Custom, Excise & Service Tax Tribunal
Cce, Indore vs M/S Mss Food Products & Others on 4 September, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
COURT NO. III
Appeal No. : E/631/2005-EX [DB]
E/CO/83/2005-EX[DB]
[Arising out of Order-In-Original No. 08/Commr/Cex/Ind/2004 dated 11.02.2004 passed by CCE,Indore]
For approval and signature:
Honble Ms. Archana Wadhwa, Judicial Member
Hon'ble Mr. Sahab Singh, Technical Member
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3
Whether Their Lordships wish to see the fair copy of the Order?
Seen
4
Whether Order is to be circulated to the Departmental authorities?
yes
CCE, Indore Appellant
Vs.
M/s MSS Food Products & Others Respondents
Coram: Honble Ms. Archana Wadhwa, Judicial Member Hon'ble Mr Sahab Singh, Technical Member Appearance:Mr. Sanjay Jain, DR for the Appellants Mr. J.C. Patel, Adv. for the Respondent Date of Hearing: 08.01.2013 Date of Decision: 03.04.2013 INTERIM ORDER NO. 203/2013 FINAL ORDER NO . 57491/2013 Per Ms. Archana Wadhwa Being aggrieved with the order passed by Commissioner, vide which he has dropped the demand against respondent M/s MSS Food Products and has dropped the show cause notice issued to them, revenue has filed the present appeal.
2. M/s. MSS Food Products are engaged in the manufacture of Pan Masala, Gutkha and Mouth Freshner under brand names of SHIMLA & VANSH falling under Chapter 2106 & 2402 of the Central Excise Tariff Act, 1985. The appellant was purchasing packaging materials that is printed laminates, pouches from M/s Flex Industries Ltd. The officers conducted simultaneous searches on 7th January 2002 at factory premises of:-
(i) M/s Flex Industries Ltd., Malanpur
(ii) M/s MSS Food Products, Indore
(iii) M/s Shri Saibaba Transport Services, Gwalior
(iv) M/s Pitambara Freight Carrier, Gwalior
(v) M/s Hans Travels, Gwalior
(vi) M/s Hans Travels, Indore.
3. On preliminary scrutiny of the records of M/s. Flex Industries Ltd., Malanpur, it was observed that there was regular production of Shimla brand laminates and outer pouches in their factory. However, M/s Flex Industries Ltd., Malanpur had issued invoices in the name of M/s MSS Food Products, Indore only in the month of June & September 2001. The sales orders lying in the factory did not show the details of brand names of laminates / pouches to be supplied to the customers. The officers further observed that M/s Flex Industries were not showing details of brand wise production in their records. Such details were also not available in Central Excise invoices. However, the unit was drawing brand wise stock statement of finished goods in an interval of 2/3 days. On verification, 850 boxes of laminates and 270 boxes of pouches of Shimla brand were found in stock. Shri A.P. Singh, Sr.GM (marketing) of M/s. Flex Industries Ltd., Noida in his statement dated 08.01.2002 and 25.04.2002, interalia, stated that they had supplied Shimla Brand laminates/pouches to M/s MSS Food Products, Indore and also to other buyers. Shri Anil Sharma, A.G.M. (Commercial) of M/s Flex Industries in his statement dated 07.01.2002, and 25.05.2002 also confirmed that Shimla Brand of Laminates/Pouches had been removed from their factory in the name of the parties and addresses other than M/s MSS Food Products, Indore also and that in the laminate packing register (weight Register), the abbreviation SPM stood for Shimla Pan Masala. Sri Subodh Sharma, Section Incharge, (Officer Commercial) of M/s Flex Industries in his statement dated 09.01.02, 9/10-03-2002 and 26.04.2002 also confirmed that they were putting the short name (abbreviated names) of the items on the cartons of their packaging material and that he was aware that particular variety of goods being dispatched does not belong/pertain/relatable to the customers to whom the goods have been consigned.
4. The officers also searched the factory premises of M/s MSS Food Products, Sanwer Road, Indore on 07.01.2002 and found 60 machines in the premises meant for manufacture of Pan Masala and Gutkha. There was a stock of pre-printed laminates of Shimla Pan Masala 2 in 1 besides laminates of Shimla Gutkha and Pan Masala which on verification tallied with the recorded balance.
5. Shri Nitesh Wadhwani, Partner of the party admitted that laminates in the form of rolls and pouches were being purchased by them from M/s Flex Industries Ltd., Malanpur and NOIDA and some other manufacturers of Delhi; that there was no written agreement with suppliers of the packaging material; that their machines could produce 50-60 pouches per minute and the production was being taken in one shift only; that there was no other unit except M/s MSS Food products, Indore in Sanwer Road, who manufacture Shimla Brand Pan Masala, Gutkha and Mouth Freshner. In his further statement dated 07.03.2002, he stated that they had sold only one consignment of Shimla Gutkha to M/s Shree Ganesh Sugandhi Bhandar vide invoice No. 305/09-10-2001 and that he was not aware about their salesman who was reported to have sold the said goods subsequently at Jabalpur.
6. The officers also searched the office godown premises of M/s Shri Saibaba Transport Services, Gwalior, and resumed documents as also laminate bearing descriptions Shimla Gutkha Saffron Yukt and Shimla Meethi Supari bearing manufacturers name M/s MSS Food Products. The statement of the authorized representatives was recorded. Similarly, the search of godown premises of M/s Pitambara Freight Carrier, Pinto park, Gwalior resulted in recovery of 148 boxes of laminates bearing the details of M/s MSS Food Products. The statement of their Manager was also recorded. The search the office premises of M/s MSS Hans Travels, Indore also resulted in recovery of 5 bags of Shimla Pan Masala/Shimla Mouth Freshner Statement of their manager Shri Nitin Gupta, was also recorded along with the statement of Shri Arvind Gupta.
7. On scrutiny of the records resumed from M/s MSS Hans Travels, it was revealed that there were signatures of the consignees representative in token of having received the goods. It was further found that even though the laminates were booked by M/s Flex Industry Ltd. for other places, the goods were delivered/unloaded at Indore itself. Hand writing and finger-print Expert, Shri C.T. Sarwate, has opined that the signatures appearing on the receipts of M/s Hans Travels were, are of Shri Subhash Joshi and Shri Amarchand Upadhyay, the employees of the party M/s MSS Food Products.
8. During the course of investigation, it was found that M/s Flex Industries Ltd. had created certain accounts in the name of various parties, which were found to be fictitious. It was also found that the requisition for consideration of the laminate purchased from M/s Flex Industries Ltd. was being made by M/s MSS Food Products through their purchaser of final product. Their statements were also recorded.
9. On the above basis, revenue entertained view a that the respondent was engaged in clandestine activities and accordingly show cause notice was issued raising demand of duty of Rs. 43,48,552.50 on the allegation that the laminates shelter by M/s Flex Industries to independent buyers against cash were in fact received by M/s MSS Food Products, who have named their final product without recording the said receipt of packing material in their record. Further, demand of duty of Rs. 13,50,400 was raised in respect of the luggage received by the said respondent and not entered in their record on the ground that they have not shown the use of the same.
10. In their defence submissions, the respondent submitted that the Revenues allegation is based upon assumption and presumption in as much as there is no conclusive evidence on record to show that the lamination sold by M/s MSS Flex Industries to other buyers, were, in fact received by the respondent. Shri A.P. Singh of M/s Flex Industries had clearly deposed that they were supplying the lamination bearing the brand name of Shimla to various persons. They also drew the attention of the adjudicating authority to the statement of Shri Ganesh Prashad Shivhare of M/s Ganesh Sugandhi Bhandar deposing that they had purchased Shimla Pan Masala and Shimla Mouth Freshener from M/s Shivam Sales Corporation. They contended that Shivam Sales Corporation, was also manufacturing Gutkha and Pan Masala using their brand name of the respondent and were also granted Central Excise Register by the revenue. In fact, they have filed a police report against such manufactures of Pan Masala which were manufacturing the goods using their name. Further, to rebutt the opinions of the handwriting expert, they produced another report by Shri A.N. Ganorkar, a handwriting expert, who after examination of the signatures bearing in the transport documents and other documents with the admitted signature of the said persons, opined that the signature were actually forged and held that the signature were in fact not written but were crude formations of letter forms showing tremors of fraud, uneven line quality, uneven lining etc. They also contended that the allegation of clandestine removal cannot be upheld on the basis of packing material allegedly supplied by M/s Flex Industries Ltd., without their being any other evidence of record of show the procurement to the raw-materials.
11. The Commissioner considered the above submission of the appellant and dropped the allegation by observing as under:
The demand of Rs. 43,48,552/- has been worked out on the basis of delivery of outer pouches to M/s MSS Foods. The officers had searched the office premises of M/s Hans travels, Gwalior and seized certain Pan Masala/Mouth freshner for which there were no duty paying documents. It was found by the officers that the original copy of the bilty was being given to the person following the consignment at the time of delivery of the goods, the acknowledgement of the party was being taken on the second copy of the builty and the same was being sent to Gwalior. At the time of delivery of the goods to the party, signatures of the concerned party were also taken on the Luggage Delivery Challan and the same was kept at Indore for record. The Manager of M/s Hans Travels, Indore after examining their own documents mentioned that according to him mention of shimla in their records means shimla pan masala wale. That according to him there is no other party called Shimlawale except manufacturers of Shimla pan masalawale. On further scrutiny of records resumed from M/s Hans Travels, Gwalior and Indore, it was observed that earlier also certain consignments in the name of M/s Sarasati & Sons, Akola, Sukhram Traders, Nashik and Susheela Traders, Nashik were transported by them and the same were said to belong to some shimlawale at Indore. The consignments were acknowledged by some representatives of shimlawale. From the records resumed it appears that the persons who had received the consignments and signed them in lieu of having received the same were Shri Subhash Joshi and Amarchand Upadhyay, employees of the Noticee. However, they declined that the signatures were theirs. Here it is worthwhile to mention that the noticee have contended in their defence that the evidence of M/s Hans Travels cannot be relied upon as the documents are being maintained by a third party. They have also emphasized that the Department had proceeded on the basis of statement of Shri Arvind Gupta who was only the person managing the vehicles whereas the person who knew about the working of M/s Hans Travels was Shri Arun Gupta. Shri Arun Gupta had given statement in favour of the noticee that the noticee had never picked up the packages from M/s Hans Travel. As regards the statement of Shri Arun Gupta, the Department should have confronted Shri Arvind Gupta on this count. The basis of alleging that the consignments in fictitious names were received by M/s MSS Food Products is the signatures found on the duplicate copies of bilties. For proving that the signatures appearing on the bilties were those of the employees of the noticee viz. Shri Joshi and Upadhyay, the opinion of the Handwriting Expert Shri C.T. Sarwate was taken who had opined that the signatures on the receipts shown to him were of Shri Subhash Joshi and Shri Amarchand Upadhyaya. Shri Joshi and Upadhyaya have denied having received the materials, as already mentioned. Cross examination of Shri Sarwate, though allowed, could not take place in view of the demise of Shri Sarwate.
