, Directors of the KTPPL and KI are involved in sale of excisable goods which had been clandestinely cleared and which they knew were liable for confiscation, penalty has been rightly imposed on them under the provisions of Rule 209 A of the Central Excise Rules, 1944 and the same is upheld. However, since penalty under Section 11 AC has been imposed on KTPPL and KI, penalty on Shri Mool Chand Malu in order-in-original no.159/05 dated 30.12.95 and 3/06 dated 30.01.06 is reduced to Rs.70 Lakhs and Rs.70 Lakhs respectively and penalty on Shri Vikas Malu imposed under order-in-original no.159/05 dated 30.12.2005 is reduced to Rs.70 lakhs.
7. As regards Shri Gowri Shanker Khattar of M/s. Delhi Marketing Co. and M/s. New Delhi Marketing, Shri Pawan Kumar Karnani of M/s. Mahamaya Trade Agencies, Raipur, Shri Dilip Ram Vallabh Sarda of M/s. Dilip Traders, Shri Bhim Karan Jain of M/s. Snow View Exports, Shri A. C. Kothari of M/s. Kothari Agencies, Shri Ashok Chaudhary of M/s. Chaudhary Sales Corporation, All of them are dealers/distributors of KI and KTPPL. On going through the records, it is seen that all of them had received branded Gutka and branded Khaini cleared without payment of duty from KTPPL and KI and had sold the same. The provisions of Rule 209 A of Central Excise Rules, 1944 in respect of them would, therefore, be attracted and hence, penalty has been rightly imposed on them and as such, the same is upheld. However, looking to the volume of transaction the penalty on Shri G.S. Khattar, Shri pawan Kumar karnani, Shri Bhim Karan Jain in order dated 30.12.2005 and penalty on Shri G.S. Khattar and Shri A.C. Kothari in order dated 30.01.2006 is reduced as under:-
Order-in-Original No.159/05 dated 30.12.2005
Shri G.S. Khattar Rs.5 Lakhs
Shri Pawan Kumar Karnani Rs.7.5 Lakhs
Shri Bhim Karan Jain Rs.7.5 Lakhs
Order-in-Original No.3/06 dated 30.01.2006
Shri G.S. Khattar Rs.12.5 Lakhs
Shri A.C. Kothari Rs. 5 Lakhs
7.1 As regards Shri Mahesh Kapoor, while penalty of Rs.20 Lakhs has been imposed on him vide order-in-original no.159/05 dated 30.12.2005, penalty of Rs.50 Lakhs has been imposed on him vide order-in-original no.3/06 dated 30.01.2006. His role in this duty evasion is discussed in detail in para51.27 to 51.31 and 66.4.4 to 66.4.9 of the order-in-orignal no.3/06 dated 30.01.2006, and para 56.33 to 56.38 and para 71.4.4 to 41.4.9 of the order-in-original no.159/05 dated 30.12.2005. While he is an employee of KI, he was owning /controlling two firmsM/s. Ganpati Agencies (GA) and M/s. Ganpati Marketing Company (GMC) - first in his own name and second in the name of his wife and the goods cleared by KI and KTPPL to GA and GMC were being marketed by Shri Kapoor in Punjab & Haryana and U.P. area. Total duty involved on the goods sold through him is about Rs.1.08 Crores. However, looking to the fact that he is only an employee of KI, though conniving with Shri Mool Chand Malu and Shri Vikas Malu in evasion of duty, total penalty of Rs.70 Lakhs on him is on higher side and the same is reduced as under:-
(i) Order-in-Original No.159/05 dated 30.12.2005 Rs.5 Lakhs
(ii) Order-in-Original No.3/06 dated 30.01.2006 Rs.10 Lakhs
7.2 As regards, Shri C.S. Baid, since admittedly, he was the person in charge of purchase of raw materials including the unaccounted raw materials, manufacture of the Branded Gutka and Branded Khaini and dispatch of the finished goods to various consignees and since the evidence on records indicates that dispatches of finished goods without payment of duty and without issue of invoices had been made with his knowledge and since it is Shri C.S. Baid, who was telling that Shri R.P. Sharma, Excise Asstt. regarding the quantity of the goods manufactured to be entered in the RG-I Register, we are of the view that he is also the person involved in dealing with the goods, which he knew were liable for confiscation and hence, penalty under Rule 209 A of Central Excise Act, 1944 has rightly been imposed on him. However, since Shri Vaid, he is only an employee of KTPPL and KI, in our view, penalty of Rs.50 Lakhs vide order-in-original no.159/05 dated 30.12.2005 and Rs.50 Lakhs vide order-in-original no.3/06 dated 30.01.06 is excessive and hence the same is reduced to Rs.5 Lakh each (Rupees Five Lakh) each.
