Custom, Excise & Service Tax Tribunal
Jay Bhawani Metal Industries vs Commissioners Of Central Excise, ... on 27 July, 2015
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
West Zonal Bench, Ahmedabad
-ooOoo-
Appeal No. : E/1142-1146,1278/2011
[ Arising out of OIA-RKA/236-241/SRT-I/2011 dtd 29/07/2011Passed by Commissioners of Central Excise, Customs and Service Tax-SURAT-I ]
1. Jay Bhawani Metal Industries
2. Ashok Kashinath Mane - Appellant(s)
3. Pukhraj C Jain
4. Ramesh R Kothari
5. Dinesh R Kothari
6. Commissioners of Central Excise, Customs
and Service Tax-SURAT-I
Vs
Commissioners of Central Excise, Customs
and Service Tax-SURAT-I - Respondent (s)
Represented by Appellant(s) : Shri Willingdon C, Advocate Respondent (s) : Shri J Nair, Authorised Representative For approval and signature :
Mr. H.K.Thakur, Hon'ble Member (Technical) 1 Whether Press Reporter 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 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 CORAM :
Mr. H.K. Thakur, Hon'ble Member (Technical) Date of Hearing : 26/6/2015 Date of Decision : 27/7/2015 ORDER No. A/11106-11111/2015 dtd 27/7/2015 Per : Mr.H.K.Thakur, Appeal No E/1142/2011 has been filed by the main appellant M/s Jai Bhavani Metal Industries, Udhana, Surat, against OIA No. RKA/236-241/SRT-I/2011 dtd 29/07/2011. Appeals No E/1143-1146/2011 have been filed by Shri Ashok Kashinath Mane, Shri Pukhraj C Jain, Shri Ramesh R Kothai and Shri Dinesh R Kothari, who are Depot Manager, Manager and Partners respectively of the main appellant, have also filed appeals against the same OIA dt 29/7/2011 for imposing penalties. Appeal No. E/1278/ 2011 has been filed by the Revenue against the same OIA passed by the first appellate authority on the ground that first appellate authority has wrongly allowed the appeal of the main appellant partly when confessional statements clearly establish Revenues case and also that penalties were wrongly reduced by the first appellate authority. Revenues appeal, therefore seeks restoration of the order passed by the Adjudicating authority.
2. Shri Willingdon C (Advocate) appearing on behalf of the main appellant and others argued that a case was booked against his clients regarding clandestine manufacture and clearance of Copper Strips, Wire Rods, Brass etc. That Revenue has made the case on the basis of 62 reconstructed copies of delivery challans-cum-profoma invoices which were made available to the investigation by some unidentified and undisclosed informer. That statement of his clients and 3 employees of the main appellant were also recorded to corroborate the case. That simultaneous search were carried out at the factory premises of the main appellant, trading shop/depot of the main appellant at Surat and Thane, 11 buyers premises at different cities and the concerned, transporters. That during the search operations no discrepancy of raw materials or finished goods was found to exist in the physical stock/recorded inventory at the factory, trading shop and the Bhiwandi godown. That no incriminating documents were found at any of the three places of the main appellant. That even from the premises of the transporters no incriminating documents were recovered and none of the transporters were interrogated. That all the 11 alleged buyers of finished goods spread over different parts of country, categorically deposed that they had not purchased any copper articles from the main appellant as shown in the reconstructed challans.