The flow back of money to M/s Flex Industries has been attempted to be worked out on the basis of Bank Drafts adjusted against certain parties like M/s S. Miss Hill Enterprises, Pune, M/s Sarafat Ali & Co,. Shabnam Enterprise, Nasik etc. Payment from these parties were received through DD. Further investigations revealed that out of the 5 parties mentioned, Demand draft in respect of one party was purchased from Chatarpur branch, Madhya Pradesh by M/s Manoj Provision Stores and listed DD 2 to 5 purchased by Shri Shyam Behari Agrawal of S.B.. Traders Chhattarpur from their Account No. 50060. Shri Manoj Agarwal whose statement was taken as a measure of follow up deposed that he purchases Shimla Gutka and Shimla Pan Masala and Shimla mouth freshner from M/s Shree Ganesh Sugandhi Bhandar, Jabalpur. He does not prepare any pucca bill and he has no relation with M/s Flex Industries. Instead of sending any payment for purchase of Shimla products in cash he purchased one DD for Rs. 80,000/- in the name of M/s Flex Industries, as per the instructions of M/s Shree Ganesh Sudgandhi Bhandar, Jabalpur. Shri Shyam Behari Agarwal of M/s S.B. Traders, Chhattarpur also deposed that he purchased Shimla Gutkha, Shimla Mouth Freshner etc. from M/s Shree Ganesh Sugandhi Bhandar, Jabalpur and he had received only one bill from them for such items and he does not know any firm in the name of M/s Sharafat Ali and M/s Shabnam Enterprises etc. He also does not know M/s Flex Industries Ltd., and instead of paying any cash as per the instructions of M/s Ganesh sugandhi Bhandar, Jabalpur, he had purchased DDs in the name of M/s Flex Industries and sent it by Courier to M/s Shree Ganesh Sugandhi Bhandar, Jabalpur. From this it has been alleged by the Department that the said 5 DDs had been adjusted by M/s Flex Industries against the sale of printed laminations on account of certain parties which were found to be fictitious. It was found from the examinations of the Receipt Book of Courier Service that dak was dispatched from M/s S.B. Traders to Ganesh Sugandhi Bhandar, Jabalpur on the date of purchase of DD or on the very next date. However, Shri Ganesh Shivhare of M/s Shree Ganesh Sugandhi Bhandar stated in his statement that he did not ask either M/s Manoj Provisions Store or S.B. Traders to send any DD to M/s Flex Industries Ltd. In view of the denial by the above individual, the link howsoever indirect it might have been vanishes. M/s Shree Ganesh Sugandhi Bhandar having declined to have received the said bank drafts, the payment received by the Noticee No.5, gets confined to Chatarpur. Also, in view of this situation, the inference that M/s Shree Ganesh sugandhi Bhandar who was supposed to be purchasing goods of M/s MSS Products, had given instructions to two Chatarpur parties, and they accordingly gave the same to M/s Flex Industries, falls flat. In fact this financial chain built by the Department after detailed investigation has certain gaping holes and weak links. First and foremost, Noticee No. 1 is not figuring in the chain. He only has an indirect connection with Noticee No.10. Only five Demand Drafts could be located and investigated upon as against a huge amount of turnover. However, after the denial by Noticee No. 10 and production of evidence by the noticee in favour of manufacture of Gutkha/Pan masala in their name by M/s Shivam sales Corporation, Mauranipur, noticees case becomes strong.
From the above, it can be seen that the Departmental case basically proceeds on the following lines. There is no dispute that M/s Flex Industries Ltd. produced outer pouches of Shimla brand which were transported by M/s Hans Travels from Gwalior to Indore. For pressing this point, reliance has been placed on some documents recovered from the premises of M/s Hans Travels. Statement of Shri Arvind Gupta and statement of some other persons was recorded who mentioned that Shimlawale meant manufacturer of Shimla pan masala. Also to further press their point, the Department has alleged that goods at Indore were reveived by the employees of the noticee. This has been tried to be proved through the report of Hand writing expert late Shri C.T. Sarvate. There are too many gaps in this scenario. Firstly main reliance has been placed on the records found at the premises of M/s Hans Travels. However, no efforts have been made to check as to who had been maintaining those records and their authenticity was also not verified. The statement of Shri Arvind Gupta, Manager of Hans Travels has been relied upon which has been challenged. There is a statement of Shri Arun Gupta, son of the proprietor of the firm of M/s Hans Travels, which indicates that they have nothing to do with M/s MSS Food Products. Though this statement is on record but no efforts have been made to confront Shri Arvind Gupta with this statement. Also on the basis of these records, it was alleged that the outer pouches were reaching Indore and were delivered to shimlawale. All this is nothing but assumptions and presumptions with no concrete evidence available. Even after this, we have come only upto the godown of M/s Hans Travels. There is only a thin thread joining the dispatch of packages from M/s Hans Travels, Indore to delivery at M/s MSS food Products. This is supposed to be the signatures of Shri Subhash Joshi and Shri Upadhyay on the Transport documents, but both of them have already denied that the impugned signatures were theirs. Department has relied upon the opinion of Shri C.T. Sarwate, Hand writing Export. However, Shri Sarvate could not be present for cross examination on the date of Personal Hearing. Moreover, now as Shri Sarvate has unfortunately expired, the said cross examination cannot take place. Moreover, the noticee has produced an opinion from Shri A.N. Ganorkar, B.A, LLB, FRMS (London), FASC (USA). In the said report which has been given after examination of the signatures on the transport and other documents clearly shows that the signatures which are being referred to as those pertaining to the employees of the Noticee, were actually forged. The report says that the signatures in fact were not written but were crude formations of letter forms showing tremors of fraud, uneven lines quality, uneven lining etc. The Noticee has also relied upon the decisions in the case of Mohammad Umar vs State reported in 1986 (26) ELT 724 (MP) and on the case of Chhota lal Keshav Ram vs CCE reported in 1993 (67) ELT 916. In these cases it has been held that evidence of Hand Writing Expert is a very week evidence. Moreover, the Hand writing Expert should bring out the dissimilarities in the standard and disputed signatures and then justify the differences to conclude that the standard and disputed signatures belong to the same individual. This has not been done in the present case as there is absence of accountability for the admitted differences in the disputed signatures and the standard signatures. I tend to accept the contention of the Noticee that the said Hand writing Experts report cannot be relied upon in this case as the report of an expert has been countered by the report of another expert.
After comparing both the opinions I observe that the opinion of Shri Ganorkar is much more methodical as compared to that of Shri C.T. Sarvate. Moreover, the report is very categorical in the case of Shri Ganorkar. Accordingly, I observe that this entire chain is not strong and contains a number of loopholes which have been challenged by the noticee. The basic evidence is entry of outer pouches in the record of M/s Flex Industries Ltd., which shows delivery of Shimla Brand outer pouches to 13 parties who were found to be fictitious. As regards the records of M/s Flex Industries, Shri A.P. Singh, Sr. Manager of M/s Flex Industries has categorically stated that they did not inquire into the bonafides of their customers and they print whatever has been ordered by their customers unless there are instructions to the contrary by a party. I agree with this contention of Shri A.P. Singh as there is nowhere mentioned in the Central Excise Rules that manufacturers should verify the antecedents of the purchasers. He can sell the goods to any person whosoever comes to the factory to buy goods. M/s Flex Industries is also not supposed to check whether a particular brand which they are manufacturing and delivering belongs to the persons to whom delivery has been given or not. I find that legally there is nothing wrong with the statement of Shri Singh. As regards the records of M/s Hans Travels which are the other link in the chain, the Noticee contends that the same cannot be relied upon being the records maintained by a third party. The Noticee has also challenged the statement of Shri Avind Gupta as per whom the goods were consigned to M/s MSS Food Products Indore, as Shimlawale referred to them. This alongwith the fact that the Department has not further inquired into the records regarding their maintenance etc. shows that this contention of the Noticee is also quite forceful.
Now, we come to the third link in the chain, according to which it has been alleged that the goods were being dispatched to M/s MSS Food Products who were also knows as shimlawale. Here, I find that this evidence is not very conclusive. This is more in a nature of here-say. Moreover, the noticee in his defence has given the name of a unit manufacturing Pan masala in Lucknow in the name and style of Shimla Chemicals who are also known as shimlawale. This has further been linked with Noticee No.1 on the basis of the report of the handwriting expert.
In view of the above, links in the chain formed by the Department appear to be weak and in this case they can be treated as nonexistent as there are so many blanks which have not been filled. Here, the Noticee has contented that merely because M/s Flex Industries Ltd. has printed certain outer pouches which contain their brand name does not mean that the goods were necessarily delivered to them or were meant for them. They have also produced evidence at the time of Personal Hearing in the form of certain pouches which had their brand name but were not being manufactured by them. They have also shown the copies of the FIR etc. filed by them with the Police in respect of the duplicate manufacturers and also showed copies of Writs filed by them in various High courts in this regard. They have also given names of 3 manufacturers who are manufacturing duplicate Shimla Brand products. They also mentioned that Trade Mark Authorities, on their complaint, had also conducted a number of searches in this matter. They have relied upon the Affidavits dt. 10.2.2003 filed by Shri Ganesh Prasad Shivhare wherein it has been stated that they had purchased Shimla pan masala of Batch No. KK and UU From M/s Shivam Sales Corporation. They contented that they never used these kinds of Batch Nos. in their products. In the absence of anything to the contrary adduced by the Department, I have no option but to accept the plea/defence of the noticee as mentioned above. It is indeed correct that duplicates of popular brands are being manufactured in a number of commodities. Moreover, the very starting point of the case i.e. the records of M/s Flex Industries indicates that the manufacturer is not supposed to go into the antecedents of the purchaser as this is not a requirement of the law. Accordingly, the Invoices under which the said outer pouches were cleared were as per the law and on payment of the duty leviable.
The trail from the factory of M/s Flex Industries to the factory of M/s MSS Food Products Indore is very bumpy and nothing conclusive has emerged. Some of it is based on records which do not appear to be authentic, some on hearsay and rest on the basis of a Hand Writing Experts report which cannot be relied upon as has already been discussed. Moreover, the Noticee has contended that for the manufacture of the finished goods which could be put in the said outer pouches they would have been required to purchase raw material worth Rs. 65.37 Lacs. On the other hand, on conducting search of Noticee No. 1s premises no discrepancy was found either in the finished products stock or in the stock of principal raw materials, i.e. Katha, Supari, Cardamon compound, menthol etc. Also it has nowhere been mentioned in the show cause notice that as to when the goods were supposed to have been manufactured and cleared clandestinely. They have themselves mentioned that they have 60 machines and they are working only in one shift. Their machines are capable of manufacturing 60 pouches per minute. Department has also not even been able to make out a case that the consumption of electricity was in excess of what it should have consumed. In fact this aspect has not been gone into at all. Also, the number of labour or their whereabouts have not been verified either from records or by recording statements.
There is no financial corroboration of either the payment of alleged outer pouches to M/s Flex Industries or payments received by the Noticee for the sale of the goods supposed to have been clandestinely manufactured and cleared. Regarding the payment from M/s MSS food Products to M/s Flex (I) Ltd. efforts have been made to find out a link. Some Demand Drafts adjusted in the names of some fictitious parties were made the basis of this financial inquiry. The investigations from the issuing Bank Branch led to 2 parties in Chatarpur, i.e. Shri Manoj Agarwal of M/s Manoj Provision Stores and Shri Shyam Behari Agrawal of M/s S.B. Traders. From here we reach M/s Shree Ganesh Sugandhi Bhandar, Jabalpur, who was supposed to have sold pan masala/pouches to M/s Manoj Provision Store and S.B. Traders and who was supposed to have issued instructions to these two parties to issue Demand Draft in the name of M/s Flex Industries. It was also tried to prove that there was definitely some correspondence on the day or very next day of purchase of the Demand Draft. However, from Jabalpur the trace simply vanishes. Some payments indeed have been made by M/s S.B. Traders and by M/s Manoj Provision Stores in the name of M/s Flex Industries but they were supposed to have been issued on the basis of the instructions received from M/s Shree Ganesh Sugandhi Bhandar, Jabalpur. No communication whatsoever between M/s MSS Food Products and M/s Shree Ganesh Sugandhi Bhandar, Jabalpur has been brought on record and inspite of detailed investigations, the Department has not come to prove any link between M/s MSS Food Products and M/s Shree Ganesh Sugandhi Bhandar, or any other party which had issued any Demand Draft or any other payment in favour of M/s Flex Industries in lieu of purchase of pan masala/gutkha supposed to have been manufactured and cleared clandestinely by the noticee. Accordingly, there is no financial link which could be established by the department.
Accordingly, there does not appear to be any challengeable evidence worth mention against the Noticee No.1. On the other hand the Noticee has cited a number of judgments in support of their contentions.