7.3 As regards Shri Subh Karan Bothra as per his initial statement dated 9.10.98 and the statement dated 17.11.98 of Shri M.C. Maloo and Shri Vikas Maloo, he was the person in charge of Sadar Bazar Officer of KTPPL and KI at 3909, Sadar Bazar, Delhi. We agree with the findings of the Commissioner in para 71.3 of the order-in-original no. 159/05 dated 30.12.05 and para 63.3 of the order-in-original no.3/06 dated 30.01.06 that Shri Bothra and Shri C.S. Baid were working in tendem and Shri S.K. Bothra was also involved in the dispatch of the goods to consignees by showing fictitious names of the consignors. Thus, Shri Bothra has also dealt with the excisable goods which he knew were liable for confiscation and penalty on him has rightly been imposed under Rule 209 A of the Central Excise Rules. However, Since he is only an employee, the penalty of Rs.30 Lakhs imposed on him by order-in-original no.159/05 dated 30.12.2005 and penalty of Rs.40 Lakhs imposed on him vide order-in-original no.3/06 dated 30.01.2006 is excessive and as such, the same is reduced to Rs.2.5 Lakhs each.
7.4 As regards the imposition of penalty on the transporters viz. Jarnail Singh, Shri Harmit Singh and Shri Harpal Singh of RKRT Transport and Devji Bhai of Diomond Transport Companies, we find that there is no dispute that these transport companies had transported the goods cleared without payment of duty. On going through the records, we find that the Commissioners finding is that these persons were aware of the illicit nature of the consignments which had been transported by them and hence, penalty on them has rightly been imposed under Rule 209 A of the Central Excise Act, 1944. We agree with the Commissioners findings as in all the GRs consignors names and addresses were bogus and the invoices covering the consignments were bogus and there is evidence on record indicating that the transporters were aware of the fact that the consignees are fictitious. However, looking to the facts that they are only the transporters, penalty of Rs. 20 Lakh each imposed by the impugned orders dated 30.12.2005 and 30.01.2006 on Shri Devji Bhai and penalty of Rs.10 Lakh each and Rs.20 Lakh each imposed on Shri Jarnail Singh, Shri Harmit Singh and Shri Harpal Singh of M/s. RKRT vide Order-in-Original No.159/05 dated 30.12.2005 and order-in-original No. 3/06 dated 30.01.2006 respectively appears to be excessive and as such, while penalty on Shri Devji Bhai is reduced to Rs. 3 Lakh each, penalty on Shri Harmit Singh, Jarnail Singh and Shri Harpal Singh is reduced to Rs.1 Lakh each in the impugned order no.159/05 dated 30.12.2005 and to Rs.50,000/- (Fifty Thousand only) each in order-in-original no.3/06 dated 30.01.2006.
7.5 As regards the confiscation of land, building, plant & machinery of KTPPL and KI under Rule 173 Q (2) of the Central Excise Rules, 1944, the same has been rightly ordered as in both the cases, the duty involved on the clearances of finished goods in contravention of the provisions of the Central Excise Rules, 1944 exceeds Rs.One Lakh and thus, the conditions for confiscation under Rule 173 Q(2) are satisfied.
8. The impugned orders are, therefore, upheld except for modification of 43the quantum of penalty as mentioned above and interest on duty under Section 11 AB which shall be chargeable only in respect of clearances w.e.f. 28.09.96. The penalty on KTPPL and KI under Section 11AC of Central Excise Act, 1944 shall be requantified by the Commissioner as per the directions in para 6 above for which the matter is remanded to the Commissioner. The appeals stand disposed of as above.
O R D E R
In view of difference of opinion, it is necessary to place the matter before the third Member. The registry shall do the needful in this regard.
[Justice R.M.S. Khandeparkar] President [Rakesh Kumar] Member [Technical] Ckp.
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