2.1 That the reconstructed challans cum pro-forma invoices were not recovered from the premises of the main appellant and source of these documents is unknown, undisclosed and unidentified. That statements recorded during the investigation cannot be relied upon against his client as the witnesses and officers of DGCEI were not allowed to be cross examined by the Adjudicating authority. That as per provisions of Sec. 9D of the Central Excise Act 1944, such statements recorded loose its relevance and evidentiary value if cross examination is not allowed. He relied upon the following case laws in support of his arguments :
(a) 2010(261)ELT.803 Shree Industries Ltd Vs CCE
(b) 2014(309)ELT.411 (All) Continental Cement Co Vs UOI
(c) 2014(308)ELT.655 (Guj) CCE Vs Saakeen Alloys Pvt Ltd
(d) 2014(309)ELT.698 (T) Jay Bhavani Metal Co Pvt Ltd Vs CCE
(e) 2015(316)ELT.162(T) Shivalyalspat & Power Ltd Vs CCE
(f) 2012(283)ELT.563(T) CCE Ns Renny Steel Caastrings P Ltd
(g) 2004(163)ELT.255 (T) Harichand Kidarnath Khanna Vs CCE
(h) 2014.TIOL.1032.CESTAT.AHM Mahesh Silk Mills Vs CCE 2.2 That reconstructed challans-cum-proforma invoices cannot be made the grounds of demand as not a single buyer whose name exist in these document has ever accepted the receipt of the goods mentioned therein. That even first appellate authority has dropped demand of Rs 10,69,486/- out of the total demand of Rs 31,78,476/- holding that nearly 20 reconstructed challans were fake, incorrect or duplicate. That first appellate authority in Para 4.2 (Page 58 of the Appeal) has rightly recorded that standing alone, these documents have no evidentiary value as these were not found at the factory nor recovered during search. That in the absence of disclosure of source of documents the same cannot be relied upon in view of the following case laws:
a) Pan Parag India Ltd vs CCE [2013(291)ELT.81(T)]
b) CCE vs Welcome Drugs & Pharmaceuticals Ltd [2014(303)ELT.35(T)]
c) CC vs East Punjab Traders [1997(18)ELT.537 (SC)]
d) Md Abdul Halim vs CC [2001(43)RLT.609(Cestat)] 2.3 That demand of Rs 3,48,740/-, based on two delivery Challan Nos. 2 & 3 both dt 23/4/2007, is not sustainable as these goods were received in the factory of the main appellant from one of their traders company M/s Jai Bhavani Metal Company (JBMC) as major renovation work was in progress at JBMC. That JBMC under letter No JBMCJ/DGCEI/03/07/08 dt 5.9.2007, addressed to Supdt., DGCEI, Zonal Unit Mumbai; clarified the quantity of goods received and that the same were purchased from M/s Mahalaxmi Metal, Ahmedabad, who imported the same vide Bill of Entry No 5 dt 21.4.2007, under Delivery Challan dt 21.4.2007 and transported in truck No GT.17.T.4865 dt 21.4.2007. That even purchase of goods by M/s Mahalaxmi Metals from M/s Dharam Barrels was also documented. That in view of the documentary evidences furnished by appellant department cannot treat that quantity as manufactured and cleared by the appellant. That in view of the following case laws, documentary evidences have to be preferred over the oral evidences/statements.
(a) Progressive Thermal Controls Pvt Ltd vs CCE [2003(157)ELT.44(T)]
(b) DXN Herbal Mfg (I) Pvt Ltd Vs CCE [2006(199)ELT.533(T)]
(c) Market chase Advertising vs CCE [2008(85)RLT.888(Cestat)]
(d) IRP India vs CC [1995(10)RTL.669(Cestat)] 2.4 That in view of the above factual matrix case of clandestine removal is not established against the appellants and appeals filed by his clients are required to be allowed with consequential relief. That main appellant had an accumulated cenvat credit of Rs 1.75 cores in his credit account at the relevant time and can have no incentive or motive to evade payment of duty.
3. Shri J Nair, appearing on behalf of the Revenue argued that all the appellants during the course of investigation have confessed that they were clearing the goods under delivery challans without payment of duty. Learned Authorised Representative made the Bench go through Para 5.3 of the OIA dt 29.7.2011 to argue that, the stand taken by the appellants in the appeal before the lower authorities is only an after thought at the instance of proper legal advice. That the entire duty amount and 25% penalty was paid by the main appellants during these proceedings which convey that they have indulged in clandestine manufacture and clearances. That reconstruction of delivery Challan cum pro-forma invoice from torn out papers vouches for the clandestine activities undertaken by the appellants to evade Central Excise duty. That all the statements of the appellants are inculpatory and admissible as evidence in deciding the case against the appellants. That the cross examination of the witnesses asked for by appellants was not required to be given as there was ample corroboration in the form of reconstructed challans-cum- invoices. Learned Authorised Representative also made the Bench go through statements dt 25/4/2011 of Shri Dinesh R Kothari, Partner of JBMC to emphasize that in certain case only delivery Challan-cum-pro-forma invoice were made without making commercial invoices as those goods were not accounted for. It was also strongly argued by the Learned Authorised Representative that option of 25% reduced penalty given was not paid, alongwith interest, within one month from the date of order passed by the Adjudicating authority. He relied upon the case law of Honble Gujarat High Court in the case of CCE, Surat, vs. Rajashree Dyes & Printing Mills Pvt Ltd [2014(305)ELT.442(Guj.)]. Learned authorized Representative thus argued that appeals filed by the appellants may be dismissed and appeal filed by the Revenue should be allowed.