12. As regards the dropping of demand of Rs. 13,50,400/- he held that the revenue has not produced any evidence to show that the received lamination was not put to use by the appellant. The charges of clandestine removal are without any corroboration from the other sources and any evidence of purchase of excess raw-material.
13. For the above findings he relied upon various decision of the tribunal and in fact placed strong reliance on the Tribunal decision in the case of M/s Collector and others Vs. CCE, Kanpur, 1999(109) E.L.T.640(Tribunal).
14. The revenue in their memo of appeal has challenged the said order of Commissioner by submitting that there is sufficient evidence or record indicating clandestine manufacture and clearance by the respondent Product. The various evidences relied upon by the revenue or stand re-capitulated by them, in brief, as under:-
(a) The case was built on an intelligence that one M/s MSS Foods Product, Indore, a manufacturer of pan masala, gutkha and mouth freshener were purchasing packing materials like pre-printed laminates in rolls, pouches, carry bags in the names of fictitious firms from M/s Flex Industries Ltd., Malanpur which were brought to their factory for packing of clandestinely manufactured pan masala, gutkha, mouth freshener.
(b) On investigation it was found that there was regular production by M/s Flex Industries of Shimla brand laminates or outer pouches, i.e. a brand owned and manufactured by the party, (M/s MSS foods products) with only a few invoices issued in the name of the party. On being asked Shri Anil Sharma, A.G.M. (Commercial) admitted that pouches of Shimla brand had been sent to name and addresses other than that of the party.
(c) The search of transporters namely Saibaba Transport Services and Pitambra Freight Careers, Gwalior led to seizures of large quantities of boxes of Shimla brand pouches which were also bearing an inscription manufactured by MSS Food, Indore but which were consigned to parties other than MSS Foods. On enquiry all these parties, without exception, were found to be fictitious and non-existent.
(d) Shri Bal Krishan Sahu, Manager Pitambra Freight Carriers in his statement inter-alia deposed that often the instructions for delivery were based not on the consignees name on the invoices but on a code-word mentioned on the boxes.
(e) It was also found that M/s Flex Industries Ltd., Malanpur, cleared 1,17,100 nos. of outer pouches of Shimla Pan Masala 2 in-1 in the name of M/s Sarasti & Sons, Akola; 1,76,800 no. of outer pouches of Shimla Pan Masala in the name of M/s Sukhram Traders, Nashik; 3,77,600 nos of outer pouches of Shimla Mouth Freshner (20 gms) in the name of M/s Salil Enterprises, Pune; and 52,000 nos. of outer pouches in the name of M/s Mohit Enterprises Amravati. The consignments of Shimla Branded pre-printed laminates/pouches which have been cleared by M/s Flex Industries Ltd., Malanpur, in the name of M/s Sarasati & Sons, Akola; M/s Sukhram Traders, Nasik and M/s Susheela Traders, Nashik, M/s Salil Enterprises, Pune, M/s Mohit enterprises, Amravati were transported by M/s Hans travels, Gwalior and as per the statement of Manager of Hans Travels these were delivered at Indore only.
(f) On verification, all the above parties namely M/s Sarasti & Sons, Akola, M/s Sukhram Traders, Nashik and M/s Susheela Traders, Nashik, M/s. Salil Enterprises, Pune, M/s. Mohit Enterprises, Amravati, in the name of which M/s. Flex Industries Ltd., Malanpur, cleared these consignments, were found to be fictitious and non-existent.
(g) The consignment cleared by M/s. Flex Industries in the name of above parties namely M/s. Sarasati & Sons, Akola; M/s Sukhram Traders, Nashik and M/s Susheela Traders, Nashik, M/s Salil Enterprises, Pune, M/s. Mohit Enterprises, Amravati were found to have been delivered at Indore, only, irrespective of the destination and addresses mentioned in the invoices / bills issued by M/s. Flex Induatries.
(h) Scrutiny of documents resumed from Hans Travels like receipts, luggage delivery sheets etc. revealed that the consignment of Shimla brand pouches invoiced in the name of fictitious parties were actually delivered at Indore, although these non-existent parties were of Nashik, Pune, Akola etc. The scrutiny of the luggage delivery sheet also showed that receipt of these consignments had been acknowledged by some representative of Shimlawale at Indore. Shri Arvind Gupta, Manager, Hans Travels in the statement dated 25.01.02 stated that Shimlawale were none other than the manufacturers of Shimla Brand Panmasala/ Guthka i.e. MSS Industries, Indore. He also confirmed that these consignments invoiced to non-existent, buyers of Akola, Pune Nasik etc were actually delivered at Indore.
(i) Shri Subhash Joshi and Shri Amar Cand Upadhyay, employees of the party received the laminates of Shimla pan masala/Gutkha etc. cleared in the name of fictitious firms sent by M/s Flex Industries Ltd., Malanpur from M/s. Hans Travels Indore as their signatures were found on the receipts/luggage charts showing acknowledgement in token of the receipt of the laminates. Shri C.T. Sarvate, handwriting expert and Additional Examiner to the Government of M.P. of Questioned Documents clearly confirmed this fact that the signatures appearing on the receipt were those of Shri Subhash Joshi and Shri Amar Chand Upadhyay, employees of the party who had also signed on the panchnama drawn at partys premises.
(J) M/s Sarasati & Sons Akola, Sukharam Traders Nashik and M/s. Sushila Traders Nashik and Mohit Enterprised Pune on verification, were found to be non-existent and were fictitious firms. The fact that the parties in whose name the invoices were issued by M/s Flex Industries for clearances of Shimla brand laminates were fictitious and the fact that the delivery of the laminates cleared by them was made to the employees of the party at Indore clearly established that the laminates were meant for M/s MSS Food and were also received by them.
(k) It was also found that M/s. Flex Industries Noida had credited certain amounts received through DDs in the name of fictitious parties to whom Shimla brand pouches had been cleared namely S. Miss Hill Enterprises, Pune, M/s. Sarafat Ali & Co., Pune, M/s. Shabnam Enterprises Nashik and M/s Sarath Enterprises Nashik. On conduct of further enquiries, Bank of Baroda, Service Branch New Delhi vide their letter NO. BR/SERDEL/HODD/70 dated 21.02.2002 informed that Rs. 80000/- credited by M/s Flex Industries against the name of M/s S. Miss Hill Enterprises Pune, was purchased from their Chhatarpur Branch by one M/s Manoj Provision Stores Chhatarpur from their account no. 1388 and the DD amounting to Rs. 50000/-, Rs.50000/-, Rs. 75000/- and Rs.80000/- credited by M/s. Flex Industries in the names of M/s. Sarafat Ali & Co., Pune, M/s Shabnam Enterprises Nashik and Sarath Enterprises Nashik were purchased by Shri Shyam Behari Agrawal of M/s SB Traders Chhatarpur from their account no. 50060.
(l) In the statement recorded under section 14 of Central Excise Act 1944 on 28.02.02, Shri Manoj Agarwal, proprietor of M/s. Manoj Provision Stores dealing in business of pan masala/ Gutkha stated that he was purchasing Shimala pan masala/Gutkha from one M/s Shri Ganesh Sugandhi Bhandar, Jabalpur and that the said pan masala/gutkha was being received from the said party under kaccha bill as no pucca bill for the sale of such pan masala/gutkha was being issued. He further stated that on the instruction of M/s. Ganesh Sugandhi Bhandar, from whom he was purchasing Shimla brand pan masala/gutkha etc., and for making payment for the pan masala/gutkha purchased by them, a demand draft of Rs. 80000/- in the name of M/s. Flex Industries Delhi was purchased by him and was sent to M/s. Ganesh Sugandhi Bhandar Jabalpur by courier. One pouch of Shimla brand mouth freshener, Shimala pan masala was resumed by the officers from this dealer.
(m) In the statement recorded under section 14 of the Act on 28.02.02, Shri Shyam Behari Agarwal, proprietor of M/s. SB Traders Chhatarpur dealing in business of pan masala/ gutkha confirmed that he was purchasing Shimla pan masala/Gutkha from one M/s Shri Ganesh Sugandhi Bhander Jabalpur and that the said pan masala/gutkha was being received from the said party without any bill / vouchers. He further stated that on the instruction of M/s Ganesh Sugandhi Bhander form whom he was purchasing Shimala brand pan masala/gutkha etc., the demand draft of Rs. 500000/-, 50000/-,75000/- and 80000/- in the name of M/s Flex Industries Delhi were purchased by him and that the same were sent to M/s Ganesh Sugandhi Bhandar through courier.
(n) The receipt book of Madhur Courier, Jabalpur withdrawn by the officers on 29.02.02 evidenced that some dak was infact dispatched by these trader to M/s. Ganesh Sugandhi Bhyandar Jabalpur on the same or next day as the DDs was drawn corroborating the statement of the traders that the DDs were sent by them through courier to Ganesh Sugandhi Bhandar, Jabalpur.
(o) In a follow up action at the business premises of M/s Ganesh Sugandhi Bhandar Jabalpur, a wholesale dealer of pan masala/Gutkha, stocks of Shimla pan masala, Shimla Gutkha and Shimla mouth freshner valued at Rs. 8253/- were seized. They received the said stock without the cover of any bills/invoices. Shri Ganesh Shivhare, proprietor of Ganesh Sugandhi Bhander in his statement admitted that he had purchased Shimla Pan Masala/Gutkha and Mouth Freshener from a salesman of the party without any bills. The pan masala and mouth freshener, which were found in the premises of Manoj Provision Store Chhatarpur, was the same as was found in the premises of Shri Ganesh Sugandhi Bhandar Jabalpur as was evident from the batch numbers appearing on the products.
(p) The demand drafts, got issued by M/s Manoj Provisions Stores, Chhatarpur and M/s SB Traders Chhatarpur, were found to have been credited by M/s Flex Industries in the names of fictitious firms namely M/s. S. Miss Hill Enterprises, Pune, M/s Sarafat Ali & Co., Pune, M/s. Shabnam Enterprises, Nashik, and M/s. Sarath Enterprises Nashik to whom M/s Flex Industries had issued invoices for the laminates. Thus it was on record that the party received Shimla brand laminates/pouches for manufacture of Shimla pan masala which had been removed from M/s. Flex Industries in fictitious names. The said laminates / pouches had been used for clandestine manufacture and clearance pan masala, Gutkha and mouth freshener etc. and that payment for such supply of laminates/pouches had been adjusted by M/s. Flex Industries in fictitious names which clearly established the flow back of money from M/s. MSS Foods Products to M/s. Flex Industries through their dealers to whom clandestinely cleared pan masala/ gutkha was being supplied.
(q) The evidence gathered in the case, therefore, provided clear cut proof of receipt unaccounted Shimla brand pouches by the party, clearances of their products made by them without payment of duty and adoption of a mode/ channel of payment whereby the payments for clandestinely cleared pan Masala were being adjusted against payment for unaccounted receipt of pouches. Although the clearance of Shimla brand pouches to fictitious buyers was on a much larger scale, the charges against the party have been limited only to the extent where the investigations could gather sufficient evidence to show that the pouches were actually received by the party. Based on this a demand of Rs. 43.48 lakhs was raised.
(r) It was also found that a large number of pouches were purchased by the party in their own name, the disposal of which could not be accounted for by the party. These pouches, all of Shimla brand, were cleared during the period 12-06-01 to 09-09-01[13500 pouches of mouth fresheners on 12-06-01 and 32,000 on 9-9-01, 16,000 pouches of Pan Masala two in one on 28-8-01, and 80000 pouches of Gutkha on 20-08-01]. On the date of the visit on 7-1-02 no stock of these pouches was found in the factory of the party-giving rise to an inevitable conclusion that the same would have been cleared between the date after receipt and the date of visit. Moreover, on record only 21,800 pouches of Gutkha was shown as cleared giving rise to an inevitable conclusion that the finished goods in remaining pouches had been cleared without payment of duty. No explanation whatsoever has been given by the party to explain the disposal of these pouches. Based on this a demand of Rs. 13.50 lakhs was raised. This also provides clear-cut evidence that party was engaged in clandestine clearance and production of dutiable goods.
15. We have gone through the impugned order and have considered the submissions made by both the sides. The charges against the respondent are that they are manufacturing and clearing their final products pan masala, gutka and mouth freshener under the brand name of SHIMLA& VANSH without payment of duty. The said charges are based upon the scrutiny of records of the packing material supplier M/s Flex Industries Limited. Commissioner has considered the said evidences produced on record by the revenue and come to a conclusion that the same are not sufficient evidences for holding the charges against the respondent.
16. The Revenue in their memo of appeal have reiterated the same very evidences which were referred to in the show cause notice. It is seen that Shri Anil Sharma, AGM (Commercial) of M/s Flex Industries, in his statement has admitted that the packing material printed in the name of Shimla was also being sold by them to the other parties. According to the Revenue the other persons, to whom the said packing material was being sent were fictitious and the packing material was, in fact, was being received by the appellant. For the above purposes, they have also relied upon the handwriting expert opinion of Shri Sarwate, in respect of signatures of the two employees of the respondent appearing on the transport documents It is however not cross- was examined on account of his death. As against the above, the respondent have produced an opinion from another handwriting expert Shri Ganorkar, which is contrary to the revenues stand. Ld. Commissioner has rightly relied upon the precedent decisions laying down that the handwriting expert opinion is a weak evidence. As such on the face of their being two contra opinions, not much reliance can be placed on the same.
17. Apart from the above, we note that the entire case of the revenue is wholly based on sale of packing material by M/s Flex Industries. As per the statement of official of M/s Flex Industries they have never enquired into the bonafide of their customers and were clearing the goods, who so ever came forward for placing order upon them. The Revenue has not produced any evidence beyond doubt that other buyers of M/s Flex Industries were in fact not available and inasmuch as M/s MSS Food Products are known as Shimlawale, that it has to be held that the entire packing material was supplied to the respondent. The appellate authority has rightly held the above evidence to be in the nature of hearsay. He has also referred to another manufacturing unit located in Lucknow manufacturing chemical with the brand name of Shimla who are also known as Shimlawale. As such he has rightly held that the revenue has a weak case.
18. Apart from the above we also find that the assessee has strongly contended before the authorities below that there were other manufacturing unit of Gutka under the same brand name and they have filed FIR in number of such dubious manufacturer. Various writ petitions also stand filed by them in different High Courts. Trade Mark Authorities, on their complaint had also conducted number of searches in this manner. All these evidences do not stand rebutted by the revenue. If that be so, the Revenue cannot solely rely upon the fact that M/s Flex Industries was clearing packing material with the printed Shimla brand name and such clearances have to be necessarily held as having been made to the respondent, who utilise the same for the clandestine manufacture and clearance of their final product.
19. We also find favour with the finding of lower authorities that there is no financial corroboration of payment of such illegally procured packing material from M/s Flex Industries. The modus operandi, referred to by the revenue as regards adjustment of the dues under the name of some fictitious parties, cannot be made the basis for establishing the case against the respondent. The lower authorities have rightly relied upon various decision to hold that such charges are to be proved out of positive and tangible evidences and not on the basis of certain doubts, which may arise against the assessee.
20. We further note that apart from the above, revenue has not referred to any procurement of raw materials etc. in a clandestine manner. Admittedly, for manufacture of such huge quantity of the final product, the raw materials are required. There is not even any iota of evidence on record to reflect upon such procurement of raw material. As such, we are of the view that the revenue has failed miserably to hold against the respondent and to establish the charges of clandestine removal made against them. Nothing incriminating was recovered from the assessees factory at the time of their searches of the factory premises or go-down etc. The stock of pre-printed laminated fully tallied with the declared stock in the statutory records.
21. We also note that all the statement of the respondents authorised representative are exculpatory in nature and there is no admission in any of the statement regarding their clandestine activities. The respondent have referred to various decisions of the Tribunal laying down with such clandestine activities are to be proved beyond doubt by production of positive and direct evidence and in the absence of the same, the charge of clandestine activity cannot be upheld. We note that the said legal issue is well settled law and does not require the support of any judicial pronouncement. We are not referring to the same so as to make order length.
22. In view of the foregoing, we note that there is no infirmity in the impugned order of the Commissioner. Revenues appeal is accordingly rejected.
(Pronounce in the open Court on 03.04.2013) (Archana Wadhwa) Member (Judicial) (Sahab Singh) Member (Technical) Jyoti* Per Sahab Singh:-
I have perused the order recorded by Honble Member (Judicial) and I am not able to agree with my learned Sister. Therefore, I am recording a separate order.
2. The brief facts have been fairly narrated in the proposed order. Therefore, I do not feel the necessity of repeating the same.
3. On investigation done by the Revenue, it was found that M/s Flex Industries were showing regular production of Shimla brand laminates and outer pouches but invoices issued by them in the name of M/s MSS Foods Pvt Ltd were very few and Shri Anil Sharma, Assistant General Manager (Commercial) admitted that pouches of Shimla brand had been sent by them in the name of other parties also. On the basis of search of transporters namely M/s Saibaba Transport Services and M/s Pitambara Freight Carriers, Gwalior, large quantity of Shimla brand pouches were seized which were bearing the inscription manufactured by M/s MSS Food Products Indore. These consignments were consigned to parties other than M/s MSS Foods. It was also found that M/s Flex Industries has cleared the outer pouches of Shimla brand Pan Masala to M/s Saraswati & sons, Akola, M/s Sukhram Traders, Nashik, M/s Salil Enterprises, Poona, and all these firms were found on verification to be non-existent. The statement of Manager of M/s Hans Travels revealed that these consignments were delivered at Indore only. From the above, I am of the view that the laminates and outer pouches manufactured by M/s Flex Industries being the similar brands were being sent to M/s MSS Foods Indore in view of seizure at transporters end, invoices issued in the name of non-existent parties located at different places in India and also the statement of Manger of M/s Hans Travels that these were delivered at Indore. Since the laminates/pouches were bearing the brand name Shimla and delivery took place in Indore only, it is difficult to believe that these were not received by M/s MSS Foods Pvt Ltd particularly in view of the statement of Shri Nitesh Wadhwani wherein he stated that there was no other unit except M/s MSS Foods Sanwar Road Indore who manufacture Shimla brand products. The receipt of such laminates/pouches by M/s MSS Foods clearly indicates the same were used in clandestine removal of Shimla brand products.
4. On scrutiny of delivery records of M/s Hans Travels, it was noticed that receipt of the consignments was acknowledged by some representative of Shimlawale at Indore. Shri Arvind Gupta, Manager of M/s Hans Travels in his statement has stated that Shimlawale were not other than manufacturers of Shimla brand Pan Masala of M/s MSS Food Products Indore. The Commissioner in his order has observed that Shri Arvind Gupta was the person managing the vehicles only. The Commissioner has stated that Mr Arun Gupta was the person knowing the working of M/s Hans Travels and Shri Arun Gupta in his statement has stated that M/s MSS Foods never took up the packets from M/s Hans Travels. I do not agree with this observation of the Commissioner in view of the fact that it was Shri Arvind Gupta who was managing the vehicles through which the goods were transported and delivered. I also do not agree with the observation of the Commissioner that Shimlawale need not necessarily mean the M/s MSS Food Products in as much as, there is another manufacturing unit located in Lucknow manufacturing chemicals in the name of Shimla who were also known as Shimlawale. I do not understand this finding of Commissioner is based on which facts. In the present case M/s Flex Industries and M/s MSS Food Products all are located in Madhya Pradesh in and around area of Indore. Therefore, as stated by Shri Arvind Gupta, the term Shimlawale will be applicable to the firms/companies located in that area only. Therefore, I do not find any infirmity in the statement of Shri Arvind Gupta that Shimlawale is none other than Shimla brand manufacturer M/s MSS Foods Products only.
5. On scrutiny of records resumed from M/s Hans Travels, it was revealed that consignments have been acknowledged by representative of M/s MSS Food Products namely Shri Subhash Joshi and Shri Amar Chand Upadhyay. Shri C.T. Sarwate, handwriting expert and Additional Commissioner to the Government of Madhya Pradesh had clearly confirmed that these signatures appearing on the receipt were those of Shri Subhash Joshi and Shri Upadhyay. On the other hand, the appellants are relying on the report of Shri Ganorkar who is also an handwriting expert and who has given a report in favour of the appellants.
5(i) I find that Shri C.T. Sarwate was an handwriting expert and Additional Commissioner working with Government of Madhya Pradesh whereas Shri Ganwarkar was retired officer and working as Consultant and his services were available to anyone on certain fees. In my view, between the two, opinion of the handwriting expert and Additional Commissioner working with the M.P. Government should prevail over the opinion of a private expert.
6. Investigation also revealed that M/s Flex Industries had credited certain amount received through DDs in the name of fictitious parties. Statement of Shri Manoj Aggarwal Proprietor of M/s Manoj Store dealing in business of Pan Masala and Gutka revealed that he was purchasing Shimla Pan Masala Gutka from Ganesh Sugandhi Bhandar without any pucca bill issued for such sale and he was making payment for such pan masala in the form of demand draft in the name of M/s Flex Industries Similarly, Shyam Bihari Aggarwal of Shyam Bihari Traders also stated that payments of Pan masala/gutka purchased from Ganesh Sugandhi Bhandar in the form of demand drafts in the name of M/s Flex Industries.
7. Further the receipt book of the courier shows that the letters were in fact dispatched by these traders to Ganesh Sugandhi Bhandar on the same/next date on which the DD was drawn. Also during the search of premises of Ganesh Sugandhi Bhandar there was seizure of Pan Masala and Shimla Gutka as these goods were without any duty paying documents. These activities indicate that Shimla brand laminates/ pouches issued in the name of non-existent firms/companies were in fact going to appellant M/s MSS Food Products clandestinely to be used in the clandestine removal of the pan Masala/Gutka and the payment in respect of these laminates/pouches was being received by M/s Flex Industries through DD. This arrangement was made between the appellant and M/s Flex Industries just to evade the payment of Central Excise duty.
11. In view of the above, I am of the view that impugned order in original needs to be set aside and Revenues appeal allowed.
(Sahab Singh) Member (Technical) Difference of Opinion Whether Revenues appeal is required to be rejected upholding the order in original as held by Honble Member (Judicial) Or Revenues appeal is required to be allowed after setting aside the order in original as held by Member (Technical).
(Archana Wadhwa) Member (Judicial) (Sahab Singh) Member (Technical) MPS* Per Rakesh Kumar:-
1. The Respondent Company M/s. MSS Food Products, Indore, having their factory at plot No. D, Sector-E, Sanwar Road, Indore, are manufacturer of Pan Masala, Pan Masala containing tobacco (called Gutkha) and Mouth Freshner under brand name Shimla & Vansh. All these products attract Central Excise duty at ad-valorem rate. These products are sold in retail packs (plastic pouches) of various MRP. Since these products are notified under Section 4A, duty on these products is charged on the value determined on the basis of their declared/printed MRP minus abatement, as notified in the notification issued under section 4A. A pre-determined quantity of Gutkha/Pan Masala/Mouth Freshner is packed mechanically by packing machines in retail pouches of laminated plastic with manufacturers name, product name, brand name, quantity packed, MRP etc. printed on them and for this purpose the Respondent purchased printed laminated plastic rolls (printed laminate) which have their name, brand name of the product packed and other details including MRP printed on them. The Respondent manufactured Gutkha/Pan Masala and Mouth Freshner pouches of MRP of Rs. 0.50/- Re 1/- and Re. 5/- per pouch. Depending on the product, Forty, Fifty or hundred such retail pouches are packed in a bigger outer pouch. Such outer pouches of laminated plastic with the product details, brand name and the Respondents name etc. printed on them were being purchased by the Respondent from M/s. Flex Industries Ltd., Malanpur (hereinafter referred to as M/s.Flex).