4. Heard both sides and perused the case records. A case of clandestine manufacture and clearance was made against the main appellant based predominantly on the basis of 62 reconstructed copies of delivery challans-cum-proforma invoices. These were corroborated by investigation by recording the statements of the appellants who initially confessed to the offence and made certain payments towards duly demanded. It is the argument of the main appellant that 62 reconstructed challans-cum-invoices cannot be relied as they are neither original nor zerox copies without the identification of the author of these challan. It is not a disputed fact that the reconstructed challans were not recovered from the premises of any of the appellants. First Appellate authority in his order has also observed that nearly 20 of these reconstructed documents are fake or incorrect and accordingly dropped demand of Rs 10,69,486/- out of total demand. Further, first Appellate Authority carried out detailed inspection during the proceedings before him and observed in Para 5.4.2 of the OIA dt 29.7.2011 that standing alone these documents have no evidentiary value as these are not found at the factory or recovered during the search. Regarding admissibility of documents whose origin is not disclosed it has been held by CESTAT, Delhi, in the case of Pan Parag India Ltd vs CCE [2013(291)ELT.81.(Tri.Del.)] that documents whose origin is not known cannot be relied upon for establishing a case. Once the author of the documents is uncertain or documents are unsigned then the same cannot be put to test and scrutiny of an aggrieved person. Cross examination of the person who created these documents cannot be allowed to the appellants, as the source has no been identified.
4.1 In the case of CCE Jaipur vs Welcure Drugs & Pharmaceuticals Ltd [2014(303)ELT.236(Tri.Del.)] also it was held that photocopies of some invoices supplied by an unidentified informer cannot establish a case of clandestine removal and made following observation.
6. I do not find any infirmity in the above views of Commissioner? (Appeals). Admittedly, allegations of clandestine removal are serious allegations and cannot be upheld on the basis of photocopies of some of the invoices, supplied by an unidentified informer. There is no disclosure on record to show as to from where the Revenue received the said photocopies of the invoices. Further, investigation conducted by the Department did not result in any evidence to reflect upon the clandestine manufacture and clearance of the final product. The various case laws discussed by the Commissioner (Appeals) in his impugned orders are in favour of the respondents. As such, I reject the Revenue appeals on the above ground. 4.2 It is also observed from the case records that these reconstructed challans-cum-proforma invoices indicate either the vehicle number or the name of the transporter. No investigations have been undertaken by the department to corroborate the reconstructed challans by recording the statements of these transporters. It has also not been brought on record as to from where main appellant procured the raw-material for manufacture of clandestinely cleared goods as held by Allahabad High Court in the case of Continental Cement Co Vs UOI [2014(309)ELT.411(All.)]. No Confirmatory statements of the buyers are available to corroborate the authenticity of 62 reconstructed documents and the supply of finished goods contained therein. All such persons have stated that they have not received any goods against the reconstructed invoices.
4.3 So far as admissibility of oral statements as piece of evidence is concerned, it is a well established law that cross examination of witness has to be allowed as per Sec. 9D of the Central Excise Act 1994 if those statements have to be relied upon as held by Delhi High Court in the case of J&K Cigarettes Ltd vs CCE [2009(242)ELT.189(Del.)] and Basudev Garg vs CC [2013(294)ELT.353(Del.)]. In the case of CCE vs Saakeen Alloys Pvt Ltd [2014(308)ELT.655(Guj.)] following observations were made by Gujarat High Court in Para 7 and 10 regarding admissibility of statements where cross examinations was not provided and procurement for additional raw materials etc:
7.As can be noted from the decision of the Tribunal,? it has extensively dealt with the entire factual matrix presented before it. The Tribunal rightly concluded that in the case of clandestine removal of excisable goods, there needs to be positive evidences for establishing the evasion, though contended by the Revenue. In absence of any material reflecting the purchase of excessive raw material, shortage of finished goods, excess consumption of power like electricity, seizure of cash, etc., the Tribunal noted and held that there was nothing to bank upon except the bare confessional statements of the proprietor and of some of the persons connected with the manufacturing activities and such statements were retracted within no time of their recording. The Tribunal also noted the fact that the requisite opportunity of cross-examination was also not made available so as to bring to the fore the true picture and therefore, it concluded against the Revenue observing that not permitting the cross-examination of a person in-charge of records of M/s. Sunrise Enterprises and absence of other cogent and positive evidences, would not permit it to sustain the demand of Rs. 1.85 Crores raised in the Demand notice and confirmed by both the authorities below.
10.All the appeals are based predominantly and? essentially on factual matrix. The Tribunal elaborately and very correctly dealt with the details furnished by both the sides and rightly not sustained the demand of Rs. 1.85 Crores, which had no evidences to bank upon. Confessional statements solely in absence of any cogent evidences cannot make the foundation for levying the Excise duty on the ground of evasion of tax, much less the retracted statements. To the extent there existed substantiating material, Tribunal has sustained the levy. No perversity could be pointed out in the approach and treatment to the facts. 4.4 In the light of above observations and settled proposition of law 62 reconstructed challans-cum-proforma invoices cannot be relied upon for fixing the case of clandestine manufacture and clearance of finished goods against the appellants. No variation in the stock of raw-materials/finished goods was noticed in the factory of the main appellant during the search. No finished goods and cash have been seized anywhere in transit or in the premises of the buyers who disowned having received any such goods.
5. So far as duty demand of Rs 3,48,740/-, on the basis of two delivery Challan Nos. 2 & 3 both dt 23.4.2007, is concerned it is the case of main appellant that these goods were purchased by their trading company M/s Jai Bhavani Metal Co, Surat (JBMC). That due to major renovation at the office/godown of JBMC, subject goods were temporarily stored in Appellants factory premises. It is observed from case records that there are documentary evidences to the effect that said goods were purchased by JBMC from M/s Malaxmi Metals Ahmedabad under delivery Challan No 5 dt 21.4.2007. This delivery Challan also has the Truck Number mentioned on it. No investigation has been done in order to refute the claim of the main appellant, by recording the statement of transporter or the supplier of trader from whom the goods have been claimed to be purchased from JBMC. It is a well established law that documentary evidence will prevail over an oral evidence especially in these proceedings where cross examination of such witness is not provided. On this issue following was observed in Para 8.1 of the case law DXN Herbal Mfg (India) vs CCE, Pondichery (supra), relied upon by the appellants.
8.1The dispute now shifts to the last sentence of Note 16 which reads as :
Similar preparations, however, intended for the prevention or treatment of diseases or ailments are excluded (Heading 30.03 or 30.04).
M/s. DXN have claimed in their appeal that RG/GL can prevent, mitigate and cure diseases. But they have not named any disease. It was also argued by learned Counsel for the appellants that the products in question had both preventive and curative properties and that the buyers treated the goods as ayurvedic medicines. In this connection, learned Counsel referred to what was deposed by some stockists/distributors when cross-examined. However, he has not specified any disease or ailment which could be prevented or cured by means of the above products, nor has any of the said witnesses so specified. When one claims a certain product to be a medicament with prophylactic or therapeutic property, one has got to specify the disease or ailment which can be prevented or cured by means of such product and must also prove this claim. This imperative requirement remains unfulfilled in this case. M/s. DXN themselves do not have a case that RG/GL can be used to prevent or cure any particular disease or ailment. Had it been their case, they would have shown that their products were sold in retail under doctors prescription. Shri Surya Prakash Rao, authorized signatory of M/s. Daehsan stated that there was no curative property in RG & GL capsules and that the products were not sold under doctors prescription. He was not cross-examined. Shri D. Premkumar, Assistant Factory Manager, DXN (Pondicherry) himself stated that they had no pharmacopoeial standards for RG & GL capsules. This statement was not retracted, nor was Shri Premkumar sought to be cross-examined. Moreover, the preponderance of evidence on record supports the Revenues claim that the products were actually projected in the market as food supplements and not as medicaments. M/s. Daehsan as marketing agents of DXN issued guidelines in writing to their distributors, reading as under :
Do not make any claims. Herbal food supplements are strictly classified as foods and regulated as such. Extra care must be done to avoid making specific claim about what the products can do to the body. Any food may be categorized as a drug if it is claimed that the product is for treatment, cure, prevention and mitigation of a disease. The important word is disease. When a product is offered as a specific treatment for a disease, it becomes a drug..... It is very important to bear in mind that you are recommending a food supplement and that you do not intend to be misconstrued as recommending a drug. The above documentary evidence of DXN having emphatically held out through their marketing agency (Daehsan) and the latters stockists/distributors before the general public that their products viz. RG & GL capsules were strictly herbal food supplements and recommended as drugs stands unrebutted and overrides an oral evidence to the contra given by any Daehsan functionary or stockist/distributor in cross-examination. It is trite law that documentary evidence would prevail over oral evidence.
6. In view of the above observations, appeals field by the appellants are allowed and appeal filed by the Revenue is rejected.
(Pronounced in the Court on 27.7.2015) (H.K.Thakur) Member (Technical) swami ??
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