1.1 On 07.01.2002 based on some intelligence, the jurisdictional Central Excise Officers searched the premises of :-
(a) Respondent M/s. MSS Food Products, Indore;
(b) M/s. Flex Industries Ltd., Malanpur;
(c) M/s. Saibaba Transport Services, Gwalior;
(d) M/s. Pitambara Freight Carrier, Gwalior;
(e) M/s. Hans Travels, Gwalior; and
(f) M/s. Hans Travels, Indore;
1.1.1 Neither any incriminating documents were recovered nor were any irregularity was deducted in the premises of the Respondent.
1.1.2 In the premises of M/s. Flex, some documents were found which showed that the outer pouches meant for packing of the products of the Respondent, in addition to being sold to them, were also being sold and despatched by M/s. Flex to a number of parties other than the Respondent. In this regard, when the inquiry was made with officials of M/s. Flex, they admitted that the outer pouches for packing of Gutkha/Pan Masala and Mouth Freshner of Shimla & Vansh brand of the Respondent, were also being sold to parties other than Respondent.
1.1.3 In course of search at the premises of Transporters, boxes containing plastic outer pouches meant for packing of retail pouches of Shimla & Vansh brand of the Gutkha/Pan Masala and Mouth Freshner of the Respondent were recovered. These consignments despatched by M/s. Flex were consigned to the parties other than the Respondents. However on inquiry, the consignees of those consignments were found to be fictitious and non-existent. In this regard, the records of M/s. Hans Travels, Indore indicated that during the period from Oct.2001 to Dec.2001, 117100 nos. of outer pouches for Shimla Pan Masala 2-in-1, had been delivered to Sarasati & Sons, Akola; 176800 nos. of outer porches for Shimla Pan Masala had been delivered to M/s. Sukhram Traders, Nashik; 377600 nos. of outer pouches for Shimla Mouth Freshner (20 gms.) had been delivered to M/s. Salil Enterprises, Pune; and 52000 nos. of outer pouches for Shimla Mouth Freshner had been delivered to M/s. Mohit Enterprises, Amravati. If these outer pouches were used for packing of retail pouches of Shimla & Vansh brand Gutkha, Pan Masala and Mouth Freshner, the total duty involved on the goods packed in these outer pouches would be Rs.43,48,552/-. However, on inquiry, M/s. Sarasati & Sons, Akola; M/s. Sukhram Traders, Nashik; M/s. Salil Enterprises, Pune & M/s. Mohit Enterprises, Amravati, were found to be fictitious. On inquiry with the employees of M/s. Hans Travels and scrutiny of their records it appeared that these outer pouches, though consigned to M/s. Sarasati & Sons, Akola; M/s. Sukhram Traders, Nashik; M/s. Salil Enterprises, Pune & M/s. Mohit Enterprises, Amravati had been delivered to the Respondent, as in this regard, Sh. Arvind Gupta, Manager of M/s. Hans Travels, Indore, gave a statement dt. 25.01.02 stating that above consignments of outer pouches received from M/s.Flex had been delivered to representatives of Shimlawale and in this regard he produced luggage delivery sheets with signatures of the recipients representatives. The investigating officers were of the view that the signatures on the luggage delivery sheets are the signatures of Sh. Subhash Joshi and Sh. Amar Chand Upadhyay, employees of the Respondent. The luggage delivery sheets of M/s. Hans Travels also contained a remark in respect of consignments meant for M/s. Sarasati & Sons, Akola; M/s. Sukhram Traders, Nashik; M/s. Salil Enterprises, Pune & M/s. Mohit Enterprises, Amravati that the same pertain to Shimlawale. The investigating officers obtained the sample signatures of Sh. Subhash Joshi and Sh. Amar Chand Upadhyay of the Respondent and sent the same to Government hand writing expert Sh. C.T.Sarvate along with luggage delivery sheets recovered from M/s. Hans Travels, Indore for his opinion as to whether the signatures on the luggage delivery sheets recovered from M/s. Hans Travels are same as the sample signatures of Sh. Subhash Joshi and Sh. Amar Chand Upadhyay, the employees of Respondent company. Sh.C.T.Sarvate vide letter dt. 19.04.02 gave his opinion that signatures on the luggage delivery sheets recovered from M/s. Hans Travels are, indeed, of Sh. Subhash Joshi and Sh. Amar Chand Upadhyay of the Respondents. However on inquiry, Sh. Subhash Joshi and Sh. Amar Chand Upadhyay of the Respondent Company denied having taken delivery of the consignments of outer pouches in question, claiming that their signatures have been forged by somebody. However on the basis of hand writing experts opinion and statement of Sh. Arvind Gupta of M/s. Hans Travels, the Investigating Officers were of the view that the outer pouches booked by M/s Flex in the name of M/s. Sarasati & Sons, Akola; M/s. Sukhram Traders, Nashik; M/s. Salil Enterprises, Pune & M/s. Mohit Enterprises, Amravati through M/s. Hans Travels had actually been received by the Respondent and used in the manufacture of un-accounted Gutkha/Pan Masala and Mouth Freshner involving duty of Rs.43,48,552/- which had been cleared clandestinely.
1.2 It was also found that there was evidence from which it appeared that payments for the outer pouches being received by the Respondent from M/s. Flex Industries Ltd., in the name of fictitious parties were being arranged by the Respondents through some other parties.
1.3 Besides this, it was also found that while the Respondent during the period from June01 to Sept.01 had purchased 13500 outer pouches for Shimla Mouth Freshner under invoice dt.12.06.01, 16000 outer pouches for 2-in-1 Shimla Pan Masala under invoice dt. 20.08.01; 80000 outer pouches for Shimla Gutkha under invoice dt. 20.08.01 and 32000 outer pouches for Shimla Mouth Freshner under invoice dt. 09.09.01 from M/s. Flex, on 07.01.02, the date of officers visit to the Respondents factory, there was no stock of these outer pouches, but in their records for the period from Sept.01 to Dec.01 period, they have shown consumption of only 21800 outer pouches of Shimla Gutkha and no production of 2-in-1 Shimla Pan Masala was shown. On this basis it is alleged that 58200 outer pouches of Shimla Gutkha and 16000 outer pouches of 2-in-1 Shimla Pan Masala have been used in production of Shimla Gutkha and 2-in-1 Shimla Pan Masala, which had been cleared clandestinely without payment of duty. Duty demand of Rs. 13,50,400/- is on this basis (para 34 of the Show Cause Notice).
1.3 From the business premises of M/s. Shree Ganesh Sugandhi Bhandar, Jabalpur, stock of Shimla brand Gutkha, Pan Masala and Mouth Freshner valued at Rs.8,253/- was seized on 02.03.02, in respect of which Sh. Ganesh Shivhare, Proprietor M/s. Shree Ganesh Sugandhi Bhandar, could not produce any document regarding payment of duty. A consignment of Shimla Gutkha and Pan Masala valued at Rs. 54,720/- was also seized from the premises of M/s. Hans Travels, Gwalior in respect of which there were no duty paying documents. The duty involved on the goods seized from the premises of M/s. Shree Ganesh Sugandhi Bhandar, Jabalpur and M/s. Hans Travels, Gwalior was Rs. 12,397/-. The Investigating Officers were of the view that these goods had been clandestinely cleared by the Respondent without payment of duty by using the unaccounted outer pouches.
1.5 On the basis of the above investigation, a Show Cause Notice dt.02.01.03 was issued to the Respondent for demand of Central Excise duty amounting to Rs.57,11,349/-(43,48,552+13,50,400+ 12,397/-) along with interest, confiscation of the Shimla Gutkha, Pan Masala and Mouth Freshner valued at Rs. 8,253/- and Rs. 54,720/- seized from the premises of M/s. Shree Ganesh Sugandhi Bhandar, Jabalpur, and M/s. Hans Travels, Gwalior respectively and also for imposition of penalty on the Respondent under section 11AC. Besides this, the Show Cause Notice also sought imposition of penalty of other parties including transporters etc. under Rule 209A of the Central Excise Rules, 1944/Rule 26 of Central Excise Rules, 2001.
1.6 The above Show Cause Notice was adjudicated by Commissioner vide order-in-original dt.11.02.04 by which he dropped the proceedings against all the noticees including the Respondent Company. This order of the Commissioner was reviewed by the Board and in this regard the Board vide Order dt. 17.02.07 under Section 35E(1) of the Central Excise Act, 1944, directed the Commissioner to filed an appeal to the Tribunal for correct determination of the points mentioned therein.
1.7 In pursuance of the order of the Board, Commissioner filed this appeal before the Tribunal. After hearing of this matter by the Tribunal on 08.01.2013, while Honble Member (J) upheld the impugned order of the Commissioner holding that there is no infirmity in it, Honble Member (T) in a separate order, ordered for allowing the Revenues appeal. The point of difference which has been referred to the undersigned for decision is as to whether the Revenues appeal is required to be rejected upholding the order-in-original, as held by the Honble Member (J) or whether the Revenues appeal is required to be allowed after setting aside the order-in-original, as held by the Honble Member (T).
2 Heard both the sides on the point of difference.
3 Sh.Sanjay.Jain, Ld. departmental representative, assailed the impugned order by reiterating the grounds of appeal and emphasized the following points:-
(a) The duty demand of Rs.43,48,552/- against the Respondent Company is based on supply by M/s. Flex to the Respondent Company of 117100 outer pouches for Shimla Pan Masala 2-in-1 in the name of M/s. Sarasti & Sons, Akola; 176800 outer pouches for Shimla Pan Masala in the name of M/s. Sukhram Traders, Nashik; 377600 nos. of outer pouches for Shimla Mouth Freshner (20 gms.) in the name of M/s. Salil Enterprises, Pune and 52000 nos. of outer pouches for Shimla Mouth Freshner in the name of M/s. Mohit Enterprises, Amravati through M/s. Hans Travels.
(b) While all the above four parties were found to be non-existent, the Statement of Sh. Arvind Gupta of M/s. Hans Travels, supported by luggage delivery sheets bearing the signatures of the persons, which on the basis of hand writing experts opinion, were found to be the signatures of Sh. Subhash Joshi and Sh. Amar Chand Upadhyay, employees of the Respondent Company, shows that the consignments of outer pouches despatched by M/s. Flex Industries Ltd. in the name of the above non-existent parties had actually been received by the Respondent and used in the manufacture of un-accounted Gutkha/ Pan Masala and Mouth Freshner which had been cleared clandestinely without payment of duty.
(c) The report of the Govt. hand writing expert Sh.C.T. Sarwate has to be preferred over contrary opinion given by some private hand writing expert on the request of Respondent. Just because Sh. C.T.Sarwate on account of his death, is not available for cross-examination, it does not diminish the evidentiary value of his report.
(d) The Commissioner has erred in rejecting the clear cut evidence of flow back of money from the Respondent M/s MSS Food Products, Indore to M/s. Flex Industries Ltd. for purchases of un-accounted outer pouches. This clear cut evidence is in the form of demand drafts purchased by M/s. Manoj Provision Stores, Chhatarpur and M/s. S.B.Traders, Chhatarpur, payable to M/s. Flex Industries Ltd., Malanpur. These demand drafts payable to M/s.Flex had been purchased by M/s. Manoj Provision Stores and M/s. S.B.Traders on the instructions of M/s. Shree Ganesh Sugandhi Bhandar, Jabalpur, who was dealing in Shimla Brand Gutkha and pan Masala purchased from the Respondent, and had been sent to M/s. Flex, who had credited these demand drafts in the sales account of the outer pouches for Shimla brand Gutkha/Pan Masala & Mouth Freshner made to fictitious buyers. The Commissioner has wrongly rejected this complete chain on the ground that no communication or linkage has been established between M/s. Shree Ganesh Sugandhi Bhandar, Jabalpur and M/s. Flex. In this regard the Commissioner has wrongly ignored facts that:-
(i) five demand drafts, in question, which had been credited by M/s Flex Industries in the account of fictitious parties in whose name the pouches of Shimla brand Gutkha/Pan Masala & Mouth Freshner had been cleared, had been purchased from the Bank by two dealers namely M/s. Manoj Provisional Stores, Chattarpur and M/s. SB Traders, Chattarpur;
(ii) as per the proprietors of these traders, these demand drafts were the payment for Shimla brand Gutkha/Pan Masala purchased by them without bills from M/s. Shree Ganesh Sugandhi Bhandar, Jabalpur and that against the payments to be made by these traders to M/s. Shree Ganesh Sugandhi Bhandar, the demand drafts had been made in the name of M/s. Flex on the instructions of M/s. Shree Ganesh Sugandhi Bhandar;
(iii) M/s. Shree Ganesh Sugandhi Bhandar, Jabalpur is a dealer of Shimla brand Gutkha/Pa Masala & Mouth Freshner manufactured by the Respondent and this fact is evident from the statement of Sh. Ganesh Shivhare, Proprietor of M/s. Shree Ganesh Sugandhi Bhandar, who has stated that they used to the purchase Shimla brand Gutkha/Pan Masala & Mouth Freshner from M/s. MSS Food Products without bills, through their salesman; and
(iv) the fact that M/s. Shree Ganesh Sugandhi Bhandar, Jabalpur were purchasing Shimla brand Gutkha/Pan Masala & Mouth Freshner from M/s. MSS Food Products without bills is evident from the fact that Shimla brand Pan Masala had been seized from their premises.
(e) the duty demand of Rs.13,15,400/- is based on the fact that during period from June01 to Sept.01, the Respondent Company purchased 141500 outer pouches for packing of Shimla Pan Masala 2-in-1, Shimla Gutkha and Shimla Mouth Freshner, and while as on 07.01.02 there was no stock of these outer pouches, during Sept.01 to Dec.01 period, as per the records of the Respondents, they had used only 21800 outer pouches of Shimla Gutkha and there was no manufacture of Shimla 2-in-1 Pan Masala, from which it is clear that 52800 outer pouches for Shimla Gutkha and 16000 outer pouches for 2-in-1 Pan Masala were used in manufacture of un-accounted Shimla brand Gutkha and Pan Masala which had been cleared clandestinely without payment of duty.
(f) as regards the duty demand of Rs. 12,397/- on the goods valued at Rs. 8,253/- and Rs. 54,720/- seized from the premises of M/s. Shree Ganesh Sugandhi Bhandar and M/s. Hans Travels, and the confiscation of these goods, since the goods under seized were of Shimla brand and without any duty paying documents, the proceedings for duty demand in respect of these goods and their confiscation have been wrongly dropped by the commissioner.
4 Sh. Ramesh Nair, Advocate, the ld. Counsel for the Respondent Company, defended the impugned order and made the following submissions:-
(a) At the time of search of Respondents factory premises, neither any irregularity in the stock of raw-material or finished goods was detected nor any incriminating documents showing receipt of un-accounted raw-material or clandestine clearance of finished products were recovered. The entire allegation of duty evasion against the Respondent is based only on alleged supply of outer pouches for packing of Gutkha/Pan Masala & Mouth Freshner by M/s. Flex Industries Ltd.,Malanpur, to the Respondent in the name of fictitious parties.
(b) M/s. Flex for supply of outer pouches were using three transporters i.e. M/s. Saibaba Transport Services, Gwalior, M/s. Pitambara Freight Carrier, Gwalior, M/s. Hans Travels, Indore/Gwalior. The statement of Sh. B.S.Sharma proprietor of M/s. Saibaba Transport Services and the statement of Sh. Bal Krishan Sahu, Manager of M/s. Pitambara Freight Carrier, Gwalior, does not implicate the Respondents in any manner. In fact the officials of M/s. Flex have stated in clear terms that they were supplying the outer pouches for Shimla brand Gutkha/Pan Masala & Mouth Freshner to parties other than the Respondent (M/s. MSS Food Products Ltd.). Though Sh. Arvind Gupta of M/s. Hans Travels in his statement, has stated that the consignments of outer pouches sent by M/s. Flex in the name of M/s. Sarasati & Sons, Akola; M/s. Sukhram Traders, Nashik; M/s. Salil Enterprises, Pune & M/s. Mohit Enterprises, Amravati, were being received by Shimlawale, and that there is no party called Shimlawale other than the manufacturer of Shimla brand Gutkha and pan Masala, this statement does not implicate the Respondent in any manner, as Sh. Arun Gupta has not named M/s. MSS Food Products Ltd. or their employees and it is a well established fact that there are a number of other parties also, who were un-authorisedly using the brand name of the Respondent on Gutkha/Pan Masala being manufactured by them and, therefore, the word Shimlawale mentioned by Sh. Arvind Gupta may refer to other manufacturers of Gutkha & Pan Masala who were un-authorisedly using the brand name Shimla of the Respondent.
(c) Though according to the Department, the signatures on luggage delivery sheets recovered from the premises of M/s. Hans Travels were containing the signatures of two employees of the Respondent Sh. Subhash Joshi and Sh. Amar Chand Upadhyay and in this regard the opinion of hand writing expert Sh. C.T. Sarwate is relied, this opinion of Sh. C.T.Sarwate is doubtful, as firstly, he was not available for cross-examination on account of his death and secondly, on the request of Respondent, another hand writing expert Sh. A.N.Ganorkar has given a contrary opinion, stating that the impugned signatures were crude formations and are forged. It is well settled law that opinion of hand writing expert, by itself, is a weak testimony and can not be relied upon unless corroborated by other evidence. In this regard he relies upon judgment of Honble Madhya Pradesh High Court in the case of Mohammad Umar Vs. State reported in 1986(26) ELT-724(M.P.); and the judgment of the Tribunal case in the case of Ram Wadhaya, Prahlad Nagar, Meerut Vs. Collector of Central Excise, Meerut reported in 1984 (15) ELT-492(Tri.)
(d) There is no evidence to show that the Respondent paid for the goods cleared by M/s. Flex to the parties other than the Respondent. In this regard the Department relies upon the fact that M/s. Manoj Provision Stores, Chattarpur and & M/s. S.B.Traders, Chattarpur had purchased demand drafts from banks payable to M/s. Flex, though they had not purchased anything from M/s. Flex, but had purchased Shimla brand Gutkha/Pan Masala & Mouth Freshner from M/s. Shree Ganesh Sugandhi Bhandar, Jabalpur and on being questioned in this regard, both these traders have stated that they had purchased the demand draft payable to M/s. Flex on the instructions of Sh. Ganesh Shivhare of M/s. Shree Ganesh Sugandhi Bhandar, Jabalpur from whom Shimla brand Gutkha/Pan Masala & Mouth Freshner had been purchased by them. However, this does not constitute evidence of flow of funds from the Respondent to M/s. Flex as, firstly, Sh. Ganesh Shivhare of M/s. Shree Ganesh Sugandhi Bhandar has denied having given any such instructions to M/s. Manoj Provision Stores and M/s. S.B.Traders and secondly, there is no evidence to link M/s. Shree Ganesh Sugandhi Bhandar with the Respondent in respect of the payments made by M/s. Manoj Provision Stores and M/s. S.B.Traders to M/s. Flex Industries Ltd. by demand drafts. These payments may be on the instructions of other manufacturers of Gutkha/Pan Masala who were un-authorisedly using the brand name of the Respondent. There is evidence on record in form of complaints with police filed by the Respondent Company which shows that there were manufacturers of Gutkha and pan Masala who were un-authorisedly using the popular brand name Shimla of the Respondent.
(e) Merely because the outer pouches for packing of retail pouches of Shimla brand Gutkha/ Pan Masala & Mouth Freshner printed with the Respondents name as manufacture were being cleared by M/s. Flex to various other buyers, it can not be concluded that those outer pouches belonged to the Respondent and had been received by the Respondent. It is common in trade that a popular brand is copied and unlawfully used by persons other than the legal brand owner. Tribunal in the case of Sulekhram Steels Pvt. Ltd. Vs. Commissioner of Central Excise, Ahmedabad reported in 2011(273) ELT-140 (Tri.- Ahmd.) in para 17 of the judgment has held that mere presence of a brand name on the goods can not establish the link with the brand owner, since a popular brand name could well have been copied and unlawfully used as being of the brand owner, in order to trade on the reputation of the brand owner. In reply to the Show Cause Notice, the Respondent have submitted details of various legal proceedings taken by them against various persons including M/s.Flex Industries Ltd. for copying and infringing the Respondents trade mark/brand name. There are also news papers reports of the seizure of illegally manufactured Pan Masala by un-authorized use of the Respondents brand name. These proceedings have been rightly referred to and relied upon by the Commissioner in para 72 of the impugned order.
(f) In any case, merely on the basis of procurement of outer pouches for packing of retail pouches of Shimla brand Gutkha/ Pan Masala & Mouth Freshner, it can not be concluded that the Respondent have manufactured un-accounted Gutkha/Pan Masala & Mouth Freshner and cleared the same clandestinely without payment of duty, when there is absolutely no evidence of procurement of other raw-material like supari, katha, tobacco, menthol etc.
(g) In view of the above, the duty demand of Rs.43,48,552/- is without any basis.
(h) As regard the duty demand of Rs.13,50,400/-, the same is based on procurement of 141500 outer pouches from M/s. Flex Industries Ltd. out of which according to the Department, except for 21,800 outer pouches for Shimla Gutkha, the remaining quantity has been used for manufacture of un-accounted Gutkha/Pan Masala which had been cleared clandestinely without payment of duty. This duty demand is also without any basis, as all these outer pouches have been used by the Respondent in the packing of Gutkha, pan Masala & mouth freshener which had been cleared on payment of duty.
(i) The Shimla brand Gutkha, Pan Masala and Mouth Freshner seized from the premises of M/s Shree Ganesh Sugandhi Bhandar, had been purchased by them from M/s. Shivam Sales Corporation under their invoices no. SSC/668 dt. 12.12.01 and a perusal of the invoices shows that the batch number of the goods as KK and UU, while the Respondent, during the period from April 2000 to March03 have used the batch No.MM, MM1, MM3, MM4, MM5, MM6, MM7, MM8 & MM9 on their products and this shows that the goods seized from M/s. Shree Ganesh Sugandhi Bhandar, had not been manufactured by the Respondent but were duplicate goods. As regards M/s. Shivam Sales Corporation, Mauranipaur, they were manufacturing Gutkha & Pan Masala and by un-authorisedly using the brand name Shimla of the Respondent in this regard, the Department also had conducted inquiries. As regards the goods seized from M/s. Hans Travels, the same had neither been manufactured by the Respondent not had been booked for passport by them. Therefore proceedings for duty demand of Rs.12,397/- and for confiscation of the seized goods have been correctly dropped by the commissioner.
5. I have considered the submissions from both the sides and perused the records. The un-disputed facts are that:-
(a) Respondent manufacture Shimla & Vansh brand Gutkha, Pan Masala & Mouth Freshner which is sold in retail pouches with MRP of Rs. 0.50 per pouch, Re. 1/- per pouch or Re. 5/- per pouch;
(b) the printed laminated plastic (plastic lamination) for packing of Gutkha/Pan Masala and Mouth Freshner in retail packs (pouches) of various MRPs was being purchased from outside and the outer pouches for various products in which 40, 50 or 100 retail pouches are packed, were being procured by the Respondent from M/s. Flex and the duty demand of Rs. 43,48,552/- in this case is based on alleged receipt of outer pouches by the Respondent from M/s. Flex;
(c) the outer pouches were different for different products with the Respondents name as the manufacturer, the name of the product packed, brand name, MRP etc. printed on them;
(d) during the period of dispute, M/s Flex had also sold outer pouches meant for packing of the products being manufactured by the Respondent to a number of persons other than the Respondent, none of which has been found to be genuine and existing entity;
(e) the fact that despatch of outer pouches meant for packing of the products being manufactured by the Respondent to parties other than the Respondent stands admitted by various officials of M/s. Flex; and
(f) the outer pouches meant for packing of the products of the Respondent were being despatched by M/s. Flex to parties other than the Respondent through three transporters - M/s. Saibaba Transport Services, Gwalior, M/s. Pitambara Freight Carrier, Gwalior and M/s. Hans Travels, Gwalior/ Indore.
6. Though the outer pouches meant for packing of Shimla and Vansh brand Gutkha/ Pan Masala & Mouth Freshner are shown to have to have been sold by M/s. Flex to a number of fictitious firms, namely; M/s. Sarasati & Sons, Akola; M/s. Sukhram Traders, Nashik; M/s. Salil Enterprises, Pune & M/s. Mohit Enterprises, Amravati; M/s. S. Miss Hill Enterprises, Pune; M/s. Sarafat Ali & Co., Pune; M/s. Shabnam Enterprises Nashik; M/s. Sarath Enterprises, Nashik; M/s. K.K.Traders, Delhi; M/s. Twin Star Sales Corporation, Rajkot; M/s. TRJ Sales, Gaya; M/s. Full Fun Enterprises, Patna & M/s. Harkishanlal & Sons, Ranchi, the duty demand of Rs. 43,48,552/- in this case is based only on the supply of outer pouches by M/s. Flex to M/s. Sarasati & Sons, Akola; M/s. Sukhram Traders, Nashik; M/s. Salil Enterprises, Pune & M/s. Mohit Enterprises, Amravati through M/s. Hans Travels, as according to the Department, the outer pouches despatched in the name of these parties through M/s. Hans Travels have actually been received by the Respondent Company and have been used in the manufacture of finished products which had been cleared clandestinely without payment of duty. In this regard the main evidence relied upon by the Department is as under:-
(a) statement dt. 25.01.02 of Sh. Arvind Gupta, Manager of M/s. Hans Travels, Indore wherein he, after examining certain documents luggage delivery sheets of M/s. Hans Travels, stated that the goods booked by M/s. Flex in the name of M/s. Sarasati & Sons, Akola; M/s. Sukhram Traders, Nashik; M/s. Salil Enterprises, Pune and M/s. Mohit Enterprises, Amravati as consignees have been delivered to the representatives of Shimlawale and that, according to him there is no other party called Shimlawale except the manufacturer of Shimla brand Gutkha/Pan Masala.
(b) report dt. 19.04.02 of Sh. C.T.Sarwate, a hand writing expert, giving opinion that the signatures on the luggage delivery sheets in respect of the consignments booked in the name of M/s. Sarasati & Sons, Akola; M/s. Sukhram Traders, Nashik, M/s. Salil Enterprises, Pune & M/s.Mohit Enterprises, Amravati are of Sh. Subhash Joshi and A.C.Upadhyay- the employees of the Respondent.
6.1 Sh. Subhash Joshi and Sh.A.C.Upadhyay, however, in their respective statements have denied having received any consignment of outer pouches in the name of the above mentioned firms and have claimed that the signatures on the luggage delivery sheets are not their signatures and somebody has forged their signature. In this regard, the Respondent rely upon the opinion of another hand writing expert Sh. A.N.Ganorkar given by him on reference by the Respondent wherein he has opined that the impugned signatures are not the genuine signatures of Sh.Subhash Joshi and Sh.A.C. Upadhyay.
6.2 Thus so far as the duty demand of Rs. 43,48,552/- is concerned, the point of dispute is as to whether the consignments of outer pouches despatched by M/s. Flex M/s. to Sarasati & Sons, M/s. Sukhram Traders, M/s. Salil Enterprises & M/s. Mohit Enterprises, through M/s. Hans Travels were actually received by Respondent Company and whether on this basis duty demand of Rs.43,48,552/- can be confirmed against them, on the assumption that outer pouches, in question, have been used by them in packing of Gutkha/Pan Masala & Mouth Freshner, cleared without payment of duty and without issue of invoices.
6.3 On considering the rival submissions on this point, I find that the statement of Sh. Arvind Gupta of M/s. Hans Travels, on this point wherein he, after referring to Luggage delivery sheets, stated that the consignments booked in the name of M/s. Sarasati & Sons, M/s. Sukhram Traders, M/s. Salil Enterprises & M/s. Mohit Enterprises as consignees, were received by representatives of Shimlawale and that there is no party called Shimlawale other than the manufacturer of Shimla brand Gutkha and pan Masala, does not specifically name the Respondent Company or its employees. The Respondent have pleaded that during the period of dispute, there were a number of other persons who also manufactured Pan Masala and Gutkha by un-authorisedly using the brand name of the Respondent and in this regard several complaints with the police had been filed and a notice had also been issue to M/s. Flex Industries Ltd. This plea of the Respondent discussed in para 72 of the impugned order has not been refuted by the Department. Moreover, there are also News Papers reports regarding un-authorized manufacture of Shimla brand Gutkha/Pan Masala by the persons other than the Respondent by un-authorisedly using their brand name. In view of these facts, the possibility of the outer pouches meant for packing of Shimla brand Gutkha and Pan Masala & Mouth Freshner manufactured by the Respondent, which had been despatched by M/s.Flex to persons other than the Respondent, having been received and used by other un-authorized manufacturers of Gutkha/Pan Masala using the Respondents brand name un-authorisedly can not be ruled out. Therefore, the statement of Sh. Arvind Gupta of M/s. Hans Travels stating that the consignment of outer pouches despatched by M/s. Flex Industries to M/s. Sarasati & Sons, M/s. Sukhram Traders, M/s. Salil Enterprises & M/s. Mohit Enterprises had been received by the representatives of Shimlawale, can not be treated as an evidence of these goods having been received by the Respondent, as per, the findings of the commissioner in para 72 of the impugned order, which are not disputed, there were other un-authorized manufacturers who were also manufacturing Gutkha & Pan Masala by un-authorisedly using the brand name of the Respondent. In this regard, the Department had not refuted the Respondents plea that they had initiated legal proceedings for un-authorised use of their brand name Shimla against three persons:- M/s. Shivam Sales Corporation, Mauranipur, M/s. Ravindranath & Co., Kanpaur and M/s. Shri Shrichand, Punjwani, Indore that Departmental authorities had conducted investigation against M/s. Shivam Sales Corporation the report of which has not been relied upon and that the good seized from M/s. Shree Ganesh Sugandhi Bhandar were duplicate goods manufactured by M/s. Shivam Sales Corporation by unauthorized use of the Respondents brand name. Even if it is assumed that Sh. Arvind Gupta, by Shimlawale mentioned in his statement meant the Respondent Company, this statement, which is in the nature of admission of a witness implicating another person, by itself, is of little evidentiary value as:-
(a) While Sh. Arvind Gupta has retracted his statement, as per the requirement of Clause (b) of sub section (1) of Section 9D of Central Excise Act, 1944, read with sub section(2) of Section 9D ibid, Shri Arvind Gupta has not been examined as a witness by the adjudicating authority and thereafter allowed to be cross examined by the Respondent to ascertain the probative value of his statement [judgments of Honble Delhi High Court in case of Basudev Garg Vs. Commissioner of Custom reported in 2013 (294) ELT-353(Del.)]; and of Honble Allahabad High Court in case of CCE Allahabad Vs. Govind Mills Ltd., reported in 2013 (294) ELT- 361 (All) (Para 13);
(b) except for handwriting experts opinion, whose evidentiary value would be discussed in the next paragraph, there is no other supporting evidence to corroborate the statement of Sh. Arvind Gupta, which has been retracted by him.
6.3.1 This leaves the question as to what is the evidentiary value of the opinion of Sh. C.T.Sarwate and whether on the basis of the opinion of the Govt. handwriting expert Sh. C.T.Sarwate, it can be concluded that the consignments of outer pouches, in question, despatched through M/s. Hans Travels in the name of M/s. Sarasati & Sons, M/s. Sukhram Traders, M/s. Salil Enterprises and M/s. Mohit Enterprises had been received by Sh. Subhash Joshi and Sh. A.C.Upadhyay, the employees of the Respondent company on their behalf.
6.3.2 The proof by identification of handwriting or signature can be:-
(a) by examining the persons, who are conversant with the handwriting and signatures of the person; or
(b) by means of direct evidence i.e. on the basis of evidence of the persons who are said to be present at the time of writing of the disputed handwriting/signatures; or
(c) by means of comparison of handwriting/signatures by the Court itself Under Section 73 of the Indian Evidence Act, 1872; or
(d) by admission of the person concerned owning up the handwriting/signatures as his handwriting or signatures; or
(e) by testimony of an expert competent to make the comparison of handwriting or signatures on scientific basis.
The evidence in form of opinion of a handwriting expert is opinion evidence. The science of identification of a person on the basis of his handwriting or signatures is based on the assumption that although a persons handwriting may vary as to its precise details, yet in its general habitual characteristics, it is the same, as personality of a person enters into his handwriting and becomes an unconscious and dominant habit which gives an identity to every handwriting. On account of the very nature of the science of handwriting and signature identification, it is not be an exact science like identification of a person on the basis of his finger prints, DNA or other biometric parameters. Honble M.P.High Court in case of Mohammad Umer Vs. State reported in 1986 (26) ELT-724 (M.P.), Honble Jharkhand High Court in case of Bidesh Singh Vs. Madhu Singh reported in 2005 AIHC 1317 (1333) (Jhar.) and Honble Bombay High Court in case of Bhargav.K.Salunkhe Vs. State of Maharashtra, reported in 1996 Cri LJ 1228, 1232 (Bom.) have held that opinion of handwriting expert is a weak evidence which should be taken with caution and is not reliable unless supported by other independent evidence. Apex Court in case of Bhargav Vs. Maharaj reported in A 1973 SC-1245 and in case of Murarilal Vs. State, reported in A 1980 SC-531 has held that:-
(a) evidence of handwriting expert, unlike that of finger print expert, is generally of frail character and its falliabilities have been quite often noticed;
(b) having due regard to imperfect nature of the science of handwriting, the approach should be one of caution and the reason for opinion must be carefully probed and examined; and;
(c) only in case where reasons for opinion are convincing and there is no reliable evidence throwing a doubt, the uncorroborated testimony of a handwriting expert may be accepted.
Honble Punjab & Haryana High Court in case of Balbir Singh Vs. Sarup Singh reported on 2004(2) Punj. LR 430 (P&H) has held that court was perfectly justified in ignoring the divergent report of two handwriting experts and placing reliance on the testimony of two attesting witnesses and the scribe of the will. In a judgment in case of Padma Priya Vs. Dharamdass reported in 15CWN 728, it has been held that opinion of a handwriting expert, when he is not called as witness and subject to cross examination is not admissible in evidence. Apex Court in case of Ramesh Chandra Agrawal Vs. Regency Hospital Ltd., reported in 2009(9) SCC-769, has relying upon its earlier judgment in case of state of Maharashtra Vs. Damu S/o Gopinath Shinde & others, reported in AIR 2999 SC-1691, held that without examining the expert as a witness in court, no reliance can be placed on his opinion.
6.3.3 From the judgments of the Apex Court and various high courts as discussed above, it is clear that consistent view of the courts with regard to opinion of handwriting expert has been that:-
(a) it is generally not a substantive evidence and is rather a weak evidence, which can only be used for the purpose of corroboration;
(b) when there are divergent opinion of two experts in respect of same handwriting or signature, the same can be ignored; and
(c) the opinion of an expert when he is not called as witness and subjected to cross examination, is inadmissible in evidence.
6.3.4 In this case, the allegation against the Respondent Company is sought to be proved by the opinion of the handwriting expert Sh. C.T.Sarwate, as Sh. Arvind Gupta of M/s. Hans Travels has not named Sh. Subhash Joshi and Sh. A.C.Upadhyay, the employees of the Respondent, as the persons who had taken delivery of the consignments of outer pouches in his presence and had signed the delivery sheets and neither anyone familiar with their signatures has identified the signature on the luggage delivery sheets nor they have accepted the signature on the luggage delivery sheets as their signatures. For testing the correctness of the opinion of Sh. Sarwate, his cross examination was necessary, as other handwriting expert Sh. A.N.Ganorkar has given a contrary opinion and both Sh. Subhash Joshi and Sh. A.C.Upadhyay have stated that signatures on the documents of M/s. Hans Travels are not their signatures. But cross examination of Sh. Sarwate was not possible on account of his death. Therefore, the opinion of Sh. C.T.Sarwate, by itself, has no evidentiary value and in view of the judgments of Apex Court, and various high courts, mentioned above it not even admissible as evidence.
6.4 Thus, merely on the basis of the statement of Sh. Arvind Gupta of M/s. Hans Travels and the opinion of hand writing expert Sh. C.T.Sarwate, it can not be concluded that the consignments of outer pouches despatched to M/s. Sarasati & Sons, M/s. Sukhram Traders, M/s. Salil Enterprises & M/s. Mohit Enterprises had actually been received by the Respondent. In this regard, the revenue relies upon another evidence, which is that two dealers M/s. Manoj Provision Stores, Chattarpur & M/s. S.B.Traders, Chattarpur had purchased bank drafts payable to M/s. Flex Industries Ltd. and on enquiry, they stated that they have purchased those drafts on the instructions of Sh. Ganesh Shivhare of M/s. Shree Ganesh Sugandhi Bhandar, Jabalpur against purchase of Shimla brand Gutkha & Pan Masala from them. However, Sh.Ganesh Shivhare has denied giving any such instructions to M/s. Manoj Provision Stores & M/s. S.B.Traders and there is absolutely no evidence to link M/s. Shree Ganesh Sugandhi Bhandar, Jabalpur with the Respondent, from which it can be concluded that on the basis of instructions of the Respondent, M/s. Shree Ganesh Sugandhi Bhandar had got the demand drafts payable to M/s. Flex industries Ltd. purchased through M/s. Manoj Provisional Stores and M/s. S.B.Traders and because of this missing link, the purchase of demand drafts payable to M/s. Flex Industries Ltd. by M/s. Manoj Provision Store and M/s. S.B.Traders can not be linked to the Respondent. Thus the Departments allegation that payment for purchase of outer pouches from M/s. Flex Industries in the name of fictitious parties was being arranged by the Respondent through M/s. Shree Ganesh Sugandhi Bhandar, M/s. Manoj Provision Stores & M/s. S.B.Traders remains un-substantiated.
6.5 When as discussed above, the allegation of un-accounted receipt of outer pouches for packing of retail pouches of Gutkha, Pan Masala and Mouth Freshner cannot be upheld, the presumption of un-accounted manufacture of retail pouches of Gutkha, Pan Masala and Mouth Freshner and their clearance without payment of duty, cannot be made and as such, the duty demand against the Respondent cannot be upheld.
6.6 Thus, the evidence of record is not sufficient to uphold duty demand of Rs. 43,48,552/-.
7. As regards the duty demand on the goods valued at Rs. 54,720/- bearing Shimla brand seized from M/s. Hans Travels, Gwalior and their confiscation, the proceedings for the same have been rightly dropped as:-
(a) There is no evidence to prove that the goods had indeed been manufactured by the Respondent and in this regard it has not been ascertained as to whether the batch number of the seized goods was the same as the batch number being used by the Respondent on their goods at that time; and
(b) There is no evidence to prove that the seized goods had been booked for passport by the Respondent.
7.1 As regards the duty demand on the goods valued at Rs. 8,253/- seized from M/s. Shree Ganesh Sugandhi Bhandar and their confiscation, while the Respondents plea is that these goods were duplicate goods purchased by M/s. Shree Ganesh from M/s. Shivam Sales Corporation and the same were bearing batch no. KK and UU, which had never been used by the Respondent during the period April 2000 to March 2003, this plea of the Respondent has not been refuted by the Department.
7.1.1 In fact if the Gutkha, Pan Masala and Mouth Freshner bearing brand name Shimla seized from the premises of M/s. Shree Ganesh Sugandhi Bhandar were duplicate goods originating from M/s. Shivam Sales Corporation and if the Respondents contention as recorded in para 36 (I) (vi) of the impugned order that the Department had verified the fact of manufacture of Shimla brand Gutkha and Pan Masala by M/s. Shivam Sales Corporation, by un-authorised use of the Respondents brand name, is correct, the purchase of demand drafts payable to M/s. Flex by M/s. Manoj Provision Stores and M/s. S.B.Traders, may be on the instructions of M/s. Shivam Sales Corporation, given through M/s. Shree Ganesh Sugandhi Bhandar.
7.2 In view of the above discussion, the proceedings for duty demand in respect of goods valued at Rs. 8,253/- seized from M/s. Shree Ganesh Sugandhi Bhandar and for confiscation of the goods have been correctly dropped by the commissioner.
8. The other component of duty demand is Rs. 13,50,400/- which is based on the allegation that while under invoices dt.12.06.01, 20.08.01, 20.08.01 and 09.09.01 of M/s. Flex, the Respondent received 13500 outer pouches for Shimla Mouth Freshner, 16000 outer pouches for 2-in-1 Shimla Pan Masala, 80000 outer pouches fopr Shimla Gutkha and 32000 outer pouches for Shimla Mouth Freshner respectively, at the time of officers visit to the Respondents factory on 07.01.02, there was no stock of the above pouches and the records of the Respondent for period from Sept.01 to Dec.01 showed that during Sept.01 to Dec.01 period, only 21800 outer pouches of Shimla Gutkha had been used for manufacture and there was no production of 2-in-1 Shimla Pan Masala during Sept.01 to Dec.01 period. On this basis it has been alleged in para 34 of the Show Cause Notice that 58200 outer pouches of Shimla Gutkha and 16000 outer pouches of 2-in-1 Shimla Pan Masala, have been used in the manufacture of Shimla Gutkha and Shimla 2-in-1 Pan Masala which had been cleared clandestinely without payment of duty and duty involved on these clearances is Rs.13,50,400/-.
8.1 The Respondent Companys contention is that they had received 13,500/- outer pouches for Re.1/- MRP Mouth Freshner in June 2001, 48000 outer pouches for Shimla Gutkha of MRP Re. 1/-, 20,000 outer pouches for Shimla Pan Masala, MRP Re. 1/- and 20,000 outer pouches for Shimla 2-in-1 Pan Masala, in Aug.01 and 40,000 outer pouches for Shimla Mouth Freshner in Sept.01 and that all these outer pouches have been used in the packing of the retail pouches of Mouth Freshner, Shimla Gutkha, Shimla Pan Masala and Shimla 2-in-1 Pan Masala manufactured by them, which had been cleared on payment of duty and whose production and clearance are duly accounted for in the accounts maintained by the Respondent.
8.2 The basis of duty demand of Rs. 13,50,400/- as explained in Para 34 of the Show Cause Notice is that out of 80,000 outer pouches for Shimla Gutkha and 16000 outer pouches of Shimla 2-in-1 Pan Masala, received by the Respondent under invoices dt. 20.08.01, only 21,800 outer pouches for Shimla Gutkha had been used during Sept.01 to Dec.01 period as per records of the Respondent and as per the records, there was no production of 2-in-1 Pan Masala during Sept.01 to Dec.01, while at the same time there was no stock of these outer pouches at the time of officers visit to factory on 07.01.02. Thus the allegation in Show Cause Notice is failure of the Respondent to account for 58,200 outer pouches for Shimla Gutkha and 16,000 outer pouches for 2-in-1 Shimla Pan Masala which had been received by them. In the Show Cause Notice there is no allegation that there was no production of Shimla Mouth Freshner during Sept.01 to Dec.01 period. However, in the Annexure to the Show Cause Notice, duty demand of Rs. 72,800/- has also been made on the basis of Respondents failure to account for 45,500 (32000+ 13,500) outer pouches for Shimla Mouth Freshner received by them. The duty demand of Rs. 72,800/- based on the Respondents alleged failure to account for 45,500 outer pouches for Mouth Freshner is not sustainable, as there is no such allegation in the Show Cause Notice.
8.3 As regards 58,200 outer pouches for Shimla Gutkha and 16,000 of outer pouches for 2-in-1 Shimla Pan Masala received under invoice dt. 20.08.01, duty demand based on their alleged use in manufacture of Shimla Gutkha and Shimla 2-in-1 Pan Masala cleared clandestinely, is Rs. 12,77,600/-. The Commissioner in the impugned order has not gone into the question as to whether the allegation of Respondents failure to account for these outer pouches for use in the manufacture of Shimla Gutkha and Shimla 2-in-1 Pan Masala cleared on payment of duty, is correct or not. The Commissioner has dropped the duty demand only on the ground that merely on the basis of alleged receipt of outer pouches for packing retail pouches of Gutkha, Pan Masala & Mouth Freshner without any other evidence regarding procurement of other raw-materials like plastic lamination for retail pouches, Supari, Kattha, Tobacco etc. the duty demand is not sustainable. Honble Member (Judicial) also has upheld the dropping of this demand by endorsing the reasoning of the Commissioner, while in order recorded by Member (Technical), this point has not been dealt with, though he has ordered for allowing of departments appeal or in other words, confirming the entire duty demand, as made in the Show Cause Notice.
8.4 Outer pouches are used for packing of 40, 50 or 100 retail pouches of Gutkha, Pan Masala and Mouth Freshner and are one of the principal raw-materials. In my view, on the basis of concrete evidence of un-accounted receipt of any one of the principal raw-materials like Supari, Kattha, tobacco, plastic laminate or outer pouches by a Gutkha and Pan Masala manufacturer or on the basis of failure of the manufactures to account of the raw-materials which, admittedly, had been received, a presumption of fact, can be made under section 114 of the Indian Evidence Act that the un-accounted raw-material had been used in the un-accounted manufacture of excisable goods cleared clandestinely without payment of duty, which would shift the burden of proof to the Assessee and unless the assessee produces evidence to prove that there was no un-accounted receipt of raw-material or there was no un-accounted consumption of the raw-material which, admittedly, had been received, the duty demand on this basis can be confirmed by preponderance of probability. But for making such a presumption of fact under Section 114 of the Indian Evidence Act, which would shift the burden of proof to the assessee, there must be cogent and concrete evidence of the fact of un-accounted receipt of any one or more of the principal raw-materials or evidence of un-accounted consumption of the principal raw-materials which admittedly had been received. However, in this case, while the receipt of 80,000 outer pouches of Shimla Gutkha and 16,000 outer pouches of 2-in-1 Shimla Pan Masala in Aug.01 is not disputed and is accounted, merely on the basis that during Sept.01 to Dec.01 only 21,800 outer pouches of Shimla Gutkha had been used and no production of Shimla 2-in-1 Pan Masala had been recorded, it can not be presumed that the balance quantity of 58200 outer pouches for Shimla Gutkha and 16000 outer pouches of Shimla 2-in-1 Pan Masala had been used for un-accounted manufacture of finished product cleared clandestinely, as looking to the number of machines which is sixty in the Respondents factory, 52,800 outer pouches for Shimla Gutkha and 16000 outer pouches for 2-in-1 Shimla Pan Masala could have been used in the month of August 2001 itself. No inquiry has been made regarding use of these outer pouches in August 2001. In my view, therefore, merely on the basis of the fact that there was no production of Shimla 2-in-1 Pan Masala during Sept.01 to Dec.01 and during this period only 21,800 outer pouches for Shimla Gutkha had been used, it cannot be presumed that 52,800 outer pouches for Shimla Gutkha and 16000 outer pouches for 2-in-1 Shimla Pan Masala had been used in the manufacture of un-accounted Shimla Gutkha and Shimla 2-in-1 Pan Masala, which had been cleared clandestinely without payment of duty, as their consumption for accounted production during August 2001 has not been ruled out.
8.5 In view of the above discussion, the duty demand of Rs. 13,50,400/- is also without any basis and has been correctly dropped.
9 In view of the above discussions, I hold that the evidence on record is not sufficient to uphold the duty demand and the same has been correctly dropped by the Commissioner. I accordingly agree with the decision of Honble Member (Judicial).
[ORDER PRONOUNCED ON 04.09.2013] (Rakesh Kumar) Member (Technical) S.Kaur 1